MGT 400 Exam 1 Study Guide

Chapter 1: What is Strategy and why is it important?
What is Competitive Advantage?
Competitive advantage. It is a superior performance relative to other competitors in the same industry or the industry average.
Sustainable - competitive advantage. When a company is able to outperform its competitors or the industry average over a prolonged period of time.
Competitive disadvantage Underperformance relative to other competitors in the same industry or the industry average.
Competitive Parity Performance of two or more firms at the same level.
The firm that possesses competitive advantage provides superior value to customers at a competitive price or acceptable value at a lower price.
What is strategy?
Strategy describes the goal – directed actions a firm intends to take in its quest to gain and sustain competitive advantage.
Strategy is about creating superior value, while containing the cost to create it.
Strategy is not a zero-sum game. It is not always the case that one party wins while all others lose. Win- win scenarios: when competitors cooperate, occasionally, with one another to achieve strategic objectives, we call this co-opetition.
Strategic positioning is staking out a unique position in an industry that allows the firm to provide value to customers, while controlling costs.
Strategy as a Theory of How to Compete. It provides managers with a roadmap to navigate the competitive territory. A firm´s strategy can be seen as its managers’ theory about how to gain and sustain competitive advantage. (A theory answers the questions, what causes what and why?) These theories have to reflect reality.
The strategic management process, therefore, is a never-ending cycle of analysis, formulation, implementation and feedback. * It is the managers´ theories about how to gain and sustain competitive advantage. * It is