Strategic Management Concepts

A collection of flashcards covering key concepts and definitions related to strategic management, focusing on competitive advantage, strategic choice, analysis tools, and various strategies.

What is a competitive advantage?

Competitive advantage is when a firm creates more economic value than its rivals by engaging in a strategy that is not easily imitated.

What is the difference between temporary and sustained competitive advantage?

Temporary advantage lasts until competitors replicate it; sustained advantage persists despite competitors' efforts to duplicate it.

What is the strategic management process?

It is a sequence of analyses and choices to develop and implement strategies that can create competitive advantage.

How do missions and objectives shape a firm's strategy?

This answer should be developed using specific content from the strategic management textbook.

What is strategic choice?

It involves selecting among strategic options that align with internal capabilities and external opportunities.

What is the role of internal analysis in strategic management?

This answer should be developed using specific content from the strategic management textbook.

What is the difference between intended and emergent strategies?

Intended strategies are planned; emergent strategies develop in response to unforeseen circumstances.

How does a firm measure its competitive advantage?

Using accounting measures (ROA, ROS) or economic measures (returns relative to cost of capital).

What is the value creation framework?

Value = Perceived benefits - Costs. Firms gain advantage by increasing benefits or reducing costs.

What are common tools used in strategic analysis?

SWOT analysis, Five Forces model, VRIO framework, value chain analysis.

What elements comprise the general environment?

Technological, demographic, cultural, economic, legal/political, international events.

What is the Five Forces Model?

A framework that identifies five sources of industry competition: rivalry, new entrants, substitutes, buyer power, supplier power.

How does rivalry affect industry profitability?

This answer should be developed using specific content from the strategic management textbook.

What conditions lead to high buyer power?

This answer should be developed using specific content from the strategic management textbook.

What influences the threat of new entrants?

Barriers like economies of scale, brand loyalty, and regulations impact how easily firms can enter an industry.

What role do substitutes play in industry competition?

This answer should be developed using specific content from the strategic management textbook.

Who are complementors?

Complementors are companies that sell products or services that add value to a firm's offerings.

How can firms analyze the external environment?

This answer should be developed using specific content from the strategic management textbook.

What is the purpose of an industry analysis?

This answer should be developed using specific content from the strategic management textbook.

How do economic indicators influence strategy?

This answer should be developed using specific content from the strategic management textbook.

What is the resource-based view of the firm?

A perspective that sees firm resources and capabilities as key to competitive advantage.

What does the VRIO framework analyze?

It analyzes whether resources are Valuable, Rare, costly to Imitate, and supported by Organization.

What makes a resource valuable?

It enables a firm to exploit opportunities or neutralize threats.

What does it mean for a resource to be rare?

Few competing firms possess it.

What is inimitability in the context of VRIO?

Resources are costly to imitate due to unique historical conditions, causal ambiguity, or social complexity.

What is organizational support in VRIO?

The firm must be organized to exploit the resource via structure, systems, and culture.

What are the four categories of firm resources?

Financial, physical, human, and organizational.

What is the value chain?

A model that identifies primary and support activities that add value to products or services.

What is the significance of causal ambiguity?

This answer should be developed using specific content from the strategic management textbook.

How can social complexity impact competitive advantage?

This answer should be developed using specific content from the strategic management textbook.

What is a cost leadership strategy?

A strategy where a firm aims to be the lowest-cost producer in its industry.

What are three sources of cost advantage?

Economies of scale, learning curve effects, and access to low-cost inputs.

What are economies of scale?

Cost savings from increased production due to fixed cost spread over more units.

What is the learning curve effect?

Costs decrease with cumulative output as efficiency improves.

What are policy choices in a cost leadership context?

Decisions to standardize offerings or simplify operations to reduce cost.

What are risks associated with a cost leadership strategy?

Technology shifts, imitation, or loss of customer perception can erode advantage.

How should a firm structure itself for cost leadership?

Use centralized decision-making, tight cost controls, and streamlined operations.

What types of control systems are used in cost leadership?

This answer should be developed using specific content from the strategic management textbook.

How does compensation strategy affect cost behavior?

Incentives aligned with cost savings motivate employee efficiency.

Can a firm differentiate itself while pursuing cost leadership?

Yes, but it's challenging and requires managing trade-offs effectively.

What is product differentiation?

Offering unique product attributes that customers value and are willing to pay a premium for.

What are the three sources of differentiation?

Product features, customer relationships, and firm linkages.

Why is perception critical to differentiation?

Because value is based on customer perception, not objective differences.

What are examples of product attribute-based differentiation?

This answer should be developed using specific content from the strategic management textbook.

How do customer relationships create differentiation?

This answer should be developed using specific content from the strategic management textbook.

How can firm linkages be used to differentiate?

This answer should be developed using specific content from the strategic management textbook.

What is a consumption chain?

The full set of experiences a customer has with a product from need recognition to disposal.

What are the risks of differentiation strategies?

Customer preferences may shift, imitation by competitors, or cost overruns.

Can differentiation increase buyer loyalty?

Yes, by creating emotional or functional attachment to the product.

What is a dual advantage firm?

A firm that simultaneously achieves low cost and differentiation.

What is corporate-level strategy?

Decisions about which industries or markets a firm should compete in.

What is corporate diversification?

Operating in more than one business to spread risk or exploit synergies.

What is related diversification?

Entering businesses with shared resources or capabilities.

What is unrelated diversification?

Entering entirely new industries with no link to existing businesses.

How do economies of scope work?

By sharing resources or capabilities across businesses to reduce cost or increase value.

What are core competencies?

Unique capabilities that provide competitive advantage across multiple products or markets.

How do shared activities add value?

They lower costs or improve performance when used across multiple divisions.

What is risk reduction in diversification?

Spreading business risk across industries to lower volatility in returns.

Why might diversification fail?

Poor fit between businesses, lack of management expertise, or overextension.

How can vertical integration relate to corporate strategy?

It allows control over upstream suppliers or downstream distributors.