SM chapter 1

Core competencies

Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals.

Strategic management process

The strategic management process is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.

Disruptive technologies

Disruptive technologies are technologies that destroy the value of an existing technology and create new markets.

Globalization

Globalization is the increasing economic interdependence among countries and their organization as reflected in the flow of goods and services, financial capital and knowledge across country borders.

Name the use of profit pools

Firms use the profit pools' tool to identify the strategy to use and the actions to take to implement that strategy.

Primary drivers of hyper-competition

Global economy and technology

Capability

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

Classification of stakeholders

(1) Capital market stakeholders - shareholders, and major suppliers of capital such as banks, (2) product market stakeholders - customers, suppliers and host communities, (3) organizational stakeholders - employees, managers, non-managers, (4) societal stakeholders - local or regional governments, and other institutions.

3 categories technology related trends and conditions can be placed

(1) Technology diffusion and disruptive technologies, (2) The information age, (3) Increasing knowledge intensity

Reasons for changing competitive landscape

(1) scarce financial capital, (2) volatile markets, (3) conventional sources of competitive advantage are less effective.

Risk of entering the global market

(1) the amount of time typically required for firms to learn how to compete in markets that are new to them, or (2) over diversification beyond firm's ability to manage these extended operations.

4 steps to identifying profit pools

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 calculations.

Steps in the resource-based model

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

Steps in I/O model

1. Study the external environment, 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 firm's strengths (developed or acquired) to implement the strategy.

The I/O model has four assumptions

1. The external environment imposes pressures and constraints that determine the strategies that would result in above-average returns. 2. Most firms competing in (a segment of) an industry control similar strategically relevant resources and pursue similar strategies in light of those resources. 3. Resources used to implement strategies are highly mobile across firms, so any resource differences that might develop between firms will be short-lived. 4. Organizational decision makers are rational and committed to acting in the firm's best interest, as shown by their profit-maximizing behavior.

Competitive advantage

A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.

Global economy

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

Mission

A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve.

Profit pool

A profit pool entails the total profits earned in an industry at all points along the value chain.

Strategy

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

Vision

A vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.

Above-average returns

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

Explain the resource-based model of above average returns

According to the resource-based model, differences in performance across time occur primarily because of the firms' unique resources and capabilities.

Average returns

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

Hyper-competition

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

Knowledge

Knowledge is gained through experience, observations and inference and is an intangible resource.

Organizational culture

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.

Perpetual innovation

Perpetual innovation describes how rapidly and consistently new information-intensive technologies replace older ones.

Resources

Resources are inputs into a firm's production process, which is classified into three categories: physical, human and organizational capital.

Risk

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

Shareholders

Shareholders are individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investment.

Stakeholders

Stakeholders are the individuals and groups who can affect the firm's vision and mission, are affected by the strategic outcomes the firm achieves through its operations, and who have enforceable claims on the firm's performance.

Strategic competitiveness

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

Strategic leaders

Strategic leaders are people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission.

Technology diffusion

Technology diffusion is the rate at which new technologies become available and are used.

Explain the I/O model of above-average returns

The I/O model of above-average returns explain the external environment's dominant influence on a firm's strategic actions.

Liability of foreignness

The risks of participating outside a firm's domestic country in the global economy are labelled a "liability of foreignness".

Assumptions resource based model of above average returns

his model also assumes that firms acquire different resources and develop unique capabilities based on how they combine and use the resources; that resources and certainly capabilities are not highly mobile across firms; and that the difference in resources and capabilities are the basis of competitive advantage.