Strategic Management

• Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy.
• Strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
• When choosing a strategy, firms make choices among competing alternatives as the pathway for deciding how they will pursue strategic competitiveness. In this sense, the chosen strategy indicates what the firm will do as well as what the firm will not do.
• -implements a strategy that creates superior value for customers and that its competitors are unable to duplicate or find too costly to imitate


  competitive advantage
• An organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors’ efforts to duplicate its strategy have ceased or failed.
• firms must understand that no competitive advantage is permanent
• The speed with which competitors are able to acquire the skills needed to duplicate the benefits of a firm’s value-creating strategy determines how long the competitive advantage will last.
• are returns in excess of what an investor expects to earn from other investments with a similar amount of risk

  above-average returns
• is an investor’s uncertainty about the economic gains or losses that will result from a particular investment

  risk
• The most successful companies learn how to effectively manage risk.
• Effectively managing risks reduces investors’ uncertainty about the results of their investment.
• are often measured in terms of accounting figures, such as return on assets, return on equity, or return on sales

  returns
• Monthly returns are computed as:

  The end price minus the beginning price divided by the beginning stock price
• Understanding how to exploit a competitive advantage is important for firms seeking to earn above-average returns.
• Firms without a competitive advantage or that are not competing in an attractive industry earn average returns at best
• are returns equal to those an investor expects to earn from other investments with a similar amount of risk

  average returns
• In the long run, an inability to earn at least average returns results first in decline and, eventually, failure.
• Failure occurs because investors withdraw their investments from those firms earning less-than-average returns.
• the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns


  strategic management process
• The model used in the strategic management process

  A - analysis

  S - strategy

  P - performance
• The firm’s first step in the process is to analyze its external environment and internal organization to determine its resources, capabilities, and core competencies —on which its strategy likely will be based.
• The strategy portion of the model entails strategy formulation and strategy implementation.
• Performance is the achievement of strategic competitiveness and above-average returns by acting on the strategies formulated.
• This dynamic strategic management process must be maintained as ever-changing markets and competitive structures are coordinated with a firm’s continuously evolving strategic inputs.