1. Strategic Management Inputs Flashcards
How is strategic competitiveness achieved?
By implementing a value creating strategy.
What is a strategy?
Integrated and coordinated actions that exploit core competences and gain competitive advantage.
What is a competitive advantage?
A strategy that competitors find costly to imitate or are unable to replicate.
What are above-average returns?
More profit than investors expected.
What is a risk?
Uncertainty about economic gains and losses.
What is a strategic management process? (SMP)
Decisions and actions a firm implements to achieve strategic competitiveness and gaining above-average returns.
True or false: The strategic management process is dynamic.
True
What is a factor that changes markets?
Governments when they fear a market will fail.
Negotiating with politicians complicates building competitive advantages.
Where does hyper competition happen?
Unstable markets.
What does hyper competition entail? Give two points.
1) Rapidly escalating price quality competition. First-movers have an advantage.
2) High aggression between firms.
What is a global economy?
An economy in which goods, services, people and skills freely move geographically.
Define globalisation.
Increasing economic interdependence between countries.
List two benefits of globalisation.
1) Increased opportunities for firms.
2) Increased performance standards (quality, cost, productivity and operational efficiency)
Give two risks of globalisation.
1) It takes time to adapt to foreign markets.
2) Over-diversification: becoming so international that extended operations are hard to manage.
Define technology diffusion.
The rate at which new technology becomes available and is used.
Increased substantially the last 15-20 years.
Define perpetual diffusion.
Describes how rapidly/consistently new information and technology replaces old ones..
What benefit does perpetual diffusion reduce?
Patents because competitors will find out about the new technology.
What do disruptive technologies do?
Destroy the value of existing technology and creates new markets.
What is an incumbent?
A firm of a market.
Can incumbents overcome disruptive technologies?
Only if they have superior resources, experience and access to the new technology.
How is knowledge gained?
Through experience, observation and interference.
How is knowledge processed in companies?
Firms capture intelligence, transform it into usable knowledge and diffuse it throughout the company.
Define strategic flexibility.
Capabilities that respond to demands/opportunities in dynamic/uncertain markets.
What does the industrial organisation (I/O) model explain?
The external environment’s dominant influence on a firm’s strategic actions.
What are the four underlying assumptions of the I/O model?
1) The external environment pressures and constraints strategies.
2) Competing firms within an industry pursue similar strategies and relevant resources.
3) Resources to implement strategies are highly mobile across firms so resource differences are short lived.
4) Organisational decision makers are rational and decide in firm’s best interest.
What does Porter’s five forces entail?
- competitive rivalry
- supplier power
- buyer power
- threat of new entrants
- threat of substitution
What is Porter’s five forces used for?
- identifies attractiveness of an industry and the best position for a firm to take in the industry
- determines the type of strategy needed for above-average returns
- 20% of firm profitability is explained by the industry the firm picks.
Define a resource based model.
Resources and capabilities of a firm are a basic for strategy and above-average returns.
What is a resource?
Input for a firm’s production.
What are the three categories of resources?
1) Human
2) Physical
3) Organisational capital
What are the two natures of resources?
Tangible, intangible
What are the four points that determine wether resources have a competitive advantage?
Valuable, rare, costly to imitate, non-substitutabe
Define capability.
Ability to exploit resources.
What is a core competence?
Capabilities that have competitive advantages.
What order should a process with these three words have? Strategy, Vision, Mission
Vision –> Mission –> Strategy
What are stakeholders?
Individuals/groups that affect a firm’s vision and are affected strategic outcomes.
True or false: Companies that manage stakeholder relations effectively outperform those that do not.
True
True or false: All stakeholders are equal.
False.
Some stakeholders have more influence.
List the three stakeholder groups.
1) Capital Market Stakeholders
2) Product market stakeholders
3) Organisation stakeholders
Describe capital market stakeholders.
They are major suppliers of a firm’s capital.
They may sell stock of dissatisfied.
Describe product market stakeholders.
They are the primary customers, suppliers, host communities and unions (workforce).
Describe organisation stakeholders.
All employees of a firm.
What are strategic leaders?
People involved in the strategic managerial process.
They are crucial for assigning strategic responsibilities to employees.
Define organisational culture.
Complex set of ideology in firm that determines how it conducts business.
What is a profit pool?
Total profit in an industry in all parts of the value chain.
What are the four steps for identifying a profit pool?
1) Define the boundaries of the pool.
2) Estimate the size of the pool.
3) Estimate the size of the value chain in the pool.
4) Reconcile the calculations.
