Strategic Management Chapter 1, Honors Strategic Management Exam 1

Too Fast Inc., a motorcycle company, is the market leader due to its superior engine technology and service orientation. These unique qualities have helped the company generate revenues that are consistently higher than other firms in the same industry. Which of the following can be concluded about Too Fast Inc. from this scenario? - It has a direct investment in other firms. - it has a competitive advantage over the firms - it has an exchange relationship with the other firms - it has a competitive parity with the other firms

it has a competitive advantage over the firms

Legal Responsibilities

laws and regulations are society's codified ethics, embodying notions of right and wrong. They also establish the rules of the game

legal responsibilities

laws and regulations are society's codified ethics; define minimum acceptable standard

Which of the following is a stakeholder attribute that managers should consider at every step in a stakeholder impact analysis? - legitimacy - supremacy - literacy - solvency

legitimacy

mission vs vision, product oriented vs customer oriented

mission statement says what a company does and why it exists right now - a vision statement describes what the company wants to become in the future customer-oriented vision statement talks about making customers happy and meeting their needs - product-oriented vision statement mainly talks about creating great products or services without focusing on customer satisfaction directly

Scenario Analysis

more in-depth approach to forecasting, detailed assessments of societal trends, economics, politics... seeks to explore possible developments that may be connected to the past. How might trends affect an issue? Can we project alternative futures based on these assessments? involves exploring multiple possible future scenarios to anticipate and prepare for various outcomes, helping organizations make more informed and adaptable strategies

A competitive disadvantage

occurs when a firm performs below the industry average or is outperformed by its competitors

Value Creation

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

general environment: global

offer both opportunities and risks ex:) changes in global trade, currency exchange rates, emergence of the Indian and Chinese economies, trade agreements among regional blocs (NAFTA, EU), creation of the WTO, increased risks associated with terrorism

The third step of stakeholder impact analysis requires managers to identify the ________ presented by internal and external stakeholders

opportunities and threats

tangible resources

organizational assets that are relatively easy to identify, including (1) physical assets like plants and facilities, location, machinery, and equipment. (2) financial assets like cash and cash equivalents, borrowing capacity, capacity to raise equity. (3) technological resources like data analytic algorithms, patents, copyrights, trademarks. (4) organizational resources like effective planning processes, evaluation, and control systems.

shareholders

owners/ own equity stock in the company

stakeholders claims & interests: creditors

payment of interest, repayment of principal

stakeholders claims & interests: suppliers

payment on time, assurance of continued relationship

Competitive parity

performance of two or more firms at the same level

competitive parity

performance of two or more firms at the same level

important stakeholder attributes

power, legitimacy, urgency

general environment: political/legal

processes and legislation influence environmental regulations which industries must comply ex:) tort reform, Americans with disabilities act (ADA) of 1990, deregulation of utilities and other industries, increases in federally mandated minimum wages, taxation at local, state, federal levels, sarbanes-oxley act, affordable care act

Complements

products and services that have an impact on the value of a firms own product and service. Used together to enhance value or usefulness Ex: hot dog and buns, smart phones and mobile apps

Strategic positioning allows managers to

provide customers value while controlling costs

A firm is likely to have a competitive advantage when it - performs at a level similar to the other firms in the industry. - provides goods similar to those of its competitors, but at a higher price. - provides services that consumers will value more than those of its rivals. - minimizes the difference between value creation and the costs involved.

provides services that consumers will value more than those of its rivals.

Corporate citizenship (philanthropic)

reflecting the notion of voluntarily giving back to society

Which of the following has contributed to Tesla's competitive advantage in terms of stock appreciation? - copying the most popular features of competitors' vehicles - reinvesting profits to continually design and produce better electric vehicles - keeping its proprietary technologies secret - using inexpensive materials to keep costs low

reinvesting profits to continually design and produce better electric vehicles

Porter's Five Forces: Intensity of rivalry among competitors

rivalry tactics include price competition, advertising battles, new product introductions, increased customer service or warranties factors lead to intense rivalry -- numerous or equally balanced competitors, slow industry growth, high fixed or shortage costs, high exit barriers, etc.

AFI: IMPLEMENTATION

set of coherent actions to implement the firms guiding policy accomplished through strategy implementation

The annual net profit after taxes for Tele Corp., a multinational conglomerate, is $5.5 billion. As legal owners, which of the following stakeholder groups has the most legitimate claim on this profit? - managers - shareholders - local communities - government

shareholders

core values statement

statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external interactions; it often includes explicit ethical considerations

Effective guiding policy is supported by and stays consistent through the use of __________

strategic commitments

The field of management that focuses on attaining competitive advantage by combining analysis, formulation and implementation is known as

strategic management

why is it important for a firm to establish a unique strategic positioning?

strategic positioning- stake out a unique position within an industry to provide value to customers while controlling costs a unique strategic positioning sets a firm apart from competitors by offering distinct products, services, or value propositions that competitors cannot easily replicate. This differentiation captures the attention of customers seeking something unique, ultimately leading to increased market share and competitive advantage

Porter's Five Forces: threat of substitutes

substitute products and services limit the potential returns of an industry substitutes can come from another country, perform the same function as the industry's offerings, place a ceiling on prices that firms in an industry can profitably charge the more attractive the price-performance ratio, the more the substitute erodes industry profits

substitutes vs competitors

substitutes are alternatives to a company's products or services, coming from different industries. Competitors are companies within the same industry or market that offer similar products or services and directly compete for the same customers

Strategy is the art and science of _______

success and failure

competitive advantage

superior performance relative to other competitors in the same industry or the industry average... relative NOT absolute

Strategy is about delivering

superior value, while containing the cost to create it, or by offering similar value at lower cost.

Which of the following groups will not be considered a company's internal stakeholder? - suppliers - board members - shareholders - managers

suppliers

Porter's Five Forces: bargaining power of suppliers

suppliers can exert bargaining power by threatening to raise prices or reduce the quality of purchased goods and services supplier groups are powerful when: - only a few firms dominate the industry - there is no competition from substitute products - suppliers sell to several industries - buyer quality is affected by industry product - products are differentiated and have switching costs, - forward integration is possible

Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time? - consistent power position - long-term capital gain - strategic positioning - sustainable competitive advantage

sustainable competitive advantage

stakeholders claims & interests: government

taxes, compliance with regulations

knowledge intensity

the basis of technology and its application. In the competitive landscape of the twenty first century, knowledge is a critical organizational resource and in increasingly valuable source of competitive advantage - how much a business relies on information and expertise to succeed... businesses that use knowledge effectively are more likely to do well in the modern world - an increase in tangible resources (knowledge) increase shareholder value and helps the firm achieve strategic competitiveness (an advantage in the industrial environment)

Organizational Capabilities

the competencies and skills that a firm employs to transform inputs into outputs. Has the capacity to combine tangible and intangible resources, using organizational processes to attain desired ends. Ex.. - outstanding customer service - excellent product development capabilities, - innovativeness of products and services, and flexibility in manufacturing processes - ability to hire, motivate, and retain human capital

environmental forecasting

the development of plausible projections about the direction, scope, speed, and intensity of environmental change - can shape the firms strategies by helping it prepare for an respond to potential future events, challenges, and opportunities in the business environment - underestimating uncertainty can cause no protection from threats and opportunities will be missed

Value Chain

the internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value 1. primary activities 2. support activities

relationship among vision statements, mission statements, and competitive advantage

the mission and vision statements set the organizations goals and direction, while the competitive advantage is how the organization accomplishes these goals and stands out in the market. These things are connected and should help the organization plan and act effectively relationship is strongest when: - the vision is customer oriented - internal stakeholders help define the vision - organizational structures align to the vision, for example, compensation

vertical integration

the number of steps in this value chain that a firm accomplishes within its boundaries company extends its control over various stages of the production or distribution process within its industry. involves owning or controlling businesses that are either suppliers (backwards integration) or distributors (forward integration) in the supply chain

Porter's Five Forces: Threat of New Entrants

the possibility that the profits of established firms in the industry may be eroded by new competitors - threats of entry high, barriers to entry low - depends on existing barriers to entry... economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scalew

Strategy

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

Stakeholder strategy allows firms

to analyze and manage how various external and internal stakeholders interact to jointly create and trade value

environmental monitoring

tracks evolution of environmental trends

Managers often have to make decisions between two conflicting strategic options, otherwise known as

trade-offs

When a firm integrates the competitive strategies of cost -leadership and differentiation, it will most likely result in - competitive advantage through superior performance. - trade-offs that work against each other. - an increase in the firm's economic contribution. - competitive parity with firms that have adopted either of the strategies.

trade-offs that work against each other

competitive disadvantage

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

A successful business strategy creates ________ for both producers and consumers

value

Value

value = amount buyers are willing to pay for the firms product and services. value received > cost of production - how customers think something is worth compared to what it costs - inside a company value is made by giving customers what they want in a cost-effective way including understanding customer needs, making products efficiently, and promoting them effectively

A good strategy should be able to provide products and services to customers at an attractive price point while maintaining internal costs, resulting in - value creation. - shareholder appreciation. - competitive benchmarking. - sustainable competitive advantage.

value creation.

stakeholders claims & interests: customer

value, warranties

stakeholders claims & interests: employees

wages, benefits, safe working environment, job security

backwards vertical integration

when a firm incorporates more stages of the value chain within its boundaries and those stages bring it closer to the end of the value chain; that is, closer to gaining access to raw materials company expanding into businesses that are further back in the supply chain, typically suppliers ex: smartphone manufacturing company starting to produce its microchips or a restaurant chain acquiring a farm to grow its own ingredients

forward vertical integration

when a firm incorporates more stages of the value chain within its boundaries and those stages bring it closer to the end of the value chain; that is, closer to interacting directly with final customers ex: car manufacturer openings it own dealership or a coffee chain owning its coffee bean farms

Resources that provide a firm with potential for competitive advantage

(1) valuable: in formulating and implementing strategies to improve efficiency or effectiveness (2) rare or uncommon: difficult to exploit (3) difficult to imitate: or copy due to physical uniqueness, path dependency, casual ambiguity, or social complexity (4) difficult to substitute: with strategically equivalent resources or capabilities

pyramid of social responsibility

(from bottom to top) 1. economic responsibilities - the basic expectation is to make a profit and be financially stable - the foundation upon which all others rest 2. Legal responsibilities - firms should follow the law and regulations - law is society's codification of right and wrong 3. Ethical responsibilities - beyond the law, they should act with integrity and fairness - obligation to do what is right, just, and fair. Avoid harm 4. philanthropic responsibilities - the highest level involves voluntary contributions for the well-being of society, like charitable donations and sustainability efforts. Be a good corporate citizen, improve quality of life

TESLA

- (1) build sports car - (2) use that money to build an affordable car - (3) use that money to provide an even more affordable car - (4) also provide zero-emission electric power generation options - (5) don't tell anyone diagnosis of the competitive challenge: to succeed tesla must manufacture attractive and affordable vehicles using its new technology, which will compete with traditional cars running on gas Guiding policy to address competitive challenge: build a cost-competitive mass-market vehicle such as the new Model 3 Set of Coherent Actions: benefit from economies of scale, ramp up its production volume, aims to increase production volume by some 20 times

AFI: Formulation (F)

- Business Strategy - Corporate Strategy - Global Strategy

Among the various types of responsibilities a business firm has, which are specifically considered to be economic responsibilities?

- Investors: expect an adequate return for their capital - Creditors: expect the firm to repay its debts - Consumers: expect safe products and services at appropriate prices and quality - Suppliers: expect to be paid in full and on time - Government: expect the firm to pay taxes and manage natural resources with stewardship

AFI: Implementation

- Organizational Design - Corporate Governance and Business Ethics

AFI: Analysis

- Strategic Leadership and the Strategy Process - External Analysis - Internal Analysis - Competitive Advantage, Firm Performance, and Business Models

What is a vision statement? What is it intended to communicate?

- Vision: What do we want to accomplish ultimately? It captures an organizations aspiration, spells out what the organization wants to accomplish, identifies long term objective, and should provide meaning for employees in pursuit of the organization's ultimate goals.

Stakeholder impact analysis is a decision tool that helps a company do which of the following?

- act as a good corporate citizen - achieve a competitive advantage

Stakeholder

- an individual or group, inside or outside the company, that has a stake in and can influence an organizations performance. - individuals, groups, or organizations that have stake in companies' success and interest in the company, can affect the vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims in the firms performance

The following are legal documents that allow business to function as an institution:

- contract enforcement - property rights

interrelationships of activities within the firm create value...

- creating value through internal activities involves optimizing processes, cutting costs, improving quality, and increasing efficiency. When different parts of the company work well together, it makes the company more competitive and valuable - creating value by working with key outside stakeholders like suppliers and customers happens through strong partnership. With suppliers, teamwork can save money and lead to innovation. With customers, understanding their needs and providing great service can make them happier and more loyal, benefiting both sides

Corporate Social Responsibility (CSR) has four components:

- economic responsibilities - legal responsibilities - ethical responsibilities - philanthropic responsibilities

an effective vision statement...

- is expressed as a statement - should be forward-looking and inspiring - should provide meaning for employees in pursuit of the organizations ultimate goals

Firms should obey all the laws, including but not limited to:

- labor - consumer protection - the environment

The following are elements of the pyramid of corporate social responsibility are required by society

- legal - economic

In the ______ step of the strategy implementation phase of the AFI strategy framework, managers would examine how the firm should be structured in order to implement the desired strategy

- organizational design

The expectations that society has towards business, in contrast to what society requires, result in which of the following elements of the pyramid of CSR?

- philanthropic responsibilities - ethical responsibilities

Stakeholders must pay attention to three important stakeholder attributes:

- power - legitimacy - urgency

role stakeholders play in strategic decision making

- stakeholders continue to support an organization when its performance meets or exceeds their expectations - research suggests that firms that effectively manage stakeholder relationships outperform those that do not. Stakeholder relationships and the firm's overall reputation among stakeholders can therefore be a source of competitive advantage

Strategic Intent

- statements, including mission, vision, and values that describe an organization's perception of its purpose, direction, and acceptable conduct - strategic intent should aim to fulfill the organizations mission and should express the organizations values and the stakeholders values. It defines what an organization does, how the organization accomplishes it, and what desired outcomes are.

Are aims to of stakeholder strategy

- to gain and sustain competitive advantage - to manage various stakeholders effectively

A well-devised strategy is about which two things?

- what to do - what not to do

Effectively managing the strategy process is the result of:

1. Analysis 2. Formulation 3. Implementation These three tasks are the pillars if research and knowledge of strategic management

Five types of financial ratios

1. Short-term solvency or liquidity 2. Long-term solvency measures 3. Asset management or turnover 4. Profitability 5. Market value

Stakeholder Impact Analysis

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 stakeholder concerns?

Stakeholder Impact Analysis

1. Who are our stakeholders? (identify stakeholders) 2. What are our stakeholders' interests and claims? (identify stakeholder interests) 3. What opportunities and threats do our stakeholders present? (identify opportunities and threats) 4. What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? (identify social responsibilities) 5. What should we do to effectively address the stakeholder concerns? (address stakeholder concerns)

general environment (6)

1. demographic 2. sociocultural 3. political/legal 4. technological 5. economic 6. global factors are both hard to predict and difficult to control

Porter's Five Forces

1. threat of new entrants 2. bargaining power of buyers 3. bargaining power of suppliers 4. threat of substitutes 5. intensity of rivalry among competitors Porter's five forces analysis aims to understand how competitive an industry is by assessing factors helping organizations to identify strategic opportunities and threats

sustainable competitive advantage

A firm that is able to outperform its competitors or the industry average over a prolonged period of time

Which of the following statements about competitive advantage is NOT true? - A firm will have a sustainable competitive advantage when it outperforms its competitors over a prolonged period of time. - A firm can gain a competitive advantage by providing goods similar to its competitors' goods at a lower price. - A firm's competitive advantage is always absolute, not relative. - A firm's past performance does not guarantee its future performance.

A firm's competitive advantage is always absolute, not relative.

Which of the following statements is true of strategy? - Tactical tools that are a part of a firm's functional and global initiatives are strategy. - Operational effectiveness and competitive benchmarking are strategies. - Actions that allow a firm to address a competitive challenge are strategy.

Actions that allow a firm to address a competitive challenge are strategy.

How should an organization's core values impact its behavior and performance?

An organization's core values should guide its behavior and performance by serving as a moral compass for decision-making, fostering a positive and ethical culture, attracting like-minded employees and customers, and ultimately enhancing its reputation, trustworthiness, and long-term success

AFI

Analyze, Formulate, Implementation

Philanthropic Responsibilities

Be a good corporate citizen. Contribute resources to the community; improve the quality of life.

strategic commitments

Credible actions that back up vision and mission statements; commitments are often costly, long-term oriented, difficult to reverse

AFI: ANALYSIS

Diagnosis of the competitive challenge accomplished through analysis of the firms external and internal environments

EatNow is a fast-food restaurant that has recently entered the hospitality industry. Since most of its competitors are pursuing a low-cost position and doing well, EatNow also wants to adopt the same strategy. Which of the following will be a likely implication of this decision? - EatNow will face low-profit potential. - EatNow will be able to create higher value for its customers. - EatNow will be better placed to gain a competitive advantage in the industry. - EatNow will not face any direct competition in the industry.

EatNow will face low-profit potential.

Good Strategy

Enables a form to achieve superior performance and sustainable competitive advantage relative to its competitors. It is based on a strategic management process that consists of three elements: 1. a diagnosis of the competitive challenge. 2. a guiding policy to address the competitive challenge 3. a set of coherent actions to implement a firm's guiding policy

In the _____ step of the stakeholder impact analysis, managers need to decide the appropriate course of action for the firm in relation to stakeholder concerns

Fifth

Stakeholders impact analysis is a _____ -step process that allows managers to better understand and address stakeholders' needs

Five-step process

What is the overall purpose of strategic management?

Gain competitive advantage

competitive intelligence

Helps firms define and understand their industry and identify rivals' strengths and weaknesses - helps firms avoid surprises - potential for unethical behavior while gathering intelligence

Global Strategy

How and where should the firm compete: local, regional, national, or international?

Business Strategy

How should the firm compete: cost leadership, differentiation, or value innovation?

The question "How do we implement the formulated strategy through an organizational structure, culture, and control system that values and encourages ethical behavior?"

Implementation phase

What actions can a firm take to gain competitive advantage?

Provide either gods or services consumers value more highly than those of its competitors, or goods and services similar to the competition at a lower price other... build strong brand image, explore international markets, attract, retain, and develop top talent

________ is an important tool because it allows a manager to recognize, prioritize and address the needs of various stakeholders. - Stockholder appreciation - Shareholder voting proxies - Stakeholder impact analysis - Shareholder Right's Plan

Stakeholder impact analysis

What are our stakeholders' interests and claims? Step 2: Identify Stakeholders' Interests

Strategic leaders ask, "What are our stakeholders' interest and claims?" They need to specify and assess the interests and claims of the pertinent stakeholders using the power, legitimacy, and urgency criteria.

What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? Step 4: Identify Social Responsibilities

Strategic leaders ask, "What economic, legal, ethical and philanthropic responsibilities do we have to our stakeholders?"

What opportunities and threats do our stakeholders present? Step 3: Identify opportunities and threats

Strategic leaders ask, "What opportunities and threats do our stakeholders present?"

Who are our stakeholders? Step 1: Identify stakeholders

Strategic leaders ask, "Who are our stakeholders?" The strategic leaders focus on stakeholders that currently have, or potentially can have, a material effect on a company. Identifies the most powerful internal and external stakeholders as well as their needs

Economic Responsibilities

The business enterprise is first and foremost an economic institution.

What should we do to effectively address the stakeholder concerns? Step 5: Address Stakeholders Concerns

The firm asks, "What should we do to effectively address any stakeholders concerns?" In the last step in stakeholder impact analysis, strategic leaders need to decide the appropriate course of action for the firm, given all of the preceding factors. Thinking about the attributes of power, legitimacy, and urgency helps to prioritize the legitimate claims and to address them accordingly.

Which of the following statements will effectively guide a strategist?- It is necessary to isolate the key stakeholders and their needs when formulating a strategy. - Industry and firm effects that determine firm performance are independent of each other. - Strategy is all about competitive benchmarking and operational effectiveness. - The principles of strategic management can be applied universally to all organizations.

The principles of strategic management can be applied universally to all organizations.

Why are black swan events such as accounting scandals and the global financial crisis perceived as caused by cheap credit and subprime mortgages offered by financial institutions, bad for business? -They allow companies to gain a competitive advantage unfairly. - They erode the implicit trust between the corporate world and society. - They contribute to competitive parity, which hinders economic growth. - They foster a false sense of prosperity, which results in an economic depression.

They erode the implicit trust between the corporate world and society.

a diagnosis of the competitive challenge.

This element is accomplished through analysis of the firm's external and internal environment.

a guiding policy to address the competitive challenge

This element is accomplished through strategy formulation, resulting in the firm's corporate, business, and functional strategies

a set of coherent actions to implement a firm's guiding policy

This element is accomplished through strategy implementation

Benchmark

To compare something against a standard, such as an activity looked at in an audit that is compared against a HIPAA standard.

Corporate Strategy

Where should the firm compete: industry, markets, and geography?

Customer-oriented vision statements

define a business in terms of providing solutions to customers needs. - allows companies to adapt to changing environments, focuses on problem solving for the customer, defines a business in terms of providing solutions to customer needs Ex: Ford Motor Company, didn't build a better horse or buggy. Ford's focus: "to provide personal mobility for people around the world." Ex: Fenty Beauty, to include women everywhere

general environment: technological

developments lead to new products and services, they can create new industries and alter existing ones ex:) genetic engineering, internet technology, research in synthetic materials, nanotechnology

stakeholders claims & interests: stockholders

dividends, capital appreciation

Ethical Responsibilities

do what is right, just and fair

general environment: Demographic

easily understandable and quantifiable ex:) aging population, rising affluence, changes in ethnic composition, geographic distribution of population, greater disparities in income levels

Which of the four corporate social responsibilities is considered first and foremost for business enterprises?

economic

general environment: economic

economic forces affect all industries ex:) interest rates, unemployment, consumer price index, trends in GDP, changes in stock market valuations, national debt

Internal Stakeholders

employees, stakeholders, board of directors

internal stakeholders

employees, stakeholders, board of directors

Strategic Management

enables you to think like a general manager to help position your organization for superior performance

Internet privacy, genetic engineering and stem cell research are examples of area's in which firm's ______ responsibilities exceed its legal responsibilities

ethical

organizational core values

ethical standards and norms that govern the behavior of individuals within a firm or organization - provide stability to the strategy

Which of the following is a philanthropic responsibility of a firm?- not infringing on other firms' patents - providing products at appropriate prices - exhibiting corporate citizenship - obeying government regulations - not infringing on other firms' patents

exhibiting corporate citizenship

Gadgets n' Stuff Inc. is a vendor who supplies machine parts to an appliance manufacturing company. In return, Gadgets n' Stuff Inc. relies on the company for its revenue and is affected by any decisions taken by the company. In this scenario, Widgets Inc. is a(n) _________ for the appliance manufacturing company. - external stakeholder - focus group - representative sample - internal stakeholder

external stakeholder

Product-Oriented Vision Statements

focus on improving existing products and services, defines a business in terms of a good or service provided. Describe the overarching long-term mission of your product Ex: U.S. Railroad companies; focused on railroad business, should have been focused on transportation and logistics

general environment: sociocultural

forces influence the values, beliefs, and lifestyles of a society. ex:) more women in the workforce, increase in temporary workers, greater concern for fitness, greater concern for the environment, postponement of family formation

economic responsibilities

gain and sustain competitive advantage

value chain support activities

general administration, human resource management, technology development, procurement add value indirectly but necessary to sustain primary activities

stakeholders claims & interests: community

good citizenship behavior such as charities, employment, not polluting the environment

To gain a competitive advantage, a firm needs to provide either

goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at lower cost

The greater the difference between value creation and cost, the - less likely a firm will gain competitive advantage. - greater a firm's economic contribution. - greater a firm's competitive parity. - less likely that a firm's strategic position will be competitive.

greater a firm's economic contribution.

AFI: FORMULATION

guiding policy to address the competitive challenge accomplished through strategy formulation, resulting in the firms corporate, business, and functional strategies

effective stakeholder management

helps a firm build a strong reputation

AFI are

highly interdependent and frequently occur simultaneously

Mission Statement

how do we accomplish our goals? What an organization actually does --> the products and services it will provide, the markets in which it will compete. The mission statement defines how the vision is accomplished.

i. capital market stakeholders ii. product market stakeholders iii. organizational stakeholders

i. shareholders, major supplies of capital ii. primary customers, suppliers, host communities, unions iii. employees, managers, non-managers

competitive advantage

if a firm underperforms its rivals or the industry average

value chain primary activities

inbound logistics, operations, outbound logistics, marketing and sales, service add value directly

Employee stock ownership plans (ESOPs)

incentive workers by offering them with discounted shares or retirement plans based on company stock

Power: Shareholder activists have more power over firms than

individual investors do

The stakeholders of a firm are ________

individuals or groups that can affect and are affected by the actions of the firm

internal vs external stakeholders

internal stakeholders are inside a company, like employees and shareholders. External stakeholders are outside, like customers and government. When creating a stakeholder strategy, its important to access three things about them: 1. how much they care about the company (interest) 2. how much power they have over it (influence) 3. How much their actions can affect it (impact)

environmental scanning

involves surveillance of a firm's external environment - Predicts environmental changes to come - Detects changes already under way - Allows firm to be proactive

strategic intent

is a bold, long term goal that guides a company. A firm's vision statement signals its strategic intent by describing its inspiring future and overall purpose actions based on vision will... - build necessary resources - build capabilities - ensure continuous organizational learning - ensure learning from failure

Strategy

is a set of goal-directed actions a firms takes to gain and sustain performance relative to competitors

Stakeholder strategy

is an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage

Strategic Management

is the integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage.

Which of the following statements related to a firm's stakeholders is not true? - While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits. - If internal or external stakeholders withhold participation in the firm's exchange relationships, it can have severe negative performance implications. - A firm's stakeholders include organizations and groups along with individuals who can affect or be affected by the firm's actions. - Effective stakeholder management is an example of how managers can act to enhance a firm's competitive advantage.

While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits.

In which of the following cases was a company at a major competitive disadvantage? - Facebook hired Sheryl Sandberg because Mark Zuckerberg, Facebook's founder, lacked important business skills. - Without a clear strategic position, Sears tried to be too many things for too many types of customers. - Sam's Club decided to prescreen its customers via required membership to establish creditworthiness. - Strategy executives at UPS used scenario planning to identify issues critical to shaping the firm's future.

Without a clear strategic position, Sears tried to be too many things for too many types of customers.

competitive advantage

a firm that achieves superior performance relative to other competitors in the same industry average

Ethical Responsibilities

a firm's ethical responsibilities, go beyond its legal responsibilities. They embody the full scope of expectations, norms, and values of its stakeholders. Strategic leaders are called upon to what society deems just and fair.

Corporate Social Responsibility (CSR)

a frame work 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

Balanced Scorecard

a method of evaluating a firm's performance using performance measures from the customers', internal, innovation and learning, and financial perspectives 1. how do customers see us? (customer perspective) 2. What must we excel at? (internal perspective) 3. Can we continue to improve and create value? (innovation and learning perspective) 4. How do we look to shareholders? (financial perspective)

Analysis, Formulation, Implementation (AFI) Strategy Framework

a model that links three interdependent strategic management tasks - analyze, formulate and implement - that together, help managers plan and implement a strategy that can improve performance and result in competitive advantage

Resource-based view

a model that sees certain types of resources as key to superior firm performance 2 activities (internal analysis of firm and external analysis of industry) - can lead to competitive advantage if: valuable, rare, hard to duplicate - tangible, intangible resources, and organizational capabilities are combines

financial ratio analysis

a technique for measuring the performance of a firm according to its balance sheet, income statement, and market valuation

When a stakeholders has power over a company it is ______

able to influence the company to do something it would otherwise not do

To which types of organizations can we apply the principles of strategic management?

all types of organization

Stakeholders strategy

an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage, (internal and external stake holders)

strategic management

an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage

A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through strategy - implementation - formulation - analysis - control

analysis

Intangible resources

are difficult for competitors to account for or imitate. They are embedded in unique routines & practices. Includes... - (1) human resources: like trust, experience and capabilities of employees, managerial skills, firm specific practices and procedures - (2) innovation resources: like technical and scientific expertise and ideas, innovation capabilities - (3) reputation resources: brand names, reputation for fairness with suppliers, non-zero sum relationships, reputation for reliability and product quality with customers

perceptual acuity

aware of internal & external environments, it is important for strategic leaders - detecting early warning signals, keeping pace with changes in the external environment can sustain competitive advantage the ability to accurately perceive a communication situation accurately (perceive, interpret, and make sense of sensory information from the environment, such as visual, auditory, or sensory cues). It involves attentiveness to both verbal and nonverbal elements of a conversation and takes into consideration the importance of context. (being keenly aware of details, patterns, and nuances in one's surroundings) important bc it helps us make better decisions, solve problems, and grasp important details in our environment, whether at work or in our personal lives

Financial ratio analysis: evaluating firm performance using...

balance sheet, income statement, market valuation, Meaningful ratio analysis must include: - historical comparison/how ratios change over time, - comparison with industry norms, - comparison with key competitors

SWOT Analysis

basic technique for analyzing firm and industry conditions SWOT = Strengths, Weaknesses, Opportunities, and Threats - used for strategic planning and to stay ahead of market trends. - A firms internal conditions = strengths and weaknesses (where the firm excels or where it may be lacking) - any environmental or external conditions = opportunities and threats (developments that exist in the general environment, activities among firms competing for the same customers in an industry)

Which of the following groups is most likely to be considered a firm's internal stakeholder? - creditors - customers - alliance partners - board members

board members

Porter's Five Forces: The bargaining power of buyers

buyers can force down prices, bargain for higher quality or more services, or play competitors against each other buyer groups are powerful when: - purchasing standard products are in large volumes - profits are low and switching costs are few - backwards integration is possible - buyers product quality is not affected by industry product

How has Walmart staked out a unique strategic position? - by paying high wages to attract the most talented employees - by providing excellent customer service in a luxury setting - by cutting costs to offer lower prices than competitors - by investing 100% of profits in community development programs

by cutting costs to offer lower prices than competitors

Firms should identify a _______ so that employees can determine if they are making progress in addressing it.

clear competitive challenge

strategic groups

clusters of firms that share similar strategies: - Breadth of product & geographic scope - Price/quality - Degree of vertical integration - Type of distribution helps firms identify barriers to mobility that protect a group from attacks by other groups, help firms identify groups whose composition may be marginal or tenuous, help chart future directions, helpful in thinking through implications of each trend for the group as a whole

Substitutes

come from different industries, against competitors products or services that can fulfill a similar need or purpose to what a company offers ex:) coffee and tea, using a bike instead of a car

philanthropic responsibilities

corporate citizenship

When identifying stakeholders, a firm should focus on those stakeholders that ________

currently have, or could potentially have, a material effect on the firm

external stakeholders

customers, suppliers, alliance partners, creditors, unions, communities, governments, and media

External Stakeholders

customers, suppliers, alliance partners, creditors, unions, communities, governments, media