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Summary Strategy chapter 1-10
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Summary of Strategic Management (Rothaermel), Chapter 1-10 (1 until 10)
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MAASTRICHT UNIVERSITYStrategy Summary
EBC1017 – International Business
Summary of ‘Strategic Management’ Chapter 1 - 10
, Chapter 1
Strategic management: integrative management field that combines analysis, formulation and
implementation in the quest for competitive advantage.
Competitive advantage: superior performance relative to other competitors in the same industry or
the industry average.
Either provide goods or services that consumers value more highly than those of competitors
or goods/services similar to those of competitors but at lower price.
Sustainable competitive advantage: outperforming competitors or the industry average over a
prolonged period of time.
Competitive disadvantage: underperformance relative to other competitors in the same industry or
the industry average.
Competitive parity: performance of two or more firms at the same level.
Strategy: the goal-directed actions a firm intends to take in its quest to gain and sustain competitive
advantage.
- Manager’s theory about how to gain and sustain competitive advantage
- Being different from your rivals
- Creating value while containing cost
- Deciding what to do and what not to do
- Combines a set of activities to stake out a unique position
- Requires long-term commitments that are often not easily reversible.
- A firm that possesses competitive advantage provides superior value to customer at
competitive price or acceptable value at lower price.
- Profitability and market share are the consequences of superior value creation.
- The greater the difference between value creation and cost, the greater the economic
contribution the firm makes, and thus the greater the likelihood for competitive advantage.
Co-opetition: cooperation by competitors to achieve a strategic objective = win-win scenario’s.
Essence of strategy is being different from rivals and thus unique accomplished through strategic
positioning: staking out an unique position in an industry that allows the firm to provide value to
customers, while controlling costs.
Strategy is used as a theory of how to compete.
The strategic management process is a never-ending cycle of analysis, formulation, implementation
and feedback.
, Firm effects: the results of managers’ actions to influence firm performance.
--- have more impact than ---
Industry effects: the results attributed to the choice of industry in which to compete.
• Where to compete
• Decisions made at the highest level of the firm
Corporate
strategy
• Objective: increase overall corporate value
• How to compete
• Occurs within strategic business units: a standalone division of a
Business larger conglomerate, with its own profit-and-loss responsibility.
strategy
• How to implement strategies
• Functional managers can have influence on the direction of the
Functional company.
strategy
Corporate managers decide which markets / how to create different synergy /setting strategic goals /
allocating resources / monitoring performance / making adjustments to the overall business portfolio
when needed / determine scope of business / decide whether to enter industries or sell divisions.
General managers in SBUs must answer the question about how to compete in order to achieve
superior performance.
Business model: organizational plan that details the firm’s competitive tactics and initiatives = how
the firm intends to make money.
- Razor-razor-blade business model: give product away or sell for small fee and make money
on replacement parts needed.
- Subscription-based business model: requiring customers to sign up for lengthy service plans.
Network effects: increase in value of a product or service as more people use it.
Key trends that will affect strategy making in the 21st century
ACCELERATING TECHNOLOGICAL CHANGE
What factors explain rapid technological diffusion and adoption?
1. Initial innovations provided the necessary infrastructure for newer innovations to diffuse
more rapidly.
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