Chapter 1 Flashcards
What is strategy?
Actions that managers take to increase their company’s performance and attain goals
What is the ultimate challenge of strategy?
Achieve performance relative to company’s rivals
How can managers pursue to achieve superior performance and provide a competitive advantage?
Describe what superior performance and competitive advantage mean and explain the pivotal role that managers play in the strategic process
What is the result of company’s strategy?
Have a competitive advantage
What is strategic leadership?
Effectively managing a company’s strategy making process to create a competitive advantage
What is strategy formulation?
selecting strategies
What is strategy implementation?
Putting strategies into action of design, delivering and supporting products, improving efficiency and effectiveness, designing a company’s organizational structure, control systems and operations
Who are shareholders?
People who own the company
What is risk capital?
Equity capital invested with no guarantee that stockholders will recoup their cash or return a decent return
What do the managers goal?
Increase profitability and ensure profits grow
Why is maximizing shareholder value the ultimate goal?
- Shareholders provide a company with the risk capital that management use to buy things for the company
- Shareholders are legal owners and they have the right to claim profits
What is shareholder value?
Returns of shareholders earn from purchasing shares in a company
When will shareholders provide risk capital
When they believe that managers are committed to pursuing strategies that provide good return on capital investment
What is the two sources of shareholder value?
Capital appreciation and dividend payments
What is profitability?
The return a company makes on the capital invested in the enterprise which is measured by efficiency and effectiveness
What are the types of risk takers
Risk averse, risk neutral, risk takers
What is return on invested capital
Net profit/capital invested
What are the principal drivers of shareholder value?
Profitability and profit growth
What is profitable growth?
High profitability and sustainable profit growth
What is competition?
Companies have similar products/services/pricing as you
When does a company have competitive advantage?
When its profitability and profit growth is greater than the average of other companies competing for the same set of customers
What is a sustained competitive advantage?
Strategies enable it to maintain above average profitability and profit growth for a number of years
What is profit growth?
Increase in net profit overtime
What is a business model?
Concept of how strategies should work together as a whole to enable the company to achieve competitive advantage
What does the business model encompass?
- Select its customers
- Define and differentiate its product offerings
- Create value for its customers
- Acquire and keep customers
- Product goods or services
- Increase productivity and lower costs
- Deliver goods and services in the market
- Organize activities within a company
- Configure its resources
- Achieve and sustain a high level of profitability
- Grow the business over time
What are the characteristics of the industry by different competitive conditions?
Demand, excess capacity, price wars, technological, profitability, new entry, profit growth
How do non profit enterprises perform?
They are expected to use their resources efficiently and operate effectively and their managers set goals to measure their performance
What are non profit agencies?
businesses not about making profits
What were the first corporations based towards?
Military strategy
What are the two types of managers?
Functional and general managers