Strategic

Chapter 1 - What is strategy and why is it important?

Business model (T/F) -Organisational plan that details the firm's competitive tactics and initiatives; in short, how the firm intends to make money. Razor-razor-blade business model is giving away or selling for a small fee the product and making money on the replacement part needed (Gilette replacement blades and HP laser printers). Subscription-based business model by having customers sign up for lengthy service plans.

Competitive advantage = Always judged relative to other competitors or the industry average. Firms must either create more value for customers while keeping cost comparable to competitors, or must provide value equivalent to competitors but at lower cost. Dominate competitors for prolonged periods = sustained comp adv.

Competitive parity = Two or more firms that perform at the same level.

Strategy = The set of goal-directed actions a firm intends to take to gain and sustain competitive advantage. Effective strategy requires that strategic trade-offs be recognised and addressed e.g. value and the cost. Successful strategy requires three integrative management tasks analysis, formulation and implementation. When managers theories on how to gain and sustain competitive advantage do not reflect reality, their firm’s strategy will destroy rather than create value, leading to inferior firm performance.

A firms performance is closely related to its managers actions (firm effect) than to the external circumstances surrounding it (industry effects). These are interdependent and are both relevant for firm performance.

Executives = Where to compete (industries, markets, and geographies), and how to create synergies among different business units. General Managers = how to compete in order to achieve superior performance. Must manage & align all value-chain activities for competitive advantage. Functional managers = responsible for implementing business strategy within a single functional area....