Chapter 7
Environments and competitive advantage
Monopoly
Only one player and no competition
Creates absolute competitive advantage
Oligopoly
Few players not directly competing against each other
Long term competitive advantage in defined market segment
Hyper competition
Several players directly competing against each other
Any competitive advantage is only temporary
Strategic Management
+ Competitive Advantage: is the ability to do something s well that one outperforms
competitors
Cost and quality : where strategies drives an emphasis on operating efficiency and
product or service quality
Knowledge and speed : where strategy drives an emphasis on innovation and speed
of delivery to market new ideas
Barriers to entry : --- creating a market stronghold that is protected from entry by
others
Financial resources: --- 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 allocation to achieve ling term organization
goals
Strategic Intent: focuses and applies organizational energies on a unifying and compelling goal
+ Levels of strategy
1. Corporate level strategy : directs the organization as a whole toward sustainable
competitive advantage.
Sets long term direction for the total enterprise 2. Business level strategy: is the strategy for a single business unit or production.
o Identifies how a division or strategic business unit will compete in its product
or service domain
o Business strategy decisions: choices of product and service mix, facilities
locations, new technologies, and the like.
Strategic business unit (SBU) is often used to describe a single business firm with larger
enterprise. Whereas the enterprise as a whole will have a corporate strategy, each SBU
will have its own business strategy.
3. Financial Strategy: guides the use of organizational resources to implement business
strategy. Guides activities within one specific area of operations.
Level of strategy: focuses on activities within specific functional area such as
marketing, manufacturing, finance, or human resources.
+ The Strategic Management Process
Is the process of formulating and implementing strategies to accomplish long term
goals and sustain competitive advantage
Process begin with :
1. Strategic analysis: is the process of analyzing the organization, the environment, and
the organization`s competitive position and current strategies.
2. Strategy formula: is the process of crafting strategies to guide the allocation of
resources.
3. Strategy Implementation: is the process of putting strategies into action.
Strategy formulation
The process of creating strategy
Involves assessing existing strategies, organizations and environment to develop
new strategies and strategic plans capable of delivering future competitive
advantage
Strategy question for strategy formulation
What is our business mission?
Who are our customers?
What do our customers consider value?
What have been our results? What is our plan?
Strategy implementation
The process of allocating resources and putting strategies into action
All organizational and management systems must be mobilized to support and
reinforce the accomplishment of strategies
Essential tasks for strategy implementation
Identify organizational mission and objectives
Asses current performance vis-a-vis mission and objectives
Create strategic plans to accomplish purpose and objectives
Implement the strategic plans
Evaluate results; change strategic plans and/or implementation processes as necessary
Essentials of Strategic Analysis
Analysis of mission, values, and objectives
Mission: statement expresses the organization’s reason for existence in society.
1. Mission and Stakeholders
Stakeholders: are individuals and groups directly affected by the organization and its
strategic accomplishments
A strategic constituencies analysis: assess interest of stakeholders and how well the
organization is responding to them.
2. Core Values
Are board beliefs about what is or is not appropriate behaviour.
Organizational Culture: is the predominant value system for the organizations as a
whole
The presence of strong core values helps build organizational identity, giving a sense of
character to the organization in the eyes of its employees and external stakeholders.
Core values also back up the mission by helping guide the behaviour of organization
members in meaningful and consistent ways. 3. Objectives
- Operating objectives are specific results that organizations try to accomplish.
o Profitability : operating with a net profit
o Financial health : acquiring capital; earning positive returns
o Cost efficiency : using resources well to operate at low cost
o Product quality : producing high quality goods or services
o Market share : gaining a specific share of possible customers
o Human talent L recruiting and maintaining a high quality workforce
o Innovation : developing new products and processes
o Social responsibility : making a positive contribution to society
SWOT analysis of organization and environment
SWOT analysis: examines organizational strengths and weaknesses and environmental
opportunities and threats
1. Organizational Strengths and Weaknesses
- A SWOT analysis begins with a systematic evaluation of the organization`s resources
and capabilities – its basic strengths and weaknesses
- Core competencies: is a special strength that gives and organization a competitive
advantage. They are rare, costly to imitate and cannot be substituted, become
potential sources of competitive advantage.
- The goal is assessing weaknesses is to identify things that inhibit performance and
hold the organization back from fully accomplishing its objectives.
2. Environmental Opportunities and Threats.
- Environmental threats may be such things as the emergence of new competitiors,
resource scarcities. Changing customer tastes, new government regulations, and a
weak economy.
Analysis of industry and environment
Assessment of macro environment
Technology
Government
Social structures and population demographics
Global economy
Natural environment
Analysis of industry environment Resource suppliers
Competitors
Customers
Strategic forces to be examined in conducting an industry analysis
1. Porter`s five forces model:
- Industry competition: the intensity of rivalry among firms in the industry and they
ways they behave competitively toward one another
- New entrants : the threat of new competitors entering the market, based on the
presence or absence of barriers to entry
- Substitute products or services : the threat of substit
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