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Chapter 1
What is Strategy?
| Question | Answer |
|---|---|
| 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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