Chapter 1: What Is Strategy and Why Is It Important?

Vocabulary flashcards covering the core concepts, strategic approaches, business model components, and evaluation tests from Chapter 1 of Arthur A. Thompson's Strategy: Core Concepts and Analytical Approaches.

Strategy

The specific market positioning, competitive moves, and business approaches that managers employ to attract and please customers, compete successfully, grow the business, respond to changing market conditions, conduct operations, and achieve targeted financial and market performance.

Competitive Advantage

An edge a company achieves over rivals in attracting buyers and coping with competitive forces, which occurs when an attractive number of buyers are drawn to purchase its products or services rather than those of competitors.

Sustainable Competitive Advantage

A condition achieved when the basis for buyer preferences for a company's product offering relative to the offerings of its rivals is durable, despite competitors' efforts to nullify or overcome the appeal of its product offering.

Low-Cost Provider Strategy

A strategic approach that strives to achieve a cost-based competitive advantage over rivals, which can then become the basis for charging lower prices and/or earning higher profits.

Differentiation Strategy

A strategic approach aimed at competing successfully and profitably against rivals based on attributes such as higher quality, wider product selection, added performance, value-added services, or technological superiority that set a company's product offering apart.

Best-Cost Provider Strategy

A hybrid strategic approach that gives customers more value for their money by meeting or beating buyers' expectations regarding key quality, features, performance, and service attributes while beating their price expectations.

Focused (Market Niche) Strategy

A strategic approach that focuses on a narrow market niche and wins a competitive edge by doing a better job than rivals of serving the special needs and tastes of buyers that compose that niche.

Evolving Strategy

The ongoing adaptation of a company's strategy resulting from changing circumstances and management efforts to improve it, making strategy crafting a work in progress rather than a one-time event.

Proactive Strategy Elements

Newly crafted strategic initiatives and ongoing strategy elements continued from prior periods that managers deliberately plan and implement to secure a competitive edge and boost performance.

Reactive Strategy Elements

Adaptive strategy adjustments and new elements that emerge on the fly as managers react to changing market conditions, unanticipated developments, and rival maneuvers.

Ethical Strategy

A strategy that passes the test of moral scrutiny by not crossing the moral line into the should not do zone, ensuring actions are not deceitful, unfair or harmful to others, disreputable, or unreasonably damaging to the environment.

Business Model

Management's blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit.

Customer Value Proposition

The portion of a company's business model that lays out its approach to satisfying buyer needs and requirements at a price customers will consider a good value.

Profit Proposition (Profit Formula)

The portion of a company's business model that concerns its business approach to generating sufficiently large revenues and controlling costs to ensure appealing profits for shareholders while delivering value to customers.

The Fit Test

A test to determine strategy caliber that evaluates how well the strategy matches external industry and competitive conditions, fits internal resources and capabilities, and exhibits dynamic fit over time.

The Competitive Advantage Test

A test to determine strategy caliber that evaluates whether the strategy is helping the company achieve a significant and durable (sustainable) competitive advantage over rivals.

The Performance Test

A test to determine strategy caliber that assesses whether the strategy delivers strong performance in competitive strength and market standing, as well as profitability and financial strength.

Good Management Equation

The fundamental managerial standard stating that $\text{Good Strategy} + \text{Good Strategy Execution} = \text{Good Management}$, representing the most trustworthy sign of a well-run business.