Strategic Management Exam 1

Chapters 1 - 6

Strategic Management

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

Strategy

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

Good Strategy

Enables a firm to achieve superior performance and a sustainable competitive advantage relative to its competitors. It is the outcome of a strategic management process that consists of three elements: 1) a diagnosis of the competitive challenge, 2) a guiding policy to address the competitive advantage, and 3) a set of coherent actions to implement a firm’s guiding policy

Competitive Advantage

superior performance relative to other competitors in the same industry or the industry average

Sustainable Competitive Advantage

outperforming competitors or the industry average over a prolonged period of time

Stakeholder Strategy

An approach to strategy formulation that considers all of the company’s stakeholders, not just its shareholders. A core tenet of stakeholder strategy is that a single-minded focus on shareholders exposes a firm to undue risks.

Corporate Social Responsibility

A framework that helps firms recognize and address the economic, legal, social, and philanthropic expectations that society has of the business enterprises at a given point in time

Strategy Formulation

the part of the strategic management process that concerns the choice of strategy in terms of where and how to compete

Strategic Business Units

stand-alone divisions of a larger conglomerate, each with their own profit-and-loss responsibility

Vision

A statement that captures an organization’s purpose and aspiration. It spells out what the organization ultimately wants to accomplish.

Strategic Intent

A stretch goal that pervades the entire organization with a sense of purpose

Mission

Description of what an organization actually does; the products and services it plans to provide, and the markets in which it will compete

Realized Core Strategy

combination of intended and emergent strategy

Intended Strategy

the outcome of a rational and structured top-down strategic plan

Serendipity

any random events, pleasant surprises, and accidental happenstances’s that can have a profound impact on a firm’s strategic initiatives

Cognitive Limitations

constraints such as time or the brain’s inability to process large amounts of data that prevent us from appropriately processing and evaluating each piece of information we encounter

Groupthink

a situation in which opinions coalesce around a leader without critically evaluating and challenging that leader’s opinions and assumptions

Strategic Management Process

method put in place by strategic leaders to formulate and implement a strategy, which can lay the foundation for a sustainable competitive advantage

Strategy Implementation

The part of the strategic management process that concerns the organization, coordination, and integration of how work gets done or strategy execution

Competitive Industry Structure

Elements and features common to all industries, including the number and size of competitors, the firms’ degree of. pricing power, the type of product or service offered, and the height of entry barriers

entry barriers

obstacles that discourage or prevent entry into an industry

exit barriers

the obstacles that interfere with a firm’s ability to leave an industry

Five Forces Model

a framework that identifies five forces that determine the profit potential of an industry and shape a firm’s competitive strategy

Industry

a group of incumbent firms with more or less the sae set of suppliers and buyers

Industry Analysis

a method to 1) identify an industry’s profit potential and 20 derive implications for a firm’s strategic position within an industry

Inflation

a general and sustained increase in the overall price level for goods and service in an economy

Mobility Barriers

industry specific factors that separate one strategic group from another

PESTEL model

A framework that categorizes and analyzes an important set of external factors (political, economic, sociocultural, technological, ecological, and legal) that might impinge upon a firm. These factors can create both opportunities and threats for the firm.

Threat of Entry

the risk that potential competitors will enter an industry

Capabilities

organizational and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically

Intangible Ressources

resources that do not have physical attributes and thus are invisible

Intellectual Property Protection

A critical intangible resource that can provide a strong isolating mechanism and thus help to sustain a competitive advantage

Primary activities

Firm activities that add value indirectly, but are necessary to sustain primary activities

Resources

any assets that a firm can draw on when formulating and implementing a strategy

Strategic Fit

Occurs when an organization matches its internal resources and capabilities to the external environment, exploiting external opportunities while mitigating external threats and internal weaknesses

SWOT analysis

Application of a framework that allows strategic leaders to synthesize insights obtained from an internal analysis of the company’s strengths and weaknesses with those from an analysis of external opportunities and threats to derive strategic implications

Value Chain

The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value

Balanced Scorecard

Strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals

Economic Value Created

Difference between Value and Cost or (V-C)

Market Capitalization

A firm performance metric that captures the total dollar market value of a company’s total outstanding share at any given point

Profit

Difference between price charged and the cost to produce (P-C); also called producer surplus

Sustainable Strategy

a strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet

Total Return to Shareholders

return on risk capital that includes stock price appreciation plus dividends received over a specific period

Value

the dollar amount a consumer attaches to a good or service; the consumers maximum willingness to pay; also called reservation price

Environmental, Social and Governance Criteria

A set of standards beyond mere financial results on which companies are evaluated

Risk Capital

The money provided by shareholders in exchange for an equity share in a company; it cannot be recovered if the firm goes bankrupt

Shared Value Creation Framework

Framework proposing that strategic leaders maintain a dual focus on shareholder value creation and value creation for society

Shareholder Capitalism

an economic system in which the investors who own share in a public company are the providers of risk capital and therefore the company’s legal owners

Tragedy of the Commons

A problem that arises when individuals, companies, or nations pursue their own self-interest without considering the well-being of society or the global community

Cost Leadership Strategy

generic business strategy that seeks to create the same or similar value for customers at lower cost

Differentiation Strategy

Generic business strategy that seeks to create higher value for customers than the value that competitors create while containing costs

Scope of Competition

The size - narrow or broad - of the market in which a firm chooses to compete

Business-Level Strategy

The goal-directed actions managers take in their quest for competitive advantage when competing in a single-product market

Focused-Differentiation Strategy

same as the differentiation strategy except with a narrow focus on a niche market

Focused Cost Leadership Strategy

same as cost leadership strategy except with a narrow focus on a niche market

Economies of Scale

Decreases in cost per unit as output increases

Value Innovation

The simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; it is considered a cornerstone of blue ocean strategy

Value Curve

Horizontal connection of the points of each value on the strategy canvas that helps strategic leaders diagnose and determine courses of action

Strategy Canvas

Graphical depiction of a company’s relative performance vis-a-vis its competitors across the industry’s key success factors

Red Oceans

the known market space of existing industries where the rivalry among existing firms is cutthroat because the market space is crowded and competition is a zero-sum game

Economies of Scope

savings that come from producing two (or more) outputs at less cost than producing each out individually, despite using the same resources and technology