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Microsoft Word - Document3 Assignment 04 – Strategic Management BU470 Directions: Answer in complete sentences Be sure to use correct English, spelling and grammar. Sources must be cited in APA format. Your response should be four (4) double-spaced pages. Margins 1” all sides Headings Bold Type Style Size Times New Roman 12-point Software MS Word You will soon find yourself fulfilling roles in organizations where the ability to think strategically about issues will make you much more valuable to employers. For example, your boss may ask you to present information on a new strategy to gain a competitive advantage in the marketplace to the board of directors. Part A: Strategic Management Part A refers to the material in Lesson 1 of this course. Using logical, clear writing, do the following: 1. Describe strategy and the strategic management process. 2. Define competitive advantage and describe the two approaches used to estimate a firm's competitive advantages. 3. Explain why it is important to understand a firm's strategy. Part B: External Analysis Part B refers to the material in Lesson 2 of this course. Using logical, clear writing, do the following: 1. Describe an external analysis. 2. Analyze the two levels of the environment. 3. Identify and define the three elements of the S-C-P model. Part C: Internal Analysis Part C refers to the material in Lesson 3 of this course. Using logical, clear writing, do the following: 1. Describe an internal analysis. 2. Explain resources and capabilities. 3. Describe the VRIO framework. Part D: Cost Leadership Part D refers to the material in Lesson 4 of this course. Using logical, clear writing, do the following: 1. Differentiate between business strategies and corporate strategies and define the nature of a cost-leadership strategy. 2. Identify six sources of cost advantages for firms. 3. Identify the most appropriate organizational structure for a firm pursuing a cost-leadership strategy. Lesson 1 - Part A/Chapter 1.pdf Strategic Management & Competitive Advantage: Concepts and Cases Sixth Edition Chapter 1 What Is Strategy and the Strategic Management Process? Copyright © 2019 Pearson Education, Inc. All Rights Reserved Copyright © 2019 Pearson Education, Inc. All Rights Reserved Learning Objectives 1.1 Define strategy and describe the strategic management process. 1.2 Define competitive advantage and explain its relationship to economic value creation. 1.3 Describe two different approaches to measuring competitive advantage. 1.4 Explain the difference between emergent and intended strategies. 1.5 Discuss why it is important for you to study strategy and the strategic management process. Copyright © 2019 Pearson Education, Inc. All Rights Reserved Walt Disney Company (1 of 2) 1984 Profits: $242 Million Theme Park Operations: 77 percent of profits Consumer Products: 22 percent of profits Filmed Entertainment: 1 percent of profits Copyright © 2019 Pearson Education, Inc. All Rights Reserved Walt Disney Company (2 of 2) Hired Michael Eisner—1984 1. Increased admission prices at theme parks 1984—$186 m 1989—$787 m 2. Focused on movie studios (character development) 1984—$2.42 m 1994—$845 m 3. Diversified into television (ABC), hotels, retail stores, sport team, cruise line, publishing, consumer products, licensing, etc. (Huey & McGowan, 1995) Market Cap: 1984 = $2 billion 1994 = $28 billion Copyright © 2019 Pearson Education, Inc. All Rights Reserved Definition of Strategy Strategy: A firm’s theory about how to gain competitive advantages Eisner’s theory may have been: People will pay a premium price for extraordinary entertainment. We have the necessary resources to create extraordinary entertainment. Therefore, let’s redeploy our resources in a different way and offer something extraordinary to people. Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (1 of 12) Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (2 of 12) Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (3 of 12) Objectives: • specific, measurable targets • the things a firm needs to “do” to achieve its mission • should influence other elements in the strategic management process Example: Steelcon’s mission & objectives Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (4 of 12) External and Internal Analysis Systematic Examination of the Environment External Analysis • interest rates • demographics • social trends • technology Internal Analysis • human resources (knowledge) • manufacturing abilities • technology Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (5 of 12) Strategic Choice Example: Stanley Black & Decker Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (6 of 12) Strategy Implementation • how strategies are carried out • who will do what • organizational structure and control – who reports to whom – how does the firm hire, promote, pay, etc. Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (7 of 12) Strategy Implementation • every strategic choice has strategy implementation implications • strategy implementation is just as important as strategy formulation A Strategy Is Only As Good As Its Implementation Example: Gen. Lee at Gettysburg Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (8 of 12) Competitive Advantage Definition: the ability to create more economic value than competitors • all other elements of the strategic management process are aimed at achieving competitive advantage Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (1 of 11) The Ability to Create More Economic Value Than Competitors • there must be something different about a firm’s offering vis-à-vis competitors’ offerings • if all firms’ strategies were the same, no firm would have a competitive advantage • competitive advantage is the result of doing something different and/or better than competitors Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (2 of 11) Two Types of Difference 1. Preference for the firm’s output • people choose the firm’s output over others’ • people are willing to pay a premium Example: Nordstrom 2. Cost advantage vis-à-vis competitors • lower costs of production/distribution Example: Wal-Mart Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (3 of 11) The Strategic Management Process identify and exploit differences that may lead to competitive advantage Examples: Apple’s iPod, iPad Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (4 of 11) Economic Models Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (5 of 11) Temporary & Sustainable • competitive advantage typically results in high profits • profits attract competition • competition limits the duration of competitive advantage in most cases Therefore, • most competitive advantage is temporary – competitors imitate the advantage or offer something better Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (6 of 11) Some competitive advantages are sustainable if: • competitors are unable to imitate the source of advantage • no one conceives of a better offering Of course, • in time, even sustainable competitive advantage may be lost Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (7 of 11) Competitive Parity • the firm’s offerings are “average” • people do not have a preference for the firm’s offering • the firm does not have a cost advantage over others • some things that may lead to competitive parity may still be critical to success Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (8 of 11) Competitive Disadvantage • people may have an aversion to the firm’s offering • the firm may have a cost disadvantage • a firm may have outdated technology/equipment • a firm may have a negative reputation Example: Wal-Mart’s Labor & Location Policies Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (9 of 11) Measuring Competitive Advantage Superior Economic Performance Is Viewed as Evidence of Competitive Advantage • it is rather easy to see the evidence of competitive advantage • measuring the source of the advantage per se is typically impossible – it’s difficult to “measure” technology Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (10 of 11) Measuring Competitive Advantage Two Classes of Measures: 1. Accounting Measures • ROA, ROS, ROE, etc. that exceed industry averages 2. Economic Measures • earning a return in excess of the cost of capital Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage (11 of 11) Copyright © 2019 Pearson Education, Inc. All Rights Reserved Competitive Advantage & The Strategic Management Process Emergent vs. Intended Strategies • the strategic management process leads managers to intended strategies However, • conditions often change or new information becomes available • managers respond and adopt emergent strategies Example: Honda Motorcycles Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (9 of 12) Summary • Firms could achieve competitive parity and survive • They would face a flat demand curve • Their cost structure would be the industry average • They would need to adapt their strategy over time just to survive • They would fail if they didn’t adapt their strategy Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (10 of 12) This course is not about mere survival, it is about thriving—achieving competitive advantage • the strategic management process helps managers achieve competitive advantage • competitive advantage depends on differences • strategy is about discovering and exploiting these differences Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (11 of 12) Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process (12 of 12) Applying Strategy to Your Career • a solid understanding of strategy concepts will help set you apart from other job candidates • you can use the process to identify and exploit difference between you and others • you can use the process to determine if you want to stay with a company Copyright © 2019 Pearson Education, Inc. All Rights Reserved The Strategic Management Process & Competitive Advantage Strategy Matters! Strategy is often the difference between: • success and failure, between mediocrity and excellence • a great manager and average managers • stumbling through life and moving ahead with purpose Copyright © 2019 Pearson Education, Inc. All Rights Reserved Copyright Lesson 1 - Part A/Lesson 1.pdf Lesson 1 – Strategy and the Strategic Management Process Welcome to Lesson