Chapter 1: Creating Competitive Advantages

Question 1

Strategic management

Answer 1

consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

Question 2

What are the three ongoing processes of strategic management?

Answer 2

1. Analysis or strategy analysis
2. Decisions or strategy formulation
3. Actions or strategy implementation

Question 3

What is analysis or strategy analysis?

Answer 3

• Analysis of strategic goals (vision, mission, and strategic objectives) along with the analysis of the internal and external environments of the organization.

Question 4

What is decisions or strategy formulation?

Answer 4

• What industries should we compete in? How should we compete in those industries?
• decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage.

Question 5

What is actions or strategy implementation?

Answer 5

Firms must take the necessary actions to implement their strategies. leaders to allocate the necessary resources and to design the organization to bring the intended strategies to reality.

Question 6

What are the two fundamental questions of strategy?

Answer 6

o How should we compete in order to create competitive advantages in the marketplace?
o How can we create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute?

Question 7

Competitive advantage

Answer 7

a firm’s resources and capabilities that enable it to overcome the competitive forces in its industry(ies) and have superior performance relative to competitors

Question 8

Four key attributes of strategic management

Answer 8

o Directs the organization toward overall goals and objectives.
o Includes multiple stakeholders in decision making.
o Needs to incorporate short-term and long-term perspectives.
o Recognizes trade-offs between efficiency and effectiveness.

Question 9

1. How is “strategic management” defined in the text, and what are its four key attributes?

Answer 9

a. The text defines strategic management as the analyses, decisions and actions an organization undertakes to obtain a competitive advantage. Analysis, decision-making, and actions are ongoing processes. The organization analyzes the strategic goals, which include the vision, mission, and strategic objectives, as well as analyzing the internal and external environment of the organization. Following analysis is the strategic decision making process. Strategic decisions generally pertain to the following questions, “What industries should we compete in?” and “How should we compete in those industries?” After management has made decisions regarding the strategic plans of the company, they must implement their new plans.

The four key attributes of strategic management:

direct the organization toward the overall goals and objectives,

include multiple stakeholders in decision making,

incorporate short-term and long-term perspectives, and

recognize trade-offs between efficiency and effectiveness.

The first key attribute, direct the organization toward the overall goals and objectives, requires management to make decisions best for the organization as a whole, rather than a single area. Include multiple stakeholders in decision-making compels management to think of all stakeholders, both internal and external, in decision-making. Incorporate short-term and long-term perspectives suggests management considers both the short term and long term goals and discourages giving up long-term shareholder value by focusing entirely on meeting short-term performance targets. Recognizes trade-offs between efficiency and effectiveness.

Question 10

Briefly discuss the three key activities in the strategic management process. Why is it important for managers to recognize the interdependent nature of these activities?

Answer 10

a. The three key activities in the strategic management process are analysis, decisions, and actions. Analysis is the first step in the process, and it involves reviewing the goals and vision of the company, the external environment, such as consumer demographics and competitors, the internal environment, and intellectual assets, such as knowledge workers and patents. During the decisions process, the organization considers the questions “What industries should we compete in?” and “How should we compete in those industries?” Finally the decisions are implemented in the action phase. Management must allocate the resources necessary and design the organization to implement the strategies. Although the three activities are interrelated, it is important that management focus on each separately and independently so they each are adequately planned.