MGMT 451

Updated 2007-02-20 07:00

Purdue MGMT 451 Study Aid

Chapter 1--- Strategic Management Inputs

Strategic competitivenessachieved when a firm successfully formulates and implements a value-creating strategy.
StrategyAn integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Competitive AdvantageFirm implements a strategy competitors are unable to duplicate or find too costly to try to imitate.
RiskInvestor's uncertainty about the economic gains or losses that will result from a particular investment.
Strategic Management Processthe full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Global EconomyEconomy in which goods, services, people, skills, and ideas move freely across geographic borders.
Strategic flexibilitySet of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.
Resourcesinputs into a firm's production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers.
Capabilitythe capacity for a set of resources to perform a task or an activity in an integrative manner.
Core competenciescapabilities that serve as a source of competitive advantage for a firm over its rivals.
VisionPicture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.
Missionspecifies the business or businesses in which the firm intends to compete and the customers it intends to serve.
Stakeholdersindividuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm's performance.
Strategic LeadersPeople located in different parts of the firm using the strategic management process to help the firm reach its vision and mission.
Organizational culturerefers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business.
Profit Poolentails the total profits earned in an industry at all points along the value chain.

Chapter 2---The External Environment


Question Answer
General Environmentbroader society grouped into six environmental segments: demographic, economic, political/legal, sociocultural, technological, global
Industry Environmentset of factors that directly influence a firm. Includes: threat of new entrants, the power of suppliers, the power of buyers, the threat of product substitutes, and intensity of rivalry.
opportunitycondition in the general environment that, if exploited, helps a company achieve strategic competitiveness.
threatcondition in the general environment that may hinder a company's efforts to achieve strategic competitiveness.
Demographic segmentconcerned with a population's size, age structure, geographic distribution, ethnic mix, and income distribution.
Economic environmentrefers to the nature and direction of the economy in which a firm competes or may compete.
Political/Legal segmentarena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding the interactions among nations.
Sociocultural segmentconcerned with a society's attitudes and cultural values.
Technological segmentincludes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and materials.
Global segmentincludes relevant new global markets, existing markets that are changing, important international political events, and critical cultural and institutional characteristics of global markets.
Industrya group of firms producing products that are close substitutes.
Competitor intelligenceset of data and information the firm gathers to better understand and better anticipate competitors' objectives, strategies, assumptions, and capabilities.
Strategic groupset of firms emphasizing strategic dimensions to use a similar strategy.
Complementorsnetwork of companies that sells complementary goods or services or are compatible with the focal firm's own product or service.

Chapter 3---The Internal Environment


Question Answer
Global mind-setthe ability to study an internal environment in ways that are not dependent on the assumptions of a single country, culture, or context.
Valuemeasured by a product's performance characteristics and by its attributes for which customers are willing to pay.
Tangible resourcesassets that can be seen and quantified.
Intangible resourcesassets that typically are rooted deeply in the firm's history and have accumulated over time.
Valuable capabilitiesallow the firm to exploit opportunities or neutralize threats in its external environment.
Rare capabilitiescapabilities that few, if any, competitors posses.
Costly-to-imitate capabilitiescapabilities that other firms cannot easily develop.
Nonsubstitutable capabilitiescapabilities that do not have strategic equivalents.
Primary activitiesinvolved with a product's physical creation, its sale and distribution to buyers, and its service after the sale.
Support activitiesprovide the assistance necessary for the primary activities to take place.
Outsourcingthe purchase of a value-creating activity from an external supplier.

Chapter 4---Business-Level Strategy


Question Answer
Business-level strategyAn integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
Market segmentationProcess used to cluster people with similar needs into individual and identifiable groups.
Cost leadership strategyAn integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.
Differentiation strategyAn integrated set of actions taken to produce goods or services that customers perceive as being different in ways that are important to them.
Focus strategyAn integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.
Total quality managementA managerial innovation that emphasizes an organization's total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on empowerment of employee groups and teams.

Chapter 5---Competitive Rivalry and Competitive Dynamics


Question Answer
CompetitorsFirms operating in the same market, offering similar products, and targeting similar customers.
Competitive rivalryThe ongoing set of competitive actions and competitive responses occurring between competitors as they compete against each other for an advantageous market position.
Competitive behaviorSet of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position.
Multimarket competitionOccurs when firms compete against each other in several product or geographic markets.
Competitive dynamicsrefer to all competitive behaviors within a market.
Market commonalityconcerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
Resource similarityExtent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount.
Competitive actionA strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position.
Competitive responseA strategic or tactical action the firm takes to counter the effects of a competitor's competitive action.
Strategic action/Strategic responseA market based move that involves a significant commitment of organizational resources and is difficult to implement and reverse.
Tactical action/Tactical responseA market based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse.
First moverFirm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position.
Second moverFirm that responds to the first mover's competitive action, typically through imitation.
Late moverFirm that responds to a competitive action, but only after considerable time has elapsed after the first mover's action and the second mover's response.
QualityExists when a firm's goods or services meet or exceed customers' expectations.
Slow-cycle marketsMarkets in which the firm's competitive advantages are shielded from imitation for what are commonly long periods of time and where imitation is costly.
Fast-cycle marketsMarkets in which the firm's competitive advantages aren't shielded from imitation and where imitation happens quickly and perhaps somewhat inexpensively.
Standard-cycle marketsMarkets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly.