What is SMP?
is process of sequential analyses and choices that increase the likelihood that a firm chooses a good strategy
Is each element linked in SMP?
Yes, to all others in the process
What is a firms mission?
Its reason for existence, SMP starts out with examining a firms mission
What should serve as the basis or background for SMP?
Mission and objectives of a firm
What is external analysis? Why is it important?
a systematic examination of the environment in which the firm operates,
important because they help a firm see threats and opportunities in the business environment
What is internal analysis? Why is it important?
a systematic examination of a firm’s resources and capabilities
helps the firm see the strengths and weaknesses of the firm.
example: Disney and the VCR
What is strategic choice? When can meaningful strategic choices only be made?
point in the process where managers choose how to organize and position the resources of the firm
when managers understand the external and internal environments
At what two levels are strategic choices made?
Business and Corporate levels
At the business level what do strategic choices deal with?
positioning of the business
What do corporate level strategies determine?
which business a firm will operate, mangers decide which business should form the corporate whole
example: owners deciding to enter another business different from the one they are positioned.
What is Strategy Implementation? What are the two parts?
how managers carry out the strategic choices they make
organizational structure and control
examples: hiring, promotion, and and compensation
Are strategy implementation issues as important as the strategic choices?
What is competitive advantage?
desired end state of the SMP, the ability to create more economic value than competitors
What is economic value?
difference between the perceived benefits a customer gets from the products or services and the total cost of producing those products and services
What is the purpose of going through the analysis of each of the SMP elements? Two parts.
to enable managers to make choice that lead to
- 1) preferences for the firms outputs
- 2) cost advantages for the firm's output
What are the bedrocks of competitive advantage?
difference in preference or cost
What are the two types of competitive advantage?
Temporary and sustainable
What is a sustainable competitive advantage?
ability for companies to keep their competitive advantage by continuing to innovate and introduce new products over time
*not about having your one unique product but continuing to innovate
When will competitive advantages die off?
- 1) another firm can duplicate the source
- 2) another firm can offer a substitute that is just as good
What is another element that competitive advantage depends on?
What is competitive parity?
a firms products or services are about the same as other firms. They are average, nothing really special about them. Most firms experience this.
What is a competitive disadvantage?
Anything that goes against a business.
- -outdated technology
- -negative reputation
What is the basic logic behind measuring competitive advantage?
If a firm has one or more competitive advantages there should be evidence in that advantage in the firms performance.
What purpose to accounting returns offer?
indication of advantage, parity, or disadvantage
What are economic measures?
comparing a firm's returns to its cost of capital
What is strategy about?
discovering and exploiting differences