[BUS 345] Chapter 1: What is Strategy? [Quiz 1]

3 Levels of Strategy Formulation

*1. Corporate* (WHERE to compete) *2. Business* (HOW to compete) *3. Functional* (How to IMPLEMENT)

Black Swan Events: 2 Key Points

*1. Managers* Managerial actions can affect the economic well-being of countless global citizens. *2. Stakeholders* Effective stakeholder management is necessary to ensure continued survival and sustainable competitive advantage.

Analysis:

*Diagnosis of the competitive advantage.* **external & internal environments

(CSR) *4 Components of Responsibility*

*ECONOMIC* - creditors, investors, suppliers *LEGAL* - sarbanes-oxley act *ETHICAL* - genetic engineering, internet privacy *PHILANTHROPIC* - donation programs, scholarships

Formulation:

*Guiding policy to address the competitive challenge.* **corporate, business, and functional strategies.

Black Swan Events:

*High impact of a highly improbable and unexpected event.* **something unanticipated

Business Model:

*Organizational plan that details the firm's competitive tactics and initiatives.* **How the firm intends to make money.

Firm Effects:

*Performance attributed to the actions managers take.* **a firms strategy within a given industry. = 30%-45% of performance

Strategic Positioning:

*Stake out a unique position within an industry to provide value to customers, while controlling costs.* **operational effectiveness, marketing skills, and other functional expertise.

Industry Effects:

*The structure of the industry in which the firm competes.* **the industry a firm is in. = 20% of performance

(What is Strategy?...#5) *It combines a set of ________ to stake out a ________.*

*activities, unique position* (It combines a set of *activities* to stake out a *unique position*.) **Key to Successful Strategy!!

(What is Strategy?...#6) *It requires long-term ________ that are often not easily ________.*

*commitments, reversible* (It requires long-term *commitments* that are often not easily *reversible*.)

The greater the ________ between value creation and cost, the ________ the economic contribution.

*difference, greater* (The greater the *difference* between value creation and cost, the *greater* the economic contribution.)

Strategy is about creating ________, while containing the ________ to create it.

*superior value, cost* (Strategy is about creating *superior value*, while containing the *cost* to create it.)

(What is Strategy?...#1) *It is the managers' ________ about how to gain and sustain ________.*

*theories, competitive advantage* (It is the managers' *theories* about how to gain and sustain *competitive advantage*.)

(What is Strategy?...#3) *It is about creating ________ while containing ________.*

*value, cost* (It is about creating *value* while containing *cost*.)

(What is Strategy?...#4) *It is about deciding _______, and ________.*

*what to do, what not to do* (It is about deciding *what to do*, and *what not to do*.) **Michale Porter

To gain competitive advantage, a firm needs to provide either goods or services...

...consumers value more highly than those of its competitors. ...similar to the competitors' but at a lower price.

A strategy is the result of *3 management tasks*...

1. Analysis 2. Formulation 3. Implementation

Corporate Social Responsibility (CSR):

A framework that helps firms recognize and address the *expectations that society has toward the business*.

AFI Strategy Framework:

A model that links 3 interdependent strategic management tasks (Analyze, Formulate, Implement) that, together, help managers plan and implement a strategy performance and result in competitive advantage.

Strategy:

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

Strategic Business Units:

A standalone division of a larger conglomerate, with its own profit-and-loss responsibility.

Strategic Management:

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

Strategy: (Michale Porter)

Is as much about deciding what not to do, as it is about deciding what to do.

Stakeholders:

Organizations, groups, and individuals that can affect or are affected by a firm's actions.

Sustainable Competitive Advantage:

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

Competitive Parity:

Performance of two or more firms at the same level.

*Pyramid of CSR* (highest to lowest)

Philanthropic Ethical Legal Economic

"Consequences" of Superior Value Creation:

Profitability & Market Share

Implementation:

Set of coherent actions to implement the firm's guiding policy.

Competitive Advantage:

Superior performance relative to other competitors in the same industry or the industry average.

To assess competitive advantage you compare the firms performance to a ________.

benchmark

(What is Strategy?...#2) *It is about being ________ from your rivals.*

different

Co-opetition:

Cooperation by competitors to achieve a strategic objective.

Strategy, is Gaining and Sustaining ________.

Competitive Advantage