Strategic Management Study Guide 1

Strategic Management Study Guide 1 - Strategic Management...

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Strategic Management Study Guide Strategy o Strategy is creation of a unique and valuable position, involving a different set of activities o Strategy is making trade-offs in competing o Strategy is about not to imitate everything about competitors o Strategy is about combining activities and maintaining strategic fit o Strategy is about pursuing profitable growth o Dominant Logic (1985 - 2000): Key managerial assumptions and beliefs Well-trained, well-compensated baristas deliver high quality coffee and experience 60% turnover compared to 140-400% in fast food industry Company-owned stores Did not franchise to control quality Helped maintain employee expertise & culture; build brand equity Changes in Dominant Logic Accelerated growth, penetration of the industry + efficient (fast) service + compromise on quality Baristas push buttons instead of drawing espressos A logistics and efficiency mental model o Overtaking quality and premium customer experience model Proliferation of licensing partnerships o Airports, smarkets, schools, businesses Maximum distribution of the product = commoditization of experience o Role of Leadership Provide the discipline to decide which industry changes and customer needs to company will respond to Maintain company’s distinctiveness Which target group of customers, varieties, and needs the company should serve? Teach others in the firm about strategy and to say no Leaders continuously communicate strategy to guide employees in making choices when faced with trade offs o Strategy and Firm Performance Iridium Communications Mobile communication services anywhere in the world through a network of 66 satellites Huge customer disappointment By July 1999, more then $5 billion was spent on the project Chapter 11 bankruptcy “We are a classic MBA case study in how not to introduce a product. First we created a marvelous technological achievement. Then we asked how to make money on it.” John Richardson, Iridium CEO
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o How do we measure economic returns? The objective of strategy is creation of sustainable competitive advantage resulting in superior economic returns Firm Performance o Survival: is it a good measure of FP? Survival provides no insights about competitive advantage or above-normal performance When a firm declares bankruptcy, does it cease to exist? Strategic bankruptcies Continental airlines Death of a firm can occur over a prolonged period of time Pan Am Small businesses and start-up firms o Accounting Measures Return on Assets Shows how well a company is using its operational assets to generate income Naturally higher for less capital-intensive firms Auto manufacturing versus service industries Return on Equity Shows how effectively a firm uses its shareholders’ funds Equity valued at book value, not current value
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Strategic Management Study Guide 1 - Strategic Management...

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