Strategic Management Concepts

Competitive Advantage

• Competitive advantage is achieved by providing greater value to customers than competitors.
• Sustainable competitive advantage is when competitors cannot replicate the value a firm offers.

Sustainable Competitive Advantage

• Organizations must possess resources that are valuable, rare, imperfectly imitable and nonsubstitutable to attain sustainable competitive advantage.

Assessing Competitive Advantage

• Uncertainty and inertia can impede accurate assessments of competitive advantage.
• Managers must be aware of strategic dissonance, the inconsistency between an organization's current strategy and changes in its environment.

Situational (SWOT) Analysis

• SWOT analysis assesses the strengths (internal), weaknesses (internal), opportunities (external) and threats (external) of an organization.

Internal Analysis

• Distinctive competence is something a company can make or do better than competitors.
• Organizations have core capabilities, less visible internal resources such as decision making routines, problem-solving processes and organizational cultures that determine efficiency.

Looking Outside (External Analysis)

• Environmental scanning helps organizations monitor the external environment for trends and threats.
• Strategic groups are clusters of companies within an industry that managers use for benchmarking and analyzing competition.

Choosing Strategic Alternatives

• Risk-avoiding strategies minimize risk while risk-seeking strategies attempt to maximize potential returns.

Corporate Level Strategy

• Concerns decisions regarding the businesses an organization wants to be in.

Portfolio Strategy

• Minimizes risk by diversifying investment among businesses or product lines.
• Can be achieved through related diversification, acquiring or growing within related industries or unrelated diversification, acquiring or growing within unrelated industries.

Grand Strategies

• Broad strategic plans to achieve organizational goals.
• Growth strategy expands an organization's business
• Stability strategy maintains its current position
• Retrenchment strategy involves significant cuts and seeks recovery.

Industry-Level Strategies

• Concerns how an organization will compete within its industry.

Positioning Strategies

• Cost leadership focuses on providing products or services at the lowest possible cost.
• Differentiation strategy emphasizes uniqueness within a particular product or service.

Adaptive Strategies

• Defender strategies focus on protecting market share in a stable industry
• Prospectors seek to grow in dynamic, uncertain industries
• Analyzers try to find a balance between defender and prospector strategies
• Reactors respond to changes in the environment but do not proactively plan for them.

Firm-Level Strategies

• Concerns how to compete against a particular firm.

Direct Competition

• Occurs when companies offer similar products or services and compete for market share, using offensive and defensive strategies.
• Market commonality is the extent to which companies compete in the same markets.
• Resource similarity is the extent to which companies have similar resources.

Strategic Moves of Direct Competition

• An attack is a competitive move to reduce a rival’s market share or profits.
• A response is a countermove to defend or improve market share after a rival’s attack.