Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

Chapter 1: Strategic Management and Strategic Competitiveness 29

REVIEW QUESTIONS

1. What are strategic competitiveness, strategy, competitive
   advantage, above-average returns, and the strategic manage-
   ment process?


2. What are the characteristics of the current competitive land-
   scape? What two factors are the primary drivers of this landscape?


3. According to the I/O model, what should a firm do to earn
   above-average returns?


4. What does the resource-based model suggest a firm should do
   to earn above-average returns?
   5. What are vision and mission? What is their value for the strate-
   gic management process?
   6. What are stakeholders? How do the three primary stakeholder
   groups influence organizations?
   7. How would you describe the work of strategic leaders?
   8. What are the elements of the strategic management process?
   How are they interrelated?

Mini-Case

Competition in the Airlines Industry

For many years, the airline industry was highly regulated
which resulted in most airlines acting like each other by
definition. However, the similarities among the large air-
line companies remained after the industry was partially
deregulated more than 30 years ago. These similarities–
in services, routes, and performance–have persisted even
to the present time. For example, airlines often offer a
new service (e.g., Wi-Fi availability on flights), but these
services are easily imitated, therefore, any differentiation
in offerings is only temporary.
In recent times, consolidation has occurred in both
European and U.S. airline industries. In particular, poor
performance led U.S. Air and America West to merge.
Additionally, much for the same reasons, Northwest
Airlines and Delta Airlines merged. Likewise United
Airlines and Continental merged to create the largest
airline in the industry. More recently, American Airlines
and U.S. Air have been approved to merge. Much of
the consolidation was approved because several of the
airlines went through bankruptcy proceedings (e.g.,
Continental and United both went through bankruptcy

before their merger). All of these mergers, however, have

not created highly differentiated services (or prices). All

of airlines largely provide the same type of services, and

prices do not differ greatly among the large “full-service”

carriers.

In fact, it seems that the primary competition is in

trying to make fewer mistakes. In fact, industry statis-

tics that report positive accounts, announce such out-

comes as a reduction in lost bags, fewer cancellations of

flights, and fewer delays. What this suggests is that all

of these areas still likely represent major problem areas.

It seems pretty bad when the most positive statement

one can make is that fewer bags have been lost in recent

times. Although profits have been up more recently, this

is primarily due to lower fuel costs and stronger demand

because the economy is growing, something that is not

controlled by those in charge of the strategy.

Obviously, there are differences between air-

lines across time. United, the largest airline, merged

with Continental to create more financial efficien-

cies and to offer greater travel options to customers.

risk 5

stakeholders 19

strategic competitiveness 4

strategic flexibility 13

strategic leaders 25

strategic management process 6

strategy 4

vision 18