SEVI CHAPTER 1

stakeholders

organizations, groups, and individuals who can effect, or are effected by a firm's actions.

how to not assess competitive advantage

(1) compare the firm to competitors in the same industry (2) compare firm to industry average

Key Attributes of Strategic Management

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

A good strategy is based on three elements

1. A diagnosis of the competitive challenge: analysis of the internal and external environments 2. A guiding policy to address the competitive challenge: Formulation of corporate, business, and functional strategies 3. A set of coherent actions to implement the firm's guiding policy: Strategy implementation

Steps of stakeholder impact analysis

1. Identify stakeholder 2. Identify stakeholder interests 3. Identify opportunities and threats 4. Identify economic, legal, and ethical, philanthropic responsibilities 5. Identify appropriate course of action

pie chart

25 percent (global, pandemic, stuff happens, other things) 20 percent (industry effects) up to 55 percent (firm effects)

Strategic Management

A. An integrative management field. B. Combines analysis, formulation, and implementation in the quest for competitive advantages C. Mastery of strategic management enables you to: view the firm in its entirety, think like a general manager, position your organization for superior performance.

Competitive advantage

Competitive advantage is achieved when a firm's performance is outperforming their competitors or the industry average

Strategy at Tesla

Guiding policy The competitive challenge coherent actions

pyramid of corporate social responsibility

Philanthropic (Corporate citizenship) Ethical (do what is right, just, and fair) Legal (laws and regulations) Economic(gain and sustain competitive advantage)

basis of strategy is

analysis

what is the key challenge in stakeholder impact analysis?

different stakeholders have different needs

what does effective strategy do?

enables a firm to exploit core competencies in a way that differentiates itself from competitors enabling the firm to outperform its rivals.

competitive advantage is

relative, not absolute

What is Strategy?

the set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors

Sustainable competitive advantage

· A firm that is able to outperform its competitors or the industry average over a prolonged period Example (apple) · Sustainable competitive advantage over Samsung for over a decade

Black swan events

· Black swan events: highly improbable with devastating impact · These events destroy value for stakeholders · Most black swan events results from executive actions · Black swan events have eroded trust between society and corporations

Value creation

· Companies with a good strategy create value for key stakeholders: o Provide products or services to customers at an affordable price o Make a profit-creating shareholder value o Create employment opportunities o Pay taxes- creating an infrastructure in the community

2. Define competitive advantage, sustainable competitive advantage, competitive disadvantages, and competitive parity

· Competitive advantage is always judged relative to other competitors or the industry average · To obtain a competitive advantage, a firm must either create more value for customers while keeping its cost comparable to competitors but at a lower costs · A firm able to outperform competitors for prolonged periods of time has a sustained competitive advantage · A firm that continuously underperforms its rivals or the industry average has a competitive disadvantage. · Two or more firms that perform as the same level have competitive parity · An effective strategy requires that strategic trade-offs be recognized and addressed. For example between value creation and the costs to create the value

Industry vs Firm Effects:

· Industry effects: underlying economic structure of the industry o Entry and exit barriers o Number and size of companies Firm effects: managerial actions- and strategy

Managers must consider three stakeholder attributes

· Power: a stakeholder can get the company to do something it might bot otherwise do · Legitimacy: a stakeholder's claim is perceived to be legally valid or otherwise appropriate · Urgency: a stakeholder's claim is urgent if it requires immediate attention and response.

differences between stakeholders

· Primary stakeholders-shareholders and investors, achieve financial objectives · Other stakeholders-employees, suppliers, customers, satisfy concerns · Stakeholder analysis: a decision tool used to recognize, prioritize , and address stakeholder needs.

why value creation matters

· Satisfied stakeholders are more cooperative · Increased trust lowers transactions costs · Effective stakeholder management reduces likelihood of negative outcomes

4. Conduct a stakeholder impact analysis

· Stakeholder impact analysis considers the needs of different stakeholders, which enables the firm to perform optimally and to live up to the expectations of good citizenship. · In a stakeholder impact analysis, managers pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency. · Stakeholder impact analysis is a five step process that answers the following questions for the firm 1. Who are our stakeholders 2. What are our stakeholders interests and claims 3. What opportunities and threats do our stakeholders present 4. What economic legal, ethical, and philanthropic responsibilities do we have to our stakeholders 5. What should we do to effectively address the stakeholders concerns.

3. Assess the relationship between stakeholder strategy and sustainable competitive advantage

· Stakeholders are individuals or groups that have a claim or interest in the performance and continued survival of the firm. they make specific contributions for which they expect rewards in return. · Internal stakeholders include stockholders, employees, and board members · External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media. The effective management of stakeholders is necessary to ensure the continued survival of the firm and to sustain any competitive advantage. This is achieved through stakeholder strategy

stakeholders part 2

· Stakeholders have a vested interest in the performance and continued survival of the firm · Stakeholders make contributions to the firm and receive benefits o Managers formulate and implement strategy and receive a salary o Creditors provide access to financial resources and receive interest payments.

1. Explain the role of strategy in a firm's quest for competitive advantage

· Strategy is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors · A good strategy enables a firm to achieve superior performance. It consist of three elements · A diagnosis of the competitive challenge · A guiding policy to address the competitive challenge · A set for coherent actions to implement the firm's guiding policy · A successful strategy requires three integrative management tasks-analysis, formulation, and implementation .

5.Explain the analysis, formulation implementation strategy framework

· The analysis, formulation, implementation strategy frame work, 1. Explains and predicts diffeences in firm performance 2. Helps managers formulate and implement a stratedgy that can result in superior performance · Effectively managing the strategy process is the result of (Analysis A,) (Formulation F), (Implementation I)