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Part 1: Strategic Management Inputs
appropriate for today’s firms and competitive environments (Chapter 12), and strategic
entrepreneurship (Chapter 13) as a path to continuous innovation are addressed.
Before closing this introductory chapter, it is important to emphasize that primarily
because they are related to how a firm interacts with its stakeholders, almost all strategic
management process decisions have ethical dimensions.
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Organizational ethics are
revealed by an organization’s culture; that is to say, a firm’s decisions are a product of
the core values that are shared by most or all of a company’s managers and employees.
Especially in the turbulent and often ambiguous competitive landscape of the twenty-first
century, those making decisions that are part of the strategic management process are
challenged to recognize that their decisions affect capital market, product market, and
organizational stakeholders differently and to evaluate the ethical implications of their
decisions on a daily basis.
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Decision makers failing to recognize these realities accept
the risk of putting their firm at a competitive disadvantage when it comes to consistently
engaging in ethical business practices.
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As you will discover, the strategic management process examined in this book calls
for disciplined approaches to serve as the foundation for developing a competitive advan-
tage. These approaches provide the pathway through which firms will be able to achieve
strategic competitiveness and earn above-average returns. Mastery of this strategic man-
agement process will effectively serve you, our readers, and the organizations for which
you will choose to work.
SUMMARY
Firms use the strategic management process to achieve •
strategic competitiveness and earn above-average returns.
Strategic competitiveness is achieved when a firm has
developed and learned how to implement a value-creating
strategy. Above-average returns (in excess of what investors
expect to earn from other investments with similar levels of
risk) provide the foundation a firm needs to simultaneously
satisfy all of its stakeholders.
The fundamental nature of competition is different in the
•
current competitive landscape. As a result, those making
strategic decisions must adopt a different mind-set, one that
allows them to learn how to compete in highly turbulent
and chaotic environments that are producing disorder and
a great deal of uncertainty. The globalization of industries
and their markets and rapid and significant technological
changes are the two primary factors contributing to the
turbulence of the competitive landscape.
Firms use two major models to help them form their vision •
and mission and then choose one or more strategies to use
in pursuit of strategic competitiveness and above-average
returns. The core assumption of the I/O model is that the
firm’s external environment has more of an influence on the
choice of strategies than do the firm’s internal resources,
capabilities, and core competencies. Thus, the I/O model is
used to understand the effects an industry’s characteristics
can have on a firm when deciding what strategy or strate-
gies to use to compete against rivals. The logic supporting
the I/O model suggests that above-average returns are
earned when the firm locates an attractive industry or part
of an industry and successfully implements the strategy
dictated by that industry’s characteristics. The core assump-
tion of the resource-based model is that the firm’s unique
resources, capabilities, and core competencies have more
of an influence on selecting and using strategies than does
the firm’s external environment. Above-average returns
are earned when the firm uses its valuable, rare, costly-to-
imitate, and nonsubstitutable resources and capabilities
to compete against its rivals in one or more industries.
Evidence indicates that both models yield insights that are
linked to successfully selecting and using strategies. Thus,
firms want to use their unique resources, capabilities, and
core competencies as the foundation for one or more
strategies that will allow them to compete in industries
they understand.
Vision and mission are formed in light of the information and
•
insights gained from studying a firm’s internal and external
environments. Vision is a picture of what the firm wants to
be and, in broad terms, what it wants to ultimately achieve.
Flowing from the vision, the mission specifies the business
or businesses in which the firm intends to compete and the
customers it intends to serve. Vision and mission provide
direction to the firm and signal important descriptive
information to stakeholders.
Stakeholders are those who can affect, and are affected by, •
a firm’s strategic outcomes. Because a firm is dependent
on the continuing support of stakeholders (shareholders,