Strategic Management Chapter #1

AFI Strategy Framework

(Analyze Formulate Implement) A model that links 3 interdependent strategic management tasks (AFI) that, together, helps managers plan and implement a strategy that can improve performance and result in a CA

3 Important Attributes of Stakeholder Impact Analysis

-A stakeholder has POWER over a company when it can get the company to do something it normally wouldn't do -A stakeholder has a LEGITIMATE CLAIM when it is perceived to be legally vivid or otherwise appropriate -A stakeholder has an URGENT CLAIM when it requires a company's immediate action and response

To be more effective, a Strategist follows a 3-step process:

-Analyze the external and internal environments -Formulate an appropriate business and corporate strategy -Implement the formulated strategy through structure, culture, and controls

What isn't Strategy:

-Grandiose statements "our strategy is to win" -A failure to face a competitive advantage -Operational effectiveness, competitive benchmarking

5 Steps of Stakeholder Impact Analysis

-Identify stakeholders -Identify stakeholders' interests -Identify opportunities and threats -Identify social responsibilities -Address stakeholder concerns

Firm performance is determined by 2 factors:

-Industry Effects -Firm Effects

Reasons effective Stakeholder Management can benefit firm performance:

-Satisfied stakeholders are more cooperative -Increased trust lowers the cost for firm's business transactions -Effective management can lead to greater adaptability and flexibility -The likelihood of negative outcomes can be reduced

Strategy explains about _____% of a company's performance

55

A good Strategy consists of 3 elements

A diagnosis of the competitive challenge -Accomplished through analysis of the firm's external and internal environments A guiding policy to address the competitive challenge -Accomplished through strategy formulation A set of coherent actions to implement the firm's guiding policy -Accomplished through strategy implementation

Corporate Social Responsibility

A framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprise at a given point in time

Strategy

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

Stakeholder Strategy

An integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage -Allows firms to analyze and manage how various internal and external stakeholders interact to jointly create and trade value

Firm Effects

Firm performance attributed to the actions managers take -Jointly determines 75% of overall firm performance

Black Swan Events

Incidents that describe highly improbable but high-impact events -9/11, Enron -These events demonstrate that managerial actions can affect the economic well-being of large numbers of people around the world

Stakeholders

Organizations, groups, and individuals that can affect or be affected by a firm's actions -Internal or External

Sustainable Competitive Advantage

Outperforming competitors or the industry average over a prolonged period of time

Competitive Parity

Performance of 2 or more firms at the same level

Stakeholder Impact Analysis

Provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders -Helps firm achieve a CA while acting as a good corporate citizen

Internal Stakeholders

Stockholders, employees (including executives, managers, workers) and board members

Competitive Advantage

Superior performance relative to other competitors in the same industry or the industry average -To assess, we compare firm performance to a benchmark

Strategic Management

The integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage -Mastering of SM enables you to view a firm in its entirety

Competitive Disadvantage

Underperforming relative to other competitors in the same industry or the industry average

Strategy is about creating superior ______, while containing the _______ to create it

value; cost -Achieve this through strategic positioning -The greater the difference between value creation and cost, the greater the firm's economic contribution and the more likely it will gain competitive advantage

External Stakeholders

Customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and media

Industry Effects

Describe the underlying economic structure of the industry/firm performance attributed to the structure of the industry in which the firm competes