Strategic Management Chapters 1-5

[3] The Four Criteria of Sustainable Competitive Advantage - Non-substitutable Capabilities

capabilities that do not have strategic equivalents (Two valuable firm resources/bundles of firm resources are strategically equivalent when they each can be separately exploited to implement the same strategies.)

[3] The Four Criteria of Sustainable Competitive Advantage - Rare Capabilities

capabilities that few, if any, competitors possess (often, valuable but common - not rare - capabilities are sources of competitive parity; e.g., Walmart's green practices adopted by Target)

[3] The Four Criteria of Sustainable Competitive Advantage - Valuable Capabilities

capabilities that help a firm neutralize threats or exploit opportunities (e.g., Groupon and their creation of the "daily deal" marketing space)

[3] The Four Criteria of Sustainable Competitive Advantage - Costly to Imitate Capabilities

capabilities that other firms cannot easily develop (often come about from one or a combination of three reasons: - unique historical conditions / valuable organizational culture - causally ambiguous link between a firm's core competencies and its competitive advantage (e.g. Southwest Airlines' low-cost strategy remains unmatched) - social complexity (at least some, and frequently many, of the firm's capabilities are the product of complex social phenomena, such as trust, friendships, and a firm's reputation with suppliers and customers)

[1] core competencies

capabilities that serve as a source of competitive advantage for a firm over its rivals (Core competencies are often visible in the form of organizational functions.)

[2] complementors

companies or networks of companies that sell complementary goods or services that are compatible with the focal firm's good or service (Complementors expand the set of competitors that firms must evaluate when competing a competitor analysis

[3] * the "right" resources

resources with the potential to be formed into core competencies as the foundation for creating value for customers and developing competitive advantages because of doing so

[2] competitor intelligence

the set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions, and capabilities

[3] value (is measured by...)

value is measured by a product's performance characteristics and by its attributes for which customers are willing to pay

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - Slow Industry Growth

when a market is growing, firms try to effectively use resources to serve an expanding customer base - markets increasing in size often reduce the pressure to take customers from competitors (*the instability in the market that results from engagements between no-growth/slow-growth markets, such as burger king vs mcdonald's vs wendy's vs..., can negatively affect all competitors' profitability.)

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - Lack of Differentiation or Low Switching Costs

when buyers find a differentiated product that satisfies their needs, they frequently purchase the product loyally over time - industries with many companies that have successfully differentiated their products have less rivalry, resulting in lower competition for individual firms

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - High Fixed Costs or High Storage Costs

when fixed costs account for a large part of total costs, companies try to maximize the use of their productive capacity - excess can be created, however; to then reduce inventories, individual companies typically cut the price of their product and offer rebates and other special discounts to customers , resulting in competition (The pattern of excess capacity (industry) resulting in intense rivalry (firm) is frequently observed in industries with high storage costs

[3] * Creating Value through Support Functions

- Finance - Activities associated with effectively acquiring and managing financial resources. Securing adequate financial capital, investing in organizational functions in ways that will support the firm's efforts to produce and distribute its products in the short and long term, and managing relationships with those providing financial capital to the firm are specific examples of these examples. - Human Resources - Activities associated with managing the firm's human capital. Selecting, training, retaining, and compensating human resources in ways that create a capability and hopefully a core competence are specific examples of these activities. - Management Information Systems - Activities taken to obtain and manage information and knowledge throughout the firm. Identifying and utilizing sophisticated technologies, determining optimal ways to collect and distribute knowledge, and linking relevant information and knowledge to organizational functions are activities associated with this support function.

[4] Earning above-average returns by implementing the cost leadership strategy

- Rivalry with Existing Competitors (factors that affect the degree of rivalry include organizational size, resources possessed by rivals, a firm's dependence on a particular market, location and prior competitive interactions between firms, and a firm's reach, richness, and affiliation with its customers.) - Bargaining Power of Buyers (Powerful customers can force a cost leader to reduce its prices; in some cases, rather than forcing firms to reduce their prices, powerful customers may pressure firms to provide innovative products and services) - Bargaining Power of Suppliers (the cost leader generally operates with margins greater than the margins earned by its competitors - when an industry faces substantial increases in the cost of its supplies, only the cost leader may be able to pay the higher prices and continue to earn either average or above average returns.) - Potential Entrants (new entrants must be willing to accept less than average returns until they gain the experience required to approach the cost leader's efficiency. To earn even average returns, new entrants must have the competencies required to match the cost levels of competitors other than the cost leader.) - Product Substitutes (a product substitute becomes a concern for the cost leader when its features and characteristics, in terms of cost and levels of differentiation that are acceptable to customers, are potentially attractive to the firm's customers.) - Competitive Risks of the Cost Leadership Strategy (processes used to produce and distribute may become obsolete through competitors' innovations, too much focus on cost reductions trying to understand customers' perceptions of "competitive levels of differentiation", or imitation of the cost leader's strategy)

[3] * Creating Value through Value Chain Activities

- Supply-Chain Management - Activities including sourcing, procurement, conversion, and logistics management that are necessary for the firm to receive raw materials and convert them into final products. - Distribution - Activities related to getting the final product to the customer. Efficiently handling customers' orders, choosing the optimal delivery channel, and working with the finance support function to arrange for customers' payments for delivered goods are examples of these activities. - Marketing (including Sales) - Activities taken for the purpose of segmenting target customers on the basis of their unique needs, satisfying customers' needs, retaining customers, and locating additional customers. Advertising campaigns, developing and managing product brands, determining appropriate pricing strategies, and training and supporting a sales force are specific examples of these activities. - Operations - Activities necessary to efficiently change raw materials into finished products. Developing employees' work schedules, designing production processes and physical layout of the operations' facilities, determining production capacity needs, and selecting and maintaining production equipment are examples of specific operations activities. - Follow-up Service - Activities taken to increase a product's value for customers. Surveys to receive feedback about the customer's satisfaction, offering technical support after the sale, and fully complying with a product's warranty are examples of these activities.

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - High Exit Barrier examples

- specialized assets (assets with values linked to a business or location) - fixed costs of exit (such as labor agreements) - strategic interrelationships (relationships of mutual dependence, such as those between one business and other parts of a company's operations, including shared facilities and access to financial markets) - emotional barriers (aversion to economically justified business decisions because of fear for one's own career, loyalty to employees, etc...) - government and social restrictions (often based on government concerns for job losses and regional economic effects; more common outside the U.S.

[2] The Five Forces of Competition Model - Competitor Analysis - what a firm must understand (concerning a competitor)

- what drives the competitor, as show by its future objectives - what the competitor is doing and can do, as revealed by its current strategy - what the competitor believes about the industry, as shown by its assumptions - what the competitor's capabilities are, as shown by its strengths and weaknesses

[1] Classification of Stakeholders

1. Capital Market Stakeholders a. shareholders b. major suppliers of capital, such as banks (These investors might take actions to improve the firm's performance, such as communicating their expectations clearly regarding performance to the firm) 2. Product Market Stakeholders a. primary customers b. suppliers c. host communities d. unions (These investors are generally satisfied when a firm's profit margin reflects at least a balance between the returns to capital market stakeholders, i.e. the returns they will accept and retain their interests in the firm, and the returns in which they share.) 3. Organizational Stakeholders a. employees b. managers c. nonmanagers (Employees expect the firm to provide a dynamic, stimulating, and rewarding work environment.)

[2] Competitor Analysis Components

1. Future Objectives 2. Current Strategy 3. Assumptions 4. Capabilities > 5. Response

[1] The Resource-Based Model of Above-Average Returns

1. Identify the firm's resources. Study its strengths and weaknesses compared with those of competitors. 2. Determine the firm's capabilities. 3. Determine the potential of firm's resources and capabilities in terms of competitive advantage. 4. Locate an attractive industry. 5. Select a strategy that best allow the firm to utilize its resources and capabilities in terms of a competitive advantage.

[2] * Legal and ethical practice examples

1. Obtaining publicly available information (e.g., court records, competitors' help-wanted advertisements, annual reports, etc...) 2. Attending trade fairs and shows to obtain competitor's brochures, view their exhibits, and listen to discussions about their products (In contrast certain practices including blackmail, trespassing, eavesdropping, and stealing drawings/samples/documents are widely viewed as unethical and often are illegal as well.)

[2] External Environmental Analysis (parts)

1. Scanning Identifying early signals of environmental changes and trends. (e.g., Amazon.com records information about individuals visiting its website, particularly when a purchase is made - Amazon then welcomes these customers, sends messages about specials and new products similar to those previously purchased.) 2. Monitoring Detecting meaning through ongoing observations of environmental changes and trends. (e.g., those monitoring retirement trends in the U.S. learned that the median retirement savings of U.S. workers was only $5000; for those aged 56-61, only $17,000. Firms seeking to serve retiree's financial needs will continue monitoring workers' savings and investment patterns to see if a trend is developing.) 3. Forecasting Developing projections of anticipated outcomes based on monitored changes and trends. (e.g., analysts might forecast the time that will be required for a new technology to reach the marketplace or how much time will elapse before changes in governmental taxation policies affect consumers' purchasing patterns.) 4. Assessing Determining the timing and importance of environmental changes and trends for firms' strategies and their management.

[1] The I/O Model of Above-Average Returns

1. Study the external environment(general, industry, competitor), especially the industry environment 2. Locate an industry with high potential for above average returns 3. Identify the strategy called for by the attractive industry to earn above average returns 4. Develop or acquire assets and skills needed to implement the strategy 5. Use the firms strengths to implement the strategy

[4] Five business-level strategies

1. cost leadership 2. differentiation 3. focused cost leadership 4. focused differentiation 5. integrated cost leadership/differentiation

[3] To become a core competence and a source of competitive advantage, a capability must allow the firm to either:

1. perform an activity in a manner that provides value superior to that provided by competitors, or 2. perform a value-creating activity that competitors cannot perform

[4] characterization of firms' relationships with customers

1. reach - revolves around the firm's access and connection to customers (e.g., Facebook connecting users with each other) 2. richness - concerns the depth and detail of the two-way flow of information between the firm and customers (allows potential to offer online services as a means of superior management of information exchanges with them - understanding of customers + understand of how the firm can satisfy them; e.g., Amazon and their mission "to be the Earth's most customer-centric company") 3. affiliation - concerned with facilitating useful interactions with customers (preferences, e.g., Walmart now delivers groceries to those who order items online and then come to the store to receive their items from an employee who brings them to their vehicle.)

[3] factors for a competitive advantage's sustainability

1. the rate of core competence obsolescence because of environmental changes 2. the availability of substitutes for the core competence 3. the imitability of the core competence (For all firms, the challenge is to effectively manage current core competencies while simultaneously developing new ones.)

[4] in terms of customers, when selecting a business-level strategy, the firm determines...

1. who will be served 2. what needs those target customers have that it will satisfy 3. how those needs will be satisfied

[1] When does a firm have a competitive advantage?

A firm has a competitive advantage when, by implementing a chosen strategy, it creates superior value for customers and when competitors are not able to imitate the value the firm's products create or find it too expensive to attempt imitation. (The speed with which competitors are able to acquire skills needed to duplicate the benefits of a firm's strategy determines how long the competitive advantage will last.)

[4] How: Determining Core Competencies Necessary to Satisfy Customer Needs

After deciding who the firm will serve and the specific needs those customers have, the firm is prepared to determine how to use its resources, capabilities, and competencies to develop products that can satisfy its target customers' needs. (In today's competitive environment and across industries, developing a core competence in the R&D function is critical; e.g., Apple, Amazon, Facebook, and Google invest significant resources to deal with it.)

[4] What: Determining Which Customer Needs to Satisfy

After the firm decides who it will serve, it must then identify the targeted customer groups needs that its goods or services can satisfy. Needs are related to a products benefits and features (what the customer wants/ how or when a customer wants it)

[2] The Five Forces of Competition Model - Threat of New Entrants - Barriers to Entry

Barriers to Entry: - economies of scale [incremental efficiency improvements through experience as a firm grows larger] - product differentiation [over time, customers may come to believe that a firm's product is unique, creating customers who consistently purchase a firm's products] - capital requirements [in addition to physical facilities, capital is needed for inventories, marketing activities and other critical business functions] - switching costs [the one-time costs customers incur when they buy from a different supplier] - access to distribution channels [new entrants have to persuade distributors to carry their products, either in addition to or in place of those currently distributed - these isn't an issue for products that can be sold on the internet] - cost disadvantages independent of scale [sometimes, established competitors have cost advantages that new entrants cannot duplicate - e.g., technology, favorable access to raw materials, desirable locations, and government subsidies] - government policy [an expectation of swift and vigorous competitive responses reduces the likelihood of entry

[4] Who: Determining the Customers to Serve

Companies divide customers into groups based upon customers' needs and to help determine who their target market will be.

[4] Basis for Customer Segmentation

Consumer Markets - - demographic factors (age, income, sex, etc...) - socioeconomic factors (social class, stage in the family life cycle) - geographic factors (cultural , regional differences) - psychological factors (lifestyle, personality traits) - consumption patterns (heavy, moderate, and light users) - perceptual factors (benefit segmentation, perceptual mapping) Industrial Markets - - end-use segments (identified by Standard Industrial Classification [SIC] code) - product segments (based on technological differences or production economics) - geographic segments (defined by boundaries between countries or by regional differences within them) - common buying factors segments (cut across product market and geographic segments) - customer size segments

[1] How do firms achieve strategic competitiveness?

Firms achieve strategic competitiveness by formulating and implementing a value creating strategy.

[4] Broad market

Firms serving a broad market seek to use their capabilities to create value for customers on an industry-wide basis.

[2] The Five Forces of Competition Model - Threat of New Entrants - Expected Retaliation

Expected Retaliation (Small entrepreneurial firms are generally best suited for identifying and serving neglected market segments; e.g., When Honda first entered the U.S. motorcycle market, it concentrated on small-engine motorcycles, a market that firms such as Harley-Davidson ignored. By targeting this neglected niche, Honda initially avoided a significant amount of head-to-head competition with well-established competitors. After consolidating its position, Honda used its strength to attack rivals by introducing larger motorcycles and competing in the broader market.)

[3] Components of an Internal Analysis

Resources: tangible/intangible; Capabilities; Core Competencies; Discovering Core Competencies; Competitive Advantage; Strategic Competitiveness

[2] * relationship between a firm and its three environments

The firm can develop and implement a more effective strategy when it successfully integrates the insights provided by analyses of the general environment, the industry environment, and the competitor environment.

[4] Narrow market

The firm intends to serve the needs of a narrow customer group.

[3] Conditions Affecting Managerial Decisions about Resources, Capabilities, and Core Competencies

Uncertainty - Uncertainty exists about the characteristics of the firm's general and industry environments and customers' needs Complexity - Complexity results from the interrelationships among conditions shaping a firm Intra-organizational Conflicts - Intra-organizational conflicts may exist among managers making decisions as well as among those affected by the decisions

[2] threat

a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness (e.g. intellectual property protection, such as between the U.S. and China)

[2] opportunity

a condition in the general environment that, if exploited effectively, helps a company reach strategic competitiveness

[1] hypercompetition

a condition where competitors engage in intense rivalry, markets change quickly and often, and entry barriers are low (In a hypercompetitive market, firms often challenge their competitors aggressively to strengthen their market position and, ultimately, their performance.)

[2] strategic group

a group of firms in an industry following the same or a similar strategy (The notion of strategic groups can be useful for analyzing an industry's competitive structure - high mobility barriers, high rivalry, and low resources among the firms within an industry limit the formation of strategic groups.) (Even highly successful firms must continuously analyze and understand their competitors if they are to maintain their current market leading positions, e.g., the decline of Sears, Macy's, JCPenney, and Toys 'R' Us)

[2] industry

a group of firms producing products that are close substitutes (Typically, companies use a rich mix of different competitive strategies to pursue above-average returns when competing in a particular industry.)

[1] vision

a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve (A vision describes a dream that challenges and energizes a company.)

[1] strategic flexibility

a set of capabilities firms use to respond to various demands and opportunities existing in today's dynamic and uncertain competitive environment

[1] disruptive technology

a technology that destroys the value of an existing technology and create new markets (Disruptive technologies surface frequently in today's competitive markets - for example, new markets created by the technologies underlying the development of Wifi, iPads, and the web browser.)

[3] value chain activities

activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers

[1] a global economy

an economy in which goods, services, people, skills, and ideas move freely across geographic borders (The global economy significantly expands and complicates a firm's competitive environment > as a result, firms must study the global economy carefully as a foundation for learning how to position themselves successfully for competitive purposes.)

[1] strategy

an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage (what the firm will and won't do)

[4] business-level strategy

an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets

[4] cost leadership strategy

an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors (Firms using the cost leadership strategy commonly sell standardized goods or services, but with competitive levels of differentiation, to the industry's most typical customers.)

[4] the differentiation strategy

an integrated set of actions taken to produce products (at an acceptable cost) that customers perceive as being different in ways that are important to them (e.g., luxury items such as Lexus, Louis Vuitton, etc...) - examples of approaches to differentiation include unusual features, responsive customer service, rapid product innovations, technological leadership, perceived prestige and status, different tastes, and engineering design and performance

[1] risk

an investor's uncertainty about the economic gains or losses that will result from a particular investment

[3] intangible resources

assets that are rooted deeply in the firm's history, accumulate over time, and are relatively difficult for competitors to analyze and imitate (trust between managers and employees, managerial capabilities, the capacity for innovation, organizational culture, etc...)

[3] tangible resources

assets that can be observed and quantified (e.g., production equipment, manufacturing facilities, distribution centers, and formal reporting structures)

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - High Strategic Stakes

competitive rivalry is likely to be high when it is important for several of the competitors to perform well in the market (e.g., among phone companies) - high strategic stakes can also exist in terms of geographic locations

[4] Using the Differentiation Strategy - Rivalry with Existing Competitors

customers tend to be loyal purchasers of products differentiated in ways that are meaningful to them - as their loyalty to a brand increases, customers become less sensitive of price increases (e.g., Apple and Samsung improving upon each others' products)

[3] "offshoring"

deciding to outsource to a foreign supplier

[1] perpetual innovation

describes how rapidly and consistently new, information-intensive technologies replace older ones

[4] business model

describes what a firm does to create, deliver, and capture value for its stakeholders (A business model is a framework for how the firm will create, deliver, and capture value while a business-level strategy is the set of commitments and actions that yields the path a firm intends to follow to gain a competitive advantage.)

[2] The Demographic Segment - Population Size example

e.g., 28% of Japan's citizens are 65 and older, while the figures for the U.S. and China are 15% and 11%, respectively - Aging populations and their proportions are a significant problem for countries because of the need for workers and the burden of supporting retirement programs.

[2] The Demographic Segment - Ethnic Mix example

e.g., Hispanics have become the largest ethnic minority in the U.S.; in fact, the U.S. Hispanic market is the third largest ethnic minority in the U.S.. Spanish is now the dominant language in parts of the U.S. such as Texas, California, Florida, and New Mexico. - The ethnic mix of countries' populations continues to change, creating opportunities and threats for many companies as a result. (The ethnic diversity of the population is important not only because of consumer needs but also because of the labor force composition.)

[2] The Demographic Segment - Age Structure example

e.g., Japan's population was one of the youngest in the world in the 1950s; however, 45 is now the median age, with the projection that it will be 55 by 2040. With a fertility relate that is below replacement value, 2040 will see almost as many 100-year-old Japanese people as it will newborns. - Aging populations threaten the ability of firms to hire and retain a workforce that meets their needs.

[2] The Demographic Segment - Geographic Distribution example

e.g., the U.S. population has shifted from states in the Northeast and Great Lakes region to states in the West (CA), South (FL), and SW (TX). CA's population has grown by 2.3mil since 2010, while TX's population has grown by 3.2mil in the same time period - Firms want to carefully study the patterns of population distributions in countries and regions to identify opportunities and threats. (Geographic distribution patterns differ throughout the world.)

[2] The Demographic Segment - Income Distribution example

e.g., the increase in dual-career couples has had a notable effect on average incomes. Although real income has been declining in general in some nations, the household income of dual-career couples has increased, especially in the U.S., yielding strategically relevant information for firms. - Differences across nations suggest that it is important for most firms to identify the economic systems that are most likely to produce the most income growth and market opportunities.

[2] The Five Forces of Competition Model - Bargaining Power of Buyers

firms seeks to maximize the return on their invested capital - alternatively, buyers want to buy products at the lowest possible possible price; to reduce their costs, buyers bargain for higher quality, greater levels of service, and lower prices (traits of a powerful buyer group (customer): - they purchase a large portion of an industry's total output - the sales of the product being purchased account for a significant portion of the seller's annual revenues - they could switch to another product at little, if any, cost - the industry's products are undifferentiated or standardized, and the buyers pose a credible threat if they were to integrate backward into the sellers' industry)

[4] competitive scope

how broadly a firm targets its products or services (broad market or narrow market)

[2] competitor analysis

how companies gather and interpret information about their competitors

[3] support functions (include...)

include the activities or tasks the firm completes in order to support the work being done to produce, sell, distribute, and service the products the firm is producing

[1] strategic leaders

people located in different areas and levels of the firm using the strategic management process to select strategic actions that help the firm achieve its vision and fulfill its mission (Visionary leadership motivates employees to expend extra effort, thereby helping to increase firm performance.)

[2] The Five Forces of Competition Model - Bargaining Power of Suppliers

increasing prices and reducing the quality of their products are potential means suppliers use to exert power over firms competing within an industry (traits of a powerful supplier group: - it is dominated by a few large companies and is more concentrated than the industry to which it sells - satisfactory substitute products are not available to industry firms - industry firms are not a significant customer for the supplier group - suppliers' goods are critical to buyers' marketplace success - the effectiveness of suppliers' products has created high switching costs for industry firms - it poses a credible threat to integrate forward into the buyers' industry. credibility is enhanced when suppliers have substantial resources and provide a highly differentiated product)

[1] stakeholders

individuals, groups, and organizations that 1. can affect the firm's vision and mission 2. are affected by the strategic outcomes achieved 3. have enforceable claims on the firm's performance (Stakeholders continue to support an organization when its performance meets or exceed their expectations.)

[1] resources

inputs into a firm's production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers (valuable = when they [resources] allow a firm to take advantage of or neutralize threats in its external environment rare = when they are possessed by few, if any, current and potential competitors costly to imitate = when other firms either cannot obtain them or are at a cost disadvantage in obtaining them non-substitutable = when they have no structural equivalents)

[1] average returns

returns equal to those an investor expects to earn from other investments possessing a similar amount of risk (Firms without a competitive advantage or those that do not compete in an attractive industry earn, at best, average returns.)

[1] above-average returns

returns in excess of what an investor expects to earn from other investments with a similar amount of risk (Understanding how to exploit a competitive advantage is important for firms seeking to earn above-average returns.)

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - Numerous or Equally Balanced Competitors

rivalries can exist at all levels of size and power - the large and often similar-sized resource bases of these firms permit vigorous actions and responses; e.g., airbus vs boeing, coca-cola vs pepsico, etc...

[2] The Five Forces of Competition Model - Intensity of Rivalry Among Competitors - High Exit Barriers

some companies continue competing in an industry even though the returns on their invested capital are low or even negative - firms making this choice likely face high exit barriers, which include economic, strategic, and emotional factors causing them to remain in an industry when the profitability of doing so is questionable

[2] The Five Forces of Competition Model - Threat of Substitute Products

substitute products are goods are services from outside a given industry that perform similar or the same functions as a product that the industry produces - e.g., e-mail and fax vs overnight delivery, plastic containers vs glass jars, tea vs coffee, etc...

[3] global mind-set

the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context

[2] The Political/Legal Segment

the arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies (This segment is concerned with how organizations try to influence governments and how they try to understand the influences of those governments on their competitive actions and responses.)

[3] judgement

the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete

[1] capability

the capacity for a set of resources to perform a task or an activity in an integrative manner

[1] organizational culture

the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business (Organizational culture is the social energy that drives-or fails to drive-the organization.)

[2] The Demographic Segment (is concerned with...)

the demographic segment is concerned with a population's size, age structure, geographic distribution, ethnic mix, and income distribution

[1] the strategic management process

the full set of commitments, decisions, and actions firms take to achieve strategic competitiveness and earn above-average returns (The process involves analysis, strategy, and performance, the A-S-P model.)

[2] The Global Segment

the global segment includes relevant new global markets, existing markets that are changing, important international political events, and critical cultural and institutional characteristics of global markets (e.g., firms competing in the automobile industry must study the global segment.) (Firms competing in global markets in global markets should recognize each market's sociocultural and institutional attributes.)

[1] globalization

the increasing economic interdependence among countries and their organizations as reflected in the flow of products, financial capital, and knowledge across country borders (Globalization is a product of a large number of firms competing against one another in an increasing number of global economies.)

[2] The Economic Segment

the nature and direction of the economy in which a firm competes or may compete (In general, firms seek to compete in relatively stable economies with strong growth potential. Because nations are interconnected as a result of the global economy, firms must scan, monitor, forecast, and assess the health of their host nation as well as the health of the economies outside it.)

[4] market segmentation

the process of dividing customers into groups based on their needs

[3] outsourcing

the purchase of a value-creating activity or a support function activity from an external supplier (Firms engaging in effective outsourcing increase their flexibility, mitigate risks, and reduce their capital investments.)

[2] the industry environment

the set of factors that directly influences a firm and its competitive actions and responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competing firms (The challenge for a firm is to locate a position within an industry where it can favorably influence the five factors or where it can successfully defend itself against their influence.)

[2] The Sociocultural Segment (is concerned with...)

the sociocultural segment is concerned with a society's attitudes and cultural values (Sociocultural factors influence the entry into new markets and the development of new firms in a country.)

[1] technology diffusion

the speed at which new technologies become available to firms and when firms choose to adopt them

[1] mission

the statement that specifies the businesses in which the firm intends to compete and the customers it intends to serve (The mission is more concrete than its vision.)

[2] The Sustainable Physical Environment Segment

the sustainable physical environment segment refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to those changes with the intent of creating a sustainable environment (There are many parts or attributes of the physical environment that firms consider as they try to identify trends in the physical environment; because of the importance to firms of becoming sustainable, certification programs have been developed to help them understand how to be sustainable organizations, e.g. Walmart, the world's largest retailer with a huge environmental footprint, has a goal to produce zero waste and to use 100% renewable energy to power its operations.)

[2] The Technological Segment

the technological segment includes the institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and materials (New technology and innovations are changing many industries - as such, firms in all industries must become more innovative in order to survive, develop new or at least comparable technology, and continuously improve it.)

[2] the general environment

the wide-ranging global, economic, technological, sociocultural, demographic, political, and legal forces that affect an organization and its task environment (Firms cannot directly control the general environments; what a company seeks to do is recognize trends in each segment and then predict each trend's effect on the general environment.)