Chapter 1 Flashcards
A Good Strategy Is Based on Three Elements
- diagnosis (of the competitive challenge)
- guiding policy (to address the competitive
challenge) - a set of coherent actions (to implement the firm’s guiding policy)
Competitive Advantage
Superior performance relative to other competitors in the same industry or the industry average
Sustainable Competitive Advantage
A firm that is able to outperform its competitors or the industry average over a prolonged period
Competitive Disadvantage
a firm that underperforms
Competitive Parity
two or more firms that perform at the same level
How to determine if ROIC is superior
It depends on the industry
How to Gain a Competitive Advantage
- Superior value creation
- Offer similar products/services at a lower price
- Higher quality than the market
Strategic Positioning
A unique position within an industry that allows the firm to provide value to customers while controlling costs
Economic Contribution Equation
Value creation - costs = economic contribution
Strategic Positioning Trade-Offs
- How to allocate resources?
- Which activities to pursue?
Unique Strategic Position
A successful combination of strategic activities
Competitive advantage has to come from
- Performing different activities
- Performing the same activities differently than rivals
What Strategy Is Not
- Grandiose statements
- Failure to face a competitive challenge
- Operational effectiveness
Good Strategy
Providing products or services to consumers at a price point that they can afford while having a profit
Value Creation
Lays the foundation for a successful economy
Examples of Value Creation
- Education
- Infrastructure
- Public safety
- Healthcare
- Clean water and air
Stakeholders
Organizations, groups, and individuals can affect or be affected by a firm’s actions. Also, they have an interest in the performance or survival of the firm.
Stakeholder Impact Analysis
Helps to recognize, prioritize, and address stakeholder needs
Legitimate claims
Perceived to be legally valid or otherwise appropriate
Urgent claims
Require a company’s immediate attention and response
AFI Framework
Explains and predicts differences in firm performance. Helps leaders formulate and implement a strategy that can result in superior performance.
AFI
- Analysis (A)
- Formulation (F)
- Implementation (I)
Stakeholder Impact Analysis List
- Who are stakeholders?
- What are stakeholder interests?
- What opportunities & threats do our stakeholders present?
- What legal, economic, and philanthropic responsibilities do we have to our stakeholders?
- How should we effectively address stakeholder concerns?
Pyramid of Corporate Social Responsibility
- Philanthropic Responsibilities (top)
- Ethical Responsibilities
- Legal Responsibilities
- Economic Responsibilities (bottom)
