Strategic Management Concepts

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Questions and Answers

What is the definition of competitive advantage?

Having the lowest operational costs in the industry.

Offering the widest range of products available.

Providing greater value for customers than competitors can. (correct)

Achieving the largest market share in the industry.

Which of the following is NOT a requirement for resources to create a sustainable competitive advantage?

Nonsubstitutable

Common (correct)

Valuable

Rare

What is competitive inertia?

A reluctance to recognize the need for strategic change. (correct)

An aggressive approach to market competition.

The tendency to change strategies rapidly.

The ability to adapt quickly to external threats.

What is included in a situational (SWOT) analysis?

Strengths, Weaknesses, Opportunities, Threats. Signup and view all the answers

What distinguishes distinctive competence from core capabilities?

Core capabilities are less visible and focus on internal processes. Signup and view all the answers

The main focus of environmental scanning is to identify which of the following?

Strategic threats and opportunities in the external environment. Signup and view all the answers

How would you describe a portfolio strategy?

A corporate-level strategy to minimize risk by diversifying across various businesses. Signup and view all the answers

What is the main purpose of implementing a growth strategy within a company?

To foster expansion either through acquisition or internal growth Signup and view all the answers

What question does corporate level strategy primarily address?

What business or businesses are we in or should we be in? Signup and view all the answers

Which type of strategy focuses specifically on reducing a rival's market share?

Attack strategy Signup and view all the answers

What is an Analyzer strategy characterized by?

Maintaining a balance between efficiency and flexibility Signup and view all the answers

Which of the following best describes a Retrenchment strategy?

Making significant cuts to recover the company’s position Signup and view all the answers

In terms of direct competition, what does the term 'market commonality' refer to?

The overlap of product offerings between rivals Signup and view all the answers

Study Notes

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.

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Description

This quiz covers key concepts in strategic management, including competitive and sustainable advantages, SWOT analysis, and internal analysis. Test your understanding of how organizations can assess and leverage their strengths and weaknesses in a competitive environment.