All About Strategy

Topics: Strategic management, Management, Michael Porter Pages: 28 (6049 words) Published: February 27, 2013
Strategy: Basic Concepts & Key Terminologies

I. Strategic Inputs

Chapter 1: Strategic Management

Strategic competitiveness is achieved when an organization successfully conceives, formulates and implements a value-creating strategy.

A strategy is an integrated and coordinated set of commitments and action designed to exploit core competencies and gain a competitive advantage.

An organization has a competitive advantage (CA) when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.

Above-average returns (AAR) are returns in excess of what an investor expects to earn from other investments with a similar amount of risk.

Note: The 2 models of above-average returns to conceive vision and mission • Industrial organizational (I/O) model (mainly external focusing: external environment -> attractive industry -> strategy formulation -> assets & skills -> strategy implementation -> AAR) • Resource-based model (internal focusing: resources -> capability -> CA -> attractive industry -> strategy formulation & implementation -> AAR)

Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment.

Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk.

• Returns are normally measured in terms of accounting figures such as return of assets, return of equity, and return of sales.

The strategic management process (SMP) is the full set of commitments, decisions and actions required for an organization to achieve strategic competitiveness (value creating ability) and earn above-average returns.

Hypercompetition is the term that captures the realities of the current competitive landscape which is inherently instable and rapidly changing (- escalating price-quality positioning, creating new knowledge, establishing first-mover advantage, protecting/invading established products/markets).

A global economy is one in which goods, services, people, skills and ideas move freely across geographic borders.

Globalization is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders (due to the increasing number of competing global economies).

Strategic flexibility is a set of capabilities (available and exploitable) used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.

Resources are inputs into an organization’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers.

• Resources -> capacity -> capability -> core competency -> competitive advantage -> strategic competitiveness

A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner (there should be a synergetic effect).

Core competencies (1) are capabilities that serve as a source of competitive advantage for an organization over its rivals (core competency is well integrated and coordinated capabilities with competitive advantage).

Vision is a picture of what the organization wants to be and, in broad terms, what it wants to ultimately achieve (usually longer term).

A mission specifies the business (one product/service) or businesses in which the organization intends to compete and the customers it intends to serve (more specific and usually short term).

• Vision and mission are conceived after comprehensive analysis of external and internal environment (using I/O and R-based models – stated above)

Stakeholders are the individuals and groups who can affect the organization’s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the organization’s performance [capital...
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