Strategic Management Chapter 1

Quality Imperative

- Change in attitudes and a raising of expectations for service quality - The implementation of management practices designed to make quality improvement an ongoing process

competitive advantage

A _________ _________ is when a firm generates higher profits compared to its competitors

unique value

A _________ ___________ is the reason a firm wins with customers or the value proposition it offers to customers, such as a low cost advantage or differentiation advantage or both

market

A ______________ is the industry, customer segment, or geographic area that a company competes in

gain, sustain

A business strategy is a company's dynamic plan to _________, and ___________ a competitive advantage in the market place

1) Markets to compete in 2) Unique value the firm will offer in those markets 3) The resources and capabilities required to offer that unique value better than competitors 4) Ways to sustain advantage by preventing imitation

A business strategy requires 4 inter-related choices:

1) Corporate Strategy 2) Business Unit Strategy 3) Functional Strategy

A company will need to formulate, and then implement the strategy at 3 different levels of the organization

mission

A company's primary purpose that often specifies the business or businesses in which the firm intends to compete of the customer it intends to serve

strategy vehicles

Activities and strategies choices that influences a firm's ability to enter particular markets, deliver unique value to customers, or create barriers to imitating its product

external

An ________ analysis is critical for addressing the first strategic choice of where we should compete

Differentiation strategy

An advantage a firm has over its competitors by making a product more attractive by offering unique qualities in the form of features, reliability, and convenience that distinguishes it from competing products.

- Low Cost - Differntiation

Companies usually try to achieve a competitive advantage by choosing between one of two generic strategies:

- Market - Government Control - Restrictions - Specific locational benefits

Considerations in selecting a country

1) Price sensitivity 2) Segmentation analysis

Customer analysis consists of two parts:

functional strategy

Decisions about how to effectively implement the business unit strategy within functional areas like finance, product development, operations, information technology, sales and marketing, and customer service.

business unit strategy

Decisions about how to gain and sustain advantage, made at the manager level for each standalone business unit within a company

corporate strategy

Decisions about what markets to compete in, made by executives at the corporate level of an organization

resources and capabilities

Delivering unique value requires developing _________ and ____________ that will allow the company to perform activities better than its competitors

segmentation analysis

Dividing up customers into groups or segments based on similar needs or wants

Born Global Firms

Firms that engage in significant international activity a short time after being established

Strategy

Formulating a strategy involves selecting which ____________ the company will take to gain and sustain a competitive advantage

mission statement

Here are the principles we live everyday

strategy implementation

It provides goods and services in accord with the plan of action

- Economies of scale - Lower cost inputs - Proprietary production know-how

Key sources of cost advantage (An advantage that a firm has over its competitors in the activities associated with producing a product or service) include:

Global Strategy

Low cost strategy attempting to benefit from scale economies in production, distribution, or marketing

Global Strategy

Low-cost strategy attempting to benefit form scale economies in production, distribution, and marketing

Administrative Coordination

MNC makes strategic decisions based on the merits of the individual situation rather than a predetermined economic or political strategy

- Product - Price - Place - Promotion

Marketing strategy involves the 4 P's

Goal Formulation

Often precedes the first two steps (environmental scanning, internal analysis)

Return on Equity (ROE)

Operating Profits/Stockholders Equity

Return on Assets (ROA)

Operating Profits/Total Assets

Environmental scanning

Provides management with accurate forecasts of trends to external changes in geographic areas where the firm is doing business or considering doing business

Transnational strategy

Pursued when high cost pressure and high demand for local responsiveness exists

Transnational Strategy

Pursued when high cost pressures and high demand for local responsiveness exists

Above Average Profits

Returns in excess of what an investor expects from other investments with a similar amount of risk.

1. Where to compete, or the attractiveness of a market or customer segment in the targeted markets 2. How to offer unique value relative to the competition in the targeted markets 3. What resources or capabilities are necessary to deliver that unique value 4. How to sustain a competitive advantage once it has been achieved

Strategies are more likely to be successful when the plan explicitly takes into account 4 factors:

Political Imperative

Strategy formulation and implementation utilizing strategies that are country responsive and designed to protect local market niches

price sensitivity

The degree to which the price of a product or service affects the willingness to purchase a product or service

implement

The final step in the strategic management process is to ___________ the strategy that was chosen during the formulation process

strategist

The most critical role of the _____________ is to figure out how to build or acquire the resources and capabilities necessary to deliver unique value.

plan, resources

The strategic management is the process by which organizations formulate a _______ and allocate ________- to achieve competitive advantage that involves making four strategic choices:

1) Markets to compete in 2) Unique value the firm will offer in those markets 3) The resources and capabilities required to offer that unique value better than competitors 4) ways to sustain the advantage by preventing imitation

The strategic management is the process by which organizations formulate a plan and allocate resources to achieve competitive advantage that involves making four strategic choices:

Finance

The transfer of funds from one place to another

1) Markets 2) Unique Value (Why we win customers) 3) Resources and Capabilities (How we deliver unique value) 4) Barriers to Imitation to sustain a competitive advantage

What are 4 strategic choices that must be made with regard to strategy?

A firm's strengths and weaknesses

What does an Internal Analysis consist of:

Economic Imperative

Worldwide strategy based on cost leadership, differentiation, and segmentation (Used for generic products)

strategy implementation

occurs when a company adopts a set of organizational processes that enable it to effectively carry out its strategy

resources

refer to assets that the firm accumulates over time

capabilities

refers to processes the firm develops to coordinate human activity to achieve specific goals

1. Capital market stakeholders (shareholders, banks, etc.) 2. Product market stakeholders (customers, suppliers) 3. Organizational stakeholders (employees) 4. Community stakeholders (communities, government bodies, community activists)

• Who benefits from a good business strategy?

International new ventures or born global firms

○ Firms that engage in significant international activity a short time after being established