BM Core 2 - Lesson 1

• Firms achieve strategic competitiveness by formulating and implementing a value-creating strategy
• A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage
• The chosen strategy indicates what the firm will and will not do
• A firm has a competitive advantage when it creates superior value for customers and competitors are unable to imitate the value or find it too expensive to attempt imitation
• No competitive advantage is permanent
• 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 possessing a similar amount of risk
• The strategic management process is the full set of commitments, decisions, and actions firms take to achieve strategic competitiveness and earn above-average returns
• The strategic management process involves analysis, strategy, and performance (the A - S - P model)
• The fundamental nature of competition in many industries is changing
• Hyper competition is a condition where competitors engage in intense rivalry, markets change quickly, and entry barriers are low
• A global economy is one in which goods, services, people, skills, and ideas move freely across geographic borders
• Globalization is the increasing economic interdependence among countries and organizations as reflected in the flow of products, financial capital, and knowledge across country borders
• Globalization is a product of firms competing against one another in an increasing number of global economies
• Technology diffusion is the speed at which new technologies become available to firms and when firms choose to adopt them
• Perpetual innovation describes how new, information-intensive technologies replace older ones rapidly and consistently
• Disruptive technologies are technologies that destroy the value of an existing technology and create new markets
• Successful firms view information technology-derived innovations as opportunities to identify and serve new markets rather than as threats to current markets
• Strategic flexibility is a set of capabilities firms use to respond to demands and opportunities in today’s dynamic and uncertain competitive environment
• The I / O model suggests that returns are influenced more by the external environment than a firm’s internal resources and capabilities
• The I / O model challenges firms to find the most attractive industry to compete in
• The five forces model of competition is an analytical tool firms use to find the most attractive industry
• The resource-based model of above-average returns assumes that each organization is a collection of unique resources and capabilities
• The uniqueness of resources and capabilities is the basis of a firm’s strategy and its ability to earn above-average returns under resource model of above average returns.
• Resources are inputs into a firm’s production process, such as capital equipment, skills of employees, patents, finances, and managers
• A capability is the capacity for a set of resources to perform a task or activity in an integrative manner
• Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals
• The vision and mission provide the foundation for the firm to choose and implement strategies
• Vision is a picture of what the firm wants to be and what it wants to achieve in broad terms
• Valuable: allows a firm to take advantage of opportunities or neutralize threats in its external environment
• Rare: possessed by few, if any, current and potential competitors
• Costly to imitate: difficult for other firms to obtain
• Non-substitutable: do not have structural equivalents
• A mission specifies the businesses in which the firm intends to compete and the customers it intends to serve
• Stakeholders are individuals, groups, and organizations that can affect the firm’s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm’s performance
• The most obvious stakeholders, at least in U.S. organizations, are shareholders—individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investments
• Capital Market Stakeholders: shareholders and lenders expect a firm to preserve and enhance their wealth
• Product Market Stakeholders: customers who seek reliable products at the lowest possible prices and suppliers who seek loyal customers willing to pay the highest sustainable prices for products
• Organizational Stakeholders: leaders and employees