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Chapter 1 Notes

by: Mackenzie Bauer

Chapter 1 Notes Mgmt 491 - Arvin Sahaym

Mackenzie Bauer
GPA 3.5
Mgmt 491
Arvin Sahaym

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Mgmt 491
Arvin Sahaym
Class Notes
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This 5 page Class Notes was uploaded by Mackenzie Bauer on Sunday February 22, 2015. The Class Notes belongs to Mgmt 491 - Arvin Sahaym at Washington State University taught by Arvin Sahaym in Spring2014. Since its upload, it has received 83 views. For similar materials see Mgmt 491 in Business at Washington State University.


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Date Created: 02/22/15
CHAPTER 1 NOTES STRATEGIC MANAGEMENT AND STRATEGIC COMPETITIVENESS Fundamental Questions of Strategy Why are some rms more successful than others What determines sustainable pro tability Macroeconomic factors GlobalNational markets Firmspecific Factors Overall competitive capability strategy Industry factors implementation Industry growth Productivity through ef cient and Competitive rivalry effective resource allocation Entry barriersNew entrants Adaptability to changing market Technological innovation conditions Customer tastes Strategic Management Process 0 The full set of commitments decisions and actions required for a rm to achieve strategic competitiveness and earn aboveaverage returns Step 1 Analyze Strategic Inputs Evaluate competitive global landscape 0 Challenging landscape created by an emerging global economy its resulting globalization and rapid changes in technology gt Global Economy 0 Free movement across borders gt March of Globalization 0 Increased economic interdependence 0 Increased range of opportunities gt Technological Changes 0 Technological Diffusion and Disruptive Technologies 0 The Information Age 0 Increasing Knowledge Intensity Step 2 Take Strategic Action 9 Formulate Strategy Based on Vision and Mission 0 Vision A enduring BIG picture of what the rm wants to be and broadly what it wants to ultimately achieve 0 Stretches and challenges people and evokes emotions and dreams 0 Effective vision statements are Consistent with strategic leaders decisions and actions Developed by a host of people from across the organization Clearly tied to environmental conditions Step 3 Realize Strategic Outcomes 0 Responsibility of strategic leaders People located in different parts of the rm who are using the strategic management process to help the rm reach its vision and mission 0 Strategic leaders must predict the potential outcomes of their strategic decisions 0 To do so they must calculate pro t pools in their industry that are linked to value chain activities 0 A pro t pool entails the total pro ts earned in an industry at all points along the value chain There are two fundamentally different models to analyze strategic inputs 9 Industrial Organization Model 9 Resource Based Model Industrial Organization IO Model 0 Aboveaverage returns are determined primarily by factors EXTERNAL to the rm 0 What matters in the I O model Industry structure Attractiveness of the external environment 0 The industry in which a rm competes has a stronger in uence on the rm s performance than do the choices managers make inside their organizations IO Model of AboveAverage Returns External Environments General 1 Strategy is dictated by the external environment of the rm what opportunities exist in these environments 2 Firm develops internal skills required by external environment what can the firm do about the opportunities Environment Four Assumptions of the IO Model 1 External environment imposes pressures and constraints that determine strategies leading to aboveaverage returns 2 Most rms competing in an industry control similar strategically relevant resources and pursue similar strategies Resources used to implement strategies are highly mobile across rms 4 Organizational decision makers are assumed to be rational and committed to acting in the rm s best interests pro tmaximizing U I we ammmx xras uIndustrv I l l I strutayy gt Strata y JIqu lementation 51102er lt ResourceBased Model Aboveaverage returns are determined primarily by factors INTERNAL to the rm 0 What matters in the resourcebased model Developingobtaining valuable resources Resources should also be hard to imitate Barriers to resourcecapabilities acquisition Resources Inputs into a rm s production process 0 Capital equipment 0 Skills of individual employees 0 Patents 0 Finances Talented managers Capabilities 0 Capacity of a set of resources to perform in an integrative manner 0 A capability should not be So simple that it is highly imitable So complex that it de es internal steering and control The ResourceBased Model of AboveAverage Returns 0 Model Assumptions 1 Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and that is the primary source of its returns 2 Capabilities evolve and must be managed dynamically Differences in rms performances are due primarily to their unique resources and capabilities rather than structural characteristics of the industry 4 Firms acquire different resources and develop unique capabilities U Strategy 1 Strategy is dictated by the firm s Competitive Advantage unique resources and capabilities Resources 2 Find an environment in which to Capabilities exploit these assets where are the best opportumtles Core Competencies A Strategic Management Process 0 Derive strategic inputs based on external and internal environments Identify marketplace opportunities and threats Determine how to use core competencies Execute strategic action Formulate and implement strategies to leverage environment and resources and capabilities Realize aboveaverage returns with pro t pool 0 Seek feedback to improve strategies 5 Forces Model of Competition 0 Firms earn aboveaverage returns by 1 Cost leadership 0 Producing standardized products or services at costs below those of competitors a cost leadership strategy 2 Differentiation 0 Manufacturing differentiated products for which customers are willing to pay a price premium 0 IBM


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