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Chapter 1

What is Strategy?

Strategic Management Integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
Strategy - Set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors - Central, integrated, focused concept of how the firm while achieve its objectives Framework, dynamic, recognizes trade-offs
NOT Strategy - A grandiose statement - Failure to face a competitive challenge - Operational effectiveness, competitive benchmarking, or other tactical tools
Good Strategy Allows a firm to achieve superior performance and sustainable competitive advantage relative to its competitors - Diagnosis of competitive challenge - Guiding policy to address the challenge - Set of coherent actions to implement guiding policy
Competitive Advantage - Superior performance relative to other competitors in the same industry or the industry average - Gained when a firm provides superior or lower cost goods/services in comparison to their competitors
Sustainable Competitive Advantage firm that is able to outperform its competitors or the industry average over a prolonged period
Competitive Disadvantage When a firm underperforms its rivals or the industry average
Competitive Parity Performance of two or more firms at the same level
Value Creation When a company w a good strategy is able to provide products/services to consumers at a price point that they can afford while keeping their costs in check (makes a profit) → leads to benefits for a successful economy: education, public safety, etc.
Stakeholders - Organizations, groups, and individuals that can affect or be affected by a firm’s actions - Have a claim/interest in performance & continued survival of the firm - Contribute to the firm and receive benefits in return → exchange relationship
Internal Stakeholders Employees (execs, managers, & employees), stockholders, and board members
External Stakeholders Customers, suppliers, alliance partners, creditors, unions, communities, governments @ various levels, and the media
Analysis, Formulation, Implementation (AFI) Strategy Framework Framework showing hor AFI help manager plan and implement a strategy that can improve performance and result in competitive advantage
What does AFI do? - Explains and predicts difference in firm performance - Helps leaders formulate and implement a strategy that can result in superior performance
Analysis of In/External Environments - Strategy leadership and the strategy process - External Analysis - Internal Analysis -Competitive Advantage, Firm Performance, and Business Models
Formulation of business/corporate strategy - Business Strategy Cost leadership, differentiation, or value innovation - Corporate Strategy Where to compete: industry markets, and geography? - Global Strategy How and where to compete: local, regional, national, or international?
Implementation of the formulated strategy through structure, culture, and controls - Organizational Design How to organize firm to turn strategy into action - Corporate Governance and Business Ethics What type of corporate governance is most effective How to anchor strategic decisions in business ethics?
Five Elements of the Strategy Diamond Arenas Staging and Pacing Differentiators Vehicles --> Economic Logic
Strategy Diamond: Economic Logic How will returns be obtained? Low cost thru scale advantages? scope and replication advantages? Premium prices due to unmatchable service? Due to proprietary product features?
Strategy Diamond: Staging and Pacing What will be our speed and sequence of moves?
Strategy Diamond: Differentiators How will be win? Image, customization, price, styling, product reliability, speed to market
Strategy Diamond: Arenas Where will be active (and how much emphasis?) Product Categories Market Segments Geographic Areas core tech value-creation strategies
Strategy Diamond: Vehicles How will we get there? internal development joint ventures licensing/franchising alliances acquisitions
IO Model of Strategy Performance is driven by industry attributes Start --> Central Assumptions
IO Model of Strategy: Central Assumptions - External environment imposes constraints that favor certain strategies over others - firm in industries have similar resources - resources are highly mobile - managers are rational decision makers ---> Managerial Choices
IO Model of Strategy: Managerial Choice/Intervention - Study External environment & locate an attractive industry - Identify Strategy - Develop skill to implement --> Performance (end)
Resource Based Value (RBV) Model of Strategy Performance is driven by firm resources Start --> Central Assumptions
RBV: Central Assumptions - Resources are unique to each firm - Resources are highly immobile - Resource values evolve over time - Source of value is not obvious to rational decision makers --> Managerial Choice
RBV: Managerial Choice/Intervention - Study internal resources & unique capabilities - Determine potential for competitive advantage given resources & capital - Locate an industry - Select strategy that best uses resources for external environment --> Performance (end)
Created by: opon12
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