Strategy & Organization
Notes of the book
Chapter 1: Strategic management and strategic competitiveness
A strategy is an integrated and coordinated set of commitments and actions designed to
develop and exploit core competencies and gain a competitive advantage.
A firm has a competitive advantage when it implements a strategy that competitors are
unable to duplicate or find too costly to try to imitate.
No competitive advantage is permanent.
Above-average returns are returns that are higher than what an investor expects to earn
from other investments with a similar amount of risk.
Risk is an investor’s uncertainty about the economic gains or losses that will result from a
particular investment.
Firms without a competitive advantage or that are not competing in an attractive industry
earn, at best, average returns
Average returns are returns equal to those an investor expects to earn from other
investments with a similar amount of risk.
A global economy is one in which goods, services, people, skills and ideas move freely across
geographic borders.
Globalization is the increasing economic interdependence among countries and their
organizations as reflected in the flow of goods and services, financial capital and knowledge
across country borders.
20% of a firm’s profitability is explained by the industry in which it chooses to compete.
36% of the variance in firm profitability is attributed to the firm’s characteristics and actions.
Resource-based model:
The resource-based model assumes that each organization is a collection of unique
resources and capabilities. The uniqueness of its resources and capabilities is the base for a
firm’s strategy and its ability to earn above-average returns.
Resources are inputs into a firm’s production process, such as capital, equipment, the skills
of individual employees, patents, finances and talented managers.
Resources can be tangible or intangible.
Individual resources alone may not yield a competitive advantage. In fact, resources have a
greater likelihood of being a source of competitive advantage when they are formed into a
capability.
A capability is the capacity for a set of resources to perform a task or an activity in an
integrative manner.
, Core competencies are capabilities that serve as a source of competitive advantage for a
firm over its rivals.
The resource-based model assumes that the differences in resources and capabilities are
the basis of competitive advantages.
Not all of a firm’s resources and capabilities have the potential to be the foundation for a
competitive advantage. This potential is realized when resources and capabilities are
valuable, rare, inimitable and non-substitutable
Resources are valuable: when they allow a firm to take advantage of opportunities or
neutralize threats in its external environment.
Resources are rare: when possessed by few, if any, current and potential competitors.
Resources are costly to imitate: when other firms either cannot obtain them or are at a cost
disadvantage in obtaining them compared with the firm that already possesses them.
Resources are non-substitutable: when they gave no structural equivalents.
Many resources can either be imitated or substituted over time. Therefore, it is difficult to
achieve and sustain a competitive advantage based on resources alone. When these four
criteria are met, however, resources and capabilities core competencies.
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to
ultimately achieve.
A mission specifies the business or businesses in which the firm intends to compete and the
customers it intends to serve.
Stakeholders are the individuals and groups who can affect the firm’s vision and mission, are
affected by the strategic outcomes the firm achieves through its operations and who have
enforceable claims on the firm’s performance.
Strategic leaders are people located in different parts of the firm using the strategic
management process to help the firm reach its vision and mission.
Organizational culture refers to the complex set of ideologies, symbols and core values that
are shared throughout the firm and that influence how the firm conducts business.
A profit pool entails the total profits earned in an industry at all points along the value chain.
Notes of the book
Chapter 1: Strategic management and strategic competitiveness
A strategy is an integrated and coordinated set of commitments and actions designed to
develop and exploit core competencies and gain a competitive advantage.
A firm has a competitive advantage when it implements a strategy that competitors are
unable to duplicate or find too costly to try to imitate.
No competitive advantage is permanent.
Above-average returns are returns that are higher than what an investor expects to earn
from other investments with a similar amount of risk.
Risk is an investor’s uncertainty about the economic gains or losses that will result from a
particular investment.
Firms without a competitive advantage or that are not competing in an attractive industry
earn, at best, average returns
Average returns are returns equal to those an investor expects to earn from other
investments with a similar amount of risk.
A global economy is one in which goods, services, people, skills and ideas move freely across
geographic borders.
Globalization is the increasing economic interdependence among countries and their
organizations as reflected in the flow of goods and services, financial capital and knowledge
across country borders.
20% of a firm’s profitability is explained by the industry in which it chooses to compete.
36% of the variance in firm profitability is attributed to the firm’s characteristics and actions.
Resource-based model:
The resource-based model assumes that each organization is a collection of unique
resources and capabilities. The uniqueness of its resources and capabilities is the base for a
firm’s strategy and its ability to earn above-average returns.
Resources are inputs into a firm’s production process, such as capital, equipment, the skills
of individual employees, patents, finances and talented managers.
Resources can be tangible or intangible.
Individual resources alone may not yield a competitive advantage. In fact, resources have a
greater likelihood of being a source of competitive advantage when they are formed into a
capability.
A capability is the capacity for a set of resources to perform a task or an activity in an
integrative manner.
, Core competencies are capabilities that serve as a source of competitive advantage for a
firm over its rivals.
The resource-based model assumes that the differences in resources and capabilities are
the basis of competitive advantages.
Not all of a firm’s resources and capabilities have the potential to be the foundation for a
competitive advantage. This potential is realized when resources and capabilities are
valuable, rare, inimitable and non-substitutable
Resources are valuable: when they allow a firm to take advantage of opportunities or
neutralize threats in its external environment.
Resources are rare: when possessed by few, if any, current and potential competitors.
Resources are costly to imitate: when other firms either cannot obtain them or are at a cost
disadvantage in obtaining them compared with the firm that already possesses them.
Resources are non-substitutable: when they gave no structural equivalents.
Many resources can either be imitated or substituted over time. Therefore, it is difficult to
achieve and sustain a competitive advantage based on resources alone. When these four
criteria are met, however, resources and capabilities core competencies.
Vision is a picture of what the firm wants to be and, in broad terms, what it wants to
ultimately achieve.
A mission specifies the business or businesses in which the firm intends to compete and the
customers it intends to serve.
Stakeholders are the individuals and groups who can affect the firm’s vision and mission, are
affected by the strategic outcomes the firm achieves through its operations and who have
enforceable claims on the firm’s performance.
Strategic leaders are people located in different parts of the firm using the strategic
management process to help the firm reach its vision and mission.
Organizational culture refers to the complex set of ideologies, symbols and core values that
are shared throughout the firm and that influence how the firm conducts business.
A profit pool entails the total profits earned in an industry at all points along the value chain.
