Chapter 1
Strategic Management and Strategic Competitiveness
LEARNING OBJECTIVES
1. Define strategic competitiveness, strategy, competitive advantage, above-average
returns, and the strategic management process.
1. Describe the competitive landscape and explain how globalization and
technological changes shape it.
2. Use the industrial organization (I/O) model to explain how firms can earn above-
average returns.
4. Use the resource-based model to explain how firms can earn above average-
returns.
5. Describe vision and mission and discuss their value.
6. Define stakeholders and describe their ability to influence organizations.
7. Describe the work of strategic leaders.
8. Explain the strategic management process.
CHAPTER OUTLINE
Opening Case: Alibaba - An Online Colossus in China Goes Global
THE COMPETITIVE LANDSCAPE
The Global Economy
Technology and Technological Changes
Strategic Focus: Starbucks - “Juicing” its Earnings per Store through technology
Innovations
,THE I/O MODEL OF ABOVE-AVERAGE RETURNS
THE RESOURCE-BASED MODEL OF ABOVE-AVERAGE RETURNS
VISION AND MISSION
Vision
Mission
STAKEHOLDERS
Classifications of Stakeholders
Strategic Focus: The Failure of BlackBerry to Develop an Ecosystem of Stakeholders
STRATEGIC LEADERS
The Work of Effective Strategic Leaders
Predicting Outcomes of Strategic Decisions: Profit Pools
THE STRATEGIC MANAGEMENT PROCESS
SUMMARY
REVIEW QUESTIONS
ADDITIONAL QUESTIONS AND EXERCISES
MINDTAP RESOURCES
,LECTURE NOTES
Chapter Introduction: You may want to begin this lecture with a general comment
that Chapter 1 provides an overview of the strategic management process. This
chapter introduces a number of key terms and models that students will study in
more detail in Chapters 2 through 13. Stress the importance of students paying
careful attention to the concepts introduced in this chapter so that they are well-
grounded in strategic management concepts before proceeding further.
OPENING CASE
Alibaba: An Online Colossus in China Goes Global
China now has world's largest number of internet users and Alibaba is China’s
largest ecommerce company (23 percent owned by Yahoo and 36 percent by Japan’s
SoftBank). In 2014, when Alibaba completed its initial public offering (IPO) on the
New York Stock Exchange, it immediately became worth more than Amazon and
eBay combined, and has a larger market capitalization than Wal-Mart. Transactions
of goods on Alibaba’s websites account for more than two percent of China’s GDP in
2012.
Teaching Note
To initiate discussion, ask how Alibaba has achieved strategic competitiveness as
described in this chapter. In addition, ask students how Alibaba top management
has used the strategic management process as the foundation for the
commitments, decisions, and the actions they took to pursue strategic
competitiveness and above-average returns.
Define strategic competitiveness, strategy, competitive advantage,
1
above-average returns, and the strategic management process.
, DEFINING STRATEGY
Strategic competitiveness is achieved when a firm successfully formulates and
implements a value-creating strategy. By implementing a value-creating strategy that
current and potential competitors are not simultaneously implementing and that
competitors are unable to duplicate, or find too costly to imitate, a firm achieves a
competitive advantage.
Strategy can be defined as an integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a competitive advantage.
So long as a firm can sustain (or maintain) a competitive advantage, investors will earn
above-average returns. Above-average returns represent returns that exceed returns
that investors expect to earn from other investments with similar levels of risk
(investor uncertainty about the economic gains or losses that will result from a
particular investment). In other words, above average-returns exceed investors’
expected levels of return for given risk levels.
Teaching Note
Point out that in the long run, firms must earn at least average returns and
provide investors with average returns if they are to survive. If a firm earns
below-average returns and provides investors with below-average returns,
investors will withdraw their funds and place them in investments that earn at
least average returns. At this point it may be useful to highlight the role
institutional investors’ play in regulating above average performances.
In smaller new venture firms, performance is sometimes measured in terms of the
amount and speed of growth rather than more traditional profitability measures - new
ventures require time to earn acceptable returns.
A framework that can assist firms in their quest for strategic competitiveness is the
strategic management process, the full set of commitments, decisions and actions
Strategic Management and Strategic Competitiveness
LEARNING OBJECTIVES
1. Define strategic competitiveness, strategy, competitive advantage, above-average
returns, and the strategic management process.
1. Describe the competitive landscape and explain how globalization and
technological changes shape it.
2. Use the industrial organization (I/O) model to explain how firms can earn above-
average returns.
4. Use the resource-based model to explain how firms can earn above average-
returns.
5. Describe vision and mission and discuss their value.
6. Define stakeholders and describe their ability to influence organizations.
7. Describe the work of strategic leaders.
8. Explain the strategic management process.
CHAPTER OUTLINE
Opening Case: Alibaba - An Online Colossus in China Goes Global
THE COMPETITIVE LANDSCAPE
The Global Economy
Technology and Technological Changes
Strategic Focus: Starbucks - “Juicing” its Earnings per Store through technology
Innovations
,THE I/O MODEL OF ABOVE-AVERAGE RETURNS
THE RESOURCE-BASED MODEL OF ABOVE-AVERAGE RETURNS
VISION AND MISSION
Vision
Mission
STAKEHOLDERS
Classifications of Stakeholders
Strategic Focus: The Failure of BlackBerry to Develop an Ecosystem of Stakeholders
STRATEGIC LEADERS
The Work of Effective Strategic Leaders
Predicting Outcomes of Strategic Decisions: Profit Pools
THE STRATEGIC MANAGEMENT PROCESS
SUMMARY
REVIEW QUESTIONS
ADDITIONAL QUESTIONS AND EXERCISES
MINDTAP RESOURCES
,LECTURE NOTES
Chapter Introduction: You may want to begin this lecture with a general comment
that Chapter 1 provides an overview of the strategic management process. This
chapter introduces a number of key terms and models that students will study in
more detail in Chapters 2 through 13. Stress the importance of students paying
careful attention to the concepts introduced in this chapter so that they are well-
grounded in strategic management concepts before proceeding further.
OPENING CASE
Alibaba: An Online Colossus in China Goes Global
China now has world's largest number of internet users and Alibaba is China’s
largest ecommerce company (23 percent owned by Yahoo and 36 percent by Japan’s
SoftBank). In 2014, when Alibaba completed its initial public offering (IPO) on the
New York Stock Exchange, it immediately became worth more than Amazon and
eBay combined, and has a larger market capitalization than Wal-Mart. Transactions
of goods on Alibaba’s websites account for more than two percent of China’s GDP in
2012.
Teaching Note
To initiate discussion, ask how Alibaba has achieved strategic competitiveness as
described in this chapter. In addition, ask students how Alibaba top management
has used the strategic management process as the foundation for the
commitments, decisions, and the actions they took to pursue strategic
competitiveness and above-average returns.
Define strategic competitiveness, strategy, competitive advantage,
1
above-average returns, and the strategic management process.
, DEFINING STRATEGY
Strategic competitiveness is achieved when a firm successfully formulates and
implements a value-creating strategy. By implementing a value-creating strategy that
current and potential competitors are not simultaneously implementing and that
competitors are unable to duplicate, or find too costly to imitate, a firm achieves a
competitive advantage.
Strategy can be defined as an integrated and coordinated set of commitments and
actions designed to exploit core competencies and gain a competitive advantage.
So long as a firm can sustain (or maintain) a competitive advantage, investors will earn
above-average returns. Above-average returns represent returns that exceed returns
that investors expect to earn from other investments with similar levels of risk
(investor uncertainty about the economic gains or losses that will result from a
particular investment). In other words, above average-returns exceed investors’
expected levels of return for given risk levels.
Teaching Note
Point out that in the long run, firms must earn at least average returns and
provide investors with average returns if they are to survive. If a firm earns
below-average returns and provides investors with below-average returns,
investors will withdraw their funds and place them in investments that earn at
least average returns. At this point it may be useful to highlight the role
institutional investors’ play in regulating above average performances.
In smaller new venture firms, performance is sometimes measured in terms of the
amount and speed of growth rather than more traditional profitability measures - new
ventures require time to earn acceptable returns.
A framework that can assist firms in their quest for strategic competitiveness is the
strategic management process, the full set of commitments, decisions and actions
