MGMT 466 Textbook Chapter 1

Strategic Competitiveness

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

Strategy

Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain competitive advantage.

Competitive advantage

when, by implementing its strategy, a firm 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

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

Risk

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

Average Returns

Returns equal to those an investor expects to earn from other investments possessing a similar amount of risk.

Strategic Management Process

Full set of commitments, decisions, and actions firms take to achieve strategic competitiveness and earn above- average returns.

A-S-P Model

Analysis:

— Analyzing external environment and internal organization to identify external opportunities and threats and to recognize its internal resources, capabilities, and core competencies

Strategy:

— analysis influence strategy. Strategy entails strategy formulation and strategy implementation.

Performance:

—To implement its strategies, the firm takes action to enact each one with the intent of achieving strategic competitiveness and above-average returns

Digitalization

The process of converting something to digital form. Competitive dimension that is affecting competition in multiple industries throughout the world.

Hypercompetition

condition in which competitors engage in intense rivalry, markets, change quickly and often, and entry barriers are low. In these types of environments, firms can find it difficult to maintain a competitive advantage.

Gobal Economy

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

Tariff

Tax imposed by a government on goods imported into their country.

Protectionism

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

Globalization

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

Network of firms that spans multiple countries with the purpose of supplying goods and services.

Liability of Foreignness

the risks of competing outside a firm’s domestic markets

Global Value Chain

refers to the process through which a firm receives raw materials, uses them to add value though the 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

• global supply chain refers to an industry, whereas a global value chain pertains to an individual firm as it seeks to create, in part, through its management of a global supply chain.

Technology Diffusion

the speed at which new technologies become available to firms and when firms choose to adopt them, is far greater than was the case a decade or two ago.

Perpetual Innovation

term used to describe how rapidly, and consistently new, information-intensive technologies replace older ones.

Disruptive Technologies

technologies that destroy the value of an existing technology and create new markets - surface frequently in today’s competitive markets.

Knowledge

the basis of technology and its application

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 amount of data to uncover hidden patterns and other information that can be used to improve decision making.

Strategic Flexibility

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

Sustainability

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

Greenwashing

when companies exaggerate the activities of the firm in areas such as protecting the environment

Uniqueness

the basis of a firm’s strategy and its ability to earn above-average returns

Resources

inputs into a firm’s production process, such as capital equipment, the skill of individual employees, patents, finances, and talented managers.

Capability

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

Core Competencies

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

Stakeholders

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

Primary Stakeholders

directly involvd in the value-creating processes of the firm

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

Fairness

one of the fundamental drivers of reciprocity

organizational justice

fairness

Distributional Justice

stakeholders feels as though they are receiving value through their relationship with their firm that is commensurate with what they contribute to the firm

Procedural Justice

means that the firm listens to stakeholders and considers their positions when making important decisions that are likely to affect them.

Interactional Justice

means that all stakeholders are treated with honesty, respect, and integrity. Formal and informal contracts are made and kept.

Arms-Length Transactions

the firm doesn’t try to develop close relationships with stakeholders, but simply responds to market forces in buying and selling products and other resources.

Vision

Picture of what the firm wants to be and, in broad terms, what it wants to achieve.

Mission

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

Values

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

Strategic Leaders

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 value that individuals throughout the firm share and that influence how the firm conducts business.

General Environment

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

Industry Environment

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.

Competitor Analysis

how companies gather and interpret information about their competitors

External Environment Analysis

4 parts: Scanning, Monitoring, Forecasting, Assessing

Scanning

Identifying early signals of environmental changes and trends

Monitoring

Detecting meaning though ongoing observations of environmental changes and trends

Forecasting

Developing projections of anticipated outcomes based on monitored changes and trends

Assessing

Determining the timing and importance of environmental changes and trends for firm's’ strategies and their management

Opportunity

condition in the general environment that if exploited effectively helps a company achieve strategic competitiveness

Threat

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

Scanning

entails the study of all segments in the general environment Mi

Monitoring

analysts observe environmental changes to see if an important trend is emerging from among those spotted through scanning

Assessing

The objective is to determine the timing and significance of the effects of environmental changes and trends that have been identified.

Demographic Segment

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.

Political / Legal Segment

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 government agencies.

Sociocultural Segment

concerned with a society’s attitude and cultural values

Technological Segment

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

Global Segment

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

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.

Industry

a group of firms producing products that are close substitutes.

Strategic Group

set of firms emphasizing similar strategic dimensions and using a similar strategy.

Future Objectives

What drives a competitor

Current Strategy

What the competitor is doing and can do

Assumptions

What the competitor believes about the industry

Strengths and Weaknesses of

What the competitor’s capabilities are, as shown by its strengths and weaknesses

Competitor Intelligence is

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

Complementors

companies or networks of companies that sell complementary goods or services.

Business Ecosystem

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 particular value proposition.

Global Mind-Set

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.

Value

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

Strategic Human Capital

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

Valuable Capabilities

Help a firm neutralize threats or exploit opportunities

Rare Capabilities

Are not possessed by many others

Costly - To -Imitate Capabilities

• Historical: unique and a valuable organizational culture or brand name

• Ambiguous: The causes and uses of a competence are unclear

  • Social Complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers

Non sustainable Capabilities

No strategic equivalent

Valuable Capabilities

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

Rare Capabilities

capabilities that few, if any, competitors posses

Costly-to-imitate capabilities

capabilities that other firms cannot easily develop

Non substitutable Capabilities

capabilities that do not have strategic equivalents.

Competitive Parity

no firm has a significant advantage over the other in any particular capability

Value Chain Activities

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.

Support Functions

include 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.

Value Creation System

each part of a system depends on other parts of the system to create value.

Social Capital

When firms have strong positive relationships with stakeholders

Outsourcing

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

Core Rigidities

Occur due to overdependence on a particular core competence even when situations change, and the core competence is no longer generating a competitive advantage.

Digital Strategy

uses digital technology to help a firm understand its customers and their needs with greater clarity as a foundation for developing innovations that create more value for those customers

Business - Level Strategy

an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in a specific product market

Core Strategy

the strategy that the firm forms to describe how it intends to compete against rivals on a day-to-day basis in its chosen product market

Reach

revolves around the firm’s access and connection to customers

Richness

concerns the depth and detail of the two-way flow of information between the firm and customers

Affiliation

the third dimension, concerned with encouraging ongoing customer interactions

Market Segmentation

the process of dividing customers into groups based on their needs

Business Model

describes what a firm does to crate, deliver, and capture value for its stakeholders

Business Model Innovation

occurs when a firm determines that its current business model is outdated and successfully replaces it with a newer one