SUMMARY ASSIGNMENT

MM5012
BUSINESS STRATEGY
RTB 1
Ireland, R. D.; R. E. Hoskisson & M. A. Hitt (2011). The
Management of Strategy: Concepts & Cases, 9th Edition,
South-Western Cengage Learning.

CH. 1 - 4
WAHYUDI ANUGRAH

NIM : 29114595

EMBA 52 CLASS
INSTITUT TEKNOLOGI BANDUNG

2015

Chapter 1 : Strategic Management and Strategic Competitiveness

As we see from the Opening Case, McDonalds was quite successful in 2008 and 2009,
outperforming Burger King and Wendys, its two main rivals. McDonalds performance
during this time period suggests that it is highly competitive (something we call a condition
of strategic competitiveness) as it earned above-average returns. All firms, including
McDonalds, use the strategic management process as the foundation for the commitments,
decisions, and actions they will take when pursuing strategic competitiveness and aboveaverage terms. The strategic management process is fully explained in this book. We
introduce you to this process in the next few paragraphs. Strategic competitiveness is
achieved when a firm successfully formulates and implements a value-creating strategy. A
strategy is an integrated and coordinated set of commitments and actions designed to exploit
core competencies and gain a competitive advantage. When choosing a strategy, firms make
choices among competing alternatives as the pathway for deciding how they will pursue
strategic competitiveness. In this sense, the chosen strategy indicates what the firm will do as
well as what the firm will not do.

Chapter 2 : The external environment

1. The general environment (elements in the broader society that affect industries and their
firms).
The industry environment is the set of factors that directly influences a firm and
itscompetitive actions and responses:the threat of new entrants, the power of suppliers,the
power of buyers, the threat of product substitutes, and the intensity of rivalry
amongcompetitors.Most firms face external environments that are highly turbulent,
complex, and globalconditions that make interpreting those environments difficult. An
opportunity is a condition in the general environment that ifexploited effectively, helps a
company achieve strategic competitiveness.A threat is a condition in the general
environment that may hinder a companysefforts to achieve strategic competitiveness.
Scanning

Identifying early signals of environmental changes and trends

Monitoring

Detecting meaning through ongoing

environmental changes and trends

Forecasting

Developing projections of anticipated outcomes based on

monitored changes and trends

Assessing

Determining the timing and importance of environmental

changes and trends form firms strategies and their
management.

observations

of

The general environment has seven segments: demographic, economic, political/legal,

sociocultural, technological, global, and physical. For each segment, the firm wants to
determine the strategic relevance of environmental changes and trends.

2. The industry environment is the set of factors that directly influences a firm and its
competitive actions and responses: the threat of new entrants, the power of suppliers, the

power of buyers, the threat of product substitutes, and the intensity of rivalry among
competitors. In total, the interactions among these five factors determine an industrys
profit potential; in turn, the industrys profit potential influences the choices each firm
makes about its strategic actions. The challenge for a firm is to locate a position within an
industry where it can favorably influence the five factors or where it can successfully
defend against their influence. The greater a firms capacity to favorably influence its
industry environment, the greater the likelihood that the firm will earn above-average
returns.
Analysis of the general environment is focused on environmental trends while an analysis
of the industry environment is focused on the factors and conditions influencing an
industrys profitability potential and an analysis of competitors is focused on predicting
competitors actions, responses, and intentions. In combination, the results of these three
analyses influence the firms vision, mission, and strategic actions. Although we discuss
each analysis separately, performance improves when the firm integrates the insights
provided by analyses of the general environment, the industry environment, and the
competitor environment.

3. The competitor environment (in which the firm analyzes each major competitors future
objectives, current strategies, assumptions, and capabilities).
Competitor analysis focuses on each company against which a firm directly competes.In a
competitor analysis,the firm seeks to understand the following:

What drives the competitor, as shown by its future objectives

What the competitor is doing and can do, as revealed by its current strategy

What the competitor believes about the industry, as shown by its assumptions

What the competitors capabilities are, as shown by its strengths and weaknesses

Chapter 3 : The internal environment

Firms with a competitive advantage offer value to customers that is superior to the
value competitors provide. Firms create value by innovatively bundling and leveraging their
resources and capabilities. Firms unable to creatively bundle and leverage their resources and
capabilities in ways that create value for customers suffer performance declines

Creating Value
Value is measured by a productsperformance characteristics and by its attributes for which
customers are willing to pay.Firms with a competitive advantage offer value to customers that
is superior to thevalue competitors provide. Firms create value by innovatively bundling and
leveragingtheir resources and capabilities.
The Challenge of Analyzing theInternal Organization
The challenge and difficulty of making effective decisions are implied by
preliminaryevidence suggesting that one-half of organizational decisions fail. Sometimes,
mistakesare made as the firm analyzes conditions in its internal organization. A firm can
stillgrow through well-intended errors; the learning generated by making and correcting
mistakescan be important to the creation of new competitive advantages. Moreover, firmsand
those managing them can learn from the failure resulting from a mistakethat is,what not to
do when seeking competitive advantage.
Managers face uncertainty in terms of new proprietary technologies, rapidly
changingeconomic and political trends, transformations in societal values, and shifts in

customerdemands.Environmental uncertainty increases the complexity and range of issues

toexamine when studying the internal environment.
-

Resources
Some of a firms resources (defined in Chapter 1 as inputs to the firms production
process) are tangible while others are intangible. Tangible resources are assets that can be
observed and quantified. Production equipment, manufacturing facilities, distribution
centers, and formal reporting structures are examples of tangible resources. intangible
resources are relatively difficult for competitors to analyze and imitate. Knowledge, trust
between managers and employees, managerial capabilities, organizational routines (the
unique ways people work together), scientific capabilities, the capacity for innovation, brand
name, and the firms reputation for its goods or services and how it interacts with people
(such as employees, customers, and suppliers) are intangible resources.

Capabilities
Capabilities exist when resources have been purposely integrated to achieve a specific
task or set of tasks. These tasks range from human resource selection to product marketing
and research and development activities.

Core Competencies
Defined in Chapter 1, core competencies are capabilities that serve as a source of
competitive advantage for a firm over its rivals. Core competencies distinguish a company
competitively and reflect its personality. Core competencies emerge over time through an
organizational process of accumulating and learning how to deploy different resources and
capabilities.

Four Criteria of Sustainable Competitive Advantage

Value Chain Analysis

Value chain analysis allows the firm to understand the parts of its operations that
create value and those that do not. Understanding these issues is important because the
firm earns above-average returns only when the value it creates is greater than the costs
incurred to create that value. The value chain is a template that firms use to analyze their
cost position and to identify the multiple means that can be used to facilitate
implementation of a chosen business-level strategy.

Outsourcing
Concerned with how components, finished goods, or services will be obtained, outsourcingis
the purchase of a value-creating activity from an external supplier. Outsourcing can be
effective because few, if any, organizations possess the resources andcapabilities required to

achieve competitive superiority in all primary and support activities.Firms must outsource
only activities where they cannot create value or where they areat a substantial disadvantage
compared to competitors. To verify that the appropriateprimary and support activities are
outsourced, managers should have four skills: strategicthinking, deal making, partnership
governance, and change management.
Competencies, Strengths, Weaknesses, andStrategic Decisions
Firms need to have the appropriate resources and capabilities to developthe desired strategy
and create value for customers and other stakeholders such asshareholders.When the firm
cannot create value in either an internal primaryor support activity, outsourcing is considered.
Usedcommonly in the global economy, outsourcing is the purchaseof a value-creating activity
from an external supplier.The firm should outsource only to companies possessing
acompetitive advantage in terms of the particular primary orsupport activity under
consideration. In addition, the firmmust continuously verify that it is not outsourcing
activitiesfrom which it could create value.
Chapter 4 : Business-Level Strategy
The purpose of a business-level strategy is to create differences between the firms
position and those of its competitors
Types of Business-Level Strategies
A business-level strategy is an integrated and coordinated set of commitments and
actions the firm uses to gain a competitive advantage by exploiting core competencies in
specific product markets. Five business-level strategies (cost leadership, differentiation,
focused

cost

leadership,

focused

differentiation,

leadership/differentiation) are examined in the chapter.

and

integrated

cost