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a blend of deliberate planned actions to improve the company's competitiveness and financial performance and as-needed unplanned reactions to unanticipated developments and fresh market conditions.

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It is normal for a company's strategy top end up being

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* In developing a desirable competitive edge * in developing distinctive competencies and sustainability * in profitability and financial strength * in competitive strength and market standing

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A well-conceived strategy is value creating producing excellence in company performance and is best when the gains are achieved

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typically a blend of deliberate/planned initiatives and emergent/unplanned reactive strategy elements.

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A company's realized strategy is

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because without adequate profitability and financial strength, the company's ultimate survival is jeopardized.

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A company needs financial objectives

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financial performance measures are lagging indicators that reflect the results of past decisions and organizational activities whereas strategic performance measures are leading indicators of a company's future financial performance.

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A balanced scorecard that includes both strategic and financial performance targets is a conceptually strong approach for judging a company's overall performance because

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how often sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.

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Thinking strategically about industry and competitive conditions in a given industry involves evaluating such considerations as

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whether buyer demand is strong or declining.

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Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on

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only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes.

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The bargaining leverage of suppliers is greater when

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True

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Artificial sweetener as a substitute for sugar is a good example of a substitute product that triggers stronger competitive pressures? True/False

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True

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Digital cameras as substitutes for film cameras is a good example of a substitute product that triggers stronger competitive pressures? True/False

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True

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Wireless phone service as a substitute for a landline telephone is a good example of a substitute product that triggers stronger competitive pressures? True/False

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True

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Video-on-demand services as a substitute for renting movies from a movie rental store is a good example of a substitute product that triggers stronger competitive pressures? True/False

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False

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Coca-Cola as a substitute for Pepsi is a good example of a substitute product that triggers stronger competitive pressures? True/False

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industry rivals are not particularly aggressive in drawing sales and market share away from rivals.

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The rivalry among competing sellers tends to be less intense when

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The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors

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What factors should a company consider when determining if an industry offers good prospects for attractive profits?

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Distinct capabilities.

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Every organization has many resources, capabilities and routines however those few things the company does really well and are performed with a very high proficiency are termed

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whether its prices and costs are competitive with those of key rivals.

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One of the most telling signs of whether a company's market position is strong or precarious is

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may be able to develop substitute resources that accomplish the same objective as the competitively valuable resource possessed by rivals.

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A company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals

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essentially involves constructing a "strategic balance sheet" where the company's resource strengths represent competitive assets and its resource weaknesses represent competitive liabilities.

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Sizing up a company's overall resource strengths and weaknesses

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is the first step in understanding a company's cost structure (since each activity in the value chain gives rise to costs).

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Identifying the primary and secondary activities that comprise a company's value chain

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the company is achieving gains in financial strength.

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One important indicator of how well a company's present strategy is working is whether

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few rivals are following a similar differentiation approach.

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A broad differentiation strategy generally produces the best results in situations where

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buyer needs and preferences are too diverse to be fully satisfied by a standardized product.

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Broad differentiation strategies generally work best in market circumstances where

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delivering superior value to buyers in ways rivals cannot readily match.

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While there are many routes to competitive advantage, they all involve

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be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competencies.

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A company's competitive strategy should

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expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities.

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Mergers and acquisitions are often driven by such strategic objectives as to

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True

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Leapfrogging competitors by being the first adopter of next-generation technologies or being first to market with next-generation products is among the principal offensive strategy options that a company can employ? True/False

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True

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Capturing unoccupied or less contested territory by maneuvering around is among the principal offensive strategy options that a company can employ? True/False

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True

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Offering an equally good or better product at a lower price is among the principal offensive strategy options that a company can employ? True/False

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True

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Attacking the competitive weakness of rivals is among the principal offensive strategy options that a company can employ? True/False

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False

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Blocking the avenues open to challengers is among the principal offensive strategy options that a company can employ? True/False

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be able to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality.

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For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company must

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True

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Gaining better access to end users and better market visibility is typically the strategic impetus for forward vertical integration? True/False

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hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success.

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The big risk of employing an outsourcing strategy is

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strengthen the company's competitive position and/or boost its profitability.

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The two best reasons for investing company resources in vertical integration (either forward or backward) are to

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offensive strategy.

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Pursuing continuous product innovation to draw sales and market share away from less innovative rivals is an example of

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stand a reasonable chance of helping a company reduce competitive disadvantage, but very rarely form the basis of a durable competitive advantage over rivals.

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Experience indicates that strategic alliances

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host-government hostility toward allowing foreign businesses market entry, often requiring local produced parts and components to be included in manufacturing, allowing for ease of funds transfers from the host country, and often requiring local ownership.

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A country's business climate is not a function of the political and economic risk factors, such as:

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minimizing capital requirements and involvement in foreign markets.

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The advantages of using an export strategy to build a customer base in foreign markets include

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hindering a company's transfer of competencies and resources across country boundaries (since somewhat different competencies and capabilities are likely to be employed in different host countries) and not promoting the building of a single, unified competitive advantage in all country markets where a company competes.

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Two drawbacks of a "think local, act local" multidomestic strategy are

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is more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and marketing methods.

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A "think local, act local" multidomestic type of strategy

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a firm is missing some essential skills or capabilities or resources and needs a partner to supply the missing expertise and competencies or fill the resource gaps.

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A joint venture is an attractive way for a company to enter a new industry when

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is faced with diminishing market opportunities and stagnating sales in its principal business.

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Diversification merits strong consideration whenever a single-business company

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to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.

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The value of determining the relative competitive strength of each business a company has diversified into is

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individual businesses add to a company's resource strengths and when a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin.

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The businesses in a diversified company's lineup exhibit good resource fit when

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the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides.

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The two biggest drawbacks or disadvantages of unrelated diversification are

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a company has the resources to adequately support the requirements of its businesses as a group without spreading itself too thin and when individual businesses add to a company's overall resource strengths.

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A diversified company's business units exhibit good resource fit when

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the extent to which there are competitively valuable relationships between the value chains of sister business units and what opportunities they present to reduce costs, share use of a potent brand name, or transfer skills or technology or intellectual capital from one business to another.

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Checking a diversified firm's business portfolio for the competitive advantage potential of cross-business strategic fits entails consideration of

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the opportunity to convert the competitive advantage potential into 1 + 1 = 3 gains in shareholder value.

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What makes related diversification an attractive strategy is

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diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses.

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To create value for shareholders via diversification, a company must

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is a diversified business with one major "core" business and a collection of small related or unrelated businesses.

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Dominant business enterprise

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anywhere along the respective value chains of related businesses.

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Cross-business strategic fits can be found

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corporate cultures that put the bottom line ahead of ethics, heavy pressures on company managers to meet or beat performance targets, and overzealous or obsessive pursuit of wealth accumulation, power, status, and other selfish interests.

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The major drivers of unethical business behavior include

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* adopting promotion from within policies and acting on suggestions from employees. * using frequent words of praise to recognize employees for commendable performance. * providing attractive perks and fringe benefits. * creating a work atmosphere in which there is genuine sincerity, caring, and mutual respect among employees and management.

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Some of the most important nonmonetary approaches to enhancing motivation and helping drive successful strategy execution include

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achieve the biggest success when extended to employee efforts in all departments—human resources, R&D, accounting and records, information systems, and so forth.

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Total quality management (TQM) programs

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making the payoff for meeting or beating performance targets a major, not minor, piece of the total compensation package.

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The guidelines for designing an incentive compensation system that will help drive successful strategy execution include

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All work is a process, all processes have variability, and all processes create data that explains variability.

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The statistical thinking underlying Six Sigma is based on the following three principles:

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(1) whether a company's market target is broad or narrow, and (2) whether the company is pursuing a competitive advantage based on differentiation or costs.

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The two factors that most distinguish one competitive strategy from another boil down to __________________

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A low-cost provider strategy, a focused low-low cost strategy, a focused differentiation strategy, a broad differentiation strategy, and a best-cost provider strategy.

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Five generic types of competitive strategy are

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it becomes the industry's low-cost provider rather than just being one of perhaps several competitors with comparatively low costs.

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A company achieves low-cost leadership when ________________

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Either using its low-cost edge to underprice competitors and attract price-sensitive buyers in large enough numbers to increase total profits or refraining from price cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold.

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What are the two ways a company can translate its low-cost advantage over rivals into attractive profit performance?

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A low-cost provider strategy

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Which strategic approach tends to work best when price competition among rival sellers is vigorous, buyers are large, and there are few ways to achieve product differentiation?

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avoiding outsourcing and vertical integration.

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Avenues for performing value chain activities at a lower cost than rivals include all of the following except ______________

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are factors having a strong effect on the cost of a company's value chain activities and cost structure.

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Cost drivers __________

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command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.

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Successful differentiation allows a firm to __________

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* Including product attributes and user features that lower the buyer's costs. * Reducing a buyer's inventory requirements. * Incorporating tangible features that improve product performance. * Incorporate intangible features that enhance buyer satisfaction in noneconomic ways.

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When choosing a differentiation strategy which of the following actions can a company select to deliver superior value to the customers?

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A differentiation strategy

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Which strategy tends to work best when buyer needs and uses of the product are diverse?

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When there are many ways to differentiate the product or service that have value to buyers.

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A differentiation strategy works best in which of the following market circumstances?

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* Pursuing continuous quality improvement * Investing in production-related R&D activities * Striving for innovation and technological advances * Increasing emphasis on marketing and brand-building activities

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Activities that managers can pursue to enhance differentiation through the systematic management of uniqueness drivers include the following:

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securing a competitive advantage by serving buyers in the target market niche at lower cost than those of rival competitors.

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A focused low-cost strategy aims at __________

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the existence of a buyer segment that is looking for special product attributes or seller capabilities.

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Successful use of a focused differentiation strategy depends on _________

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A focused strategy

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Which strategic approaches becomes most appealing when a market is not important to industry leaders?

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product differentiation is the norm and there is an attractively large number of value-conscious buyers.

answer

Best-cost provider strategies work best when _____________

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the incorporation of upscale attributes into its product offering at a lower cost than rivals.

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A best-cost provider's resources and capabilities must allow ____________

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highlight carefully designed products or services appealing to the unique preferences and needs of a narrow, well-defined group of buyers.

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The marketing emphasis of a company pursuing a focused differentiation strategy usually is to ______________

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the value-conscious buyer.

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The strategic target of a best-cost provider is ____________

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it is predicated on leveraging a competitively valuable collection of resources and capabilities that match the strategy.

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A company's competitive strategy is unlikely to succeed unless ____________

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* To always act in a legal, ethical and moral manner in its relations with all stakeholders * To demonstrate socially responsible behavior by being a committed corporate citizen * To adopt business practices that conserve natural resources and protect the interest of future generations

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A Firm's Ethical Duties to Its Stakeholders

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Is the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.

answer

Business Ethics

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Ethical principles in business are not different materially different from ethical principles in general.

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How do ethics and business ethics differ?

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* Are judged by general ethical standards of society. * Are not subject to more permissive standards.

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Business actions

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* The view that "the business of business is business, not ethics" * Heavy pressures on managers to meet performance targets * A company culture that fosters illegal and unethical conduct * Overzealous pursuit of wealth and other selfish interests

answer

Reasons for unethical behaviors

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Requires that publicly-traded firms have a code of ethics or else explain in writing to the Securities and Exchange Commission why they do not.

answer

The Sarbanes-Oxley Act (2002)

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* The School of Ethical Universalism * The School of Ethical Relativism * Integrative Social Contracts Theory

answer

Applying ethical standards across countries and cultures

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* Some concepts of what is right and what is wrong are universal and transcend most all cultures, societies, and religions. * All societies, companies, and individuals are accountable to a set of universal ethical standards. * Where basic moral standards really do not vary significantly according to local cultural beliefs, traditions, or religious convictions, a multinational company can develop a code of ethics that it applies more or less evenly across its worldwide operations.

answer

According to the school of ethical universalism

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* What is to be deemed ethical or unethical behavior must be judged by local social and moral standards. * It is appropriate for local moral standards to take precedence over ethical standards in a company's home market.

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According to the school of ethical relativism

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* The assumption that local morality is an adequate guide for ethical behavior. * Loss of the moral basis for enforcing company-wide ethical standards across the differing markets of a multinational firm.

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Risks of ethical relativism

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* A limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations. * The circumstances of local cultures, traditions, and values that further prescribe what constitutes ethically permissible behavior and what does not.

answer

Integrative Social Contracts Theory - The ethical standards a firm should uphold are governed by:

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That "first order" universal ethical norms always take precedence over "second order" local ethical norms when local norms are more permissive.

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Integrative social contracts theory provides

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There are many instances where cross-country differences in ethical norms create situations where it is tough to draw a line in the sand between right and wrong decisions, actions, and business practices.

answer

Ethical "gray areas"

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* Economic responsibility to shareholders * Legal responsibility to comply with the laws of the countries where it operates * Ethical responsibility to abide by society's norms * Discretionary philanthropic responsibility to meet the unmet needs of society

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Engaging in corporate social responsibility involves the firm's assumption of a series of responsibilities:

question

A balance of: People, planet, profit AND Triple bottom line performance

answer

Corporate Social Responsibility

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*Market-and resource-driven activities * Success depends on - Attracting and pleasing customers - Outcompeting rivals - The firm's collection of resources and capabilities

answer

Crafting Strategy

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* Execution of operations-driven activities * Successful depends on management's ability to - Direct change - Allocate resources - Build capabilities - Build strategy-supportive policies and culture - Deliver good results

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Implementing Strategy

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* Staffing the organization's workforce * Acquiring, developing, and strengthening strategy-supportive resources and capabilities * Structuring the organization and work effort

answer

Organization building actions

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* Put people with strong strategy implementation skills and a results orientation in key managerial posts. * Replace weak executives, strengthening the skills of those who remain, and bringing in fresh outsiders.

answer

Assembling a capable management team is a cornerstone organization-building task:

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* Putting key resources and capabilities into place. * Refreshing and strengthening them as needed. * Modifying them as market conditions evolve.

answer

Good strategy execution requires:

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