What is strategy and the strategic management process?

Strategy
This is a firms theroy about how to gain competitive advantage. It is almost impossible to know for sure, almost always a theroy.
Strategic management Process
is a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy.
Mission
This is a firms long term purpose, it is what a firm aspires to be in the long run and what it wants to avoid in the meantime. Very broad
Visionary Firms
This is were firms mission is central to all they do. These firms on average have higher returns.
Objectives
These are specific measurable targets a frim can use to evaluate the extent to which it is realizing its mission.
External Analysis
A firm identifies the critical threats and opportunities in its competitive enviornment. It also examines the threats of compititors.
Internal Analysis
helps a firm identiy its organzational strengths and weaknesses. It also helps to find out which of its resources are likely to be sources of competitive advantage.
Business-level strategies
are actions firms take to gain competitive advantages in a single market or industry. Examples are cost leadership or prodcut differentiation.
Corporate-level strategies
Actinos firms take to gain competitive advantages by operating in multiple markets or industries simultaneously.
Strategy Implementation
This is when a firm adopts organizational polices and practices that are consistent with its strategy. The three are organizational structure, management controls, and compensation policy.
Competitive Advantage
This is when a firm is able to create more econmic value than rival firms.
Competitive Pairity
Same economic value as their rivals.
Accounting Measures
Calculated using profit and loss statements.
Comparable because of GAAP.
Economic Measures
Compare cost of capital to level of return
Capailities
Are a subset of a firms’ resources and are defined as tangiable and intangiable that allow firms to realize its other resources. EX: Marketing skills, teamwork and cooperation amoung managers.
Finacial resources
Include all themonney from whatever source not just its profits.
Physical Resources
This includes all the physical tech used in a firm
Human resources
Include the traning, experience, judgement, and insight of individual managers and workers in the firm.
Organizational resources
Formal reporting structure, its fromal and informal planning, culture and reputation.
Resource Heterogeneity
One of the key assumptions the RBV model assumes. It implies that some firms may be more skilled in accoplishing an activity than others.
Resource Immobility
And assumption of the RBV model: Some of these resource diffences may be long lasting becuse they maybe very costly for other firms to acquire.
VRIO Framework
Primary tool to identify a firm’s internal strengths and weaknesses to determine its competitive potential.
Imperfectly imitable
When firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to frims that already posses it.
Imitation
Can occur in either direct duplication or subsitution.
Causally Ambiguity
Imitating frims are not able3 to understand the rellationship between resources and capabilities.
Social Complexity
Factors include: Interpersonal relations among managers in a firm, firm’s culture, and a firm’s reputation amoung the market.
Path Dependence
Events early in the evolution of a process have significant effects on subsequent events.
Patents
Can prove to be costly to the firm with a comperative advantage.
Organazation
Is important so that a firm can realize its full potential.
Formal Reporting Structure
Is a description of whome in the organization reports to whom and is demonsrated in an organizational chart.
Formal Management control systems
include a firm’s budgeting and reporting activities that keep higher level employees about lower level employees.
Complementary Resources
Organizational components, they assit in realizing full potential.
Distinctive Competence
Valuable and rare resource.
Competitive Dynamics
Decisions made by other firms who dont have an advantage define the nature of competitive dynamics.
Tacit Cooperation
Any actions a firm takes that reduces the level of rivarly in an industry but doesn’t directly communicate with other firms.
It needs a small number of firms, one with large market share, homogenous products and high barriers to entry.
Tacit Collusion
When Tacit cooperation has the effect of reducing supply and increasing prices.
Tactics
The specific actions a frim takes to implement its strategies. have the capability of leap frogging the competitive advantage.
Strategic Management Process Outline
Firm chooses a mission (mission statement) typically general elements don’t lead a firm to choose or implement strategy— A firm then has set objectives to help realize (judge) a mission—-A firm well next conduct external (threats and opportunities in enviroment)and internal (identify strengths and weaknesses) anylass—-Once this is finished firms are ready to choose theroy of how to gain advantage (Business-level strategy or Corrprate)
Strategy Choice
Choose a strategy that supports the firm’s mission, is consistent with a firm’s objectivies, exploits opportunities in a firm’s enviroment with a firm’s strengths, neutralizes threats in a firm’s enviorment while avoiding weaknesses.