Summary Strategic Management full summay 2023

Strategic Management
CH1
- Strategic competitiveness  achieved when a firm successfully formulates and
implements a value-creating strategy
- Strategy  integrated and coordinated set of commitments and actions design to exploit
core competencies and gain competitive advantage
 Firms chose from competing alternatives  what to do VS what not to do
- Competitive advantage  strategy which competitors are unable to duplicate or find too
costly to imitate
 Confirmed when imitation attempts fail  the advantage is not permanent
- Above-average returns  returns in excess of what an investor expects to earn from other
investments with a similar amount of risk
 Risk  investor’s uncertainty about the economic gains or losses that will results from
a particular investment  must be effectively managed
 Measured in accounting figures, stock market returns, speed of growth
 Achieved through exploiting competitive advantages
- Average returns  returns equal to those an investor expects to earn from other
investments with a similar amount of risk
- Strategic management process  full set of commitments, decisions and actions required
for a firm to achieve strategic competitiveness and earn above-average returns
 Analyzing external VS internal environment  resources, capabilities, core
competencies (strategic input sources)
 Competitive landscape
- Evolving nature of competition  volatile markets + boundaryless industries +
globalization + technological changes
- Hypercompetition  assumptions of market stability replaced by notions of inherent
instability and change
 Based on dynamics of strategic maneuvering among global and innovative competitors
 Competitions based on price-quality positioning, new know-how and first-mover
markets
 Caused by global economy + rapid technological change
 Global economy  economy in which goods, services, people, skills, ideas move
freely across geographic borders
- Globalization  increasing economic interdependence among countries and their
organizations as reflected in the flow of goods and services, financial capital and
knowledge across county borders
 Large number of firms competing against each other in an increasing number of global
economies
 Higher performance standards in competitive dimensions  quality, cost, productivity,
product introduction and operational efficiency  must be met
 Overdiversification in global markets can have negative effects
- Technological diffusion VS disruptive technologies
 Technology diffusion  rate at which new technologies become available and are used
 Perpetual innovation  how rapidly and consistently new information-intensive
technologies replace older ones
 Disruptive technologies  technologies that destroy value if existing technology and
create new markets
 Information age + increasing knowledge intensity  growing value of intangible
resources

, - Strategic flexibility  set of capabilities used to respond to various demands and
opportunities existing in a dynamic and uncertain competitive environment
 Continuous learning
 I/O model of above average-returns

External environment  attractive industry  strategy formulation  assets and skills 
strategy implementation  superior returns

- Explains the external environment’s dominant influence on a firm’s strategic actions
 Industry and industry segment have a stronger influence on performance than internal
managerial choices
 Firm performance determined by range of industry properties  economies of scale,
barriers to marker entry, diversification, product differentiation and degree of
concentration of firms in an industry
 Returns are determined primarily by external characteristics rather than by the
firm’s unique resources and capabilities
- Underlying assumptions
 External environment imposes pressures and constraints that determine strategies that
can result in above-average returns
 Most firms competing within an industry or segment are assumed to control similar
strategically relevant resources and to pursue similar strategies based on such
resources
 Recourses used to implement strategies are assumed to be highly mobile across firms
 resource differences are short lived
 Organizational decision makers are assumed to be highly rational and committed to
acting in the firm’s best interest  assume profit-maximizing behaviors
 Five forces model to identify attractiveness of an industry and most advantageous
positioning given the structural characteristics
 Resources based model of above-average returns
Resources  capabilities  competitive advantage  attractive industry  strategy
formulation and implementation  superior return
- Each organization is a collection of unique resources and capabilities  the uniqueness of
such is the basis for the firm’s strategy and ability to achieved above-average returns
 Resources  inputs into a firm’s production process  capital equipment, individual
skills, patents, finances  physical, human & organizational capital  tangible VS
intangible
 Capabilities  capacity for a set of resources to perform a task or an activity in an
integrative manner
 Core competencies  capabilities that serve as a source of competitive advantage for
a firm over its rivals
- Differences in performances across time occur because of firm’s unique resources and
capabilities rather than the industries structural characteristics
 Firm’s acquire and develop resources and capabilities based on how they combine and
use resources  not highly mobile across firms
 Differences in resources and capabilities are the basis for competitive advantage 
become stronger and more difficult to imitate through continuous use
 The chosen strategy should allow a firm to use competitive advantages in an
attractive industry
- Resources are  valuable/rare/costly/nonsubstitutable
 If all are met then resources and capabilities become core competencies
- Vision  picture of what the firms want to be and what it wants to ultimately achieve

, - Mission  specifies the business in which the firm intends to compete and the customers
it intends to serve
- Stakeholders  individuals and groups who can affect the firm’s vision and mission, are
affected by the strategic outcomes the firm achieves through its operations and who have
enforceable claims on the firms performance
 Capital market stakeholders  shareholders/banks
 Product market stakeholders  primary customers, suppliers, host communities
 Organizational stakeholders  managers, employees
- Strategic leaders  people located in different parts of the firm using the strategic
management process to help the firm reach its vision and mission
- Organizational culture  complex set of ideologies, symbols and core values that are
shared throughout the firm and that influence how the firm conducts business
- Profit pool  total profits earned in an industry at all points along the value chain
CH2
 External environment
- Threats and opportunities  affect strategic action
 General environment  composed of dimension in the broader society that influence
an industry and the firms within it  segments
 Analysis of environmental trends
 Industry environment  set of factors that directly influence a firm and its competitive
actions and responses: the threat of new entrants’, power of suppliers, power of
buyers, threat of product substitutes and intensity of rivalry  interaction determines
industries profit potential
 Analysis of factors and conditions influencing an industry’s profitability potential
 Analysis of competitors  predicting competitors’ actions, responses and intentions
 External environmental analysis
 Opportunity  condition in the general environment that if exploited helps a
company achieve strategic competitiveness
 Threat  condition in the general environment that may hinder a company’s efforts
to achieve strategic competitiveness
- Components
 Scanning  identifying early signals of environmental changes and trend
 Monitoring  detecting meaning through ongoing observations of 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 for firms’ strategies and their management
- General environment segments
 Demographic  population size, age structure, geographic distribution, ethic mix,
income distribution
 Economic  nature and direction of the economy in which a firm competes or may
compete
 Political/legal  arena in which firms compete for attention, resources and voices and a
say in the regulations that define the interactions among governmental agencies and
firms
 Socio-cultural  attitudes and cultural values
 Technological segment  institutions and activities involved with creating knowledge
and translating that knowledge into outputs