ADMS 1000 Chapter Notes - Chapter 5: Air Miles, American Express
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Strategic management consists of the analysis, decisions, implementations, and evaluations a firm undertakes to create and sustain its competitive advantages. The plans made or the actions take in an effort to help an organization obtain its intended purpose. Michael porter drew upon research from industrial organization economics to propose a powerful, prescriptive model known as the five-forces model. The threat of current industry rivals or competitors. New entrants can take two basic forms: new startups and diversification of existing firms in other industries. Regardless, the entrants bring new capacities, desires to gain market share, and substantial resources and capabilities. Prices can be bid down or incumbents" costs inflated as a result, reducing profitability. Cost disadvantaged independent of scale: economies of scale refers to spreading the costs of production over number of units produced. The cost of a product per unit declines as the number of units per period increases.