2. After this lecture you should be able to:
• Define strategic competitiveness, strategy, competitive
advantage, above-average returns, and the strategic
management process
• Describe the competitive landscape and explain how
globalization and technology changes shape it.
• Use the industrial organization (I/O) model to explain how firms
can earn above-average returns.
• Use the resource-based model to explain how firms can earn
above-average returns.
• Describe vision and mission and discuss their values.
• Define stakeholders and describe their ability to influence
organizations.
• Describe the work of strategic leaders.
• Explain the strategic management process
4. Strategy
Is an integrated and coordinated
set of commitments and actions
designed to exploit core
competencies and gain a
competitive advantage.
5. Competitive advantage
A firm has a competitive
advantage when it implements a
strategy competitors are unable to
duplicate or find too costly to try
to imitate.
7. Risk
Is an investor’s uncertainty about
the economic gains or losses that
will result from a particular
investment.
8. Average Returns
Are returns equal to those an
investor expects to earn from
other investments with a similar
amount of risk.
9. 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.
10. The Competitive Landscape
The Global Economy
Technology and Technological
Changes
Technology Diffusion and Disruptive
Technologies
Information Age
12. The I/O Model of Above –Average Returns
The External Environment
•The general environment
•The industry environment
•The competitor environment
An Attractive Industry
•An industry whose structural
characteristics suggest above-average
returns.
Strategy Formulation
•Selection of a strategy linked with above-
average returns in a particular industry
Assets and Skills
•Assets and skills required to implement a
chosen strategy
Strategy Implementation
•Selection of strategic actions linked with
effective implementation of the chosen
strategy
Superior Returns
•Earning of above-average returns
1. Study the external environment,
especially the industry
environment
2. Locate an industry with high
potential for above-average
returns.
3. Identify the strategy called for by
the attractive industry to earn
above-average returns.
4. Develop or acquire assets and
skills needed to implement the
strategy.
5. Use the firm’s strengths (its
developed or acquired assets and
skills) to implement the strategy.
13. The Resource-Based Model of Above –Average Returns
Resources
•Inputs into a firm’s production process
Capability
•Capacity of an integrated set of resources
to integratively perform a task or activity.
Competitive Advantage
•Ability of a firm to outperform its rivals
An Attractive Industry
•An industry with opportunities that can be
explored by the firm’s resources and
capabilities.
Strategy Formulation and
Implementation
•Strategic actions taken to earn above-
average returns
Superior Returns
•Earning of above-average returns
1. Identify the firm’s resources. Study its
strengths and weaknesses compared
with those of competitors.
2. Determine the firm’s capabilities. What
do the capabilities allow the firm to do
better than its competitors?
3. Determine the potential of the firm’s
resources and capabilities in terms of a
competitive advantage.
4. Locate an attractive industry.
5. Select a strategy that best allows the
firm to utilize its resources and
capabilities relative to opportunities in
the external environment
15. Corporate Values
Corporate values are the underlying principles
which guide and also drive the actions and
activities of individual companies.
– A set of principles that further clarifying what
we stand for.
– A compass for individual and collective
behavior.
– A clarification of what we are prepared to be
judged on by audiences.
16. Corporate Values
Each company or organization has their own set
of values.
• “Heart and Soul” of the organization
– Performance
– Reputation
• Endure throughout the life of the organization.
17. Developing a Corporate Values
• Question: What values or beliefs do
you want to represent your company?
• Facilitator selected top managers and
key personnel to complete values
form.
• Brainstorming Exercise
• Final agreement by consensus on the
best values to represent company.
20. Vision statement
Is a picture of what the firm wants to be and,
in broad terms, what it wants to ultimately
achieve.
“What do we want to
become?”
21. Vision & Mission
Many organizations develop both vision & mission
statements.
Vision statement--
• Should be established first and foremost
• Short – preferably one sentence
• Broad management involvement
22. Vision Statement Examples
Fauji Cement Company Limited:
To be a role model cement manufacturing
Company, benefiting all stake holders and
fulfilling Corporate Social Responsibilities while
enjoying public respect and goodwill.
23. Mission statement
-- 90% of all companies have used a mission
statement in the previous five years.
“What is our business?”
•Enduring statement of purpose
•Distinguishes one firm from another
•Declares the firm’s reason for being
25. Mission Statements
Reveal what an organization wants to
be and whom it wants to serve
Essential for effectively establishing
objectives and formulating
strategies.
26. Developing Vision & Mission
Clear mission is needed before alternative
strategies can be formulated and
implemented
Participation from diverse
managers is important in
developing the mission.
27. Developing Vision & Mission
Approach to developing --
– Select several articles about vision or
mission
– Read as background information
– Ask to prepare a draft statement
– A facilitator merge into document
– Request for modifications, Additions, and
deletions
– Revise the document
• Reach final agreement by consensus on
vision or mission of the company.
28. Mission Statement Examples
REEBOK'S MISSION
Always Challenge and Lead through
Creativity
At Reebok, they see the world a little differently
and throughout their history have made their
mark when they've had the courage to challenge
convention. Reebok creates products and
marketing programs that reflect the brand's
unlimited creative potential.
29. Mission Statement Examples
Nike’s mission statement :
“To bring inspiration and innovation to every
athlete* in the world.”
The legendary University of Oregon track and field
coach, and Nike co-founder, Bill Bowerman said, “If
you have a body, you are an athlete.”
Bowerman was a teacher who showed athletes the
secrets to achievement. Nike invites you to
experience our innovative and inspiring Nike
Products.
30. Mission Statement Examples
Adidas’ Mission Statement
The adidas Group strives to be the global leader in
the sporting goods industry with brands built on a
passion for sports and a sporting lifestyle. We are
committed to continuously strengthening our
brands and products to improve our competitive
position.
31. Importance of Mission
Mission
Resource Allocation
Unanimity of Purpose
Organizational Climate
Focal point for work
structure
Benefits from a strong mission
32. Effective Missions
Broad in scope
Generate strategic alternatives
Not overly specific
Reconciles interests among
diverse stakeholders
Finely balanced between
specificity & generality
34. Elements of Missions Statements
Mission
Elements
Customers
Markets
Employees
Public
Image
Self-Concept
Philosophy
Survival
Growth
Profit
Products
Services
Technology
35. PepsiCo Mission
PepsiCo’s mission is to increase the value of our
shareholders’ investment. We do this through sales
growth, cost controls, and wise investment resources.
We believe our commercial success depends upon
offering quality and value to our consumers and
customers; providing products that are safe, wholesome,
economically efficient and environmentally sound; and
providing a fair return to our investors while adhering to
the highest standards of integrity.
36. Ben & Jerry’s Mission
Ben & Jerry’s mission is to make, distribute and sell the
finest quality all-natural ice cream and related products
in a wide variety of innovative flavors made from
Vermont dairy products. To operate the Company on a
sound financial basis of profitable growth, increasing
value for our shareholders, and creating career
opportunities and financial rewards for our employees.
To operate the Company in a way that actively
recognizes the central role that business plays in the
structure of society by initiating innovative ways to
improve the quality of life of a broad community—local,
national and international.
37. Mission Statement Evaluation Matrix
COMPONENTS
Organization Customers
Products
Services Markets
Concern for
Survival,
Growth,
Profitability Technology
PepsiCo Yes No No Yes No
Ben & Jerry's No Yes Yes Yes No
38. Mission Statement Evaluation Matrix
COMPONENTS
Organization Philosophy
Self-
Concept
Concern for
Public Image
Concern for
Employees
PepsiCo Yes No No No
Ben & Jerry's No Yes Yes Yes
39. Summary Values, Vision, Mission
• The reason for preparing Values, Vision and
Mission statements is to provide a sense of
purpose and direction for the organization which
is much greater than simply making a profit.
• Once completed, these statements should be
shared with the company’s management,
employees and primary customers.
• These statements should also serve to both
motivate and guide the actions of the company’s
managers and employees.
40. Strategic Leaders
Are people located in different parts of the
firm using the strategic management
process to help the firm reach its vision
and mission.
• The Work of Effective Strategic Leaders
• Predicting Outcomes of Strategic Decisions:
Profit Pools
41. Organizational Culture
Refers to the complex set of ideologies,
symbols, and core values that are shared
throughout the firm and that influence how
the firm conducts business.
42. Review Questions
1. What are strategic competitiveness, strategy, competitive advantages,
above-average returns, and the strategic management process?
2. What are the characteristics of the current competitive landscape? What two
factors are the primary drivers of this landscape?
3. According to the I/O model, what should a firm do to earn above-average
returns?
4. What does the resource-based model suggest a firm should do to earn
above-average returns?
5. What are vision and mission? What is their value for the strategic
management process?
6. How would you describe the work of strategic leaders?
7. What are the elements of the strategic management process? How are they
interrelated?
