From the LEARN, determine which of the two primary drivers of the competitive landscape is more influential.
Before starting this activity, review the Week 1 LEARN (e-Activity) Response to the following:
1) From the LEARN, determine which of the two primary drivers of the competitive landscape is more influential.
a. Explain your rationale.
2) Identify an organization that could benefit from the application of the I/O Model of Above-Average Returns
a. Follow the five steps to justify your answer.
b. Do not use Apple or Walmart in this exercise, nor should the organization you select be the same as another post.
Be sure to respond to at least one (1) other student and/or myself student (more responses may be required to get your percentage to 100%).
ATTACHED FILE(S)
Senior Seminar in Business Administration
BUS499
Strategic Management and Strategic Competitiveness
Welcome to the Government Contract Law.
In this lesson we will discuss Strategic Management and Strategic Competitiveness.
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Objectives
Upon completion of this lesson, you will be able to:
Identify the vision, mission, and stakeholders of a firm
When you complete this lesson you will be able to:
Identify the vision, mission, and stakeholders of a firm.
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Supporting Topics
The Competitive Landscape
The I/O Model of Above Average-Returns
The Resource-Based Model of Above Average-Returns
Vision and Mission
Stakeholders
Strategic Leaders
The Strategic Management Process
In order to achieve this objective, the following supporting topics will be covered:
The competitive landscape;
The I/O model of above average-returns;
The resource-based model of above average-returns;
Vision and mission;
Stakeholders;
Strategic leaders; and
The strategic management process.
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The Competitive Landscape
Competition is Changing
Money is scare
Markets are becoming volatile
Firms effectively using the strategic management process
Hypercompetition
Challenge competitors
Competition between many of the world’s industries is changing. Many of these industries are competing due to money being scare and markets becoming volatile. Boundaries that once seemed drawn between industries are becoming blurred. An example of this challenge would be the advances in interactive computer networks and telecommunications. These advancements have entered into the realm of the entertainment industry. We also see that many partnerships in the entertainment industry further blur the boundaries of the industry. In order to be successful and maintain a competitive edge, managers must adopt new strategies to stay current with the evolving conditions.
Many firms effectively use the strategic management process to help reduce the likelihood of failure with various challenges they may encounter.
Hypercompetition is a term often used to illustrate the competitive landscape. The conditions of hypercompetition assume that market stability is replaced by notions of inherent instability and change.
Hypercompetition results from the dynamics of strategic maneuvering among global and innovative combatants. It is a condition of rapidly escalating competition based on the following:
Price quality positioning;
Competition to create new know-how and establish first mover advantage; and
Competition to protect or invade established product or geographic markets.
In a hypercompetitive market, firms will want to challenge their competitors with the end goal of improving their competitive position and performance. The emergence of a global economy and technology along with specifically rapid technological changes are the two primary elements of hypercompetitive environments and help create today’s competitive landscape.
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The Competitive Landscape, continued
Global Economy
Helps create opportunities and challenges
Examples
European Union
700,000,000 potential customers
China
Seen as a low competition market and low cost producer
Now is an extremely competitive market
A global economy refers to the goods, services, people, skills, and ideas that move freely across geographic borders. The emergence of the global economy helps create interesting opportunities and challenges. For example, the European Union has become one of the world’s largest markets, with seven hundred million potential customers. For several years China was seen as a low competition market and a low cost producer. Today, China is now an extremely competitive market, with local markets seeking MNCs or multinational corporations. Now these local markets must fiercely compete against other MNCs and those local companies that are more cost effective and faster with their product development.
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The Competitive Landscape, continued
Globalization
Seen as a product of large firms competing against each other
Can increase the range of opportunities for companies
Higher Performance Standards
Firms must exceed global standards to earn above average returns
Overdiversification
Globalization refers to a growing interdependence among countries and their organizations, as shown by the flow of goods and services, financial capital, and knowledge across the countries’ borders. Globalization can be seen as a product of large numbers of firms competing against each other throughout a number of global economies.
In some globalized markets and industries, financial capital can be obtained in one national market and used to buy raw materials in another. This goes to show that globalization can increase the range of opportunities for companies competing in the current competitive landscape. Firms must make culturally sensitive decisions when engaging in globalization with their operations. Overall, it is important to note that globalization has led to higher performance standards in many competitive dimensions, including the following:
Quality;
Cost;
Productivity;
Product introduction time; and
Operational efficiency.
Firms must understand that in order to compete in today’s world, companies must exceed global standards to earn above average returns. Globalization, while positive, does offer potential risks. Risks of participating outside of the firm’s domestic country in the global economy is referred to as a liability of foreignness. One risk of entering the global market is the amount of time required for firms to learn the proper ways to be competitive in new markets. If a firm does not grasp the concepts of being competitive, their performance can suffer until this knowledge is grasped sufficiently.
Additionally, a firm’s performance may suffer with substantial amounts of globalization. A firm may suffer from this principle by overdiversifying internationally beyond their ability. As a result of this, overdiversification negatively affects a firm’s overall performance.
Due to all of these possible issues, it is best to effectively use the strategic management process. While getting involved in global markets is an attractive option for some companies, it is not the only way a company can be strategically competitive.
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The Competitive Landscape, continued
Technology Related Trends and Conditions
Technology Diffusion
Has increased greatly over 15-20 years
Perceptual innovation
Imitation of Competitor Actions
Technology-related trends and conditions can be placed into the following three categories:
Technology diffusion and disruptive technologies;
The information age; and
Increasing knowledge intensity.
These three categories illustrate several different ways that technology is significantly altering competition and contributing to unstable competitive environments.
The rate of technology diffusion has increased greatly over the past fifteen to twenty years. A word often used along with technology diffusion is perpetual innovation. This term refers to the rapidly and consistently new technologies that replace older ones. A competitive premium is placed on being able to produce new innovative and creative products quickly. We see that products which are somewhat indistinguishable because of the growth of technology use the speed to market strategy. These new innovative products derive from an understanding of global standards and expectations of product functionality.
Another indicator of rapid technology diffusion is that it now may take less time for firms to gather information about their competitors’ research, development and product decisions. We see that in the global economy, competitors will often imitate a firm’s successful competitive actions within a few days. As a result of methods like this, we see a reduction in the competitive benefits of patents. However, we also see that patents used today are an effective way of protecting proprietary technology.
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The Competitive Landscape, continued
Changes in Information Technology
Technological Developments
Cell phones, computers, and social networking
Declining Costs of Information Technologies
Global proliferation
Availability of Information Technologies
Internet
Price changes from ISPs
Hypercompetition
Dramatic changes in information technology have occurred in recent years. Everything we use in our daily live, such as personal computers, cellular phones, and multiple social networking sites, shows the end result of technological developments. An important outcome of these changes is the ability to effectively and efficiently access and use information. These information technology advances have given small firms more flexibility in competing with large firms. Using technology efficiently will help promote and increase technology diffusion.
The declining costs of information technologies and the increased accessibility to these technologies further paints an image of the current competitive landscape. We also see that the global proliferation of relatively inexpensive computing power and the ability to link on a global scale via computer networks further supports the diffusion of information technologies.
Due to this unification and diffusion, the competitive potential of information technologies is now available to companies of all sizes throughout the world. The Internet has really boomed, and is a centerpiece in our everyday lives. The Internet has also promoted hypercompetition amongst its users. Because the Internet is available to people throughout the world, it allows the delivery of information to computers in any location. Access to the Internet on smaller devices such as cell phones is another aspect that is having an impact on competition between companies.
However, there is a possibility that changes to Internet Management and Strategic Competitiveness Service Providers’ or ISPs’ pricing structures could affect the rate of growth for Internet-based applications. Many users today are downloading or streaming high definition movies, playing video games online, and so forth. If these pricing changes were to be implemented, the users would be affected the most by a pricing structure based around total usage.
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The Competitive Landscape, continued
Knowledge
Basis of technology and its applications
Shift from hard assets to intangible resources
Today’s competitive landscape puts a huge value on intangible resources
Capturing Intelligence
Turn intelligence into usable knowledge
Gaining of a competitive advantage
Develop and acquire knowledge to integrate into the organization
Strategic Flexibility
The basis of technology and its applications is knowledge. In today’s competitive world, knowledge is a critical organizational resource and increasingly a very valuable source of competitive advantage. We saw that starting in the 1980s, the basis of competition shifted from hard assets to intangible resources. An example of intangible resources would be relationships with customers and suppliers. Intangible resources build knowledge through experience, observation, and inference. Today’s competitive landscape puts a huge value on intangible resources, and they are expanding as a proportion of total shareholder value.
To enhance the probability of achieving strategic competitiveness, firms want to develop the ability to capture intelligence. They then want to transform this intelligence into usable knowledge, and then diffuse it rapidly throughout the company. Therefore, to gain a competitive advantage, firms must develop and acquire knowledge and then integrate it into the organization. Innovations require a strong knowledge base. Firms that lack the appropriate internal knowledge resources are less likely to invest money into research and development.
Knowledge spillovers are common, so firms must continue to keep current with their information. Due to this risk of spillovers, firms try to use their knowledge in productive ways. Firms will often build routines that facilitate the diffusion of local knowledge throughout the organization.
Strategic flexibility allows firms to get better in areas in which they may be lacking Using strategic flexibility allows for a set of capabilities to respond to various demands and opportunities that exist in today’s dynamic and uncertain competitive environments. Being strategically flexible sometimes means coping with uncertainty and risks that may follow. Firms should try to develop strategic flexibility in all areas of their operations. However, it is important for firms to develop strategic flexibility because inertia can build up over time. It is also important to note that a firm’s focus and past core competencies may actually slow change and affect strategic flexibility.
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The I/O Model of Above- Average Returns
Determining Strategies to Be a Successful Firm
External Environment
1960s-1980s
Industrial Organization Model of Above-Average Returns
Performance based on range of industry properties
Contains four assumptions
Challenges firms to find the best industry to thrive in
From the 1960s through the 1980s, the external environment was thought to be the most important factor in determining strategies firms need in order to be successful. The external environment’s influence on a firm’s strategic actions is shown using the industrial organization model of above-average returns. This model specifies that the industry or segment of an industry that chooses to compete in the market has a stronger influence on performance than the decisions mangers make within the company. The firm’s performance is believed to be determined primarily by a range of industry properties, including the following:
Economies of scale;
Barriers to market entry;
Diversification;
Product differentiation; and
The degree of concentration of firms in the industry.
Based around economics, the I/ O model contains four underlying assumptions. The first assumption is that the external environment is assumed to impose pressures and constraints that determine the strategies of above-average returns. Secondly, it is assumed that most firms competing within an industry are controlled using similar strategically relevant resources. These firms then pursue similar strategies in light of those resources. The third assumption is that resources used to implement strategies are highly mobile across firms. This would mean that any resource differences that might develop between firms will be short-lived. Lastly, it is assumed that organizational decision-makers are rational and committed to acting in the firm’s best interests. This can be attributed to their various profit maximizing behaviors.
The I/ O model challenges firms to find the best industry to thrive in. Since most firms have similar valuable resources that are mobile, performance can only increase if they operate in an area of high profit potential. It is also important to use resources wisely to implement a successful strategy.
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The I/O Model of Above-Average Returns, continued
The Five Forces Model of Competition
Suppliers
Buyers
Competitive Rivalry Among Industry Firms
Product Substitutes
Potential Entrants to the Industry
Many firms use this model to identify the attractiveness of an industry
The five forces model of competition is an analytical tool that firms use to help find the most attractive area of operation. The model encompasses several variables and tries to capture the complexity of competition. The five forces model suggests that the industry’s profitability results from the interactions among five forces which include the following:
Suppliers;
Buyers;
Competitive rivalry among current industry firms;
Product substitutes; and
Potential entrants to the industry.
Many firms use the five forces model to help them identify the attractiveness of an industry, as well as to find the best area to set up operations. This model promotes the idea that firms can earn above-average returns by producing either standardized goods or services at costs below those of competitors. These firms can also produce differentiated goods or services for which customers will pay a price premium.
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The Resource- Based Model of Above Average Returns
Assumes Organizations Consist of Unique Resources and Capabilities
Three Categories of Resources
Physical
Human
Organizational Capital
Either Tangible or Intangible
Capacities
Core Competencies
The next model we will look at is the resource-based model. This model assumes that each organization consists of a group of unique resources and capabilities. The basis of a firm’s strategy and its ability to earn above-average returns is based around the diversity of its resources and capabilities. Resources are inputs into a firm’s production process. A firm’s resources are classified into three categories, which include:
Physical;
Human; and
Organizational capital.
As we described previously, resources are either tangible or intangible in nature. Individual resources alone may not yield a competitive advantage. Capacities are a source of competitive advantage and stem from resources. A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. These capabilities can evolve over time, and managing them in a dynamic manner can help promote above-average returns. Resources and capabilities serve as another source of competitive advantage and are referred to as core competencies. These core competencies are often visible in the form of organizational functions.
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The Resource- Based Model of Above Average Returns, continued
Basis of Competitive Advantage
Resources and capabilities not being mobile across firms
Capabilities
Become stronger and more difficult to imitate
When Resources and Capabilities Don’t Yield a Competitive Advantage
Valuable
Rare
Costly to Imitate
No substitutable
This model also assumes that firms acquire different resources and develop unique capabilities based on how they combine and use resources. The basis of competitive advantage with this model stems from resources and capabilities not being highly mobile across firms. Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. It is important to note that a capability should not be too easy or too hard.
Not all of a firm’s resources and capabilities have the potential to be the foundation for a competitive advantage. This potential is realized when resources and capabilities are the following:
Valuable;
Rare
Costly to imitate; and
Nonsubstitutable.
Resources are deemed valuable when they allow a firm to take advantage of opportunities or neutralize threats in the external environment. When resources are labeled as rare, they are possessed by few current or potential competitors. Resources that are costly to imitate are often non-obtainable or obtainable only at a cost disadvantage. They are nonsubstitutable when they have no structural equivalents. Many resources can either be imitated or substituted over time. Due to this, it is hard to achieve and maintain a competitive advantage based on resources alone. Integration of individual resources is often completed in the form of capabilities. These capabilities are more likely to have the four attributes we reviewed.
When these four criteria are met, resources and capabilities form core competencies. As noted previously, research shows that both the industry environment and a firm’s internal assets affect that firm’s performance over time.
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Strategic Competitiveness & Competitive Advantage
Strategic Competitiveness
Value-creating strategy
Strategy
Competitive Advantage
Competitors do not duplicate
No competitive advantage is permanent
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. In this sense, the chosen strategy indicates what the firm intends to do, as well as what it does not intend to do.
A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. An organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors’ efforts to duplicate its strategy have ceased or failed. In addition, firms must understand that no competitive advantage is permanent. The speed with which competitors are able to acquire the skills needed to duplicate the benefits of a firm’s value-creating strategy determines how long the competitive advantage will last.
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Above-Average Returns
Definition
Exploiting a competitive advantage
Average returns
Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment. Returns are often measured in terms of accounting figures, such as return on assets, return on equity, or return on sales. Alternatively, returns can be measured on the basis of stock market returns, such as monthly returns.
In smaller, new venture firms, performance is sometimes measured in terms of the amount and speed of growth rather than more traditional profitability measures, because new ventures require time to earn acceptable returns on investors’ investments. Understanding how to exploit a competitive advantage is important for firms that seek to earn above-average returns.
Firms without a competitive advantage or that are not competing in an attractive industry earn, at best, average returns. Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk. In the long run, an inability to earn at least average returns results in failure. Failure occurs because investors withdraw their investments from those firms earning less-than-average returns.
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Stakeholders
Affect the vision and mission
Affected by strategic outcomes achieved
Have enforceable claims
Not every stakeholder has the same level of influence
Every organization involves a system of primary stakeholder groups with whom it establishes and manages relationships. Stakeholders are the individuals and groups who can affect the vision and mission of the firm, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance. Claims on a form’s performance are enforced through the stakeholders’ ability to withhold participation essential to the organization’s survival, competitiveness, and profitability. Stakeholders continue to support an organization when its performance meets or exceeds their expectations. Also, recent research suggests that firms that effectively manage stakeholder relationships outperform those that do not. Stakeholder relationships can therefore be managed to be a source of competitive advantage.
Although organizations have dependency relationships with their stakeholders, they are not equally dependent on all stakeholders at all times. As a consequence, not every stakeholder has the same level of influence. The more critical and valued a stakeholder’s participation, the greater a firm’s dependency on it. Greater dependence, in turn, gives the stakeholder more potential influence over a firm’s commitments, decisions, and actions. Managers must find ways to either accommodate or insulate the organization from the demands of stakeholders controlling critical resources.
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Stakeholders, continued
Capital market holders
Shareholders and major suppliers
Product market holders
Customers, suppliers, host communities, and unions
Organizational stakeholders
Employees
The parties involved with a firm’s operations can be separated into at least three groups. These groups are the capital market holders, the product market stakeholders, and the organizational stakeholders.
Shareholders and the major suppliers of a firm’s capital constitute the capital market holders. Shareholders and lenders both expect a firm to preserve and enhance the wealth they have entrusted to it. The returns they expect are commensurate with the degree of risk accepted with those investments. Dissatisfied lenders may impose stricter covenants on subsequent borrowing of capital. Dissatisfied shareholders may reflect their concerns through several means, including selling their stock.
Some might think that product market stakeholders, customers, suppliers, host communities, and unions, share few common interests. However, all four groups can benefit as firms engage in competitive battles. For example, depending on product and industry characteristics, marketplace competition may result in lower product prices being charged to a firm’s customers and higher prices being paid to its suppliers.
Employees, the firm’s organizational stakeholders, expect the firm to provide a dynamic, stimulating, and rewarding work environment. As employees, we are usually satisfied working for a company that is growing and actively developing our skills, especially those skills required to be effective team members and to meet or exceed global work standards. Workers who learn how to use new knowledge productively are critical to organizational success. In a collective sense, the education and skills of a firm’s workforce are competitive weapons affecting strategy implementation and firm performance.
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Vision
Points the firm in the direction of where it would like to be
Reflect a firm’s values and aspirations
Enduring
Relatively short and concise
CEO is responsible for working with others to form the firm’s vision
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. Thus, a vision statement articulates the ideal description of an organization and gives shape to its intended future. In other words, a vision statement points the firm in the direction of where it would eventually like to be in the years to come.
It is also important to note that vision statements reflect a firm’s values and aspirations and are intended to capture the heart and mind of each employee and, hopefully, many of its other stakeholders.
A firm’s vision tends to be enduring while its mission can change in light of changing environmental conditions.
A vision statement tends to be relatively short and concise, making it easily remembered.
As a firm’s most important and prominent strategic leader, the CEO is responsible for working with others to form the firm’s vision. Experience shows that the most effective vision statement results when the CEO involves a host of people to develop it.
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Check Your Understanding
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Mission
Vision is the foundation for the firm’s mission
Specifies businesses in which to compete and customers to serve
Should establish a firm’s individuality
Should be inspiring and relevant to all stakeholders
Business ethics are a vital part
The vision is the foundation for the firm’s mission.
A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. The firm’s mission is more concrete than its vision.
However, like the vision, a mission should establish a firm’s individuality and should be inspiring and relevant to all stakeholders. Together, vision and mission provide the foundation the firm needs to choose and implement one or more strategies.
The probability of forming an effective mission increases when employees have a strong sense of the ethical standards that will guide their behaviors as they work to help the firm reach its vision. Thus, business ethics are a vital part of the firm’s discussions to decide what it wants to become as well as who it intends to serve and how it desires to serve those individuals and groups.
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Strategic Leaders
Strategic Leaders
People located in different areas and levels of the firm
Qualities
Organizational Cultures
Force that drives or fails to drive the organization
We will now discuss strategic leaders. Strategic leaders are defined as people located in different areas and levels of the firm. These leaders use the strategic management process help them select strategic actions that can help the firm achieve its goals. There are several qualities that define a strategic leader and they include the following:
Successful strategic leaders are decisive;
They are committed to nurturing those around them; and
These leaders are committed to helping the firm promote and create value with all stakeholders.
CEOs and other high ranking mangers are often who we think of when we talk about strategic leaders. These managers are indeed looked upon as strategic leaders. CEOs have the responsibility of making sure their firm uses the strategic management process correctly. There is a lot of pressure and stress for CEOs to make the best decisions involving their firm. There are however, other members of a firm that aid in the determination of firm decisions. Understanding how to effectively delegate strategic responsibilities to people throughout the firm is very quality of CEOs and top level managers. Delegation is very important within a firm because it helps alleviate too much manager control at the top of the firm.
We also see that the organizational culture of a firm has an effect on strategic leaders and their work. Strategic leaders’ decisions and actions shape a firm’s culture. We defined organizational culture as a set of complex ideologies, symbols, and core values that are shared throughout the firm. These ideologies in turn can influence how the firm conducts business. The organizational culture is force that drives or fails to drive the organization. It is important to understand that some organizational cultures are a source of disadvantage. As a result of this concept it is important for strategic leaders to understand that regardless if the firm’s culture is functional or dysfunctional; their effectiveness is influenced by that culture. The relationship formed between the organizational culture and strategic leaders’ help shape the leader’s leadership skills and aids in the evolution of the organizational culture of the firm.
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Strategic Leaders, continued
Characteristics
Strategic orientation
Promote innovation
Innovative thinking
Add ideas to a global mindset
Effective Strategic Leaders
Provide a vision as the foundation of the firm’s mission
Use one or more strategies
Strategic leaders must also have a strong strategic orientation characteristic. They must be able to embrace change and deal with it effectively. Strategic leaders can adapt to this competitive landscape by promoting innovation and by embracing innovative thinking. To promote innovation it must be facilitated by a diverse management team that represents different types of expertise and leveraging relationships. Leveraging by strategic leaders can be completed when their organizations are ambidextrous. This means that the organization must promote exploratory and exploitative learning. This process then allows incremental knowledge to be added to existing knowledge bases. The end result is a better understanding and use of existing products. To take this a step further strategic leaders need to adapt these ideas in to a global mindset and take on an ambicultural approach to management.
The most effective strategic leaders provide a vision as the foundation for the firm’s mission and use of one or more strategies.
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Strategic Leaders, continued
Predicting of Outcomes Based on Decisions
Concerned with an uncertain future
Future plans
Mapping an industry’s profit pool
Analyzing the Profit Pool
Define pool boundaries
Estimate the pool’s overall size
Estimate the size of the value-chain activity
Reconcile the calculations
Strategic leaders attempt to predict the outcomes of their decisions before taking efforts to implement them. Many decisions made during the strategic management process are concerned with an uncertain future and the firm’s future plans. Managers try to combat uncertainty by trying to predict the future effects on the firm’s profits as a result of strategic decisions. Mapping an industry’s profit pool is something strategic leaders can do to anticipate the possible outcomes of different decisions and to focus on growth in profits rather than strictly growth in revenues. A profit pool entails the total profits earned in an industry at all points along the value chain.
Analyzing the profit pool in the industry may help a firm see something others are unable to see and to understand the primary sources of profits in an industry. There are four steps to identifying profit pools which include the following:
Step one define the pool’s boundaries. A profit pool entails the total profits earned in an industry at all points along the value;
Step two estimate the pool’s overall size;
Step three estimate the size of the value- chain activity in the pool; and
Step four reconcile the calculations.
Profit pools are a potentially useful tool that can assist in the actions being taken increase the likelihood of increasing profits. It is important to note that profits made by a firm and in an industry can be partially interdependent on the profits earned in adjacent industries. An example of this would be the, profits earned in the energy industry and how they can affect profits in other industries. When oil prices are high, it can reduce the profits earned in industries that must use a lot of energy to provide their goods or services.
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Strategic Management Process
Analyze external and internal environments
Develop mission and vision
Continuously evolving strategies
The strategic management process is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns. The firm’s first step in the process is to analyze its external and internal environments to determine its resources, capabilities, and core competencies, the source of its strategic inputs.
With this information, the firm develops its vision and mission and formulates its strategy. To implement this strategy, the firm takes actions toward achieving strategic competiveness and above-average returns. Effective strategic actions that take place in the context of carefully integrated strategy formulation and implementation actions result in desired strategic outcomes.
It is a dynamic process, as ever-changing markets and competitive structures are coordinated with a firm’s continuously evolving strategic inputs.
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Summary
The Competitive Landscape
The I/O Model of Above Average-Returns
The Resource-Based Model of Above Average-Returns
Vision and Mission
Stakeholders
Strategic Leaders
The Strategic Management Process
We have reached the end of this lesson. Let’s take a look at what we have covered.
First, we discussed strategic competitiveness and competitive advantage. Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.
Next, we went over above-average returns. Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
We then discussed stakeholders. Stakeholders are the individuals and groups who can affect the vision and mission of the firm, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance.
Next, we talked about a firm’s vision and mission. Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve.
We concluded the lesson with a discussion on the strategic management process. The strategic management process is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
This completes this lesson.
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