BUS-J 306 1st EditionExam # 1 Study GuideBARNEY AND HESTERLY BOOK (STRATEGIC MANAGEMENT AND COMPETITIVE ADVANTAGE)Chapter 1:Responsible for:- Strategy and the strategic Management Process-Strategy: Its theory about how to gain competitive advantages. -Good strategy: A strategy that actually generates such advantages -Strategic management process: A sequential set of analyses and choices that can increase the likelihood that firm will choose a good strategy, a strategy that generates competitive advantages-A firm’s mission: its long-term purpose-Visionary firms: firms whose mission is central to all they do have enjoyed long periods of high performance. - What is competitive advantage-A firm has competitive advantage when it is able to create more economic value than rival firms.- Figure 1.3Chapter 2:Responsible for- Understanding the Firm’s General Environment-This general environment consists of broad trends in the context within which a firm operates can have an impact on a firm’s strategic choices (6)1. Demographics: The distribution of individuals in a society in terms of age, sex, marital status, income ethnicity, and other personal attributes that may determine buying patterns2. Culture: The values,beliefs, and norms that guide behavior in a society3. Economic climate: The overall health of the economic systems within which a firm operates4. Legal and political conditions5. Specific international events6. Technological change- The Five Forces Model of Environmental Threats (use this to supplement reading in the Magretta book) 1. Threat of supplier leverage2. Threat from superior or lower-cost substitute products3. Threat from competition among existing companies4. Threat from new competition5. Threat from buyers influence - Industry Structure and Environmental OpportunityMature industries include: slowing growth in total industry demand, the development ofexperienced repeat customers, a slowdown in increases in production capacity, a slow-down in the introduction of new products or services, an increase in the amount of international competition, and an overall reduction in the profitability of firms in the industry. -Opportunities:1. Process innovation: is a firms effort to refine and improve its current processes.2. Product Refinement3. Emphasis on service Chapter 3: Responsible for:- The Resource-based View of the Firm-RBS is a model of firm performance that focuses on the resources and capabilities controlled by a firm as sources of competitive advantage - The VRIO Framework-Stands for four questions one must ask about a resource or capability to determine its competitive advantage1. The questions of Value: Do resources and capabilities enable a firm to exploit an external opportunity or neutralize an external threat?2. Rarity: How many competing firms already posse’s particular valuable resources and capabilities? 3. Imitability: Do firms without a resource or capability face a cost disadvantage in obtaining or developing it compared to firms that already posses it? 4. Organization: Is a firm organized to exploit the full competitive potential of its resources and capabilities? - Applying VRIO-These questions can be brought together into a single framework to understand the return potential associated with exploiting any of a firm’s resources and capabilities-Use VRIO to relate to strengths and weaknesses- Implications of the resource-based view1. The responsibility for competitive advantage in a firm is every employee’s responsibility2. Competitive parity and competitive advantage: It is better for a firm to exploit its own valuable, rare, and costly-to-imitate resources than to imitate the valuable and rare resources of a competitor3. Difficult to implement strategies4. Socially complex resources5. The role of organization: should support the use of valuable, rare, and costly-to-imitate resoucesChapter 4:Responsible for:- What is business-level strategy?-Actions firms take to gain competitive advantages in a single market or industry- What is cost leadership?-Focuses on gaining advantages by reducing its costs to below those of all its competitors- The value of cost leadership-Helps to reduce the threat of new entrants by creating cost-based barriers to entry-Helps to reduce threat of suppliers and buyers Chapter 5:Responsible for:- What is product differentiation-A business strategy where firms attempt to gain a competitive advantage by increasing the perceived value of their products or services relative to the perceived value of their products or service - Bases of Product differentiation-To create the perception that a firms products or services are unusually valuable1. Product features2. Product complexity3. Timing and product introduction4. Location5. Product customization6. Consumer marketing7. Product reputation8. Linkages among functions within a firm9. Linkages with other firms10. Product mix11. Distribution channels12. Service and support- Value of Product differentiation-Helps to reduce the threat of rivalry, threat of substitutes, threat of powerful suppliers and reduce the threat of powerful buyers-Help take advantage of environmental opportunities - Can firms implement product differentiation and cost leadership simultaneously?-Cannot be implemented simultaneously -If implement both, will be “stuck in the middle:MAGRETTA BOOK (UNDERSTANDING MICHAEL PORTER)Chapter 1 Responsible for:- Competition, the right mindset-Strategy is one of the most dangerous concepts in business -Strategy is a good competitive strategy that will result in sustainably superior performance -Strategy explains how an organization, faces with competition, will achieve superior performance - Why not the best?-Competition to be the best is the wrong way to think about competition-In the vast majority of businesses, there is simply no such thing as “the best”-If rivals all pursue the “one best way” to compete, they will find themselves on a collision course, it is an impossible goal- Competition to be unique-Companies should compete to be unique -All about value of product -Strategic competition means choosing a path different from that of others - Figure 1-1: The right mindset for competition (be the best vs be unique)Chapter 2 Responsible for:- The five forces; see also figure 2-11. Buyers -Powerful buyers will force prices down or demand more value in the product, thus capturing more of the value for