Ch. 1 Flashcards
Three components of strategic management
Analysis
Formulation
Implementation
The goal of strategic management
to gain and sustain a competitive advantage
Definition: Strategy
a set of goal directed actions a firm takes to gain and sustain superior performance relative to competitors
- get there, stay there, excel there
In order to achieve superior performance, companies compete for resources, like:
New ventures: for financial and human capital
Existing companies: for profitable growth
Charities: for donations
Universities: for the best students and professors
Sports teams: championships
Celebrities: media attention
Definition: Analysis
Diagnosis of the competitive challenge
- SWOT
Definition: Formulation
Guiding policy to address the competitive challenge
Defintion: Implementation
A set of coherent actions to implement the firm’s guiding policy
Definition: Strategic Management
an integrative management field that combines analysis, formulation, and implementation in the quest for a competitive advantage
Defintion: Competitive Advantage
superior performance relative to other competitors in the same industry or the industry average
- performing different activities or performing same activities better than rivals
Definition: Sustainable Competitive Advantage
outperforming competitors or the industry average over a prolonged period of time
Definition: Competitive Disadvantage
underperformance relative to other competitors in the same industry or the industry average
Definition: Competitive Parity
performance of two or more firms at the same level
ex. BMW and Mercedes Benz
The key to creating is competitive advantage is _________ > ___________
Value > Cost
the larger the difference, the more money you make
- create more value for less depending on your go to market strategy
ex. Walmart clothes vs. Nordstrom
Three things a competitive advantage is NOT:
- Grandiose statements
- Hope is not a strategy - A failure to face a competitive challenge
- blockbuster
- Operational effectiveness, competitive benchmarking, or other tactical tools
Firm performance is determined by two factors:
- Industry effects
2. firm effects
Which factor, industry or firm, has more influence over the determination of performance for a company?
Firm: 55% choose to react to a market, Internal decisions
A “good” stakeholder strategy helps to:
generate value for society
- Provide products or services to consumers at an affordable price
- Make a profit
- Benefit both parties
- Make society better
Definition: Black Swan Event
Profound impact of a highly improbable and unexpected event
- something unanticipated
Defintion: Stakeholders
- Organizations, groups, and individuals that can affect or are affected by a firm’s actions.
- Have a vested claim or interest in the performance and continued survival of the firm.
Internal vs. External Stakeholders
Internal: Stockholders, employees, board members
External: Communities, customers, suppliers, partners, creditors, unions, governments, media
Definition: Stakeholder Strategy
Managing stakeholders in order to gain and sustain competitive advantage
- Firms analyze and manage stakeholders
- Determine how external and internal stakeholder’s interact
- Stakeholder’s can create and trade value
Definition: Stakeholder Impact Analysis
A decision tool with which managers can recognize, assess, and address the needs of different stakeholders, allowing the firm to achieve competitive advantage while acting as a good corporate citizen.
Power, legitimacy, urgency
5 Q’s of the Stakeholder Impact Analysis
- Who are stakeholders?
- What are their interests and claims?
- What opportunities and threats do they possess?
- What economic, legal, ethical, and philanthropic responsibilities do we have towards SH?
- What should we do to address their concerns?
Definition: Corporate Social Responsibility
A framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has toward business
The four components of corporate social responsibility:
- Economic (return on investment, paying bills, etc.)
- Legal (following laws)
- Ethical (doing what’s right and beyond what’s required)
- Philanthropic (service, corporate citizenship)
* can’t do the 2nd without having the first, and so on
