bus499 week1 discussion
BUS 499, Week 1: Strategic Management and Strategic Competitiveness
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Slide # |
Topic |
Narration |
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Slide 1 |
Introduction |
Welcome to the Business Administration Capstone. In this lesson we will discuss Strategic Management and Strategic Competitiveness. Please go to the next slide. |
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Slide 2 |
Objectives |
When you complete this lesson you will be able to: Identify the competitive landscape, different above average return models, vision, mission, and stakeholders of a firm. Please go to the next slide. |
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Slide 3 |
Supporting Topics |
In order to achieve this objective, the following supporting topics will be covered: The competitive landscape; The I / O model of above-average returns; The resource-based model of above-average returns; Vision and mission; Stakeholders; Strategic leaders; and The strategic management process. Please go to the next slide. |
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Slide 4 |
The Competitive Landscape * |
Competition between many of the world’s industries is changing. Many of these industries are competing due to money being scare and markets becoming volatile. Boundaries that once seemed drawn between industries are becoming blurred. An example of this challenge would be the advances in interactive computer networks and telecommunications. These advancements have entered into the realm of the entertainment industry. .. We also see that many partnershipsin the entertainment industry further blur the boundaries of the industry.In order to be successful and maintain a competitive edge, managers must adopt new strategies to stay current with the evolving conditions. Many firms effectively use the strategic management processto help reduce the likelihood of failure with various challenges they may encounter. Hypercompetition is a term often used to illustrate the competitive landscape. The conditions of hypercompetition assume that market stability is replaced by notions of inherent instability and change. Hypercompetition results from the dynamics of strategic maneuvering among global and innovative combatants. It is a condition of rapidly escalating competition based on the following: Price quality positioning; Competition to create new know-how and establish first mover advantage; and Competition to protect or invade established product or geographic markets. In a hypercompetitive market, firms will want to challenge their competitors with the end goal of improving their competitive position and performance.The emergence of a global economy and technology along with specifically rapid technological changes are the two primary elementsof hypercompetitive environments and help create today’s competitive landscape. Please go to the next slide. |
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Slide 5 |
The Competitive Landscape, continued * |
A global economyrefers to the goods, services, people, skills, and ideas that move freely across geographic borders. The emergence of the global economy helps create interesting opportunities and challenges. For example, the European Union has become one of the world’s largest markets, with seven hundred million potential customers.For several years China was seen as a lowcompetition market and a low costproducer. Today, China is now an extremely competitive market,with local markets seeking MNCs or multinational corporations. Now these local markets must fiercely compete against other MNCsand those local companies that are more cost effective and fasterwith theirproduct development. Please go to the next slide. |
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Slide 6 |
The Competitive Landscape, continued * |
Globalizationrefers to a growinginterdependence among countries and their organizations,as shown bythe flow of goods and services, financial capital, and knowledge across the countries’ borders. Globalizationcan be seen as a product of large numbers of firms competing against each other throughout a number of global economies. In some globalized markets and industries, financial capital can be obtained in one national market and used to buy raw materials in another. This goes to show that globalization can increase the range of opportunities for companies competing in the current competitive landscape. Firms must make culturally sensitive decisions when engaging in globalization with their operations. Overall, it is important to note that globalization has led to higher performance standards in many competitive dimensions, including the following: Quality; Cost; Productivity; Product introduction time; and Operational efficiency. Firms must understand that in order to compete in today’s world, companies must exceed global standards to earn above average returns. Globalization, while positive, does offer potential risks. Risks of participating outside of the firm’s domestic country in the global economy is referred to as a liability of foreignness.One risk of entering the global market is the amount of time required for firms to learn the proper ways to be competitive in new markets. If a firm does not grasp the concepts of being competitive, their performance can suffer until this knowledge is grasped sufficiently. Additionally, a firm’s performance may suffer with substantial amounts of globalization. A firm may suffer from this principle by overdiversifyinginternationally beyond their ability.As a result of this, overdiversificationnegatively affects a firm’s overall performance. Due to all of these possible issues, it is best to effectively use the strategic management process. While getting involved in global markets is an attractive option for some companies, it is not the only way a company can be strategically competitive. Please go to the next slide. |
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Slide 7 |
The Competitive Landscape, continued * |
Technology-related trends and conditions can be placed into the following three categories: Technology diffusion and disruptive technologies; The information age; and Increasing knowledge intensity. These three categories illustrate several different ways that technology is significantly altering competition and contributing to unstable competitive environments. The rate of technology diffusion has increased greatlyover the past fifteen to twenty years. A word often used along with technology diffusion is perpetual innovation. This term refers to therapidly and consistently new technologies that replace older ones. A competitive premium is placed on being able to produce new innovative and creative products quickly. We see that products which are somewhat indistinguishable because of the growth of technology use the speed to market strategy. These new innovative products derive from an understanding of global standards and expectations of product functionality. Another indicator of rapid technology diffusion is that it now may take less time for firms to gather information about their competitors’ research, development and product decisions. We see that in the global economy, competitors will often imitate a firm’s successful competitive actions within a few days. As a result of methods like this, we see a reduction in thecompetitive benefits of patents. However, we also see that patents used todayare an effective way of protecting proprietary technology. Please go to the next slide. |
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Slide 8 |
The Competitive Landscape, continued * |
Dramatic changes in information technology have occurred in recent years. Everything we use in our daily live, such as personal computers, cellular phones, and multiple social networking sites,shows the end result of technological developments. An important outcome of these changes is the ability to effectively and efficiently access and use information. These information technology advances have given small firms more flexibility in competing with large firms.Using technology efficiently will help promote and increase technology diffusion. The declining costs of information technologies and the increased accessibility to these technologies further paints an image of the current competitive landscape. We also see that the global proliferation of relatively inexpensive computing power and the ability to link on a global scale via computer networks further supports the diffusion of information technologies. Due to this unification and diffusion,the competitive potential of information technologies is now available to companies of all sizes throughout the world. The Internet has really boomed, and is a centerpiece in our everyday lives. The Internet has also promoted hypercompetition amongst its users. Because the Internet is available to people throughout the world,it allows the delivery of information to computers in any location. Access to the Internet on smaller devices such as cell phones is another aspect that is having an impact on competition between companies. However, there is a possibility that changes to Internet Management and Strategic Competitiveness Service Providers’ or ISPs’ pricing structures could affect the rate of growth for Internet-based applications. Many users today are downloading or streaming high definition movies, playing video games online, and so forth. If these pricing changes were to be implemented, the users would be affected the most by a pricing structure based around total usage. Please go to the next slide. |
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Slide 9 |
The Competitive Landscape, continued * |
The basis of technology and its applications isknowledge. In today’s competitive world, knowledge is a critical organizational resource and increasingly a very valuable source of competitive advantage. We saw that starting in the 1980s, the basis of competition shifted from hard assets to intangible resources. An example of intangible resources would be relationships with customers and suppliers. Intangible resources build knowledge through experience, observation, and inference. Today’s competitive landscape puts a huge value on intangible resources, and they are expanding as a proportion of total shareholder value. To enhance the probability of achieving strategic competitiveness, firms want to developthe ability to capture intelligence. They then want to transformthis intelligence into usable knowledge, and then diffuseitrapidly throughout the company. Therefore, to gain a competitive advantage,firms must develop and acquire knowledge and then integrate it into the organization.Innovations require astrong knowledge base. Firms that lack the appropriate internal knowledge resources are less likely to invest money intoresearch and development. Knowledge spillovers are common, so firms must continue to keep current with their information. Due to this risk of spillovers, firms try to use their knowledge in productive ways. Firms will often build routines that facilitate the diffusion of local knowledge throughout the organization. Strategic flexibility allows firms to get better in areas in which they may be lacking Using strategic flexibilityallows for a set of capabilities to respond to various demands and opportunities that exist in today’sdynamic and uncertain competitive environments. Being strategically flexible sometimes means coping with uncertainty and risks that may follow. Firms should try to develop strategic flexibility in all areas of their operations. However, it is important for firms to develop strategic flexibilitybecause inertiacan build up over time. It is also important to note that a firm’s focus and past core competencies may actually slow change and affect strategic flexibility. Please go to the next slide. |
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Slide 10 |
The I/ O Model of Above- Average Returns * |
From the 1960s through the 1980s, the external environment was thought to be the most important factor in determining strategies firms need in orderto be successful. The external environment’s influence on a firm’s strategic actions is shown using the industrial organization modelof above-average returns.This model specifies that the industry or segment of an industry that chooses to compete in the market has a stronger influence on performance than the decisions mangers make within the company. The firm’s performance is believed to be determined primarily by a range of industry properties, including the following: Economies of scale; Barriers to market entry; Diversification; Product differentiation; and The degree of concentration of firms in the industry. Based around economics,the I/ O model containsfour underlying assumptions. The first assumption is that the external environment is assumed to impose pressures and constraints that determine the strategies of above-average returns. Secondly, it is assumedthat most firms competing within an industry are controlledusing similar strategically relevant resources. These firms then pursuesimilar strategies in light of those resources. The third assumption is that resources used to implement strategies are highly mobile across firms. This would mean that any resource differences that might develop between firms will be short-lived. Lastly, it is assumed that organizational decision-makers are rational and committed to acting in the firm’s best interests. This can be attributed to their variousprofitmaximizing behaviors. The I/ O model challenges firms to find the best industry to thrive in. Since most firms have similar valuable resources that are mobile, performance can only increase if they operate in an area of high profit potential. It is also important to use resources wisely to implement a successful strategy. Please go to the next slide. |
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Slide 11 |
The I/ O Model of Above- Average Returns, continued * |
The five forces model of competition is an analytical tool that firms use to help find the most attractive area of operation. The model encompasses several variables and tries to capture the complexity of competition. The five forces model suggests that the industry’s profitabilityresults from the interactions among five forces which include the following: Suppliers; Buyers; Competitive rivalry among current industry firms; Product substitutes; and Potential entrants to the industry. Many firms use the five forces model to help them identify the attractiveness of an industry, as well as to find the best area to set up operations. This model promotes the idea that firms can earn above-average returns by producing either standardized goods or services at costs below those of competitors. These firms can also produce differentiated goods or servicesfor which customers will pay a price premium. Please go to the next slide. |
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Slide 12 |
The Resource- Based Model of Above- Average Returns * |
The next model we will look at is the resource-based model. This model assumes that each organization consists of a group of uniqueresources and capabilities. The basis of a firm’s strategy and its ability to earn above-average returns is based around the diversity of its resources and capabilities. Resources are inputs into a firm’s production process.A firm’s resources are classified into three categories, which include: Physical; Human; and Organizational capital. As we described previously, resources are either tangible or intangible in nature. Individual resources alone may not yield a competitive advantage. Capacities are asource of competitive advantage and stem from resources. A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. These capabilities can evolve over time, and managing them in a dynamic manner can help promote above-average returns. Resources and capabilities serve as another source of competitive advantage and are referred to as core competencies. These core competencies are often visible in the form of organizational functions. Please go to the next slide. |
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Slide 13 |
The Resource- Based Model of Above- Average Returns, continued * |
This model also assumes that firms acquire different resources and develop unique capabilities based on how they combine and use resources. The basis of competitive advantage with this model stems from resources and capabilities notbeing highly mobile across firms. Through continued use, capabilities become stronger and more difficult for competitors to understand and imitate. It is important to note that a capability should not be too easy or too hard. Not all of a firm’s resources and capabilities have the potential to be the foundation for a competitive advantage. This potential is realized when resources and capabilities are the following: Valuable; Rare Costly to imitate; and Nonsubstitutable. Resources are deemed valuable when they allow a firm to take advantage of opportunities or neutralize threats in the external environment. When resources are labeled as rare,they are possessed by few current or potential competitors. Resources that are costly to imitateare often non-obtainable or obtainable only at a cost disadvantage. They are nonsubstitutable when they have no structural equivalents. Many resources can either be imitated or substituted over time. Due to this, it is hardto achieve and maintaina competitive advantage based on resources alone. Integration of individual resources is often completed in the form of capabilities. These capabilities are more likely to have the four attributes we reviewed. When these four criteria are met, resources and capabilities formcore competencies. As noted previously, research shows that both the industry environment and a firm’s internal assetsaffect that firm’s performance over time. Please go to the next slide. |
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Slide 14 |
Strategic Competitiveness and Competitive Advantage |
Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. When choosing a strategy, firms make choices among competing alternatives. In this sense, the chosen strategy indicates what the firm intends to do, as well as what it does not intend to do. A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. An organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors’ efforts to duplicate its strategy have ceased or failed. In addition, firms must understand that no competitive advantage is permanent. The speed with which competitors are able to acquire the skills needed to duplicate the benefits of a firm’s value-creating strategy determines how long the competitive advantage will last. Please go to the next slide. |
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Slide 15 |
Above-Average Returns |
Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment. Returns are often measured in terms of accounting figures, such as return on assets, return on equity, or return on sales. Alternatively, returns can be measured on the basis of stock market returns, such as monthly returns. In smaller, new venture firms, performance is sometimes measured in terms of the amount and speed of growth rather than more traditional profitability measures, because new ventures require time to earn acceptable returns on investors’ investments. Understanding how to exploit a competitive advantage is important for firms that seek to earn above-average returns. Firms without a competitive advantage or that are not competing in an attractive industry earn, at best, average returns. Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk. In the long run, an inability to earn at least average returns results in failure. Failure occurs because investors withdraw their investments from those firms earning less-than-average returns. Please go to the next slide. |
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Slide 16 |
Stakeholders |
Every organization involves a system of primary stakeholder groups with whom it establishes and manages relationships. Stakeholders are the individuals and groups who can affect the vision and mission of the firm, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance. Claims on a form’s performance are enforced through the stakeholders’ ability to withhold participation essential to the organization’s survival, competitiveness, and profitability. Stakeholders continue to support an organization when its performance meets or exceeds their expectations. Also, recent research suggests that firms that effectively manage stakeholder relationships outperform those that do not. Stakeholder relationships can therefore be managed to be a source of competitive advantage. Although organizations have dependency relationships with their stakeholders, they are not equally dependent on all stakeholders at all times. As a consequence, not every stakeholder has the same level of influence. The more critical and valued a stakeholder’s participation, the greater a firm’s dependency on it. Greater dependence, in turn, gives the stakeholder more potential influence over a firm’s commitments, decisions, and actions. Managers must find ways to either accommodate or insulate the organization from the demands of stakeholders controlling critical resources. Please go to the next slide. |
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Slide 17 |
Stakeholders, continued |
The parties involved with a firm’s operations can be separated into at least three groups. These groups are the capital market holders, the product market stakeholders, and the organizational stakeholders. Shareholders and the major suppliers of a firm’s capital constitute the capital market holders. Shareholders and lenders both expect a firm to preserve and enhance the wealth they have entrusted to it. The returns they expect are commensurate with the degree of risk accepted with those investments. Dissatisfied lenders may impose stricter covenants on subsequent borrowing of capital. Dissatisfied shareholders may reflect their concerns through several means, including selling their stock. Some might think that product market stakeholders, customers, suppliers, host communities, and unions, share few common interests. However, all four groups can benefit as firms engage in competitive battles. For example, depending on product and industry characteristics, marketplace competition may result in lower product prices being charged to a firm’s customers and higher prices being paid to its suppliers. Employees, the firm’s organizational stakeholders, expect the firm to provide a dynamic, stimulating, and rewarding work environment. As employees, we are usually satisfied working for a company that is growing and actively developing our skills, especially those skills required to be effective team members and to meet or exceed global work standards. Workers who learn how to use new knowledge productively are critical to organizational success. In a collective sense, the education and skills of a firm’s workforce are competitive weapons affecting strategy implementation and firm performance. Please go to the next slide. |
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Slide 18 |
Check Your Understanding |
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Slide 19 |
Vision |
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. Thus, a vision statement articulates the ideal description of an organization and gives shape to its intended future. In other words, a vision statement points the firm in the direction of where it would eventually like to be in the years to come. It is also important to note that vision statements reflect a firm’s values and aspirations and are intended to capture the heart and mind of each employee and, hopefully, many of its other stakeholders. A firm’s vision tends to be enduring while its mission can change in light of changing environmental conditions. A vision statement tends to be relatively short and concise, making it easily remembered. As a firm’s most important and prominent strategic leader, the CEO is responsible for working with others to form the firm’s vision. Experience shows that the most effective vision statement results when the CEO involves a host of people to develop it. Please go to the next slide. |
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Slide 20 |
Mission |
The vision is the foundation for the firm’s mission. A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. The firm’s mission is more concrete than its vision. However, like the vision, a mission should establish a firm’s individuality and should be inspiring and relevant to all stakeholders. Together, vision and mission provide the foundation the firm needs to choose and implement one or more strategies. The probability of forming an effective mission increases when employees have a strong sense of the ethical standards that will guide their behaviors as they work to help the firm reach its vision. Thus, business ethics are a vital part of the firm’s discussions to decide what it wants to become as well as who it intends to serve and how it desires to serve those individuals and groups. Please go to the next slide. |
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Slide 21 |
Strategic Leaders * |
We will now discuss strategic leaders. Strategic leaders are defined as people located in different areas and levels of the firm. These leaders use the strategicmanagement process help them select strategic actions that can help the firm achieve its goals. There are several qualities that define a strategic leader and they include the following: Successful strategic leaders are decisive; They are committed to nurturing those around them; andThese leaders are committed to helping the firm promote and create value with all stakeholders. CEOs and other high ranking mangers are often who we think of when we talk about strategic leaders. These managers are indeed looked upon as strategic leaders.CEOs have the responsibility of making sure their firm uses the strategic management process correctly. There is a lot of pressure and stress for CEOs to make the best decisions involving their firm. There are however, other members of a firm that aid in the determination of firm decisions. Understanding how to effectively delegate strategic responsibilities to people throughout the firm is very quality of CEOs and top level managers. Delegation is very important within a firm because it helps alleviate too much manager control at the top of the firm. We also see that the organizational cultureof a firm has an effect on strategic leaders and their work. Strategic leaders’ decisions and actions shape a firm’s culture. We defined organizational cultureas a set of complex ideologies, symbols, and core values that are shared throughout the firm. These ideologies in turn can influence how the firm conducts business. The organizational culture is force that drives or fails to drive the organization. It is important to understand that some organizational cultures are a source of disadvantage. As a result of this concept it is important for strategic leaders to understand that regardless if the firm’s culture is functional or dysfunctional; their effectiveness is influenced by that culture. The relationship formed between the organizational culture and strategic leaders’helps shape the leader’s leadership skills and aids in the evolution of the organizational culture of the firm. Please go to the next slide. |
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Slide 22 |
Strategic Leaders, continued * |
Strategic leaders must also have a strong strategic orientationcharacteristic. They must be able to embrace change and deal with it effectively. Strategic leaders can adapt to this competitive landscape by promoting innovation and by embracing innovative thinking. To promote innovation it must be facilitated by a diverse management team that represents different types of expertise and leveraging relationships. Leveraging by strategic leaders can be completed when their organizations are ambidextrous. This means that the organizationmust promote exploratory and exploitative learning. This process then allows incremental knowledge to be added to existing knowledge bases. The end result is a better understanding and use of existing products. To take this a step further strategic leaders needto adapt these ideas in to a global mindset and take on an ambicultural approach to management. The most effective strategic leaders provide a vision as the foundation for the firm’s mission and use of one or more strategies. Please go to the next slide. |
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Slide 23 |
Strategic Leaders, continued* |
Strategic leaders attempt to predict the outcomes of their decisions before taking efforts to implement them. Many decisions made during the strategic management process are concerned with an uncertain future and the firm’s future plans. Managers try to combat uncertainty by trying to predict the future effects on the firm’s profits as a result of strategic decisions.Mapping an industry’s profit po Do you need a similar assignment done for you from scratch? We have qualified writers to help you. We assure you an A+ quality paper that is free from plagiarism. Order now for an Amazing Discount! |
