Chapter 1

Strategic Management and

Strategic Competitiveness

Hitt, th
Hitt, Ireland,
Ireland, Hoskisson,
Hoskisson, Harrison,
Harrison, Strategic
Strategic Management:
Management: Concepts
Concepts and
and Cases:
Cases: Competitiveness
Competitiveness and
and Globalization,
Globalization, 14
14th Edition.
Edition. ©
© 2024
2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.in part.
 Icebreaker

1. Pair up with another student, introduce yourself, and consider the

following questions:
− What do you think globalization means?
− Do you think globalization is good for all companies?
− Do you think globalization benefits humans?

2. Introduce your student partner to the rest of the class, using some
information you gained from your discussion about globalization.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning Objectives
By the end of this chapter, you should be able to:
1.1 Define strategic competitiveness, strategy, competitive advantage, above-average
returns, and the strategic management process.
1.2 Describe the competitive landscape and explain how globalization, technological
changes, and expectations of socially responsible behavior shape it.
1.3 Use the industrial organization (I/O) model to explain how firms can earn above-
average returns.
1.4 Use the resource-based model to explain how firms can earn above-average returns.
1.5 Use the stakeholder model to explain how firms can earn above-average returns.
1.6 Describe vision, mission, and values, and explain why they are important.
1.7 Describe strategic leaders and what they do.
1.8 Explain the strategic management process.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-1
An Overview of Strategy and Strategic
Competitiveness

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 An Overview of Strategy and Strategic
Competitiveness (1 of 5)
• Firms achieve strategic competitiveness by formulating and
implementing 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 as the pathway for deciding how they will pursue strategic
competitiveness.
▪ The chosen strategy indicates what the firm will and will not do.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 An Overview of Strategy and Strategic
Competitiveness (2 of 5)
• A firm has a competitive advantage when, by implementing a
chosen strategy, it creates superior value for customers and when
competitors are not able to imitate the value the firm’s products
create or find it too expensive to attempt imitation.
− Almost no competitive advantage is sustainable permanently.
− How long a competitive advantage will last depends on how quickly
competitors can acquire the skills needed to duplicate the benefits of
a firm’s value-creating strategy.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 An Overview of Strategy and Strategic
Competitiveness (3 of 5)
• 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.
▪ The most successful companies learn how to manage risk effectively.
▪ Doing so reduces investors’ uncertainty about the outcomes of their
investment.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 An Overview of Strategy and Strategic
Competitiveness (4 of 5)
• Firms without a competitive advantage or those that do not
compete in an attractive industry earn, at best, average returns.
− Average returns are returns equal to those an investor expects to
earn from other investments possessing a similar amount of risk.
− Over time, an inability to earn at least average returns results first in
decline and, eventually, failure.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 An Overview of Strategy and Strategic
Competitiveness (5 of 5)
• The strategic management process is the full set of
commitments, decisions, and actions firms take to achieve
strategic competitiveness and earn above-average returns.
− The process involves analysis, strategy, and performance (the A-S-P
model).
− A firm analyzes the external environment and its internal
organization, then formulates and implements strategies to achieve
a desired level of performance.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Figure 1.1
The Strategic
Management
Process

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Knowledge Check 1-1

An organization can be confident that its strategy yields a competitive advantage

after:
a. competitors decide how they will pursue strategic competitiveness.
b. competitors duplicate the firm’s value-creating strategy.
c. competitors’ efforts to duplicate it have ceased or failed.
d. competitors begin to imitate their product and strategies.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-2
The Competitive Landscape

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Competitive Landscape (1 of 2)

• The fundamental nature of • Managers must adopt a new mind-set

competition in many of the world’s that values:
industries is changing.
− Flexibility
− Firms must understand the strategic
implications associated with digitalization − Speed
and integrate digitalization effectively into
their strategies. − Innovation

− Conventional sources of competitive − Integration

advantage such as large advertising − The challenges flowing from constantly
budgets and economies of scale are not
as effective as they once were in helping changing conditions
firms earn above-average returns.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Competitive Landscape (2 of 2)

• Hypercompetition is a condition • It is a condition of rapidly escalating

where competitors engage in intense competition based on:
rivalry, markets change quickly and
often, and entry barriers are low. − Price-quality positioning

− Hypercompetition makes it difficult for − Competition to create new know-how and

firms to maintain a competitive establish first-mover advantage
advantage.
− Competition to protect or invade
• Two primary drivers of established product and/or geographic
hypercompetition: markets

− The emergence of a global economy

− Rapid technological change

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Global Economy (1 of 3)

• A global economy is one in which goods, services, people, skills, and ideas
move freely across geographic borders.
• The global economy significantly expands and complicates a firm’s competitive
environment.
• An understanding of the size of the economies in which a firm participates is
important when studying the global environment.
− Such an analysis also must consider entry barriers to various economies in the form of
tariffs.
− A tariff is one of the evidences of what is called protectionism, which involves actions taken
by a government to protect its economy from adverse influences due to foreign trade.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Global Economy (2 of 3)
• When evaluating the attractiveness of a country for expansion, it is important to
consider economic growth, since with growth comes increased demand for
products and services.
• Globalization
− Globalization is the increasing economic interdependence among countries and their
organizations as reflected in the flow of products, financial capital, and knowledge across
country borders.
− Globalization is a product of a large number of firms competing against one another in an
increasing number of global economies.
− A global supply chain is a network of firms that spans multiple countries with the purpose
of supplying goods and services.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Global Economy (3 of 3)
• Globalization has led to higher • Globalization is not without challenges.
performance standards with − Workers flowing rather freely among
respect to multiple competitive global economies
dimensions, including:
− “Liability of foreignness”
− Quality
▪ The amount of time required to learn to
− Cost compete in new markets
− Productivity ▪ Entering too many global markets
either simultaneously or too quickly
− Product introduction time
− Operational efficiency • Deglobalization is a reduction in
participation in global supply and value
chains.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Technology and Technological Changes
(1 of 4)
• Technology affects all aspects of how companies operate.
• Information technologies facilitate the integration of enterprises into the global
supply chains.
• Technology diffusion is the speed at which new technologies become available
to firms and when firms choose to adopt them.
• Perpetual innovation is a term used to describe how rapidly and consistently
new, information-intensive technologies replace older ones.
• Disruptive technologies are technologies that destroy the value of an existing
technology and create new markets.
− Increasing knowledge
Hitt, Ireland, intensity
Hoskisson, Harrison, th
Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14 Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Technology and Technological Changes
(2 of 4)
• Information Technology and Big Data
− Knowledge consists of information, intelligence, and expertise.
▪ Is the basis of technology and its application
▪ Is a critical organizational resource and an increasingly valuable source of competitive
advantage
▪ Is acquired knowledge through experience, observation, and inference
▪ Is an intangible resource
▪ Is developed by firms through training programs
▪ Is acquired by firms by hiring educated and experienced employees
▪ Must be integrated into the organization to create capabilities and then applied to gain a
competitive advantage

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Technology and Technological Changes
(3 of 4)
− Information technology is key to acquiring and managing knowledge flows.
− Firms have begun applying “big data” technologies to help with these processes.
▪ Big data refers to the data retrieved by firms that are increasing in volume, variety, and
frequency.
▪ Big data analytics is the process of examining huge amounts of data to uncover hidden
patterns and other information that can be used to improve decision making.
− The internet increased low-cost data storage capacity and increased efficient
processing technologies have made capturing and processing large volumes of
data possible.
− “Cloud” technologies that link computer servers through the internet mean that
many of these processes can be performed offsite rather than on local computers.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Technology and Technological Changes
(4 of 4)
− Big data analytics combined with internal systems that help information get to parts
of the organization where it is most useful can enhance a firm’s strategic flexibility.
− Strategic flexibility:
▪ is a set of capabilities firms use to respond to various demands and opportunities
existing in today’s dynamic and uncertain competitive environment.
▪ involves coping with uncertainty and its accompanying risks.
▪ requires developing the capacity for continuous learning and adapting to a changing
environment.
− Firms capable of applying quickly what they have learned exhibit the strategic
flexibility and the capacity to change in ways that will increase the probability of
dealing successfully with uncertain, or even hypercompetitive, environments.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Social Responsibility (1 of 2)
• Today’s competitive environment is also marked by the need to incorporate
social responsibility into a firm’s strategic management, often called corporate
social responsibility, or CSR.
• Society is holding corporations and other businesses accountable for their
actions with regard to a number of societal expectations, including:
− How they treat employees
− Their records with regard to inclusiveness
− The quality and safety of the products they make and services they provide
− Their environmental records
− The absence or existence of legal suits brought by any of their stakeholders
− Their philanthropic activities

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Social Responsibility (2 of 2)
• The basic idea behind sustainability is that a firm should not deplete or destroy
natural elements upon which it depends for survival.
− Sustainability has also been extended into other resource areas beyond the
environment, such as human capital, gender equality, global poverty, and
innovation.
− Often large firms are also held accountable for the actions of the firms with which
they do business.
− Firms that are high in social responsibility are at less risk of legal suits, negative
social media, walkouts, and so forth.
− The majority of large corporations publish sustainability reports which outline their
activities in ESG (environment, society, and governance).
▪ Greenwashing is exaggerating a firm’s environmental protection activities.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Polling Activity 1-2
Corporate social responsibility is …
a. what makes a company stand out as a good investment over other
companies.
b. a necessary component of any firm’s strategic management if they wish to be
successful in today’s competitive environment.
c. what will drive large corporations to make better choices in the materials they
use and how they source them.
d. the best method to bring about change in production companies around the
world that engage in sweatshop practices.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-3
The I/O Model of Above-Average Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The I/O Model of Above-Average Returns
(1 of 3)
• The logic of the I/O model is that the profitability potential of an industry or a
segment of it as well as the actions firms should take to operate profitably are
determined by a set of industry characteristics, including:
− Economies of scale
− Barriers to market entry
− Diversification
− Product differentiation
− The degree of concentration of firms in the industry
− Market frictions
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The I/O Model of Above-Average Returns
(2 of 3)
• Four underlying assumptions of the I/O model:
− The external environment imposes pressures and constraints that determine the
strategies that would result in above-average returns.
− Most firms competing within an industry or within a segment of that industry are
assumed to control similar strategically relevant resources and to pursue similar
strategies in light of those resources.
− Resources are highly mobile, meaning that any resource differences that might
develop between firms will be short-lived.
− Organizational decision makers are rational individuals who are committed to acting
in the firm’s best interests, as shown by their profit-maximizing behaviors.
• The I/O model challenges firms to find the most attractive industry in which to
compete.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The I/O Model of Above-Average Returns
(3 of 3)
• The five forces model of competition is − Firms can earn above-average returns by
an analytical tool firms use to find the producing either:
industry that is most attractive. ▪ Standardized products at costs below
those of competitors (a cost leadership
• The five forces model suggests that: strategy)
▪ Differentiated products for which
− An industry’s profitability is a function of customers are willing to pay a price
interactions among: premium (a differentiation strategy)
▪ Suppliers
• Managers’ strategic actions affect the
▪ Buyers
firm’s performance as do the
▪ Competitive rivalry among firms currently
in the industry characteristics of the environment in
▪ Product substitutes which the firm competes.
▪ Potential entrants to the industry
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Figure 1.2
The I/O Model of
Above-Average
Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Knowledge Check 1-3
The industrial organization (I/O) model assumes that:
a. firms acquire different resources and develop unique capabilities based on
how they combine and use the resources.
b. the external environment imposes pressures and constraints that determine
the strategies that would result in above-average returns.
c. any resource differences that develop between firms will be long term.
d. firms can earn above-average returns by producing standardized products at
costs below those of competitors.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-4
The Resource-Based Model of
Above-Average Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Resource-Based Model of
Above-Average Returns (1 of 3)
• The resource-based model of above-average returns assumes that each
organization is a collection of unique resources and capabilities.
• The uniqueness of resources and capabilities is the basis of a firm’s strategy
and its ability to earn above-average returns.
• Resources are inputs into a firm’s production process, such as capital
equipment, the skills of individual employees, patents, finances, and talented
managers.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Resource-Based Model of
Above-Average Returns (2 of 3)
• Firms typically classify resources into • Resources have a greater likelihood
three categories: of being a competitive advantage
− Physical capital
when integrated to form a capability.

− Human capital − A capability is the capacity for a set

of resources to perform a task or an
− Organizational capital activity in an integrative manner.
− Core competencies are capabilities
that serve as a source of competitive
advantage for a firm over its rivals.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Figure 1.3
The Resource-
Based Model of
Above-Average
Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Resource-Based Model of
Above-Average Returns (3 of 4)
• Resources and capabilities have the potential to be the foundation for a
competitive advantage when they are:
− Valuable (allow a firm to take advantage of opportunities or neutralize threats in its
external environment)
− Rare (possessed by few, if any, current and potential competitors)
− Costly to imitate (are difficult for other firms to obtain)
− Non-substitutable (have no structural equivalents)

• It is difficult to achieve and sustain a competitive advantage based on resources

alone.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Resource-Based Model of
Above-Average Returns (4 of 3)
• The four assumptions of the model are:
− (1) differences in firms' performances across time are due primarily
to their unique resources and capabilities rather than the industry's
structural characteristics;
− (2) firms acquire different resources and develop unique
capabilities based on how they combine and use the resources;
− (3) resources and capabilities are not highly mobile across firms;
and
− (4) the differences in resources and capabilities are the basis of
competitive advantage.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Knowledge Check 1-4
Which of the following is an assumption of the resource-based model?
a. Resources and capabilities are not highly mobile across firms.
b. A firm's performance across time is due primarily to the industry's structural
characteristics rather than to the firm's unique resources and capabilities.
c. Most firms competing within an industry or within a segment of that industry
are assumed to control similar strategically relevant resources and to pursue
similar strategies in light of those resources.
d. Organizational decision makers are assumed to be rational individuals who
are committed to acting in the firm's best interests, as shown by their profit-
maximizing behaviors.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-5
The Stakeholder Model of
Above-Average Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Stakeholder Model of
Above-Average Returns (1 of 4)
• Stakeholders are individuals, groups, and organizations that can both influence
and are affected by the objectives, actions, and outcomes of a firm.
• Stakeholders are internal and external constituencies that have a strong interest
in the activities and outcomes of an organization and upon whom the
organization relies on to achieve its own objectives.
− Internal stakeholders include all a firm’s employees, including both non-managerial
and managerial personnel.
− External stakeholders are a diverse group and include the major suppliers of a
firm’s capital as well as product market stakeholders—the firm’s customers,
suppliers, host communities, and any unions representing the workforce.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Stakeholder Model of
Above-Average Returns (2 of 4)
• Primary stakeholders are directly • Secondary stakeholders can both
involved in the value-creating influence and are influenced by what
processes of the firm and include: the firm does, but they do not
− Suppliers
contribute directly to the value the
firm creates.
− Employees
• This sort of management is often
− Customers
called managing for stakeholders or
− The communities in which the firm stakeholder-oriented management.
operates
− Financiers such as the firm’s
shareholders and banks
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Figure 1.4
The Stakeholder
Model of Above-
Average Returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Stakeholder Model of
Above-Average Returns (3 of 4)
• Managing for stakeholders implies that more attention and resources are
allocated to satisfy the needs of stakeholders than might be necessary simply to
retain their participation in the productive activities of the firm.
• It also means that firms incur greater costs as, for example, they:
− Provide better wages and benefits to their employees
− Give back to the communities in which they operate
− Provide high-quality products or outstanding service to customers at prices that are
perhaps a little lower than they might otherwise charge

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Stakeholder Model of
Above-Average Returns (4 of 4)
• One of the fundamental drivers of reciprocity is fairness, or what scholars call
organizational justice, which can be divided into three primary types:
− Distributional justice means that stakeholders feel as though they are receiving
value through their relationship with their firm that is commensurate with what they
contribute to the firm.
− Procedural justice means that the firm listens to stakeholders and considers their
positions when making important decisions that are likely to affect them.
− Interactional justice means that all stakeholders are treated with honesty, respect,
and integrity.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Managing for Stakeholders (1 of 2)
• Not all firms that manage for stakeholders will have above-average returns.
− Stakeholder management is only one important component in the strategic
management process.
− Situations may occur in which a firm would perform better if they simply engage in
what are called arms-length transactions with stakeholders.
▪ The firm simply responds to market forces in buying and selling products and other
resources.
▪ Could be more efficient when innovation, loyalty, and higher levels of stakeholder
motivation are not as important.

• This model suggests a firm should treat stakeholders better than competing
firms but not with overzealousness that could lead to “giving away the store.”

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Managing for Stakeholders (2 of 2)
• One of the keys to managing for stakeholders is determining how much is too
much when it comes to allocations to stakeholders.
− From an economic efficiency perspective, it is best to offer to each stakeholder a
value proposition that is just noticeably better than what they would get if they
engage in the same sort of transactions with a competing firm.
− Allocations beyond this level could lead to feelings among some stakeholders that a
firm is showing favoritism, thus reducing the sense that the firm is being fair.
− Over time, greatly disparate allocations could mean that the firm has insufficient
resources to invest in other important resource areas or stakeholders.

• Although organizations have dependency relationships with all their primary

stakeholders, they are not equally dependent on all stakeholders at all times.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Polling Activity 1-5

Which of the models is best at helping firms devise competitive strategies and
determining a firm’s overall purpose?
a. The I/O model of above-average returns
b. The resource-based model of above-average returns
c. The stakeholder model of above-average returns

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-6
Vision, Mission, and Values

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Vision, Mission, and Values

• After analyzing the external environment, the internal organization, and

relationships with stakeholders, the firm has the information required to form its
vision, mission, and values.
• Stakeholders learn a great deal about a firm by studying its vision, mission, and
values.
• A key purpose of these statements is to inform stakeholders of what the firm is,
what it seeks to accomplish, and who it seeks to serve.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Vision

• Vision is a picture of what the firm • An effective vision:

wants to be and, in broad terms, what − stretches and challenges people.
it wants to achieve.
− is developed by the CExdO and other
• A vision statement: top-level managers, employees,
suppliers, and customers.
− articulates the ideal description of an
organization and gives shapes to its − is consistent with the decisions and
intended future. actions of those involved with
developing it.
− tends to be relatively short and
concise.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Mission

• A mission specifies the businesses − deals more directly with product

in which the firm intends to compete markets and customers.
and the customers it intends to serve. − should be developed by the CEO,
top-level managers, and other
• A mission:
organizational members.
− is more concrete than a firm’s vision.
− has a higher probability of being
− should establish a firm’s individuality. effective when employees have a
strong sense of ethics.
− should be inspiring and relevant to all
stakeholders.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Values

• The values of an organization define − can help a firm define its purpose and
what should matter most to managers answer the fundamental question of
and employees when they make and what the firm stands for.
implement strategic decisions. − should help determine the way
stakeholders are treated and their
• Values: priority in important decisions.
− help guide what is rewarded and
reinforced in the organization. • Core values are sometimes
incorporated into a firm’s mission
− are a practical application of business statement, but many firms put them in
ethics. separate statements to reinforce to
stakeholders what they stand for.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-7
Strategic Leaders

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Strategic Leaders (1 of 2)

• Strategic leaders are people located in • In general, CEOs are responsible for
different areas and levels of the firm making certain that their firms use the
using the strategic management process strategic management process properly.
to select actions that help the firm
achieve its vision and fulfill its mission. • Many others help choose a firm’s
strategy and the actions to implement it.
• Successful strategic leaders are:
• The most effective CEOs and top-level
− Decisive managers understand how to delegate
− Committed to nurturing those around strategic responsibilities to people
them throughout the firm.
− Committed to helping the firm create
value for all stakeholder groups
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Strategic Leaders (2 of 2)

• Strategic leaders’ decisions and actions shape a firm’s culture.

− Organizational culture refers to the complex set of ideologies, symbols, and core
values that individuals throughout the firm share and that influence how the firm
conducts business.
− Organizational culture is the social energy that drives—or fails to drive—the
organization.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Knowledge Check 1-7

How can a firm avoid managerial hubris (overconfidence) at the top of the
organization?
a. Act globally.
b. Set goals for each employee.
c. Establish a vision for the company.
d. Delegate strategic responsibilities.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 1-8
The Strategic Management Process

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Strategic Management Process (1 of 2)

• Competitor analysis focuses on each company against which a firm competes directly.

• In a competitor analysis, the firm seeks to understand the following:

− What drives the competitor, as shown by its future objectives.
− What the competitor is doing, as revealed by its current strategy.
− What the competitor believes about the industry, as shown by its assumptions.
− What the competitor’s capabilities are, as shown by its strengths and weaknesses.

• Knowledge about these four dimensions helps the firm prepare an anticipated response
profile for each competitor.

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 The Strategic Management Process (2 of 2)

• A-S-P process:
− The analyses (A) firms use to develop strategies.
− The firm’s analyses provide inputs that are the foundation for choosing one or more
strategies (S) and deciding which one(s) to implement.
− The strategic management process calls for disciplined approaches to serve as the
foundation for developing a competitive advantage.
− The process has a major effect on the performance (P) of the firm.

• Mastery of this strategic management process contributes positively to a firm’s

efforts to achieve strategic competitiveness and, in doing so, to create value for
its stakeholders.
Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Figure 1.1
The Strategic
Management
Process

Hitt, Ireland, Hoskisson, Harrison, Strategic Management: Concepts and Cases: Competitiveness and Globalization, 14th Edition. © 2024
Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.