1 - STRATEGIC MANAGEMENT AND STRATEGIC COMPETITIVENESS

TWENTY-FIRST CENTURY COMPETITION  The information age: Internet and the global proliferation
Factors in Today’s Competitive Markets of low-cost computing power
 Global Economy  Increasing knowledge intensify as an intangible source of
 Globalization competitive advantage
 Rapid Technological Change
 Increasing importance of Knowledge and People STRATEGIC FLEXIBILITY
 Flexibility – ability to adapt to changes
STRATEGIC COMPETITIVENESS  Involves coping with the uncertainty and risks of
hypercompetitive environments.
 Must first overcome built-up organizational inertia.
Formulation and  Requires developing the capacity for continuous learning
implementation of a and applying the new and updated skills sets and
superior value- competencies to the firm’s competitive advantage.
creating strategy
THE INDUSTRY ORGANIZATION (I/O) MODEL OF ABOVE-
AVERAGE RETURNS
The Firm’s Strategic Choices
Commitments and actions to achieve above-  Economies of scale – higher quantity of units produced,
average performance and returns lower unit price
 Barriers to market entry – obstacles usually placed by the
government
 Diversification – expanding in different industries (e.g.:
What the firm COMPETITIVE What the firm conglomerate)
will do ADVANTAGE will not do  Product differentiation
 Industry concentration – focusing on a specific industry
by improving (hindi sila nagdidiversify)
 Market frictions – conflicts in the market
THE GLOBAL COMPETITIVE LANDSCAPE
o Consumers versus producers – due to price
Increasing:
o Consumers versus consumers
 Market volatility and instability due to the rapid pace of o Producers versus producers – due to increase
change in markets in sales and profit
 Blurring of market boundaries
 Globalized flow of financial capital I/O Model
 Need for flexibility, speed, innovation, and integration in 1. Study the external environment, especially the industry
the use of technology environment.
 Strategic and operational complexity of global-scale o The External Environment:
competition  The general environment
 Rising product quality standards  The industry environment
 The competitor environment
Decreasing: 2. Locate an industry with high potential for above-average
 Traditional time for adapting to change returns
 Traditional sources of competitive advantage o Attractive Industry  an industry whose
 Traditional managerial mindset structural characteristics suggest above-
average returns
HYPERCOMPETITION 3. Identify the strategy called for the attractive industry to
Factors earn above-average returns
 Global Economy o Strategy Formation  selection of a strategy
 Technology linked with above-average returns in a particular
industry
Strategic Options in Hypercompetitive Environments 4. Develop or acquire assets and skills needed to
 Use of price-quality poisoning to build market presence implement the strategy
 Creation of new know-how and use of first-mover o Assets and Skills  assets and skills required
advantage to implement a chosen strategy
 Protection or invasion of established geographic or 5. Use the firm’s strengths (its developed or acquired assets
product markets and skills) to implement the strategy.
o Strategy Implementation  selection of
COMPETITIVE SUCCESS FACTORS strategic actions linked with effective
Top Corporate Performers implementation of the chosen strategy
 Have an entrepreneurial/opportunistic mindset o Superior Returns  earning of above-average
o Entrepreneurial – introducing new things to the returns
market
o Opportunistic – sometimes the products they I/O Model Assumptions
produce accidentally hit the market very well  The external environment imposes pressures and
 Are market/customer-needs oriented constraints that determine strategic choices.
o Pressures:
 Make effective use of valuable competencies
 Political
o Effectiveness and efficiency are able to achieve
 Economic
the goal, but efficiency is about maximising
 Sociocultural
resources with less wastage
 Technological
 Offer new and innovative products and services
 Demographic
o People’s needs change; thus, company should
 Global
change. Otherwise, their products will be
 Similarity in strategically relevant resources causes
obsolete.
competitors to pursue similar strategies.
TECHNOLOGY AND TECHNOLOGICAL CHANGES  Resource differences among competitors are short-lived
Technological trends impacting the global competitive due to resource mobility across firms.
environment o Mobility  move
 Increasing rate of technology diffusion and the  Strategic decision makers are rational and engage in
emergence of disruptive technologies profit-maximizing behaviours.
1 - STRATEGIC MANAGEMENT AND STRATEGIC COMPETITIVENESS
FIVE FORCES MODEL OF COMPETITION (by Michael Porter)
Substitutes
Industry
Suppliers
Rivalry Buyers
Potential
Entrants
 Bargaining Power of Suppliers  if monopoly, they can
dictate the price and date of delivery
 Bargaining Power of Buyers  profit of organization is
affected
Five Forces Model Assumptions
 Industry profitability (i.e., rate of return on invested capital
relative to cost of capital) is a function of interactions
among the five forces.
 Industry attractiveness equates to its profitability potential
for earning above-average returns by:
o Producing standardized goods or services at
costs below competitor costs (a cost leadership
strategy).
o Producing differentiated goods or services for
which customers are willing to pay a price
premium (a differentiation strategy).
 Iba iba ang goods because they add
value to it
THE RESOURCE-BASED MODEL OF ABOVE-AVERAGE
RETURNS
 Resources  inputs (supplies)
 Capability  anong magagawa mo?
 Core Competencies  source of edge over competitors
The Resources-Based Model
1. Identify the firm’s resources. Study its strengths and
weaknesses compared with those of competitors.
o Resources  inputs into a firm’s production
processes
2. Determine the firm’s capabilities. What do the capabilities
allow the firm to do better than its competitors?
o Capability  capacity of an integrated set of
resources to integratively perform a task or
activity
3. Determine the potential of the firm’s resources and
capabilities in terms of a competitive advantage
o Competitive advantage  ability of a firm to
outperform its rivals
4. Locate an attractive industry
o Attractive industry  industry with opportunities
that ca be exploited by the firm’s resources and
capabilities
5. Select a strategy that best allows the firm to utilize its
resources and capabilities relative to opportunities in the
external environment
o Strategy Formulation and Implementation 
strategic actions taken to earn above-average
returns
o Superior Returns  earning of above-average
returns
Resource-Based Model Assumptions
 Firms acquire different resources  due to different
products and suppliers
 Firms develop unique capabilities based on how they
combine and use resources.
 Resources and certain capabilities are not highly mobile
across firms  they don’t move
 Differences in resources and capabilities are the bases of
competitive advantage and a firm’s performance rather
than its industry’s structural characteristics.
o Large organizations perform bureaucracy,
meaning they perform the same functions (eg:
LTO  driver’s license)
RESOURCES AS CORE COMPETENCIES
How resources become core competencies
(e.g.: human resources)
 Costly to imitate
 Rare
 Valuable
 Non-substitutable
Competitive Strategy Decision
 Industry Organisation (I/O) Model
 Resource-Based Model
VISION STATEMENT
A Successful Vision
 An enduring word picture of what the firm wants to be and
expects to achieve in the future.
o How do you see yourself in five years?
 Stretches and challenges its people.
 Reflects the firm’s values and aspirations.
 Most effective when its development includes all
stakeholders.
 Recognizes the firm’s internal and external competitive
environments.
 Supported by upper management decisions and actions.
MISSION STATEMENT
 Shows the purpose of the existence of the organization
An Effective Mission
 Specifies the present business or businesses in which
the firm intends to compete and customers it intends to
serve.
 Has a more concrete, near-term focus on current product
markets and customers than the firm’s vision.
 Should be inspiring and relevant to all stakeholders.
STAKEHOLDERS
Primary Stakeholders (individuals, groups, and organizations)
 Can affect development of the firm’s vision and mission
 Are affected by the strategic outcomes achieved by the
firm
 Can have enforceable claims/interest on the firm’s
performance
 Are influential when in control of critical or valued
resources
Categories of Stakeholders
Capital Market Stakeholders  claim: increase the value of share
price
 Shareholders
 Major suppliers of capital (e.g.: banks)
Conflicting expectations of shareholders and lenders
 Influence
 Preservation of investment
 Risk/return
 Enhanced wealth
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Product Market Stakeholders

 Primary Customers  claim/interest: continuous
patronization
 Suppliers  claim or interest: continuous purchase
 Host communities
 Unions (organization that protects the rights of
employees)

Organizational Stakeholders
 Employees
 Managers
 Nonmanagers

Responsibilities of strategic leaders for development and effective

use of the firm’s human capital
 Education and skills of the employees
 Organizational culture and ethical work environment
 Strategic goals and global standards
 International assignments

THE WORK OF EFFECTIVE STRATEGIC LEADERS

Strategic Leaders
 Have a strong strategic orientation that relies on thorough
analysis when taking action.
 Located at various levels throughout the firm.
 Want the firm and its people to accomplish more.
 Innovative thinkers who promote innovation.
o Innovation is introducing new things in the
market
 Can leverage relationships with external parties while
simultaneously promoting exploratory learning.
 Have an ambicultural (global mindset) approach to
management.

THE STRATEGIC MANAGEMENT PROCESS: THE ASP

PROCESS

Before: ADA (Analyses, Decision, Action)

Analyses
 The External Environment
 The Internal Organization

Strategies
 Business-level Strategies
 Marketplace Competition
 Corporate-level Strategies
 Diversified Portfolio Management
 International Strategies
 Cooperative Strategies

Performance
 Governance Mechanisms
 Organizational Structure
 Strategic Leadership
 Strategic Entrepreneurship