Chapter 1

Question 1

What is strategy? (Book definition)

Answer 1

STRATEGY is a set of goal-directed actions to gain and

sustain superior performance relative to competitors

Question 2

Michael Porter’s definition of strategy?

Answer 2

STRATEGY is the unique position a firm will

achieve among competitors

Question 3

Henry Mintzberg: 5 Ps of STRATEGY

Answer 3

Plan – a consciously-intended course of action to deal with a situation
• Ploy – a specific “maneuver” intended to outwit a competitor
• Pattern – a consistent stream of action
• Position – location among competitors (cf. strategic group map)
• Perspective – how strategy is conceived by the firm and managers

Question 4

What is competitive advantage?

Answer 4

A firm that achieves superior performance relative to
competitors or the industry average has a COMPETITIVE
ADVANTAGE

Question 5

Firms with lower performance than other competitors or the

industry average are at ______?

Answer 5

Competitive Disadvantage

Question 6

If two or more firms perform at the same level, they

are said to have _____?

Answer 6

Competitive Parity

Question 7

______ results when a firm
outperforms competitors or the industry average for a
prolonged period of time

Answer 7

A sustainable competitive advantage

Question 8

How can firms achieve a competitive advantage?

Answer 8

• Customers purchase goods and services from firms that provide
them the most VALUE
• Firms achieve a competitive advantage by offering SUPERIOR
VALUE – value beyond other firms

Question 9

Superior value can be created in two (2) different ways:

Answer 9

1. Greater intrinsic value
   • E.g., Bose speakers provide superior sound, etc.
2. Lower relative price
   • E.g., Wal-Mart sells many inferior-quality products at low prices

Question 10

Firms determine the optimal combination of intrinsic value and
costs through STRATEGIC POSITIONING

Answer 10

• Stake out a unique (in theory) position within an industry that allows firms
to provide value to customers while controlling its costs

Question 11

Strategic positioning requires trade-offs

Answer 11

• Managers make conscious decisions to focus on creating value through
DIFFERENTIATION or COST LEADERSHIP
• While some firms can do both (Best Cost), most firms struggle to integrate
both forms of value creation (Stuck in the Middle)

Question 12

STAKEHOLDER STRATEGY is an
integrative approach to managing a
diverse set of stakeholders effectively

Answer 12

Stakeholders may include owners,
employees, customers, suppliers,
retailers, regulatory bodies, the media,
communities, society, etc

Question 13

Three (3) important stakeholder

attributes

Answer 13

• Power – How much influence does a
stakeholder have?
• Legitimacy – Are they perceived as
legally or socially valid?
• Urgency – How immediate are their
claims?

Question 14

What is strategic management?

Answer 14

STRATEGIC MANAGEMENT is an integrative management field that
combines (1) analysis, (2) formulation, and (3) implementation in the quest for
competitive advantage

Question 15

Define: Analysis, formulation, implementation

Answer 15

• Analysis: diagnosis of the competitive advantage
• Apple: identified competitive challenges (i.e. <5% market share)
• Formulation: guiding policy to address the competitive challenge
• Apple: refocused around innovation – integrate products through mobile
devices (i.e., iPod, iPhone, & iPad)
• Implementation: set of actions that implement the firm’s guiding policy
• Apple: focused on limited product line development (i.e., two models –
desktop & laptop) and industry-disruptive innovations