Strategic management chapter 1
Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. When choosing a strategy, firms make choices among competing alternatives. In this sense, the chosen strategy indicates what the firm intends to do, as well as what it does not intend to do.
A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. An organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors’ efforts to duplicate its strategy have ceased or failed. In addition, firms must understand that no competitive advantage is permanent. The speed with which competitors are able to acquire the skills needed to duplicate the benefits of a firm’s value-creating strategy determines how long the competitive advantage will last. Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment. Returns are often measured in terms of accounting figures, such as return on assets, return on equity, or return on sales. Alternatively, returns can be measured on the basis of stock market returns, such as monthly returns (the end-of-the-period stock price minus the beginning stock price, divided by the beginning stock price, yielding a percentage return). ** Firms without a competitive advantage or that are not competing in an attractive industry earn, at best, average returns. Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk. In the long run, an inability to earn at least average returns results in failure. Failure occurs because investors withdraw their investments from those firms earning less-than-average returns. The strategic management process is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns. * The firm’s first step in the process is to analyze its external and’ internal environments to determine its resources, capabilities, and core competencies— the sources of its “strategic inputs.” With this information, the firm develops its vision and mission and formulates its strategy. To implement this strategy, the firm takes actions toward achieving strategic competitiveness and above-average returns. Effective strategic actions that take place in the context of carefully integrated strategy formulation and implementation actions result in desired strategic outcomes. It is a dynamic process, as ever-changing markets and competitive structures are coordinated with a firm’s continuously evolving strategic inputs. These explanations demonstrate why some firms consistently achieve competitive success while others fail to do so. * The Competitive Landscape
The fundamental nature of competition in many of the world’s industries is changing. The pace of this change is relentless (inflexible) and is increasing. Even determining the boundaries of an industry has become challenging. Other characteristics of the current competitive landscape are noteworthy (interesting). Conventionalمتفق sources of competitive advantage such as economies of scale and huge advertising budgets are not as effective as they once were. Moreover, the traditional managerial mind-set is unlikely to lead a firm to strategic competitiveness. Managers must adopt a new mind-set that values flexibility, speed, innovation, integration, and the challenges that evolve from constantly changing conditions. The conditions of the competitive landscape result in a perilousمعرض...
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