Slide 1What we need for effective strategy:Strategy defines….Slide 4Slide 5Slide 6Strategic Management DefinedCompetitive AdvantageSlide 9The Strategic Management ProcessTwo levels of StrategyWhat is Strategy?What is Strategy?What is Strategy?What is Strategy?What is Strategy?Four Perspectives on Competitive AdvantageSlide 18Slide 19Slide 20Slide 21Slide 22The Resource-Based Model of Above-Average ReturnsThe Resource-Based Model of Above-Average ReturnsThe Resource-Based Model of Above-Average ReturnsThe Resource-Based Model of Above-Average ReturnsDynamic PerspectiveSlide 28The Three Stakeholder GroupsSecondary StakeholdersSlide 31Slide 32Slide 33Charting a Good StrategyStrategy DiamondArenasVehiclesDifferentiatorsStagingEconomic LogicJetBlu’s StrategyFramework for Strategy ImplementationIntroducing Strategic ManagementWhat we need for effective strategy:A missionA planElephantsThat’s the strategic processStrategy defines….Who are you?Where are you going?How are you going to get there?Alice: Which way should I go?Cat: That depends on where you are going.Alice: I don’t know where I am going.Cat: Then it doesn’t matter which way you go.Lewis Carroll, Though the Looking-GlassOrganizations should make two types of decisions1) Strategic decisions2) Strategically driven decisionsOrganizations should make two types of decisions1) Strategic decisions2) Strategically driven decisionsCompany ACompany BCompany CWhat are we doing here?All firms have strategy. The only decision is whether you manage it, or simply back into it…Strategic Management Defineddecisions and actions required for the firm to create value and earn returns higher than those of competitorsformulation and implementation of plans designed to achieve objectivesunifying theme that gives coherence and direction to organizational/individual decisionsgame plan management has for positioning the company in its chosen market, competing successfully, satisfying customers, and achieving good business performanceintegrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantageWhat is a competitive advantage?Competitive AdvantageWhen a firm implements a strategy that rivals can’t duplicate, or find it too expensive to do try to imitateCompetitive advantages become sustainable competitive advantages when rivals stop trying to replicateThe Strategic Management ProcessStrategic analyses•Internal•ExternalVision and mission•Fundamental organizational purpose•Organizational valuesStrategy•Arenas•Vehicles•Differentiators•Staging•Economic logicThe central, integrated, externally oriented concept of how a firm will achieve its objectivesImplementation levers andStrategic leadershipTwo levels of Strategy??Corporate-level strategy •In which markets do we compete today?•In which markets do we want to compete tomorrow?•How does our ownership of a business ensure its •competitiveness today and in the future?•How do we compete in this market today?•How will we compete in this market in the future?Business-level strategyWhat is Strategy? Strategy is not doing similar activities better than your rivals – that’s operational effectivenesscontinual improvement not a sustainable advantageindustry-wide cost reductions do not lead to increased profitabilityexamples: PCs, automobiles, airlinesWhat is Strategy? 1) Strategy is performing different activities or performing similar activities in a different wayStrategy is about positioninga) Variety-based positioningoffering a unique choice of goods/services - Chic-fil-a, GameStopb) Needs-based positioningserving most/all of a particular group of customers’ needs - Babies R Usc) Access-based positioningserving a set of customers that require unique access – Kinkos, Movie Gallery, SuperetteWhat is Strategy? 2) Strategy is about choosing a position which requires tradeoffs, choosing what not to dowithout tradeoffs, all firms would imitateTradeoffs arise frominconsistent image/reputationdifferent activities, products, equipment, employees, skills, systems, machinespriorities, internal coordination, and controlWhat is Strategy? 3) Strategy is about combining activities as advantages come from fit and reinforcing Operational effectiveness is about excellence in individual activitiesFit/integration increases sustainability by reducing imitabilityWhat is Strategy? 4) The desire to grow is most threatening to an effective strategy Blurs uniquenessCreates compromisesReduces fitErodes original advantagesFour Perspectives on Competitive AdvantageIndustrial/Organization (I/O) Economic Model – External PerspectiveResource-Based View – Internal PerspectiveDynamic Perspective – Combination of the twoStakeholder ApproachThe Industrial/Organization (I/O) Model of Above-Average ReturnsBasic Premise of the I/O Model – to explain the dominant influence of the external environment on a firm's strategic actions and performanceThe Industrial/Organization (I/O) Model of Above-Average ReturnsUnderlying AssumptionsThat the external environment imposes pressures and constraints that determine the strategies resulting in above-average returnsThat most firms competing within a particular industry or industry segment control similar strategically relevant resources and pursue similar strategies in light of those resourcesThe Industrial/Organization (I/O) Model of Above-Average ReturnsUnderlying Assumptions (cont.)That resources for implementing strategies are highly mobile across firms, and that due to this mobility any resource differences between firms will be short livedThe Industrial/ Organization (I/O) Model of Above-Average ReturnsThe Industrial/Organization (I/O) Model of Above-Average ReturnsMichael Porter’s Five-Forces ModelReinforces the importance of economic theoryOffers an analytical approach that was previously lacking in the field of strategyDescribes the forces that determine the nature/level of competition and profit potential in an industrySuggests how an organization can use the analysis to establish a competitive advantageThe Resource-Based Model of Above-Average ReturnsBasic Premise of the Resource-Based Model – to propose that a firm's unique resources and capabilities should define its strategic actions and be used effectively to exploit opportunities in the