Strategic Ch 1

A firm' theory about how to gain competitive advantage

The ability to create more economic value than competitors;2 ways to generate competitive advantage:Differentiation of products (higher total value of products)Lower costs

Creates a competitive advantage; Economic Value = Total Value - Costs; The difference between the perceived benefits gained by a customer that purchases a firm's products or services and the full economice costs of these products or services

A sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy that generates competitive advantages; reduces the risk of mistakes being made

Mission⇒Objectives⇒[External and Internal Analysis]⇒Strategic Choice⇒Strategy Implementation⇒Competitive Advantage

Step 1 in SMP. A broad statement of a firm's purpose and values; it's long-term purpose; defines what a firm aspires to be in the long run and what it wants to avoid in the meantime

Step 2 in SMP. Specific measurable targets a firm can use to evaluate the extent to which it is realizing its mission

Step 3 in SMP. Helps a firm identify its organizational strengths and weaknesses as well as help understand which of its resources and capabilities are likely to be sources of competitive advantage

Step 3 in SMP. When a firm identifies the critical threats and opportunities in its competitive environment (threats and opportunities)

The individuals and groups who can affect and who are affected by the strategic outcomes achieved and who have enfoceable claims on a firm's performance

Capital market stakeholders - provide capital to firm (shareholders, banks)Product market stakeholders - people who are related to firm through production (suppliers)Organizational stakeholders - work for company (employees, managers)

Helps you make choices and develop strategies, should be able to make projections about the future; SWOT analysis

Step 4 of SMP: The firm choosing its theory of how to gain competitive advantage. Criteria for good strategic choice: help firm neutralize threats and exploit advantages in ext environment while capitalizing its internal strengths and avoid/fix weaknesses

Business Level: actions firms take to gain competitive advantages in a single market or

industryCorporate Level: actions firms take to gain competitive advantages by operating in multiple markets or industries simultaneously

Occurs when a firm adopts organizational policies ad practices that are consistent with its strategy; ex: organizational structure, management control systems.