Business Policy Chapter 1
Terms in this set (31)
achieved when a firm successfully formulates and implemented a value-creating strategy
commitments and actions to achieve above-average performance returns.
an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage
often measured in terms of accounting figures, such as return on assets, return on equity, or return on sales.
can also be measured on the basis of stock market returns, such as monthly returns
obtained once the firm implements a strategy that creates superior value for customers and competitors are unable to duplicate or find too costly to try to imitate.
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 this.
returns equal to those an investor expects to earn from other investments with a similar amount of risk.
firms without a competitive advantage or that are not competing in an attractive industry, at best, earn this.
Strategic Management Process
the full set of commitment, decisions, and actions required for a firm to achieve strategic competitiveness and earn above average returns
ASP - Analysis, Strategy, and Performance
Strategic Management Process - Analysis
1st step in strategic management process - analyze it's external environment and internal organization to determine its resources, capabilities, and core competencies - on which strategy will likely be based.
Strategic Management Process - Strategy
2nd step in the Strategic Management Process - strategy formulation and implementation
a term often used to capture the realties of the competitive landscape
in this market firms often aggressively challenge their competitors in the hopes of improving their competitive position and ultimately their performance
an economy in which goods, services, people, skills, and ideas move freely across geographic borders.
the increasing economic independence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders
Product of a large number of firms competition against one another in an increasing number of global economies
Increases the range of opportunities for companies competing in the current competitive landscape.
Technology trends impacting the global competitive environment
Increasing rate of technology diffusion and the emergence of disruptive technologies
The information age: internet and the global proliferation of low-cost computing power
Increasing knowledge intensity as an intangible source of competitive advantage
a term used to describe how rapidly and consistently now, information-intensive technologies replace older ones.
technologies that destroy the value of an existing technology and create new markets.
can create what is essentially a new industry or can harm industry incumbents
a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.
coping with uncertainty and risks of hypercompetitive markets
must first overcome built-up organizational inertia
requires developing the capacity for continuous learning and applying the new and updated skills sets and competencies to the firm's competitive advantage.
4 Assumptions of the I/O Model of Above Average Returns
The external environment imposes pressures and constraints that determine strategic choices
Similarity in strategically relevant resources causes competitors to pursue similar strategies
Resource differences among competitors are short lived due to resource mobility across firms
Strategic decision makers are rational and engage in profit maximizing behaviors
Resource-Based Model of Above Average Returns
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
inputs into a firm's production process, such as capital equipment, the skill of individual employees, patents, finances, and talented managers.
costly to imitate
the capacity for a set of resources to perform a task or an activity in an integrative manner.
evolve over time and must be managed dynamically in pursuit of above average returns
resources and capabilities that serve as a source of competitive advantage for a firm over its rivals
an enduring word picture of what the firm wants to be and expect to achieve in the future
stretches and challenges its people
reflects the firm's values and aspirations
is most effective when its development includes all stakeholders
recognizes the firm's internal and external competitive environments
is supported by upper management decisions and actions
Foundation for the firms mission
An Effective Mission Statement
specifies the business or businesses in the which the firm intends to compete and the customers it intends to serve
more concrete than the vision
specifies the present business in which the firm intends to compete and customers it intends to serve
has a more concrete, near-term focus on current product markets and customers than the firm's vision
should be inspiring and relevant to stakeholders
Capital Market Stakeholders
Major suppliers of capital
Product Market Stakeholders
Primary Stakeholders (Individuals, Groups, and Organizations)
Can affect development of the firm's vision and mission. Are affected by the strategic outcomes achieved by the firm. Can have enforceable claims on the firm's performance. Are influential when in control of critical or valued resources
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.
referes to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business.
entails the total profits earned in an industry at all points along the value chain.
helps a firm see what others do not see and to understand primary sources of profits in an industry
Identifying Profit Pools
Define the pool's boundaries
Estimate the pool's overall size
Estimate the size of the pool's value chain activity
Reconcile the calculations