CHAPTER 1 STRATBUS Flashcards
When a firm successfully formulates and implements a value-creating strategy.
strategic competitiveness
A __________is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
strategy
When a firm implements a strategy that its competitors are unable to duplicate or find too costly to try to imitate.
Competitive Advantage
note: firms must understand that no competitive advantage is permanent!!
Possessing a ________, and understanding how to use it effectively in marketplace competitions, is foundational to all firms’ efforts to achieve strategic competitiveness and outperform rivals in the process of doing so.
competitive advantage
An investor’s uncertainty about the economic gains or losses that will result from a particular investment.
Risk
Returns equal to those an investor expects to earn from other investments with a similar amount of risk.
Average Returns
Returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
Above-average Returns
The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns
Strategic Management Process
firms have a_________ when they deliver the same value to customers as competitors deliver but at a lower cost, or when they deliver benefits for which customers are willing to pay that exceed the benefits competitors offer.
competitive advantage
With the information gained from_____ and ____analyses, the firm develops
its vision and mission and formulates one or more strategies
external and internal
This model suggests that the external environment is the primary determinant of a firm’s strategic actions
Industrial Organization or I/O
According to this model, identifying and then operating effectively in an attractive (i.e., profitable) industry or segment of an industry are the keys to competitive success.
Industrial Organization or I/O Model
This model suggests that a firm’s unique resources and capabilities are the critical link to strategic competitiveness.
resource-based model
______is the process of converting something to digital form, is a new competitive dimension that is affecting competition in multiple industries throughout the world.
Digitalization
How many are the digital customers globally who are under 25 years of age?
2.5 Billion/ 2 and half Billion
_____________is a condition where competitors engage in intense rivalry, markets
change quickly and often, and entry barriers are low. In these environments, firms find it
difficult to maintain a competitive advantage
Hypercompetition
It is a condition of rapidly escalating competition based on price-quality positioning, competition to create new know-how and establish first-mover advantage, and competition to protect or invade established product and/or geographic markets.
Hypercompetition
What are the two primary drivers of hypercompetitive environments and the nature of today’s competitive landscape?
The emergence of a global economy and technology,
________ is one in which goods, services, people, skills, and ideas move freely across geographic borders
> > Movement is relatively unfettered by artificial constraints.
Expansion into global arena complicates a firm’s competitive environment.
• Short-term: Where is the fastest growth likely to occur?
• Long-term: Where will sustainable growth occur?
global economy
In 2018 what country was the world’s largest economy at a value of $20.4 trillion?
United States
The_________ estimated that China and India’s economies would exceed the size of the U.S. economy by 2050 and that the economies of Germany, United Kingdom, and France would decline in size by this time as well.
World Economic Forum
_________is the increasing economic interdependence among countries and their organizations as reflected in the flow of products, financial capital, and knowledge across
country borders
Globalization
________ is a product of a large number of firms competing against one another in an increasing number of global economies.
Globalization
______increases the range of opportunities for companies competing in the current competitive landscape
Globalization
_______has led to higher performance standards with respect to multiple competitive dimensions, including quality, cost, productivity, product introduction time, and operational efficiency
________ are a key source of competitive advantage
Employees
________is the term describing the risks of competing outside a firm’s domestic markets
Liability of foreignness
the emergence of emerging-market __________ in international markets forces large MNCs based in developed markets to enrich their own capabilities to compete effectively in global markets
multinational corporations (MNCs)
________affects all aspects of how companies operate and as such, the strategies they choose to implement
technology
The speed at which new technologies become available
Technology Diffusion
Technologies that destroy the value of existing technology and create new markets
Disruptive Technologies
The rapidity and consistency with which new, information-intensive technologies replace older ones
Perpetual Innovation
_______are vital to firms’ efforts today to understand customers and their needs and to implement strategies in ways that satisfy those needs as well as the interests of all other
stakeholders.
Data and information
The ability to effectively and efficiently access and use information has become an important source of competitive advantage.
Technology includes personal computers, cellular phones,
artificial intelligence, virtual reality, massive databases, electronic networks, internet trade.
The Information Age
___________ is the basis of technology and its application.
This is also a critical organizational resource and an increasingly valuable source of competitive advantage.
Knowledge (information, intelligence, and expertise)
Note: Individuals acquire knowledge through experience, observation, and inference
___________ is a key intangible asset that when diffused quickly throughout a firm contributes to efforts to outperform rivals.
Knowledge
__________ is a set of capabilities firms use to respond to various demands and opportunities existing in today’s dynamic and uncertain competitive environment.
It also involves coping with uncertainty and its accompanying risks
Strategic flexibility
This is a slack resources that allow the firm flexibility to respond to environmental changes
Organizational slack
The logic of the________ is that a set of industry characteristics, including economies of scale, barriers to market entry, diversification, product differentiation, the degree of concentration of firms in the industry, and market frictions, determine the profitability potential of an industry or a segment of it as well as the actions
firms should take to operate profitably.
I/O model
Four underlying assumptions in Industrial Organization Model
- the external environment imposes pressures and constraints that determine the strategies that would result in above-average returns
- Most firms competing in an industry control similar strategically relevant resources and pursue similar strategies.
- Resources used to implement strategies are highly mobile across firms. - meaning that
any resource differences that might develop between firms will be short-lived. - Organizational decision makers are assumed to be rational and committed to acting in the firm’s best interests (profit maximizing).
True or false
A firm is able to increase its performance only when it competes in the industry with the highest profit potential and learns how to use its resources to implement the strategy required by the industry’s structural characteristics
True
Firms use the__________to identify the attractiveness of an industry
five forces model
firms can earn above-average returns by producing either standardized products at costs below those of competitors
Cost Leadership Strategy
Producing differentiated products for which customers are willing to pay a price premium
Differentiation Strategy
the_______ suggests that firms earn above-average returns by studying the external environment effectively as the foundation for identifying an attractive industry and implementing an appropriate strategy in it.
I/O model
Under I/O model of Above-average returns
1st: The external environment
Study the external environment, especially the industry environment:
• Economies of scale • Barriers to market entry • Diversification • Product differentiation • Degree of concentration of firms in the industry
Under I/O model of Above-average returns
2nd: Attractive Industry
Locate an attractive industry with a high potential for above-average returns.
Attractive industry: One whose structural characteristics suggest above-average returns.
Under I/O model of Above-average returns
3rd: Strategy Formulation
Identify the strategy called for by the attractive industry to earn above-average returns.
Strategy formulation: Selection of a strategy linked with above-average returns in a particular industry.
Under I/O model of Above-average returns
4th: Assets and Skills
Develop or acquire assets and skills needed to implement the strategy
Assets and skills required to implement a chosen strategy
Under I/O model of Above-average returns
5th: Strategy Implementation
Use the firm’s strengths (its developed or acquired assets and skills) to implement
the strategy.
Selection of strategic actions linked with effective implementation of the chosen strategy
Under I/O model of Above-average returns
6th: Superior Returns
Earning of above-average
returns
_________are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers
Resources
3 categories of resources
physical, human, and organizational capital.
A _________ is the capacity for a set of resources to perform a task or an activity in an integrative manner
capability
__________ are capabilities that serve as a source of competitive advantage for a firm over its rivals.
Core competencies
Core competencies are often visible in the form of _____________
organizational functions
Capacity of an integrated set of resources to integratively perform
a task or activity
Capability
Resources are______ when they allow a firm to take advantage of opportunities or neutralize threats in its external environment.
valuable
Resources are ______when possessed by few, if any, current and potential competitors.
rare
Resources are______ when other firms either cannot obtain them or are at a cost disadvantage in obtaining them compared with the firm that already possesses
costly to imitate
Resources are ___________ when they have no structural equivalents
non-substitutable
_________is a picture of what the firm wants to be and, in broad terms, what it wants to
achieve.
Vision
vision statement articulates the ideal description of an organization
and gives shape to its intended future.
_________articulates the ideal description of an organization and gives shape to its intended future.
vision statement
, a vision statement articulates the ideal description of an organization
and gives shape to its intended future.
A_________specifies the businesses in which the firm intends to compete and the customers it intends to serve.
mission
True or false
Vision is more concrete than the firm’s mission.
False!!!
Mission is more concrete than the firm’s vision.
_______ are the fruits of the firm’s efforts to achieve its vision and mission.
Above-average returns
True or false
The probability of forming an effective mission decreases when employees have a strong sense of the ethical standards that guide their behaviors as they work to help the firm reach its vision
False
decreases- increases
_________ are individuals, groups, and organizations that can affect the firm’s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance
Stakeholders
This means that stakeholders possess different degrees of ability to influence an organization.
Unequal dependencies
True or false
The more critical and valued a stakeholder’s participation, the greater a firm’s dependency on it
True
Individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investments.
Shareholders
They prefer that investors receive a minimum return on their investments.
They could have their interests maximized when the quality and reliability of a firm’s products are improved, but without high prices
Customers
Who are the Capital Market Stakeholders?
• Shareholders
• Major suppliers of capital
(e.g., banks)
Who are the Product Market Stakeholders?
- Primary customers
- Suppliers
- Host communities
- Unions
Who are the Organizational Stakeholders?
- Employees
- Managers
- Nonmanagers
They seek loyal customers who are willing to pay the highest sustainable prices for the
products they receive.
Suppliers
This refers to multiple levels of power and influence
polycentric
They are are generally satisfied when a firm’s profit margin reflects at least a balance between the returns to capital market stakeholders (i.e., the returns lenders and shareholders will accept and retain their interests in the firm) and the returns in which they share.
product market stakeholders
They want companies willing to be long-term employers and providers of tax revenues while minimizing demands on public support services
Host communities
_______ want secure jobs and desirable working conditions
Union officials
_______ Expect a dynamic, stimulating and rewarding work environment and are satisfied by a company that is growing and actively developing their skills
Employees
_________ are people located in different parts of the firm who are using the strategic
management process to help the firm reach its vision and mission.
Strategic Leaders
The complex set of ideologies, symbols, and core values that are shared
throughout the firm and that influence how the firm conducts business.
Organizational Culture
The total profits earned in an industry at all points along the value chain
Profit Pool
