Strategic Management And Strategic Competitiveness - Presentation Transcript 1. 2.

E-business Strategy : Formulation Knowledge Objectives

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Studying this chapter should provide you with the strategic management knowledge needed to: Strategic management and objective setting The Stretegic process Internal analysis External analysis Competitive stretegies for e-business

Stretegic management and objective setting

Stretegic management is about determining the purpose and aims of an organisation, choosing the most appropriate courses of action towards achieving those aims, and fulfilling the aims over a set period of time.

Chandler (1962) describes strategy as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resoruces necessary to carry out those goals.

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Chandlers definition includes :

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The mission statement communicates the overriding purpose of the organisation The vision managers have to be able to communicate a vision of what the organisation is all about and where it wants to be in the future, it describes the aspirations of the organisation

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Objectives communicates the specific outcomes that need to be acheved such as sales, turnover, market share, rate of growth, etc

Basic Concept

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Strategic Competitiveness Strategy Suistained Competitive Advantage Above Average Return

E-business context how managers view the future of the industry

The market domination of a few globally recognised brands in providing products and services online

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The rate of growth in demand for online products and services The emergence of a dominant marketplace for e-business and e-commerce The impact of increasing regulation in the online industry The changes in the technological enviroment New opportunities and threats in the e-business environment

Objectives and performance indicators in e-business Expand into growing markets and create new innovative services that add value to customers. Make an acquisition of a rival firm Increase market share Form partnerships and alliances with two key supply chain firms Improve efficiency in supply chain Improve customer satisfaction ratings by 12 % through market research and customer feedback Improve customer satisfaction Meet 99 % of delivery time targets over next 12 month period Improve delivery times Reduce procurement costs by 12 % over next 12 month period using existing ICT capability Reduce cost of procurement Retain 95 % of existing customer accounts Retain existing customers Conversion rate increase by 1 % by end of 12 month period Increase revenue form new marketing campaign Performance indicator objectives

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The Strategic Management Process Figure 1.1 Copyright 2004 South-Western. All rights reserved. Current Competitive Landscape

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A Perilous Business World Investments required to compete on a global scale are enormous Consequences of failure are severe Important Elements of Success Developing strategy Implementing strategy

10. Competitive Landscape

Strategic maneuvering among global and innovative combatants

Global economy Rapid technological change 11. Competitive Landscape: Hypercompetition Hypercompetition Hypercompetition A condition of rapidly escalating competition based on

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Price-quality positioning Competition to create new know-how and establish first-mover advantage Competition to protect or invade established product or geographic markets

12. Global Economy

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Global Economy Goods, people, skills, and ideas move freely across geographic borders Movement is relatively unfettered by artificial constraints Expansion into global arena complicates a firms competitive environment

13. Global Economy (contd)

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Globalization Increased economic interdependence among countries as reflected in the flow of goods and services, financial capital, and knowledge across country borders

Increased range of opportunities for companies competing in the 21st-century competitive landscape

Technology and Technological Changes

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Rate of change of technology and speed at which new technologies become available Perpetual innovation how rapidly and consistently new, information-intensive technologies replace older ones The development of disruptive technologies that destroy the value of existing technology and create new markets

14. Technological Change

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The Information Age The ability to effectively and efficiently access and use information has become an important source of competitive advantage Technology includes personal computers, cellular phones, artificial intelligence, virtual reality, massive databases, electronic networks, internet trade

15. Technological Changes

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Increasing Knowledge Intensity Strategic flexibility: set of capabilities used to respond to various demands and opportunities in dynamic and uncertain competitive environments

 

Organizational slack: slack resources that allow the firm flexibility to respond to environmental changes Capacity to learn

16. The I/O Model of Above-Average Returns Adapted from Figure 1.2

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Study the external environment, especially the industry environment The general environment The industry environment The competitor environment

The External Environment 17. The I/O Model of Above-Average Returns 2. Locate an attractive industry with a high potential for above-average returns

An industry whose structural characteristics suggest above-average returns

Adapted from Figure 1.2 An Attractive Industry The External Environment 18. The I/O Model of Above-Average Returns 3. Identify the strategy called for by the attractive industry to earn above-average returns

Selection of a strategy linked with above-average returns in a particular industry

Adapted from Figure 1.2 The External Environment An Attractive Industry Strategy Formulation 19. The I/O Model of Above-Average Returns 4. Develop or acquire assets and skills needed to implement the strategy

Assets and skills required to implement a chosen strategy

Adapted from Figure 1.2 Assets and Skills The External Environment An Attractive Industry Strategy Formulation 20. The I/O Model of Above-Average Returns 5. Use the firms strengths (its developed or acquired assets and skills) to implement the strategy

Selection of strategic actions linked with effective implementation of the chosen strategy

Adapted from Figure 1.2 Strategy Implementation The External Environment An Attractive Industry Strategy Formulation Assets and Skills 21. The I/O Model of Above-Average Returns

Superior returns: earning of above-average returns

Adapted from Figure 1.2 Superior Returns The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation 22. Five Forces Model of Competition

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An industrys profitability results from interaction among Suppliers Buyers Competitive rivalry among firms currently in the industry Product substitutes Potential entrants to the industry

23. Five Forces Model of Competition (contd)

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Firms earn above average returns by Producing standardized products or services Manufacturing differentiated products for which customers are willing to pay a price premium

24. Resource-Based Model of Above-Average Returns

Each organization is a collection of unique resources and capabilities that provides the basis for its strategy and that is the primary source of its returns

Capabilities evolve and must be managed dynamically

25. Resource-Based Model of Above-Average Returns (contd)

Differences in firms performances are due primarily to their unique resources and capabilities rather than structural characteristics of the industry

Firms acquire different resources and develop unique capabilities

26. Resource-Based Model of Above-Average Returns (contd)

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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?)

Firms Resources The Firm

27. Resources and Capabilities

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Resources Inputs into a firms production process

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Capital equipment Skills of individual employees Patents Finances Talented managers

Capabilities Capacity of a set of resources to perform in an integrative manner A capability should not be So simple that it is highly imitable So complex that it defies internal steering and control

28. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3

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Identify the firms resources. Study its strengths and weaknesses compared with those of competitors Inputs into a firms production process

Resources 29. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3 2. Determine the firms capabilities. What do the capabilities allow the firm to do better than its competitors.

Capacity of an integrated set of resources to integratively perform a task or activity

Capability Resources 30. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3 3. Determine the potential of the firms resources and capabilities in terms of a competitive advantage.

Ability of a firm to outperform its rivals

Competitive Advantage Capability Resources 31. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3 4. Locate an attractive industry.

An industry with opportunities that can be exploited by the firms resources and capabilities

An Attractive Industry Competitive Advantage Capability Resources 32. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3 5. Select a strategy that best allow the firm to utilize its resources and capabilities relative to opportunities in the external environment.

Strategic actions taken to earn above-average returns

Strategy Implementation An Attractive Industry Competitive Advantage Capability Resources 33. The Resource-Based Model of Above-Average Returns Adapted from Figure 1.3

Superior returns: earning of above-average returns

Superior Returns Strategy Implementation An Attractive Industry Competitive Advantage Capability Resources

Key Criteria of Resources and Capabilities

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Valuable Resources and capabilities are valuable when they allow a firm to take advantage of opportunities or neutralize threats in external environment

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Rare Resources and capabilities are rare when possessed by few, if any, current and potential competitors

34. Key Criteria of Resources and Capabilities

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Costly to Imitate Resources and capabilities are costly to imitate when other firms either cannot obtain them or are at a cost disadvantage in obtaining them

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Nonsubstitutable Resources and capabilities are nonsubstitutable when they have no structural equivalents

35. Core Competencies

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When the four key criteria of resources and capabilities are met, they become core competencies Core competencies serve as a source of competitive advantage Managerial competencies are especially important

36. How Resources and Capabilities Provide Competitive Advantage The firm is organized appropriately to obtain the full benefits of the resources in order to realize a 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 Costly to imitate When other firms cannot obtain them or must obtain them at a much higher cost Nonsubstitutable 37. Resources and Capabilities, Core Competencies, and Outcomes Core Competencies Competitive Advantage Value Creation Above Average Returns Valuable Rare Costly to Imitate Nonsubstitutable 38. Strategic Intent

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Internally focused The leveraging of a firms resources, capabilities and core competencies to accomplish the firms goals Exists when all employees and levels of a firm are committed to the pursuit of a specific, significant performance criterion

39. Strategic Mission

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Externally focused A statement of a firms unique purpose and the scope of its operations in product and market terms Establishes a firms individuality and is inspiring and relevant to all stakeholders

Provides general descriptions of the firms intended products and its markets

40. Stakeholders

Individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firms performance

Claims are enforced by the stakeholders ability to withhold essential participation

41. The Three Stakeholder Groups Figure 1.4 42. Capital Market Stakeholders

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Shareholders and lenders expect the firm to preserve and enhance the wealth they have entrusted to it Returns should be commensurate with the degree of risk to the shareholder

43. Product Market Stakeholders

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Customers Demand reliable products at low prices Suppliers Seek loyal customers willing to pay highest sustainable prices for goods and services Host communities Want companies willing to be long-term employers and providers of tax revenues while minimizing demands on public support services

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Union officials Want secure jobs and desirable working conditions

44. Organizational Stakeholders

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Employees Expect a dynamic, stimulating and rewarding work environment Are satisfied by a company that is growing and actively developing their skills

45. Stakeholder Involvement

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Two issues affect the extent of stakeholder involvement in the firm How to divide returns to keep stakeholders involved?

Capital Market Product Market Organizational

How to increase returns so everyone has more to share?

46. Strategic Leaders

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People responsible for the design and execution of strategic management processes Decisions they make include

  

How resources will be developed or acquired At what price resources will be obtained How resources will be used

47. Organizational Culture

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The complex set of Ideologies Symbols Core values that are shared throughout the firm, that influence how the firm conducts business

48. Mapping an Industrys Profit Pools

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Define the pools boundaries Estimate the pools overall size Estimate the size of the value-chain activity in the pool Reconcile the calculations

49. Strategic Management Process

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Study the external and internal environments Identify marketplace opportunities and threats Determine how to use core competencies Use strategic intent to leverage resources, capabilities and core competencies and win competitive battles Integrate formulation and implementation of strategies Seek feedback to improve strategies