Chapter 1 Notes

Question 1

strategy

Answer 1

theory about how to gain competitive advantages

Question 2

strategic management process

Answer 2

a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy

Question 3

mission

Answer 3

long term purpose, usually written in a mission statement

Question 4

visionary firms

Answer 4

firms whose mission is central to all they do

Question 5

objectives

Answer 5

specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission

Question 6

external analysis

Answer 6

firm identifies the critical threats and opportunities in its competitive environment

Question 7

internal analysis

Answer 7

helps a firm identify its organizations strengths and weaknesses

Question 8

business level strategies

Answer 8

actions firms take to gain competitive advantages in a single market or industry

Question 9

corporate level strategies

Answer 9

actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously

Question 10

strategy implementation

Answer 10

occurs when a firm adopts organizational policies and practices that are consistent with its strategy

Question 11

competitive advantage

Answer 11

a firm has this when it is able to create more economic value than rival firms

Question 12

economic value

Answer 12

the difference between the perceived benefits gained by a customer that purchases a firm’s products or services and the full economic cost of these products or services

Question 13

temporary competitive advantage

Answer 13

a competitive advantage that lasts for a very short period of time

Question 14

sustained competitive advantage

Answer 14

lasts much longer than a temporary competitive advantage

Question 15

competitive parity

Answer 15

firms that create the same economic value as their rivals experience this

Question 16

competitive disadvantage

Answer 16

firms that generate less economic value than their rivals have this

Question 17

accounting performance

Answer 17

measure of its competitive advantage calculated by using info from published financial statements

Question 18

ratios?

Answer 18

pg 14 Revisit if required by teacher

Question 19

accounting ratios

Answer 19

numbers taken from a firms financial statements that describe company performance

Question 20

profitability ratios

Answer 20

ratios with some measure of profit in the numerator and some measure of firm size or assets in the deonominator

Question 21

liquidity ratios

Answer 21

ratios that focus on the ability of a firm to meet its short term obligations

Question 22

leverage ratios

Answer 22

ratios that focus on the level of a firms flexibility, including the ability to obtain more debt

Question 23

activity ratios

Answer 23

ratios that focus on the level of activity of a firm’s business

Question 24

above average accounting performance

Answer 24

when its performance is above the industry average

Question 25

average accounting performance

Answer 25

when a firm operates at the industry average

Question 26

below average accounting performance

Answer 26

when a firm operates at below the industry average

Question 27

cost of capital

Answer 27

rate of return that a firm promises to pay it suppliers of capital

Question 28

economic measures of competitive advantage

Answer 28

compares a firm’s level of return to its cost of capital

Question 29

two types of capital

Answer 29

debt and equity

Question 30

cost of debt

Answer 30

interest that a firm pays its creditors

Question 31

cost of equity

Answer 31

interest that a firm promises its equity holders

Question 32

weighted average cost of capital(WACC)

Answer 32

the percentage of a firm’s total capital

Question 33

above normal economic performance

Answer 33

when a firm earns more than its cost of capital

Question 34

normal economic performance

Answer 34

when a firm earns its cost of capital

Question 35

below normal economic performance

Answer 35

when a firm earns less than its cost of capital

Question 36

emergent strategies

Answer 36

theories of how to gain competitive advantage in an industry