Exam Notes PDF

Chapter 1 - What is Strategy? Why is Strategy Important? Defines Direction: Helps organizations determine where they are and where they want to go. Ensures Competitive Advantage: Differentiates a firm from its competitors by creating superior value for customers. Allocates Resources Efficientl...

Chapter 1 - What is Strategy? Why is Strategy Important? Defines Direction: Helps organizations determine where they are and where they want to go. Ensures Competitive Advantage: Differentiates a firm from its competitors by creating superior value for customers. Allocates Resources Efficiently: Ensures resources are focused on the most impactful initiatives. Mitigates Risks: Identifies and addresses challenges proactively. Why Are Some Firms Successful? Clear Strategy: Firms like Google succeed by creating unique and valuable positions with coordinated activities. Innovation: Continuous improvement and technological advances. Customer Value Creation: Focus on meeting or exceeding customer expectations. Execution Excellence: Superior operational efficiency and organizational alignment. Why Do Some Firms Fail? Lack of Strategic Vision: E.g., Kodak failed to adapt to digital photography trends. Failure to Innovate: General Motors struggled with outdated products and high costs. Poor Resource Management: Misallocation or underinvestment in critical areas. External Factors: Market shifts, competition, or regulatory changes. Why is Google Outperforming Competitors? Focused Innovation: Investment in AI, search algorithms, and cloud computing. Ad Revenue Model: Dominance in digital advertising. Ecosystem Approach: Integration of services like Gmail, YouTube, and Android. Culture of Data-Driven Decisions: Uses evidence-based strategies to stay ahead. Why Did GM and Kodak Go Bankrupt? GM: ​ High fixed costs and pension liabilities. ​ Lack of adaptability to customer demand for fuel-efficient cars. ​ Bankruptcy during the 2008 financial crisis. Kodak: ​ Late transition to digital photography despite pioneering it. ​ Over-reliance on film sales and poor strategic focus. What is Strategy? Definition: The creation of a unique and valuable position involving a coordinated set of actions across the organization. Porter’s View: Involves trade-offs and activities that fit together to build a competitive advantage. Characteristics: ​ More than slogans – must lead to actionable steps. ​ Concerned with positioning against competitors. ​ Includes trade-offs (e.g., low cost vs. high service). ​ A coordinated set of activities integrated throughout the organization. Why is Strategy Becoming More Important (and More Difficult)? Globalization: Broader competition and market reach. Technological Advancements: Faster changes and innovation cycles. Knowledge Intensity: Shift from raw materials to intellectual capital. Hypercompetition: Constant pressure to innovate and differentiate. Competitive Advantage and Value Creation Competitive Advantage: Achieved when a firm’s profitability exceeds the industry average. Value Creation: The process of creating products/services that customers value, resulting in increased sales, profitability, and share prices. ROIC Formula: I/O Model of Strategy Resource-based Model of Strategy Four Attributes of Resources and Capabilities for Sustainable Competitive Advantage 1.​ Valuable: allow the firm to exploit opportunities or neutralize threats in its external environment 2.​ Rare: possessed by few, if any, current and potential competitors 3.​ Costly to imitate: when other firms cannot obtain them or must obtain them at a much higher cost 4.​ Nonsubstituable : No structural equivalents Resources and capabilities that meet these four criteria become a source of: Core Competencies are the basis for a firm’s: Basic Model of Strategic Planning Intended Strategy Planned Approach: A deliberate, formal strategy developed by top management to achieve specific goals. Strengths: Provides clear direction and aligns resources. Weaknesses: Can be rigid and fail in dynamic environments. Example: A five-year plan to expand into international markets. Strategic Questions 1.​ Where are we now? ​ Requires SWOT analyses. 2.​ Where do we want to go? ​ Vision/Mission ​ FINANCIAL outcomes to achieve ​ STRATEGIC outcomes to achieve 3.​ How will we get there? ​ e.g., business and corporate strategies What comprises a company’s vision? Core Values ​ 3-5 guiding principals (ex., honesty, equality, creativity) that matter most within the organization ​ These are independent of product and market conditions. Core purpose ​ A idealized statement of why the company exists, how it contributes to society Long term objective / Envisioned future (BHAG) ​ What the organization will be known for 10-30 years from now; a specific goal. Corporate Strategy ​ Multi-business firms ​ Horizontal Diversification, Vertical Integration, Geographical expansion/diversification. Business Strategy ​ Strategy for single business  Broad Sources of Data 1.​ Public Sector: ​ IGOs (e.g., IMF, OECD, WTO, IEA) ​ Monetary (e.g, Federal reserves, BoC) ​ Government departments (e.g., Stats Can, NR Can) 2.​ Private Sector: ​ Databases – (e.g., Factiva, Business Source Premier). ​ Firm Information - Look up Firm’s 10K and Financial Statements. ​ Look up NAICS code for industry on web (first 4 digits). 3.​ Quality Business Media: ​ e.g. WSJ, FT, Reuters, Bloomberg, G&M (Canadian firms).