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how to most effectively manage a company's strategy-making process to create competitive avantage
strategic leadership
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the task of selecting strategies
stategy formulation
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the task of putting strategies into action
stategy implementation
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capital that cannot be recovered if a company fails and goes bankrupt
risk capital
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the returns that shareholders earn from purchasing shares in the company
sharholder value
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the return that a company makes on the capital invested in the enterprise
profitability
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measured by the increase in net profits over time
profit growth
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high profitability and sustainable profit growth
profitable growth
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a company's profitability is greater than the average profitability and profit growth of other companies competing for the same set of customer
competitive advantage
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when a company's strategies enable it to maintain above-average profitability for a number of years
sustained competitive advantage
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manager's conception of how the set of strategies his company pursues should mesh together into a congruent whole
business model
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bear responsibility for the overall performance of the company or for one of its major self-contained subunits or divisions
general managers
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responsible for supervising a particular function, that is, a task, an activity, or an operation, such as accounting, marketing, R&D, IT, or logistics
functional managers
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a company that competes in several different businesses and has created a separate, self-contained division to manage each
mutidivisional company
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these individuals occupy the apex of decision making within an organization, including CEO's and other senior executives, and corporate staff
corporate-level managers
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self-contained division (with its own fuctions, for example, financec, purchasing, production, and marketing departments) that provides a product or service for a particular market
business unit
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describes what the company does
mission
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lays out some desired future state and what the company would like to achieve
vision
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states how managers and employees should conduct themselves, how they should do business, and what kind of organization they should build to help a company achieve its mission
values
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individuals or groups that have an interest, claim, or stake in the company, in what it does, and in how well it performs
stakeholders
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identifies strategic opportunies and threats from an organization's operating environment that will affect how it pursues its mission
external analysis
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focuses on reviewing the resources, capabilities, and competencies of a company, including it's strengths and weaknesses
internal analysis
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comparison of strengths, weaknesses, opportunities, and threats
SWOT analysis
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indicates that strategic planning is ongoing; it never ends
feedback loop
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the product of whatever planned strategies are actually put into action and of any unplanned (emergent) strategies
realized strategy
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unplanned responses to unforeseen circumstances
emergent strategies
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formulating plans that are based on what-if scenarios about the future
scenario planning
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strategic plans formulated in a vacuum by top managers who have little understanding or appreciation of current operating realities
ivory tower approach
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those that appear time and time again
systematic errors
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human decision makers process information and reach decisions by falling back on certain rules of them that help us make sense out of the complex world
cognitive biases**
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decision makers who have strong prior beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong
prior hypothesis bias
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decision makers, having already committed significant resources to a project, commit even more resources even if they receive feedback that the project is failing
escalating commitment
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involves the use of simple analogies to make sense out of comlex problems
reasoning by analogy
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rooted in the tendency to generalize from a small sample or even a single vivid anecdote
representativeness
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the tendency to overestimate one's ability to control events
the illusion of control
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arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine
availability error
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the generation of both a plan and a critical analysis of the plan
devil's advocacy
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the generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action
dialectic inquiry
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planners identify a reference class of analogous past strategic initiatives, determine whether those initiatives succeeded or failed, and evalute the project at hand against those prior initiatives
outside view
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the ability to understand one's own moods, emotions, and drives, as well as their effect on others
self-awareness
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the ability to control or redirect disruptive impulses or moods, that is, to think before acting
self-regulation
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a passion for work that goes beyond money or status and a propensity to pursue goals with energy and persistence
motivation
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the ability to understand the feelings and viewpoints of suboridnates and to take those into account when making decisions
empathy
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friendliness with a purpose
social skills
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The major goal of a company is to...
...maxmize the returns that shareholders get from holding shares in the company
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Formal strategic planning models stress that an organization's strategy is...
...the outcome of a rational planning process
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The major components of the strategic management process are...
- defining the mission, vision, values, & major goals
- analyzing external & internal environment
- choose aligning busines model & strategies
- adopting structures & control systems to implement chosen strategies
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What are the 3 techniques for enhancing the effectiveness of strategic decision making?
- devil's advocacy
- dialectic inquiry
- outside view
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What are the levels of strategic management?
- Corporate-level managers
- Business-level managers
- Functional-level managers
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What are the 4 main components of a mission statement?
- Mission
- Vision
- Key values
- Major goals
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