Describe the historical roots of strategy Create a strategic framework for a firm by outlining its purpose, analyzing its internal and external environments, defining its vision, mission, and objectives, and describing its strategic formulation process Describe how a firm can achieve competitive advantage by defining specific activities, making trade-offs among activities, and creating fit among the activities © South-Western, a part of Cengage Learning

Describe the ways in which companies enter global markets Explain the differences between business-level strategy and corporate-level strategy Explain the advantages and disadvantages of different global strategies Describe the ways in which companies enter global markets © South-Western, a part of Cengage Learning

Strategy and Competitive Advantage Pursuing a set of unique activities that provide value to customers; making trade-offs about which businesses to pursue, what products to produce, and which customers to serve; and aligning resources to achieve organizational objectives Strategy A firm achieves a competitive advantage when it creates more economic value than competitors by engaging in a strategy that is difficult or impossible for others to duplicate Competitive advantage © South-Western, a part of Cengage Learning

Conglomeration Act of growing through unrelated diversification, essentially by acquiring companies in different industries © South-Western, a part of Cengage Learning

Strategy and the Organization: A Framework What is the purpose of our business? In what businesses or areas will we compete? Questions in the development of strategy How will environmental forces impact our firm? Who will we serve? What stakeholders are important? How to distinguish our firm from competitors? © South-Western, a part of Cengage Learning

Internal Environment Goal Core competencies An organizationally desired result, product, or end state Goal A network of unique activities that strategically fit together and are difficult to replicate Core competencies © South-Western, a part of Cengage Learning

Figure 4.2 - Strategic Framework © South-Western, a part of Cengage Learning

Vision, Mission, and Objectives A concept or picture of what a firm wants to achieve and how it plans to accomplish that Vision The activities a firm performs for its customers Mission A statement that defines a firm’s reason for existence Mission statement Series of quantifiable milestones or benchmarks by which a firm can assess its progress Objectives © South-Western, a part of Cengage Learning

Strategy Formulation Identifying how a firm can best align its resources to carve out a defensible position in the marketplace Development of strategy: Is the first step toward creating value for customers and achieving profitability Is both a planned and emergent and evolving process Is directed as a top-down process under the guidance of an upper management team lead by the CEO Does not always flow in a linear fashion due to the dynamic nature of the business environment Involves making a series of strategic choices © South-Western, a part of Cengage Learning

Operational Effectiveness Performing certain activities that enable a firm to operate more effectively than its competitors do © South-Western, a part of Cengage Learning

Steps in the Strategy Definition Process Choosing a set of activities Strategic position: A place in an industry that a firm occupies by way of the products or services it offers and the methods it chooses to deliver them Making trade-offs Return on equity (ROE): A measure of the rate of return on the ownership interest of the common stock owners Creating fit among activities Aligning activities to reinforce the differentiation of the firm’s products or services such that they cannot be easily copied by competitors © South-Western, a part of Cengage Learning

Figure 4.3 - Three Components of Strategy © South-Western, a part of Cengage Learning

Table 4.2 - Criteria for Evaluating the Quality of a Firm’s Strategy Source: Adapted from Donald C. Hambrick and James W. Fredrickson, “Are You Sure You Have a Strategy?” Academy ofManagement Executive, Vol. 15, No. 4, November 2001 © South-Western, a part of Cengage Learning

Business-Level versus Corporate-Level Strategy The determination of how a company will compete in a given business and position itself among its competitors Business-level strategy The way a company seeks to create value through the configuration and coordination of multimarket activities Corporate-level strategy © South-Western, a part of Cengage Learning

Figure 4.4 - Business-Level and Corporate-Level Strategy Source: Adapted from Robert M. Grant, Contemporary Strategy Analysis: Concepts, Techniques, Applications (Cambridge, MA: Blackwell Publishers, 1991), p.20. © South-Western, a part of Cengage Learning

Strategies for Going Global Strategies in which the parent company organizes local subsidiaries and gives them autonomy to develop products tailored to local tastes Multinational strategies Strategies that focus on developing overall scale economies and global efficiency instead of catering to local tastes Global strategies Strategies that combine elements of multinational and global strategies by using foreign subsidiaries to produce and distribute products International strategies Strategies that balance a firm’s international activities among efficiency, local responsiveness, and organizational learning Transnational strategies © South-Western, a part of Cengage Learning

Market Entry Strategies Shipping a firm’s products from its domestic home base to global markets Exporting A contractual arrangement whereby the licensor allows its technology, patents, trademarks, designs, processes, knowhow, intellectual property, or other proprietary advantages to be used for a fee by the licensee Licensing An arrangements which involves a corporation sharing management and marketing techniques with the owner in exchange for a fee and some percentage of the unit’s revenues Franchising © South-Western, a part of Cengage Learning

Market Entry Strategies A structure where two firms come together to form a new company in a market Joint venture A structure where partners come together by contract to engage jointly in activities in a market Alliances A fully operational, independent entity that a firm sets up in a foreign country to conduct business in that market Wholly owned subsidiary © South-Western, a part of Cengage Learning

KEY TERMS Alliances Business-level strategy Competitive advantage Conglomeration Core competencies Corporate-level strategy Exporting Franchising Global Strategies Goal International strategies Joint venture Licensing Mission Mission statement Multinational strategies Objectives Operational effectiveness Return on equity Strategic position Strategy Strategy formulation Transnational strategies Vision Wholly owned subsidiary © South-Western, a part of Cengage Learning