MGMT 466- Chapter 1

1. define the pool's boundaries 2. estimate the pool's overall size 3. estimate the size of the value chain activity in the pool 4. reconcile the calculation

There are 4 steps to identifying profit poools:

core competencies

are capabilities that serve as a source of competitive advantage for a firm over its rivals

industrial organization (I/O) model of above-average returns

explains the external environment's dominant influence on a firm's strategic actions. Specifies that the industry or segment of an industry in which a company chooses to compete has a stronger influence on performance than do the choices mangers make inside their organizations

global economy

is one in which goods, services, people, skills, and ideas move freely across geographic borders

capability

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

strategic management process

is the full set of commitment, decisions, and actions required for a firm to achieve strategic competitiveness and earn above average returns

globalization

is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country border

organizational culture

refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business

product market stakeholders

the firm's primary customers, suppliers, host communities, and unions representing the workforce

- entrepreneurial - market oriented (effective knowledge of the customer's needs) - used valuable competencies - offered innovative products and services

A recent study conducted to identify the factors that contribute to the success of top corporate performers. The factors are:

1. the external environment is assumed to impose pressures and constraints that determine the strategies that would result in above average returns 2. most firms competing withing a industry or within a segment of that industry are assumed to control similar strategically relevant resources and to pursue similar strategies in light of those resources 3. resources used to implement strategies are assumed to be highly mobile across firms, so any resource differences that might develop between firms will be short lived 4. organizational decision makers are assumed to be rational and committed to acting in the firm's best interests, as show by their profit maximizing behaviors

Grounded in economics, the I/O model has 4 underlying assumptions:

1. physical 2. human 3. organizational capital

In general, a firm's resources are classified into three categories:

1. valuable 2. rare 3. imitate 4. nonsubstitutable

Not all firm's resources and capabilities have the potential to be foundation for a competitive advantage. This potential is realized when resources and capabilities are:

analysis, strategy and performance (A-S-P model)

Strategic management process involves-

1. technology diffusion and disruptive technologies 2. the information age 3. increasing knowledge intensity

Technology trends and conditions can be placed into 3 categories:

"liability of foreignness"

The risks of participating outside of a firm's domestic markets in the global economy are labeled a _________

1. amount of time required for firms to learn how to compete in new markets 2. overdiversification

What are some risks for globalization?

1. capital market stakeholders 2. product market stakeholders 3. organizational stakeholders

What are the classifications of stakeholders?

1. emergence of global economy & technology 2. rapid technological change

What are the two primary drivers of hypercompetitive environments?

Analyze; analyze its external environment and internal organization to determine its resources, capabilities, and core competencies- on which its strategy likely will be based

What is the first step in the strategic management process?

is to inform stakeholders of what the firm is, what it seeks to accomplish, and who it seeks to serve

What is the key purpose of vision and mission statements?

Strategy; with the information gained from external and internal analyses, the firm develops its vision and mission and formulates one ore more strategies

What is the second step in the strategic management process?

Performance; to implement its strategies, the firm takes actions to enact each strategy with the intent of achieving strategic competitiveness and above average returns (performance)

What is the third step in the strategic management process?

competitive advantage

a firm has ___________________ when it implements a strategy that creates superior value for customers and competitors are unable to duplicate or find too costly to try to imitate

organizational stakeholders

all of a firm's employees, including both nonmanagerial and managerial personnel

resources

are inputs into a firm's production process, such as a capital equipment, the skills of individual employees, patents, fiances, and talented managers

strategic leaders

are 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

average returns

are returns equal to those an investor expects to earn from other investments with a similar amount of risk

above average returns

are returns in excess of what an investor expects to earn from other investments with a similar amount of risk

stakeholders

are the individuals, groups, and organizations that can affect the firm's vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm's performance

profit pools

entails the total profits earned in an industry at all points along the value chain

shareholders

individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investments. These stakeholders' rights are grounded in laws governing private property and private enterprise

vision

is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve. This statement articulates the ideal description of an organization and gives shape to its intended future. It points the firm in the direction of where it would like to be in the years to come.

strategic flexibility

is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment

hypercompetition

is a term often used to capture the realities of the competitive landscape.

perpetual innovation

is a term used to describe how rapidly and consistently new, information-intensive technologies replace older ones

strategic competiveness

is achieved when a firm successfully formulates and implements a value-creating strategy

strategy

is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

risk

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

capital market stakeholders

shareholders and the major suppliers of a firm's capital

mission

specifies the businesses in which the film intends to compete and the customers it intends to serve

disruptive technology

technologies that destroy the value of an existing technology and create new ones

resource based model of above average returns

this model assumes that each organization is a collection of unique resources and capabilities. The uniqueness of its resources and capabilities is the basis of a firm's strategy and its ability to earn above average returns