Strategic Management in Action

1. Strategic Management in Action 2 The Context of Managing Strategically

2. Learning Objectives 1. Define competitive advantage. 2. Describe the different perspectives on ways to achieve competitive advantage. 3. Explain what makes organizational resources unique. 4. Discuss the concept of transitory (temporary) competitive advantage. 5. Describe the driving forces of the “new” business environment. 6. Explain the implications of the “new” business environment. (continued on next slide)

3. Learning Objectives 7. Discuss the critical success factors for the “new” business environment. 8. Differentiate between organizational vision and mission. 9. Describe the concept of a world-class organization. 10. Discuss how corporate social responsibility and ethics affect strategic management. 11. Define organizational learning. 12. Describe the characteristics of a learning organization.

4. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE • Managing Strategically • Make decisions and implement strategies • that develop and maintain competitive advantage • • • • Recognize impact of dynamic external factors Capitalize on organizational resources and capabilities

5. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE • Competitive Advantage • (or competitive edge) • • • • • • • • • • Sets an organization apart Having something other competitors don't Doing something better than other organizations Doing something that others can't Necessary for long-term success and survival

6. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE Table 2-1Comparison of I/O, Resource-Based, & Guerilla Views of Competitive Advantage I/O View Resource-Based View Guerilla View Competitive Positioning Possessing unique Temporary Advantage in industry organizational assets Determinants Characteristics Type, amount, Ability to change and of of industry; and nature of radically surprise Profitability firm’s position firm’s resources competitors with within industry strategic actions Focus of Analysis External Internal External and internal Major Competition Resources— Continual, radical, and Concern competencies chaotic conditions Strategic Choosing Developing Rapidly and repeatedly Choices attractive unique resources disrupting current situation industry and capabilities and surprising competitors Positioning in industry Characteristics of industry; firm’s position within industry External Competition Choosing attractive industry Possessing unique organizational assets Type, amount, and nature of firm’s resources Internal Resources— competencies Developing unique resources and capabilities Temporary Ability to change and radically surprise competitors with strategic actions External and internal Continual, radical, and chaotic conditions Rapidly and repeatedly disrupting current situation and surprising competitors

7. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE • Industrial Organization (I/O) View • Focus of the strategic analysis is external • • • • • • Structural forces Competitive environment Michael Porter

8. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE • Resource-Based View (RBV) • Exploiting resources • develops and maintains advantage • • • • • • • • • • Difference in culture, experiences, assets, and capabilities Link internal assets and capabilities with environment Key assets (resources) give a firm sustainable advantage Financial, • Physical, • Human, • Intangible, • Structural-cultural Resource must be unique

9. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE Does it add value? Is it rare? • What • Makes • Organizational • Resources • Unique? • Figure 2-2 Organizational Resources as Competitive Advantage Is it easily imitated? Can firm exploit it?

10. MANAGINGSTRATEGICALLY&COMPETITIVEADVANTAGE • Guerilla View • Competitive advantage is only temporary • • • • • • • • • • • • • • Changes that characterize environment Continual Radical Revolutionary Successful organizations must be adept at Rapid and repeated disruptions of current situation Radical surprises keep competitors off balance

11. REALITIES OF THE NEW BUSINESS ENVIRONMENT Drivers of the New Business Environment Drivers of the New Business Environment •Information revolution •Technological advances and breakthroughs •Globalization • The • New • Business • Environment • Figure 2-3 Implications • Continual turbulence and change • Reduced need for physical assets • Vanishing distance • Compressed time Critical Success Factors • Ability to embrace change • Creativity and innovation capabilities • Being a world-class organization

12. Drivers of the New Business Environment The Information Revolution • • • • Information readily available Information as the essential resource of production Technological Advances and Breakthroughs Perform tasks with equipment, materials, knowledge, and experience Four major technological trends

13. Drivers of the New Business Environment Table 2-2 Major Technological Trends • • • • Increasing rate of change and diffusion Increasing commercialization of innovations Increasing dependence on knowledge intensity Advent of increasing returns

14. Drivers of the New Business Environment Globalization • • • • • • Specific ways global factors impact Global marketplace Global competitors Globalization Solves customer needs Segments markets on a global basis

15. REALITIES OF THE NEW BUSINESS ENVIRONMENT Drivers of the New Business Environment •Information revolution •Technological advances and breakthroughs •Globalization • The • New • Business • Environment • Figure 2-3 Implications • Continual turbulence and change • Reduced need for physical assets • Vanishing distance • Compressed time Critical Success Factors • Ability to embrace change • Creativity and innovation capabilities • Being a world-class organization

16. Implications of These Driving Forces Continual Turbulence and Change • Change • Any alteration in external environmental factors • or • internal organizational arrangements • Organizational change • Any alteration in what an organization does • and • how it does it

17. Implications of These Driving Forces Reduced Need for Physical Assets • • Traditionally, massing physical assets led to power Today, physical impedes flexibility, value in intangible Yesterday Today Physical Nonphysical •• Manufacturing facilities Customer databases • Office buildings • Equipment • Inventory • Online ordering systems • Process innovation • Employee knowledge sharing

18. Implications of These Driving Forces Vanishing Distance • • • Boundaries don’t determine customers and competitors Compressed Time E-mail & interactive Web sites instantly deliver info Instant interactivity creates dynamic environment

19. REALITIES OF THE NEW BUSINESS ENVIRONMENT Drivers of the New Business Environment •Information revolution •Technological advances and breakthroughs •Globalization • The • New • Business • Environment • Figure 2-3 Implications • Continual turbulence and change • Reduced need for physical assets • Vanishing distance • Compressed time Critical Success Factors •Ability to embrace change •Creativity and innovation capabilities •Being a world-class organization Critical Success Factors • Ability to embrace change • Creativity and innovation capabilities • Being a world-class organization

20. Critical Success Factors Ability to Embrace Change • • • • Change agents Creativity and Innovation Capabilities “Create and innovate or lose!” Creativity—a unique ability Innovative organization channels creativity

21. Critical Success Factors Strong Customer Focus • Major • Characteristics • of • World-Class • Organizations • Figure 2-4 Significant TechnologicalSupport Continual Learning and Improvement World-Class Organization Flexible Organization Structure Egalitarian Climate Creative Human Resource Management

22. Critical Success Factors Organizational Vision • • • • • • Broad comprehensive picture of organization Built on core foundation Elaborates purpose for organization Summarizes what organization does Specifies broad goals Mission What organizational units do and hope to do

23. Critical Success Factors Corporate Social Responsibility (CSR) Decision makers have an obligation to recognize the interrelatedness of business and society • • • Organizations are responsible to Stockholders Stakeholders

24. Critical Success Factors Shareholders Political Action Groups Governments • Potential • Organizational • Stakeholders • Figure 2-5 Organization Trade Associations Customers Social Action Groups Suppliers Employees Communities

25. Critical Success Factors Ethics • • • • Grey Zone “Doing the right thing” Interpretations vary More than just legal compliance

26. Critical Success Factors Organizational Learning • • • • Competence acquisition Experimentation Continuous improvement Boundary spanning

27. Chapter Two ? Questions