what is strategy

Question 1

21. define strategy and its 3 elements

Answer 1

def: set of goal-directed actions a firm takes to gain & sustain superior performance relative to competitors

3 elements:

1. diagnosis: identify the competitive challenge, analysing firm’s external & internal environment
2. guiding policy: address the competitive challenge by formulation of firm’s corporate, business & functional strategies
3. coherent actions: implement firms guiding policy through strategy implementation

Question 2

21. define competitive advantage

Answer 2

superior performance relative to other competitors in the same industry/industry average

Question 3

21. how to gain competitive advantage?

Answer 3

1. differentiation: delivering superior value while containing the cost to create it (nordstorm)
2. Cost leadership: offering similar value at lower cost (walmart)

Question 4

21. Value creation

Answer 4

Companies with good strategy are able to provide products or services to consumers at a price point that they can afford while keeping their cost in check, thus making a profit at the same time

Both parties benefit from this trade as each captures part of the value created

Question 5

22. mean & variance formulas & meanings

Answer 5

mean: sum pixi
variance: sum pi(xi-mean)^2

small variance: numbers are focused around the mean
high variance: numbers more dispersed

increase in variance achata

Question 6

22. conditional probability and joint probability

Answer 6

P(X|Y) = P (X,Y) / P(Y)

P(X,Y) = P(X|Y)*P(Y)

Question 7

23. Prediction of events - 2 approaches

Answer 7

Approach 1:
1. threshold (P*)
2. Prior P(Y) -> build theory
3. Signal P(Y|s)
If P(Y|s) > P* you go-ahead

Approach 2: -> assigning values to profit/loss

1. estimate monetary values
2. attribute utilities
3. Calculate the threshold

Question 8

23. notes on the prediction of events

Answer 8

• attention to avoid confirmatory bias (essential to select threshold P* before estimating probabilities or seeing data)
• you can have more than 2 scenarios and actions

Question 9

23. how is the utility model similar to setting a threshold probability

Answer 9

By setting a threshold probability you are in fact setting utilities. For instance, if your threshold P* for entring a business is high you will probably set a high negative value for “utility” of lost

Question 10

23. Correlation vs Causation

Answer 10

Correlation: measure the extent to which two variables are related; when one moves so does the other (in the same or opposite direction)

Causation: indicates that one event is the result of the others; cause & effect