Strategy Chapter 1&2

black swan events

incidents that describe highly improbable but high-impact events. The implicit trust relationship between the corporate world and society at large has deteriorated because of the arrival of several black swans (like global financial crisis of 2008)

strategic management process

lays the foundation for sustainable competitive advantage. Strategic leaders design a process to formulate and implement strategy.

What strategy is NOT:

-grandiose statements ("our strategy is to win") -a failure to face a competitive challenge (no clear definition of competitive challenge) -operational effectiveness, competitive benchmarking, or other tactical tools (ex. marketing strategy, pricing strategy, etc.)

3 elements of a 'good strategy' (AFI Framework)

1. A diagnosis of the competitive challenge. This element is accomplished through analysis of the firm's external and internal environments 2. 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 3. A set of coherent actions to implement the firm's guiding policy. This element is accomplished through strategy implementation

5 steps of stakeholder impact analysis

1. identify stakeholders 2. identify stakeholder's interests 3. identify opportunities and threats 4. identify social responsibilities 5. address stakeholder concerns

competitive advantage

A firm that achieves superior performance relative to other competitors in the same industry or the industry average. 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 a lower price. The rewards of superior value creation and capture are profitability and market share.

sustainable competitive advantage

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

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.

strategic commitments

Actions to achieve the mission that are costly, long-term oriented, and difficult to reverse. To be effective, firms need to back up their visions and missions with these commitments.

Strategy Formulation (F) Topics and Questions

Business strategy: How should the firm compete: cost leadership, differentiation, or value innovation Corporate strategy: Where should the firm compete: industry, markets, and geography? Global strategy: How and where should the firm compete: local, regional, national, or international?

Mission

How do we accomplish our goals? describes what an organization does; it defines the means by which vision is accomplished. describes the products and services it plans to provide, and the markets in which it will compete.

strategic positioning

How managers achieve a combination of value and cost. That is, they stake out a unique position within an industry that allows the firm to provide value to customers, while controlling costs.

competitive disadvantage

If a firm underperforms its rivals or the industry average

Strategy Implementation (I) Topics and Questions

Organizational design: How should the firm organize to turn the formulated strategy into action? Corporate governance and business ethics: What type of corporate governance is most effective? How does the firm anchor strategic decisions in business ethics?

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. matters because it provides touchstones for the employees to understand the company culture.

Strategy Analysis (A) Topics and Questions

Strategic leadership and the strategy process: What roles do strategic leaders play? What are the firm's vision, mission, and values? What is the firm's process for creating strategy and how does strategy come about? External analysis: What effects do forces in the external environment have on the firm's potential to gain and sustain a competitive advantage? How should the firm deal with them? Internal analysis: What effects do internal resources, capabilities, and core competen- cies have on the firm's potential to gain and sustain a competitive advantage? How should the firm leverage them for competitive advantage? Competitive advantage, firm performance, and business models: How does the firm make money? How can one assess and measure competitive advantage? What is the relationship between competitive advantage and firm performance? (

economic contribution

The greater the difference between value creation and cost, the greater the firm's economic contribution and the more likely it will gain competitive advantage.

Values

What commitments do we make, and what guardrails do we put in place, to act both legally and ethically as we pursue our vision and mission?

Vision

What do we want to accomplish ultimately? captures an organization's aspiration and spells out what it ultimately wants to accomplish. An effective vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target, while leaving room for indi- vidual and team contributions. Employees in visionary companies tend to feel part of something bigger than them- selves. To provide meaning for employees in pursuit of the organization's ultimate goals, vision statements should be forward-looking and inspiring.

legitimacy

a stakeholder has a legitimate claim when it is perceived to be legally valid or otherwise appropriate

urgency

a stakeholder has an urgent claim when it requires a company's immediate attention and response

Stakeholder strategy

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

Firm effects

attribute firm performance to the actions managers take. managers' actions tend to be more important in determining firm performance than the forces exerted on the firm by its external environment.

customer oriented vision statements

defines a business in terms of providing solutions to customer needs.

Product-Oriented Vision Statements

defines the business in terms of the product or service that it provides.

Industry Effects

describe the underlying economic structure of the industry. They attribute firm performance to the industry in which the firm competes. The structure of an industry is determined by elements common to all industries, elements such as entry and exit barriers, number and size of companies, and types of products and services offered.

stakeholders

organizations, groups, and individuals that can affect or be affected by a firm's actions Internal stakeholders include stockholders, employees (including executives, managers, and workers), and board members External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, governments at various levels, and the media.

strategic leadership

pertains to executives' use of power and influence to direct the activities of others when pursuing an organization's goals.The first step in this process is to define a firm's vision, mission, and values

Stakeholder impact analysis

provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders Stakeholder impact analysis takes managers through a five-step process of recognizing stakeholders' claims. In each step, managers must pay particular attention to three important stakeholder attributes: power, legitimacy, and urgency

Strategy

set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. To achieve superior performance, companies compete for resources. In any competitive situation, therefore, a good strategy enables a firm to achieve superior performance. strategy is about creating superior value, while containing the cost to create it.

Corporate Social Responsibility (CSR)

the economic (adequate return, payments of debts), legal (what is right and wrong, society's code of ethics), ethical (beyond legal, to embody full scope of expectations, norms, and values of its stakeholders), and philanthropic (corporate citizenship, giving back to society) responsibilities do companies have to our stakeholders

organizational core values

the ethical standards and norms that govern the behavior of individuals within a firm or organization. Strong ethical values have two important functions. First, they form a solid foundation on which a firm can build its vision and mission, and thus lay the groundwork for long-term success. Second, values serve as the guardrails put in place to keep the company on track when pursuing its vision and mission in its quest for competitive advantage.

Stratgic Leadership

the executives' successful use of power and influence to direct the activities of others when pursuing an organization's goals.

Strategic management

the integrative management field that combines analysis, management formulation, and implementation in the quest for competitive advantage. Mastery of strategic management enables you to view a firm in its entirety. It also enables you to think like a general manager to help position your firm for superior performance.

competitive parity

two or more firms perform at the same level

stakeholder power

when a stakeholder can get the company to do something that it would not otherwise do