2 1 Perspectives of Competitive Advantage Managing Strategically

2. 1 Perspectives of Competitive Advantage �Managing Strategically – formulating and implementing strategies that allow an organization to develop and maintain a Competitive Advantage. � 1. Industrial Organization � 2. Resource Based View � 3. Guerilla View

Industrial Organization �I/O View focuses on the structural forces within an industry, the competitive environment of firms, and how these influence competitive advantage.

Resource Based View A firms resources are most important in getting and sustaining a competitive advantage. �Financial- Banks �Physical – GM �Human – Southwest Airlines �Intangible – Coca Cola �Cultural – Walmart

Resource Based View contd.

Guerilla View �The view that organizations competitive advantage is temporary

Old VS. New Business Environment �Old Drivers �New Drivers Labor Force Production Resources Funding Information Revolution Technology Globalization

Information Revolution �The amount of digital information is 3 million times all the books ever written �Information saved in a single year could fill half a million libraries size of the Library in Congress �Growing at a rate of 57% a year

Information Revolution Cont. �Information is now the essential resource of production with a supporting cast of Labor, Land Capitol �Information provides a sustainable competitive advantage when used correctly with traditional factors of production.

Technology �What is Technology? �One impact of technology is called “Bottom Up” where the power has shifted from the institutions to individuals �Technology impacts innovation, which we define as turning creative idea into a product or process that can be sold

Technology in Innovation �How important is innovation? �IBM’s CEO Sam Palmisano says, “The way you will thrive in this environment is by innovating – innovating in technologies, innovating in strategies, innovating in business models”

Globalization �The days where the U. S. produce all consumer products are gone �Globalization influences strategic management in two ways… �GLOBAL MARKETS �GLOBAL COMPETITORS

Globalization Cont. �To sustain a competitive advantage you must look globally for customers as long with resources from different locations �Some cases to make the most effective strategy is to partner with a competitor to create or market products

Four Implications of Driving Forces � 1. Organization/Continual change - can be external or internal and defined as structured transition in what an organization does or how it does it � 2. Reduced need for physical assets – Large Corporations are finding value in intangible factors such as ideas, employee knowledge sharing, customer databases, product innovation and online ordering systems

Implications Cont. � 3. Vanishing Distance & Compressed Time – Limitations of physical distance have disappeared along with time constraints � 4. Vulnerability – Threats of computer viruses, terrorist attacks, and biological attacks illustrate the increased vulnerability that organizations face from interconnectedness and openness

Critical Success Factors � 1. Ability to Embrace Change – Change can bring new opportunity and exploit challenges dealing with change. � 2. Creativity and Innovation Capabilities – “Create and innovate or fail” � 3. Being a World Class Organization – Strategic decision makers take actions to help it be the best in the world at what it does

2. 3 Organizational Elements that Guide Strategic Decision Makers �Organizational vision and mission �CSR and Ethics

Vision �Four components of vision � 1. Vision must be “Built on a foundation of the organizations core values and beliefs” � 2. Vision should “Elaborate a purpose for the organization” � 3. Vision should “Include a brief summary of what the organization does” � 4. Visions “Specify broad goals”

Mission Statement �Statement of what specific organizational units do, and what they hope to accomplish �Can be mission statements for several different departments of the firm. (divisional, group projects, etc. ) �Starbucks mission statement “Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. . ”

Corporate Social Responsibility and Ethics �CSR – The obligation of the organizational decision makers to make decisions and act in ways that recognize the interrelatedness of business and society. �Formerly – what is in the best interest of the stockholder �Today – what is in the best interest of the stakeholders, or possible future stakeholders.

CSR Potential Stakeholder Target Market

CSR & Ethics �Ethics – Ethics involves the principles that define right and wrong decisions and behavior. �being able to decipher in given situations what most would consider “right or wrong. ” Ethical decisions are involved a great deal in managing strategically.