Flashcards in Chapter 1 Deck (15):
What is strategy? (Book definition)
STRATEGY is a set of goal-directed actions to gain and
sustain superior performance relative to competitors
Michael Porter's definition of strategy?
STRATEGY is the unique position a firm will
achieve among competitors
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
What is competitive advantage?
A firm that achieves superior performance relative to
competitors or the industry average has a COMPETITIVE
Firms with lower performance than other competitors or the
industry average are at ______?
If two or more firms perform at the same level, they
are said to have _____?
______ results when a firm
outperforms competitors or the industry average for a
prolonged period of time
A sustainable competitive advantage
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
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
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
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)
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
Three (3) important stakeholder
• Power – How much influence does a
• Legitimacy – Are they perceived as
legally or socially valid?
• Urgency – How immediate are their
What is strategic management?
STRATEGIC MANAGEMENT is an integrative management field that
combines (1) analysis, (2) formulation, and (3) implementation in the quest for