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Bus109 Midterm Study Guide (2)

Bus109 Midterm Study Guide (2) - Ch 1 Know the definitions...

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Ch. 1 Know the definitions of Strategy. Strategy : management’s action plan for running the business and conducting operations. The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing the business, attracting and pleasing customers, competing successfully, conducting operations, and improving the company’s financial and market performance Strategy = how management intends to grow the business, how it will build a loyal clientele, and outcompete rivals, how each functional piece of the business will be operated, how performance will be boosted Know what we mean by sustainable competitive advantage. Sustainable competitive advantage: 1) Striving to be the industry’s low-cost provider, thereby aiming for a cost-based competitive advantage over rivals ( ex: Wal-Mart & Southwest Airlines ) 2) Outcompeting rivals based on such differentiating features as higher quality, wider product selection, added performance, value-added services, more attractive styling, technological superiority, or unusually good value for the money ( ex: Johnson & Johnson product reliability, Chanel & Rolex – top of the line prestige, Amazon’s wide collection and convenience) 3) Focusing on a narrow market niche and winning a competitive edge by doing a better job than rivals of serving the special needs and tastes of buyers comprising the niche ( ex: eBay online auctions, Starbucks premium coffees, Whole Foods Market – natural and organic foods ) Developing expertise and resource strengths that give the company competitive capabilities that rivals can’t easily imitate or trump with capabilities of their own. ( ex: FedEx next-day delivery, Walt Disney theme park management/family entertainment, Toyota defect-free vehicles at low cost) Know what are the best indicators of a company’s strategy. A company’s actions in the marketplace and the statements of senior managers about the company’s current business approaches, future plans, and efforts to strengthen its competitiveness and performance
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Know what we mean by a work in progress when it comes to strategy (reactive versus proactive. Proactive actions to improve the company’s financial performance and secure a competitive edge Typically, managers proactively modify this or that aspect of their strategy as new learning emerges about which pieces of the strategy are working well and which aren’t, and as they hit upon new ideas for strategy improvement As-needed reactions to unanticipated developments and fresh market conditions See Figure 1.2 Know what is the relationship between a company’s strategy and its business model. Business model : explains the rationale for why its business approach and strategy will be a moneymaker; absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt A business model explains why its business approach and strategy will generate
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