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Competing for Advantage

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Four Attributes of Resources and Capabilities (Competitive Advantage) ... Competitive advantage: ability of a firm to outperform its rivals ... – PowerPoint PPT presentation

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Title: Competing for Advantage


1
The Strategic Management Process
The External Environment
Strategic Intent Strategic Mission
Strategic Inputs
The Internal Environment
Strategy Implementation
Strategy Formulation
Corporate Governance
Organizational Structure and Controls
Corporate- Level Strategy
Competitive Rivalry and Competitive Dynamics
Business-Level Strategy
Strategic Actions
Strategic Entrepreneurship
Cooperative Strategy
Acquisition and Restructuring Strategies
International Strategy
Strategic Leadership
Strategic Competitiveness Organizational Success
Strategic Outcomes
Feedback
2
Definitions
Strategic Management Process
The full set of commitments, decisions, and
actions required for a firm to create value and
earn above-average returns
Value Creation
What is achieved when a firm successfully
formulates and implements a strategy that other
companies are unable to duplicate or find too
costly to imitate.
3
Definitions
Average Returns
Returns that are equal to those an investor
expects to earn from other investments with a
similar amount of risk
Above-Average Returns
Returns that are in excess of what an investor
expects to earn from other investments with a
similar amount of risk
4
Definitions
Risk
An investors uncertainty about the economic
gains or losses that will result from a
particular investment
5
Competitive Landscape
Dynamics of strategic maneuvering among global
and innovative combatants
Price-quality positioning, new know-how, first
mover
Competitive environments
Protect or invade established product or
geographic markets
Fundamental nature of competition is changing
6
Competitive Landscape
Goods, services, people, skills, and ideas move
freely across geographic borders
Emergence of global economy
Spread of economic innovations around the world
Competitive environments
Political and cultural adjustments are required
Fundamental nature of competition is changing
7
Competitive Landscape
Increasing rate of technological change and
diffusion
Emergence of global economy
Rapid technological change
The information age
Increasing knowledge intensity
Competitive environments
Fundamental nature of competition is changing
8
Strategic Flexibility
A set of capabilities used to respond to various
demands and opportunities existing in a dynamic
and uncertain competitive environment It involves
coping with uncertainty and the accompanying risks
9
Strategic Flexibility
Strategic Flexibility
Strategic Flexibility
Strategic flexibility
10
I/O Model of Above-Average Returns
1. External Environments
1. Strategy dictated by the external environment
of the firm (what opportunities exist in these
environments?) 2. Firm develops internal skills
required by external environment (what can the
firm do about the opportunities?)
Industry Environment
Competitor Environment
11
Four Assumptions of the I/O Model
  • 1. The external environment is assumed to possess
    pressures and constraints that determine the
    strategies that would result in above-average
    returns
  • 2. Most firms competing within a particular
    industry or within a certain segment of it are
    assumed to control similar strategically relevant
    resources and to pursue similar strategies in
    light of those resources

12
Four Assumptions of the I/O Model
  • 3. Resources used to implement strategies are
    highly mobile across firms
  • 4. Organizational decision makers are assumed to
    be rational and committed to acting in the firms
    best interests, as shown by their
    profit-maximizing behaviors

13
I/O Model of Above-Average Returns
Industrial Organization Model
  • 1. Study the external environment, especially the
    industry environment
  • economies of scale
  • barriers to market entry
  • diversification
  • product differentiation
  • degree of concentration of firms in the industry

14
I/O Model of Above-Average Returns
2. Locate an attractive industry with a high
potential for above-average returns
Industrial Organization Model
Attractive industry one whose structural
characteristics suggest above-average returns
15
I/O Model of Above-Average Returns
3. Identify the strategy called for by the
attractive industry to earn above-average returns
Industrial Organization Model
Strategy formulation selection of a strategy
linked with above-average returns in a particular
industry
16
I/O Model of Above-Average Returns
4. Develop or acquire assets and skills needed to
implement the strategy
Industrial Organization Model
Assets and skills those assets and skills
required to implement a chosen strategy
17
I/O Model of Above-Average Returns
5. Use the firms strengths (its developed or
acquired assets and skills) to implement the
strategy
Industrial Organization Model
Strategy implementation select strategic actions
linked with effective implementation of the
chosen strategy
18
I/O Model of Above-Average Returns
Industrial Organization Model
Superior returns earning of above-average returns
19
Resource-based Model of Above Average Returns
1. Strategy dictated by the firms unique
resources and capabilities 2. Find an environment
in which to exploit these assets (where are the
best opportunities?)
1. Firms Resources
20
Resource-based Model of Above Average Returns
1. Identify the firms resources-- strengths and
weaknesses compared with competitors
Resource-based Model
Resources inputs into a firms production process
21
Resource-based Model of Above Average Returns
2. Determine the firms capabilities--what it can
do better than its competitors
Resource-based Model
Capability capacity of an integrated set of
resources to integratively perform a task or
activity
22
Four Attributes of Resources and Capabilities
(Competitive Advantage)
Valuable
allow the firm to exploit opportunities or
neutralize threats in its external environment
Rare
possessed by few, if any, current and potential
competitors
Resources and Capabilities
Costly to imitate
when other firms cannot obtain them or must
obtain them at a much higher cost
the firm is organized appropriately to obtain the
full benefits of the resources in order to
realize a competitive advantage
Nonsubstitutable
23
Resources and capabilities that meet these four
criteria become a source of
Valuable
Rare
Core Competencies
Core Competencies
Resources and Capabilities
Costly to imitate
Nonsubstitutable
24
Core Competencies are the basis for a firms
Competitive advantage
Value Creation
Core Competencies
Ability to earn above-average returns
25
Resource-based Model of Above Average Returns
3. Determine the potential of the firms
resources and capabilities in terms of a
competitive advantage
Resource-based Model
Competitive advantage ability of a firm to
outperform its rivals
26
Resource-based Model of Above Average Returns
4. Locate an attractive industry
Resource-based Model
An attractive industry an industry with
opportunities that can be exploited by the firms
resources and capabilities
27
Resource-based Model of Above Average Returns
5. Select a strategy that best allows the firm to
utilize its resources and capabilities relative
to opportunities in the external environment
Resource-based Model
Strategy formulation and implementation
strategic actions taken to earn above average
returns
28
Resource-based Model of Above Average Returns
Resource-based Model
Superior returns earning of above-average returns
29
Strategic Intent Mission
  • Strategic Intent
  • Winning competitive battles by leveraging the
    firms resources, capabilities, and core
    competencies
  • Strategic Mission
  • An application of strategic intent in terms of
    products to be offered and markets to be served

30
The Firm and Its Stakeholders
Stakeholders
Groups who are affected by a firms performance
and who have claims on its wealth
The firm must maintain performance at an adequate
level in order to retain the participation of key
stakeholders
31
The Firm and Its Stakeholders
Stakeholders
Capital Market Stakeholders
  • Shareholders
  • Major suppliers of capital
  • Banks
  • Private lenders
  • Venture capitalists

32
The Firm and Its Stakeholders
Stakeholders
Capital Market Stakeholders
Product Market Stakeholders
Primary customers Suppliers Host
communities Unions
33
The Firm and Its Stakeholders
Stakeholders
Capital Market Stakeholders
Product Market Stakeholders
Organizational Stakeholders
Employees Managers Nonmanagers
34
Stakeholder Involvement
Two issues affect the extent of stakeholder
involvement in the firm
Capital Market
Organizational
1
How do you divide the returns to keep
stakeholders involved?
Product Market
35
Stakeholder Involvement
Two issues affect the extent of stakeholder
involvement in the firm
Capital Market
Organizational
2
How do you increase the returns so everyone has
more to share?
Product Market
36
Organizational Strategists
  • Serve as a major source of competitive advantage
  • Are held responsible by stakeholders
  • Make decisions regarding development,
    acquisition, cost and use of resources
  • Assess risks of strategic actions
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