Chapter 1
Strategic Management
and Strategic Competitiveness
Hitt, Ireland, and Hoskisson
Strategic management process

The full set of
commitments,
decisions, and
actions required
for a firm to
achieve strategic
competitiveness
and earn aboveaverage returns.
Insert figure 1.1 graphic
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Step 1: Analyze strategic inputs

Evaluate competitive, global landscape

Challenging landscape created by an emerging
global economy, its resulting globalization, and
rapid changes in technology.
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2 models to analyze strategic inputs

Industrial organization
(I/O) model


External environment is
primary determinant of a
firm’s strategic actions
Model focuses on the
firm’s external
environment

Resource-based model


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A firm’s unique resources
and capabilities are the
critical link to strategic
competitiveness.
Model focuses on the
firm’s internal
environment
Technology and technological changes


Technology significantly alters competition and
contributes to unstable competitive environments.
3 categories of technology trends and conditions



technology diffusion and disruptive technologies
the information age
increasing knowledge intensity
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I/O model of
above-average returns

According to the model,
the industry in which a
company chooses to
compete has a stronger
influence on
performance than do
the choices managers
make inside their
organizations.
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I/O model suggests strategies

Firms may earn above-average returns by


manufacturing standardized products, or
producing standardized services at costs below
those of competitors (a cost leadership strategy),
or
manufacturing differentiated products for which
customers are willing to pay a price premium
(a differentiation strategy).
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Resource-based model

Assumes each
organization is a
collection of unique
resources and
capabilities, and
uniqueness of its
resources and
capabilities is the
basis for a firm’s
strategy and ability to
earn above-average
returns.
Insert Figure 1.3 The
Resource-Based
Model of AboveAverage Returns
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Resource-based model


Using this model, a firm would choose to
enter an industry in which it had competitive
advantages
To become a competitive advantage, a
resource or capability must be valuable, rare,
costly to imitate, and not substitutable.
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Step 2: Take strategic action


Vision is a picture of what the firm wants to
be and, in broad terms, what it wants to
ultimately achieve.
A mission specifies the business(es) in which
the firm intends to compete and the
customers it intends to serve.
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Classifications of stakeholders
Insert figure Figure 1.4 The
Three Stakeholder Groups
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Step 3: Realize strategic outcomes



Strategic leaders must predict the potential
outcomes of their strategic decisions.
To do so, they must first calculate profit pools
in their industry that are linked to value chain
activities.
A profit pool entails the total profits earned in
an industry at all points along the value chain.
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