Strategic Management Exam 1
Questions & Answers 100% Correct!!
strategy - ANSWERA set of goal-directed actions a firm takes to gain and sustain superior
performance relative to competitors; to achieve superior performance, companies compete for
resources.
3 elements that make up strategy - ANSWER1. A Clear and Critical diagnosis of the competitive
challenge:
Accomplished through analysis of the firm's internal and external environments
2. A guiding policy or overarching approach to address the competitive challenge:
-Accomplished through strategy formulation and results in corporate, business, and functional
strategy; -Must be consistent, often backed with strategic commitments (such as sizable
investments/changes to an organization's incentive/reward system) and provide clear guidance for
employees
3. A set of coherent actions to implement the firm's guiding policy:
-Accomplished through strategy implementation]
purpose of strategy - ANSWERIt provides an integrative overview of the most important internal and
external factors to be taken into account by an organization.
-It is a general direction set for the company and its various components to achieve a desired state in
the future; strategy results from the detailed strategic planning process.
- It is about delivering superior value, while containing the cost to create it, or by offering similar
value at a lower cost.
strategic management - ANSWERThe integrative management field that combines analysis,
formulation, and implementation in the quest for competitive advantage.
,3 management tasks that are required to successfully create/ implement strategy - ANSWERAnalysis
(A) of the external and internal environments
Formulation (F) of an appropriate business and corporate strategy
Implementation (I) of the formulated strategy through structure, culture, and controls
Competitive Advantage - ANSWERa firm that achieves superior performance relative to other
competitors in the same industry or the industry average has this
-Competitive advantage is always relative, not absolute.
-Create value which reflected by how much consumers are willing to pay for products - costs you
incur
-Price: price your customers pay
-Cost: cost you incur or pay for production/labor
Price- Cost= Profit
To assess competitive advantage, we compare firm performance to a benchmark - ANSWERCompare
firm to competitors in the same industry (performance of other firms in same industry)
Compare the firm to the industry average.
What must a firm do to create competitive advantage? - ANSWERProvide goods or services that
consumers value more highly than those of its competitors, OR are similar to the competitors' at a
lower price.
Sustainable Competitive Advantage - ANSWERa firm that is able to outperform its competitors or the
industry average over a prolonged period.
-Biggest threat to a good strategy is imitation of your business --> taking business away from you so
you need to sustain your strategy
,(Requires understanding of your market and competitors and how the world is evolving)
EX: Apple over Samsung in the smartphone industry
Competitive Disadvantage - ANSWERa firm that underperforms its rivals or the industry average
Occurs when the resource is not valuable, rare, easy to imitate, and there are substitutes --> cause
people to go out of business because no one values what they have and they aren't able to generate
revenue
Competitive Parity - ANSWERwhen 2+firms perform the same level
-If the resource is valuable, but not rare, it's easy to imitate and has substitutes
-Not earning much profit but we're able to recover the cost of producing product/service (typical for
product/commodity markets: where everyone has same resource like oil but it isn't rare)
Stakeholders - ANSWEROrganizations, groups, and individuals that can affect or be affected by a
firm's actions.
Internal Stakeholders - ANSWEREmployees (executives, managers, workers), Stockholders, Board
Members
External Stakeholders - ANSWERCustomers, Suppliers, Alliance Partners, Creditors, Unions,
Communities, Governments (at various levels), and the Media
Stakeholders vs. Stockholders - ANSWERStockholders are always stakeholders in a corporation, but
stakeholders are not always stockholders.
A stockholder owns part of a public company through shares of stock, while a stakeholder has an
interest in the performance of a company for reasons other than stock performance or appreciation.
importance of managing stakeholders - ANSWERManaging stakeholders is important because
effective stakeholder management benefits firm performance:
, -Satisfied stakeholders are more cooperative/
more likely to reveal info that can further increase the firm's value creation or lower its costs
-Can lead to greater organizational adaptability/flexibility
-The likelihood of negative outcomes can be reduced --> creating more predictable/stable returns
-Firms can build strong reputations that are rewarded in the marketplace by business partners,
employees, and customers
purpose of stakeholder analysis - ANSWERStakeholder Impact Analysis: provides a decision tool with
which strategic leaders can recognize, prioritize, and address the stakeholder needs; helps the firm
achieve a competitive advantage while acting as a good corporate citizen
Key challenge of stakeholder strategy is to effectively balance the needs of various stakeholders and
ensure that its primary stakeholders (firm's shareholders and investors) achieve their objectives
Firm also need to recognize/address the concerns of other stakeholders (employees, suppliers,
customers) in an ethical/fair manner
3 important stakeholder attributes - ANSWER1. Power: when stakeholder can get the company to do
something that it wouldn't otherwise do.
2. Legitimate claims: perceived to be legally valid or otherwise appropriate, just keep them informed,
low power
3. Urgent claims: require a company's immediate attention and response, low power
5 steps of stakeholder impact analysis - ANSWER1. identify stakeholders
2. identify stakeholder's interests
3. identify opportunities and threats
4. identify social responsibilities
5. address stakeholder concerns
