Strategies & Decision Making Exam #1

strategic competitiveness

achieve this by successfully formulating and implementing a value creating strategy.

strategy

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

competitive advantage

a firm has this when, by implementing a chosen strategy, it creates superior value for customers, and when competitors are not able to imitate the value the firm’s products create or find it too expensive to attempt imitation.

above-average returns

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

risk

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

average returns

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

strategic management process

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

hypercompetition

is a condition where competitors engage in intense rivalry, markets change quickly and often, and entry barriers are low.

global economy

is one in which goods, services, people, skills, and ideas move with limited barriers across geographic borders.

protectionism

involves actions taken by a government to protect its economy from adverse influences due to foreign trade.

globalization

is the increasing economic interdependence among countries and their organizations as reflected in the flow of products, financial capital, and knowledge across country borders.

global supply chain

is a network of firms that spans multiple countries with the purpose of supplying goods and services.

global value chain

refers to the processes through which a firm receives raw materials, uses them to add value through manufacturing a product that provides greater utility for the consumer, and sells the product to another firm or the ultimate consumer of the product, in a global setting.

big data

refers to the data retrieved by firms that are increasing in volume, variety, and frequency.

big data analytics

the process of examining huge amounts of data to uncover hidden patterns and other information that can be used to improve decision making.

strategic flexibility

is a set of capabilities firms use to respond to various demands and opportunities existing in today’s dynamic and uncertain competitive environment.

sustainability

means that a firm should not deplete or destroy natural elements upon which it depends for survival.

capability

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

core competencies

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

stakeholders

are individuals, groups, and organizations that can both influence and are affected by the objectives, actions, and outcomes of a firm.

primary stakeholders

are directly involved in the value creating processes of the firm.

suppliers, employees, customers, communities in which the firm operates, financiers such as the firm’s shareholders and banks.

secondary stakeholders

can both influence and are influenced by what the firm does, but they do not contribute directly to the value the firm creates.

vision

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

mission

specifies the businesses in which the firm intends to compete and the customers it intends to serve.

values

these of an organization define what should matter most to managers and employees when they make and implement strategic decisions.

strategic leaders

are people located in different areas and levels of the firm using the strategic management process to select actions that help the firm achieve its vision, fulfill its mission, and adhere to its values.

organizational culture

refers to the complex set of ideologies, symbols, and core values that individuals throughout the firm share and that influence how the firm conducts business.

business ecosystem

a complex network of interconnected organizations—suppliers, customers, government agencies, technology suppliers, financiers, and other stakeholders—whose competitive and cooperative efforts are associated with the satisfaction of a particular value proposition (e.g., product or service).

competitor analysis

in this firms gather and interpret information about their competitors.

competitor intelligence

is the set of data and information the firm gathers to better understand and anticipate competitors’ objectives, strategies, assumptions, and capabilities.

complementors

are companies or networks of companies that sell complementary goods or services that are compatible with the focal firm’s goods or services.

demographic segment

is concerned with a population’s size, age structure, geographic distribution, ethnic mix, and income distribution.

economic environment

refers to the nature and direction of the economy in which a firm competes or may compete.

general environment

is composed of dimensions in the broader society that influence an industry and the firms within it.

global segment

includes relevant new global markets and their critical cultural and institutional characteristics, existing markets that are changing, and important international political events.

industry

a group of firms producing products that are close substitutes.

industry environment

the set of factors that directly influences a firm and its competitive actions and responses: the threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and the intensity of rivalry among competing firms.

opportunity

is a condition in the general environment that, if exploited effectively, helps a company reach strategic competitiveness.

political/legal segment

the arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies.

sociocultural segment

is concerned with a society’s attitudes and cultural values.

strategic group

A set of firms emphasizing similar strategic dimensions and using a similar strategy is called a

sustainable physical environment segment

refers to potential and actual changes in the physical environment as well as business practices that are intended to positively respond to those changes in order to create a sustainable environment.

threat

a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness.

technological segment

includes the institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and materials.

costly to imitate capabilties

are capabilities that other firms cannot easily develop.

global mindset

the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context.

intangible resources

are assets that are rooted deeply in the firm’s history, accumulate over time, and are relatively difficult for competitors to analyze and imitate.

nonsubstitutable capabilties

are capabilities that do not have strategic equivalents.

outsourcing

is the purchase of a value-creating activity or a support function activity from an external supplier.

rare capabilities

are capabilities that few, if any, competitors possess.

strategic human capital

allows a firm to develop capabilities through matching the knowledge, skills, and abilities of their employees to particular strategic objectives.

support functions

include the activities or tasks the firm completes in order to support the work being done to produce, sell, distribute, and service the products the firm is producing.

tangible resources

are assets that can be observed and quantified.

valuable capabilities

allow the firm to exploit opportunities or neutralize threats in its external environment.

value

is measured by a product’s performance characteristics and by its attributes for which customers are willing to pay.

value chain activities

are activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers.

value creation system

in this, each part of a system depends on other parts of the system to create value. If one part of the system is not functioning properly, it can hold back creation of value in the entire system.

I/O Model of Above Average Returns

explains the external environment’s dominant influence on the choice of strategy and the actions associated with it.

Key assumptions:

• Resources between firms are similar.

• Resources are highly mobile.

• Decision makers are rational and seek profit maximization.

suggests that firms earn above-average returns by studying the external environment effectively as the foundation for identifying an attractive industry and implementing an appropriate strategy in it

Resource-based view

focuses on internal resources and capabilities

Valuable: Having something that is a value that other people will want

Rare: Something difficult to produce, find, have access to

Inimitable: Doesn’t necessarily have to be the product, could be company culture

Non-substitutable

Stakeholder Model of Above Average Returns

Identify groups:

• capital market

• product market

• organizational stakeholders

Goal: balance returns among key groups.

ASP Model

Analysis: analyze external environment, competitors, technology,

Strategy:

Performance: do we want to do more of the same, change it up