Strategic Management: Competitiveness and Globalisation 7th ASIA Pacific Edition by Dallas Hanson So

investment). In other words, the above-average returns exceed investors’ expected
levels of return for given risk levels. In smaller new venture organisations, performance
is sometimes measured in terms of the amount and speed of growth rather than more
traditional profitability measures – new ventures require time to earn acceptable
returns.
Teaching Note: Point out that in the long run, organisations must earn at least
average returns and provide investors with average returns if they are to survive.
If an organisation earns below-average returns, investors will withdraw their
funds and place them in investments that earn returns that are at least average.
At this point, it may be useful to highlight the role institutional investors play in
regulating above-average performance.
Chapter 1: Strategic management and strategic competitiveness 1-3
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, 7th Edition. © 2022 Cengage
Australia Pty Ltd. 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
Figure 1.1 illustrates the dynamic, interrelated nature of the elements of the strategic
management process and provides an outline of where the different elements of the
process are covered in this text.
Feedback linkages among the three primary elements indicate the dynamic nature of
the strategic management process: strategic inputs, strategic actions and strategic
outcomes.
• Strategic inputs, in the form of information gained by scrutinising the internal
environment and scanning the external environment, are used to develop the
organisation's vision and mission.
• Strategic actions are guided by the organisation’s vision and mission and are
represented by strategies that are formulated or developed and subsequently
implemented or put into action.
• Desired strategic outcomes – strategic competitiveness and above-average
returns – result when an organisation is able to successfully formulate and
implement value-creating strategies that others are unable to duplicate.
• Feedback links the elements of the strategic management process together and
helps organisations continuously adjust or revise strategic inputs and strategic
actions in order to achieve desired strategic outcomes.
This chapter also discusses two approaches to the strategic management process. The
first, the industrial organisation or I/O model, suggests that the external environment
should be considered as the primary determinant of an organisation’s strategic actions.
The second is the resource-based model, which perceives the organisation’s resources
and capabilities (the internal environment) as critical links to strategic competitiveness.
Following the discussion in this chapter, as well as in Chapters 2 and 3, students should
see that these models must be integrated to achieve strategic competitiveness.
Teaching Note: The transient nature of strategic competitiveness is illustrated
even more clearly when one realises that only 52 of the 500 largest US industrial
corporations in 1955 remained competitive in 2019. To be more precise, half of
the Fortune 500 companies have disappeared since 2000 (in the last 21 years)
due to their lack of strategic competitiveness.
Teaching Note: The section also reviews Figure 1.1 (The strategic management
process), providing both an outline of the process and the framework for the
next 12 chapters. Figure 1.1 is a helicopter view to show how different chapters
are aligned with different steps of the strategic management process.
Chapters 2 and 3 provide more detail regarding the strategic inputs to the strategic
management process: assessments of organisations’ external and internal environments
that must be performed so that sufficient knowledge is developed regarding external
opportunities and internal capabilities. This enables the development of an
organisation's vision and mission.
1-4 Hanson 7e Instructor’s Manual 
Hanson, Backhouse, Leaney, Hitt, Ireland, Hoskisson, Strategic Management, 7th Edition. © 2022 Cengage
Australia Pty Ltd. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Chapters 4 to 9 discuss the strategy formulation stage of the process. Topics covered
include:
• Deciding on business-level strategy, or how to compete in a given business
(Chapter 4).
• Understanding competitive dynamics, in that strategies are not formulated and
implemented in isolation but require understanding and responding to