GMS Chapter 7
Competitive Advantage: is the ability to do something so well that one
- Typical sources of competitive advantage include:
o Cost and quality: where strategy drives an emphasis on operating
efficiency and product or service quality.
o Knowledge and speed: where strategy drives an emphasis on
innovation and speed of delivery to market for new ideas.
o Barriers to entry: where strategy drives an emphasis on creating
a market stronghold that is protected from entry by others.
o Financial resources: where strategy drives and emphasis on
investments or loss absorption that competitors cant match.
- Sustainable competitive advantage: Is the ability to outperform rivals
in ways that are difficult or costly to imitate.
Strategy and strategic intent
- Strategy: is a comprehensive plan guiding resource allocating to achieve
- Strategic intent: Focuses and applies organizational energies on a
unifying and compelling goal.
- There are three levels of strategy in organizations corporate, business
and functional strategies.
o Corporate strategy: sets long-term direction for the total
enterprise. Ask questions like “In what industries and markets
should we compete?”
o Business strategy: identifies how a division or strategic business
unit will complete in its product or service domain. Asks questions
like “ How are we going to compete for customers in this industry
o Functional Strategy: guides activities within one specific area of
operations. Focuses on activities within a specific functional area
such as marketing, human resources, finance etc. Ask questions
like “ How can we best utilize resources within a function ot
implement our business strategy?”
The Strategic Management Process
- Strategic management: is the process of formulating and implementing
- Strategic analysis: is the process of analyzing the organization, the
environment, and the organization’s competitive position and current
strategies. - Strategy formulation: is the process of crafting strategies to guide the
allocation of resources.
o revise objectives and select new staregies (corporate, business, and
- Strategy implementation: is the process of putting strategies into
Essentials Of Strategic Analysis
Analysis od mission, values and objectives
- Mission and Stakeholders
o Mission: statement expresses the organizations reason for existence
o Stakeholders: are individuals and groups directly affected by the
organization and its strategic accomplishments.
o Strategic constituencies analysis: assesses interests of stakeholders
and ho well the organization is responding to them.
- Core values: are broad beliefs about what is or is not appropriate
- Organizational culture: is the predominant value system for the
organization as a whole.
o Operating objectives: are specific results that organizations try
o Typical operating objectives include:
Profitability- operating with a net profit.
Financial Health- acquiring capital; earning positive
Cost efficiency- using resources well to operate at low cost
Customer service- meeting customer needs and
Product quality- producing high quality goods or services.
Market Share- gaining a specific share of possicle
Human Talent- recruiting and maintaining a high quality
Innovation- developing new products and processes.
Social responsibility- making a positive contribution to
SWOT Analysis of Organization and Environment
- SWOT analysis: examines organizational strengths and weaknesses and
environmental opportunities and threats.
- Internal Assessment of the organization: strengths and weaknesses. o Core competencies: is a special strength that gives an
organization a competitive advantage.
- External Assessment of the environment: opportunities and threats.
- What are our strengths?
o Manufacturing efficiency?
o Skilled workforce?
o Good market share?
o Strong financing?
o Superior reputation?
- What are our weaknesses?
o Outdated facilities?
o Inadequate R&D?
o Obsolete technologies?
o Weak management?
o Past planning failures?
- What are our opportunities?
o Possible new markets?
o Strong economy?
o Weak market rivals?
o Emerging technologies?
o Growth of existing market?
- What are our threats?
o New competition?
o Shortage of resource?
o Changing market tastes?
o New regulations?
o Substitute products?
Analysis of Rivalry and Industry Attractiveness
- Monopoly: only player in the industry
- Oligopoly: facing a few competitors
- Hyper competition: facing several direct competitors such as the fast
- Porters Five Forces Model: model of 5 strategic forces affecting industry
1) Industry competition: The intensity of rivalry among firms in the
industry and the ways they behave competitively towards one and
2) New entrants: the threat of new competitors entering the market,
based on the presence or absence of barriers to entry.
3) Substitute products or services: the threat of substitute
products or services based on the ability of consumers to find
what they want from other sellers.
4) Bargaining power of suppliers: the ability of resource suppliers
to influence the price that one has to pay for their products or
services. 5) Bargaining power of customers: the ability of customers to
influence the price that they will pay for the firms products or
Corporate- Level Strategy Formulation
The CEO and senior management team in a business focus on corporate level
strategy formulation. The goal at this level of strategic analysis is to plot the overall
direction of the organization in the competitive setting of its industry.
Grand or Master Strategies
- Growth strategy: involves expansion of the organization’s current
- Stability strategy: maintains current operations without substantial
- Renewal strategy: tries to solve problems and overcome weaknesses that
are hurting performance.
o Liquidation: business operations cease and assets are sold to pay
- Combination Strategy: pursues growth, stability, and/ or retrenchment
in some combination.
Growth and Diversification Strategies
- Concentration: one approach to grow is through concentration, where
expansion in within the same business area.
- Diversification: where expansion takes place in new and different areas.
Growth by acquisition of or investment in new and different business
- Related diversification: pursues growth by acquiring new b