Strategic Management Overview

Strategic Management Overview

• 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.
• Competitive advantage is when a firm implements a strategy that creates superior value for customers and that its competitors are unable to duplicate or find too costly to imitate.

Competitive Advantage and 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.
• Understanding how to exploit a competitive advantage is important for firms seeking to earn above-average returns.
• Firms without a competitive advantage or that are not competing in an attractive industry earn, at best, average returns.

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.
• The process involves analysis, strategy, and performance (the A-S-P model).
• The firm's first step in the process is to analyze its external environment and internal organization to determine its resources, capabilities, and core competencies.

The Competitive Landscape

• The competitive landscape is characterized by hypercompetition, which is excessive competition that creates inherent instability and necessitates constant disruptive change for firms.
• Managers must adopt a new mindset that values flexibility, speed, innovation, integration, and the challenges that evolve from constantly changing conditions.

Technology and Technological Changes

• Increasing knowledge intensity is a critical element of the competitive landscape, and knowledge is a critical organizational resource and an increasingly valuable source of competitive advantage.
• Firms must develop and acquire knowledge, integrate it into the organization to create capabilities, and then apply it to gain a competitive advantage.

The I/O Model of Above-Average Returns

• The I/O model explains the external environment's dominant influence on a firm's strategic actions.
• The model specifies that the industry or segment of an industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations.