Final Exam Notes

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Department
Management (MGS)
Course
MGSC01H3
Professor
Professor Constantinou
Semester
Fall

Description
Chapter 1 three themes that are critical to developing competency in the field of strategic management are: 1. firms and industries are dynamic in nature 2. to succeed, the formulation of a good strategy and its implementation should be inextricably connected 3. strategic leadership is essential if a firm is to both formulate and implement strategies that create value business strategy strategy for competing against rivals within a particular industry or industry segment corporate strategy strategy for guiding a firms entry and exit from different businesses, for determining how a parent company adds value to and manages its portfolio of businesses, and for creating value through diversification strategy formulation process of developing a strategy strategy implementation process of executing a strategy the 5 elements of the strategy diamond: 1. arenas where will we be active 2. vehicles how will we get there 3. differentiators how will we win in the marketplace 4. staging and pacing what will be our speed and sequence of moves 5. economic logic how will we obtain our returns competitive advantage a firms ability to create value in a way that its rivals cannot three perspectives of competitive advantage: internal perspective focuses on resources and capabilities as internal sources of uniqueness that allows firms to beat the competition external perspective focuses on the structure of industries and the ways in which firms can position themselves within them for competitive advantage dynamic perspective, which bridges the internal and external perspectives, is a third view of competitive advantage; this view helps explain why competitive advantages do not typically last over long periods of time Summary of Challenges 1) Understand what strategy is and identify the difference between business-level and corporate-level strategy. Strategic management is the process by which a firm manages the formulation and implementation of its strategy. A strategy is the central, integrated, externally oriented concept of how a firm will achieve its objectives. Strategies typically take one of two forms: business strategy or corporate strategy. The objective of a business strategy is to spell out how the firm plans to compete. This plan integrates choices regarding arenas (where the firm will be active), vehicles (how it will get there), differentiators (how it will win), staging (the speed and sequence of its moves), and economic logic (how it obtains its returns). The objective of corporate strategy is to spell out which businesses a firm will compete in, how ownership by the corporate parent adds value to the business, and how this particular diversification approach helps each business compete in its respective markets. 2) Understand why we study strategic management. It should be clear to you by now that strategic management is concerned with firm performance. Strategic management holds clues as to why firms survive when performance suffers. Strategy helps you to understand which activities are important and why and how a plan, absent good execution, is perhaps only as valuable as the paper its printed on. 3) Understand the relationship between strategy formulation and implementation. Strategy formulation is the determination of what the firm is going to do; strategy implementation is how the firm goes about doing it. These two facets of strategy are linked and interdependent. This interdependence is made strikingly clear by the strategic management process. 4) Describe the determinants of competitive advantage. Competitive advantage is realized when one firm creates value in ways that the competitors cannot, such that the firm clearly performs better than its competitors. Advantage is not simply higher relative performance; rather, superior performance signals the ability of a firm to do things in ways it direct competitors cannot. The two primary views of competitive advantageinternal and externalare complementary and together are used to formulate effective strategies. The internal view portrays competitive advantage to be a function of unique, firm-specific resources and capabilities. The external view holds that a firms performance is largely a function of its position in a particular industry or industry segment given the overall structure of the industry. Profitable industries are considered attractive, and therefore, high firm performance is attributed to a firms position in the industry relative to the characteristics of the industry or industry segment. 5) Recognize the difference between the fundamental and dynamic views of competitive advantage. The two fundamental views of competitive advantage are characterized by a largely internal or external orientation toward competitive advantage, research shows that few firms persist in their dominance over competitors over prolonged periods of time. For most firms, therefore, competitive advantage is considered to be temporary. The dynamic perspective assumes that a firms current market position is not an accurate predictor of future performance because position itself is not a competitive advantage. Instead, the dynamic perspective looks at the past for clues about how the firm arrived at its present position and to the future to divine what the new competitive landscape might look like. It also holds that its possible for the firm to influence the future state of the competitive landscape. Chapter 2 strategic leadership task of managing an overall enterprise and influencing key organizational outcomes succession planning process of managing a well-planned and well-executed transition from one CEO to the next with positive outcomes for all key stakeholders vision simple statement or understanding of what the firm will be in the future mission declaration of what a firm is and what it stands forits fundamental values and purpose values the principles that are held dear by members of the organizationguiding principles managers and employees will not compromise while pursuing the vision and strategic goals strategic goals are those overarching and results that the organization pursues to accomplish its mission and achieve its vision goals and objectives combination of a broad indication of organizational intentions (goals) and specific, measurable stems (objectives) for reaching them return on invested capital (ROIC) how effectively a company uses the money (borrowed or owned) invested in its operations super-ordinate goal overarching reference point for a host of hierarchical sub-goals balanced scorecard strategic management support system for measuring vision and strategy against business- and operating-unit-level performance interpersonal roles figureheadceremonial liaisonmaintain relationships with external stakeholders leaderemployees and stakeholders look to their authority for motivation and direction informational roles sharing information disseminatorcommunicate factual information and value-based information spokespersonlobbying, public relations and formal reporting decisional roles entrepreneurdesigns the firms strategy/authorizes initiatives and supervises implementation disturbance handlerfixer resource allocatorwhere the money/people get assigned negotiatornon-routine transactions strategic purpose simplified, widely shared mental model of the organization and its future, including anticipated changes in its environment strategic coherence symmetric co-alignment of the five elements of the firms strategy, the congruence of functional-area policies with these elements, and the overarching fit of various businesses under the corporate umbrella stakeholder individual or group with interest in firms ability to deliver intended results and maintain viability of its products and services ethnocentrism belief in the superiority of ones own ethnic group or, more broadly, the conviction that ones own national, group, or cultural characteristics are normal stereotyping relying on a conventional or formulaic conception of another group based on some common characteristic four personality characteristicslocus of control, need for achievement, tolerance for risk or ambiguity, charisma and emotional intelligence Summary of Challenges 1) Explain how strategic leadership is essential to strategy formulation and implementation. Strategic leadership is concerned with the management of an overall enterprise and the ways in which top executives influence key organizational outcomes, such as performance, competitive superiority, innovation, strategic change, and survival. Leaders typically play three critical rolesinterpersonal, informational, and decisionalall of which support the firms vision and mission and the implementation of its strategy. The Level 5 Hierarchy is a model of leadership skills that calls for a wide range of abilities, some of which are hierarchical in nature. Leaders can be distinguished by personality and demographic differences, and strategic leadership can be exercised either by individuals or groups. 2) Understand the relationships among vision, mission, values, and strategy. An organizational vision is a simple forward-looking statement or understanding of what the firm will be in the future. A mission is a declaration of what a firm is and what it stands forits fundamental values and purpose. Together, mission and vision statements expre
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