Strategic Management: Creating Competitive Advantages: An Overview
Analyzing the External Environment of the Firm
Analyzing the Internal Environment of the Firm
Recognizing a Firm’s Intellectual Assets: Human Capital, Technology and Knowledge, Brands and Trademarks, Relationships
chapter 1 Strategic Management:
Creating Competitive Advantages: An Overview
After reading this chapter, you should have a good understanding of: LO 1 the essence and definitions of strategy, strategic management, and competitive advantages. LO 2 the four key attributes of strategic management and the three principal and interrelated activities of the strategic management process. LO 3 the vital role of corporate governance and stakeholder management in the strategic management process and the long-term success of all organizations. LO 4 the key environmental forces that create unpredictable change and call for a greater strategic management perspective throughout the organization. LO 5 how an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.
Chapter 1 Strategic Management: Creating Competitive Advantages: An Overview
One of the things that makes the study of strategic management so interesting is that it tries to answer the question: Why do some firms outperform others? How is it that struggling firms can become stars, while high flyers can become earthbound very rapidly? When Wal-Mart announced its intentions of entering the Canadian retail scene in the mid-1980s, most established companies—large and small alike—were justifiably terrified. Within the next few years and as a direct result of Wal-Mart’s aggressive strategy, venerable competitors, such as Eaton’s and Kmart, disappeared. Others, though, were able to survive and some, such as Canadian Tire and Loblaws, faced the onslaught head-on and have thrived in the new competitive landscape. Bombardier has been a Canadian success story of genius and serendipity; it was able to carve a unique place in a range of industries in aerospace, public transit, and outdoor recreational equipment. During the recent stock market slump beginning in 2000, many technology firms were particularly ravaged. Let’s look at one such firm that experienced a hard fall from grace.
John Roth, after his appointment in 1997 as chief executive officer of the Brampton, Ontariobased telecom behemoth Nortel Networks, embarked on a three-year journey to transform Nortel from a lumbering bureaucracy into a template for the New Economy. Along the way, Nortel electrified the high-tech industry with a series of lightning-quick manoeuvres and became a major player in the Internet revolution. Roth’s efforts earned him Canada’s Outstanding CEO of the Year Award for 2000. He catapulted Nortel beyond its decades-long core business of making telephone equipment into the red-hot market for fibre-optic networks and other systems for transmitting digital information over the Internet. It also spawned a series of multi-billion dollar acquisitions and new alliances. In 2000, Nortel ranked as North America’s number two maker of telecom products, trailing only Lucent Technologies, and was the second largest router manufacturer, behind its other chief rival, Cisco Systems Inc. In early 2000, Nortel Networks had surpassed $400 billion in market capitalization and accounted for as much as 36 percent of the value of the TSE 300, leading the stock exchange to record trading volumes. Yet, on February 15, 2001, sales growth expectations were cut in half to 15 percent, earnings growth predictions were reduced from 30 percent to 10 percent, and a first-quarter earnings guidance was revised downward from 16 cents per-share growth to a loss of 4 cents per share. Nortel’s stock, which had already been battered along with all high-tech shares...