MGMT 386 Lecture Notes - Lecture 4: Strategic Choice, Strategic Management, Competitive Advantage
A firm's theory about how to gain competitive advantages
Strategic Management Process or Mission of Firm
Mission-> Objectives->External and Internal Analysis-> Strategic Choice->Strategy Implementation->
Competitive Advantage
Objectives of the Strategic Management Process
specific, measurable targets
the things a firm needs to 'do' to achieve its mission
should influence other elements in the strategic management process
External and Internal Analysis or Systematic examination of the Environment
External Analysis:
-interest rates
-demographics
-social trends
-technology
Internal Analysis:
-human resources (knowledge)
-manufacturing ability
- technology
Strategic Choice
External and internal analysis -> Strategic Choice-> Business Level and Corporate level
Strategy Implementation
- how strategies are carried out
- who will do what
find more resources at oneclass.com
find more resources at oneclass.com
- organizational structure and control
- who reports to whom
- how does the firm hire, promote, pay, etc.
- every strategic choice has strategy implementation implications
- strategy implementation is just as important as strategy formulation
A Strategy Is Only As Good As Its Implementation
Competitive Advantage
the ability to create more economic value than competitors
- all other elements of the strategic management process are aimed at achieving competitive advantage
- there must be something different about a firm's offering vis-à-vis competitors' offerings
- if all firms' strategies were the same, no firm would have a competitive advantage
- competitive advantage is the result of doing something different and/or better than competitors
Competitive Advantage- Two Types
1)Preference for the firm's output
- people choose the firm's output over others'
- people are willing to pay a premium
2)Cost advantage vis-à-vis competitors lower costs of production/distribution
Competitive Advantage Temporary and Sustainable
Temporary:
- competitive advantage typically results in high profits
- profits attract competition
- competition limits the duration of competitive advantage in most cases
Therefore:
- most competitive advantage is temporary
find more resources at oneclass.com
find more resources at oneclass.com
- competitors imitate the advantage or offer something better
Sustainable:
Some competitive advantages are sustainable if:
- competitors are unable to imitate the source of advantage
- no one conceives of a better offering
Of Course:
- in time, even sustainable competitive advantage may be lost
Competitive Parity
- the firm's offerings are 'average'
- people do not have a preference for the firm's offering
- the firm does not have a cost advantage over others
- some things that may lead to competitive parity may still be critical to success (e.g., telephones)
Competitive Disadvantage
- people may have an aversion to the firm's offering
- the firm may have a cost disadvantage
- a firm may have outdated technology/equipment
- a firm may have a negative reputation
Measuring Competitive Advantage
Superior Economic Performance Is Viewed as Evidence of Competitive Advantage
- it is rather easy to see the evidence of competitive advantage
measuring the source of the advantage per-se is typically impossible
- it's difficult to 'measure' technology
Two Classes of Measures:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
A firm"s theory about how to gain competitive advantages. Objectives of the strategic management process specific, measurable targets the things a firm needs to "do" to achieve its mission should influence other elements in the strategic management process. External and internal analysis or systematic examination of the environment. External and internal analysis -> strategic choice-> business level and corporate level. How does the firm hire, promote, pay, etc. Every strategic choice has strategy implementation implications. Strategy implementation is just as important as strategy formulation. A strategy is only as good as its implementation. Competitive advantage the ability to create more economic value than competitors. All other elements of the strategic management process are aimed at achieving competitive advantage. There must be something different about a firm"s offering vis- -vis competitors" offerings. If all firms" strategies were the same, no firm would have a competitive advantage. Competitive advantage is the result of doing something different and/or better than competitors.
