Chapter 1

Chapter 1 - Chapter 1 Strategic Management and Strategic...

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Strategic Management and Strategic Competitiveness Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. By implementing a value-creating strategy that current and potential competitors are not simultaneously implementing and that competitors are unable to duplicate, or find too costly to imitate, a firm achieves a competitive advantage . Strategy can be defined as an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. So long as a firm can sustain (or maintain) a competitive advantage, investors will earn above-average returns. Above-average returns represent returns that exceed returns that investors expect to earn from other investments with similar levels of risk (investor uncertainty about the economic gains or losses that will result from a particular investment). In other words, above average-returns exceed investors' expected levels of return for given risk levels. Note: Firms must earn at least average returns and provide investors with average returns if they are to survive. If a firm earns below-average returns and provides investors with below-average returns, investors will withdraw their funds and place them in investments that earn at least average returns. At this point it may be useful to highlight the role institutional investors play in regulating above average performances. In smaller new venture firms, performance is sometimes measured in terms of the amount and speed of growth rather than more traditional profitability measures – new ventures require time to earn acceptable returns. A framework that can assist firms in their quest for strategic competitiveness is the strategic management process , the full set of commitments, decisions and actions required for a firm to systematically achieve strategic competitiveness and earn above-average returns. This process is illustrated in Figure 1.1 . FIGURE 1.1 The Strategic Management Process Figure 1.1 illustrates the dynamic, interrelated nature of the elements of the strategic management process and provides an outline of where the different elements of the process are covered in this text. Feedback linkages among the three primary elements indicate the dynamic nature of the strategic management process: strategic inputs, strategic actions and strategic outcomes. Strategic inputs , in the form of information gained by scrutinizing the internal environment and scanning the external environment, are used to develop the firm's vision and mission. Strategic actions are guided by the firm's vision and mission, and are represented by strategies that are formulated or developed and subsequently implemented or put into action. Desired
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This note was uploaded on 04/01/2012 for the course MGT 4476 taught by Professor Marthabrowski during the Spring '10 term at Troy.

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Chapter 1 - Chapter 1 Strategic Management and Strategic...

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