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Flashcards in Chapter 1 Deck (15):
1

What is strategy? (Book definition)

STRATEGY is a set of goal-directed actions to gain and
sustain superior performance relative to competitors

2

Michael Porter's definition of strategy?

STRATEGY is the unique position a firm will
achieve among competitors

3

Henry Mintzberg: 5 Ps of STRATEGY

Plan – a consciously-intended course of action to deal with a situation
• Ploy – a specific “maneuver” intended to outwit a competitor
• Pattern – a consistent stream of action
• Position – location among competitors (cf. strategic group map)
• Perspective – how strategy is conceived by the firm and managers

4

What is competitive advantage?

A firm that achieves superior performance relative to
competitors or the industry average has a COMPETITIVE
ADVANTAGE

5

Firms with lower performance than other competitors or the
industry average are at ______?

Competitive Disadvantage

6

If two or more firms perform at the same level, they
are said to have _____?

Competitive Parity

7

______ results when a firm
outperforms competitors or the industry average for a
prolonged period of time

A sustainable competitive advantage

8

How can firms achieve a competitive advantage?

• Customers purchase goods and services from firms that provide
them the most VALUE
• Firms achieve a competitive advantage by offering SUPERIOR
VALUE – value beyond other firms

9

Superior value can be created in two (2) different ways:

1. Greater intrinsic value
• E.g., Bose speakers provide superior sound, etc.
2. Lower relative price
• E.g., Wal-Mart sells many inferior-quality products at low prices

10

Firms determine the optimal combination of intrinsic value and
costs through STRATEGIC POSITIONING

• Stake out a unique (in theory) position within an industry that allows firms
to provide value to customers while controlling its costs

11

Strategic positioning requires trade-offs

• Managers make conscious decisions to focus on creating value through
DIFFERENTIATION or COST LEADERSHIP
• While some firms can do both (Best Cost), most firms struggle to integrate
both forms of value creation (Stuck in the Middle)

12

STAKEHOLDER STRATEGY is an
integrative approach to managing a
diverse set of stakeholders effectively

Stakeholders may include owners,
employees, customers, suppliers,
retailers, regulatory bodies, the media,
communities, society, etc

13

Three (3) important stakeholder
attributes

• Power – How much influence does a
stakeholder have?
• Legitimacy – Are they perceived as
legally or socially valid?
• Urgency – How immediate are their
claims?

14

What is strategic management?

STRATEGIC MANAGEMENT is an integrative management field that
combines (1) analysis, (2) formulation, and (3) implementation in the quest for
competitive advantage

15

Define: Analysis, formulation, implementation

• Analysis: diagnosis of the competitive advantage
• Apple: identified competitive challenges (i.e. <5% market share)
• Formulation: guiding policy to address the competitive challenge
• Apple: refocused around innovation – integrate products through mobile
devices (i.e., iPod, iPhone, & iPad)
• Implementation: set of actions that implement the firm’s guiding policy
• Apple: focused on limited product line development (i.e., two models –
desktop & laptop) and industry-disruptive innovations