SI 422QST SI422 Miterm Study Guide. Strategy Midterm Study Guide

Lecture 1:  Focus on strategy rather than management or tactics  Lesson from Taxi/Coffee Case o No mater how “hard working” some employees are, they will find it hard to make profits because their industries are extremely competitive o Industry affiliation has a substantial impact on firm profitability  Supermarkets have historically low profits  Pharmaceutical companies have high profits  result of economies of those industries  Lesson from Soccer/Zappos Case o Demonstrate the impact of Strategy at the firm level within a difficult competitive environment  Within a particular competitive environment (or industry), Strategy can affect a firm’s performance relative to its rivals  An effective Strategy requires trade-offs Porterian View:  Operational Effectiveness – refers to the extent to which a firm performs similar activities better than rivals (or “at least as good”) o The important sources of differences in profits o Productivity frontier shifts outward as new inputs, technologies, and management approaches become available o Constant improvement in OE is necessary to stay ahead of the competition o Necessary but not sufficient for long-run competitive advantag  Strategy – refers to performing different activities from those of rivals or performing them in a different way o Chose the right configuration of activities incentives, systems o Make the right trade-offs o Rests on unique activities  Ultimately, Porter believes that firms can achieve competitive advantage only if they have both operational effectiveness and superior strategy  What is Strategy: Exists as a field of research and practice o In practice  the goal is to enable organizations to achieve the greatest organizational performance o In research  the goal is to understand what are the determinants of long-term organizational performance Lecture 2:  Strategic Activities Map – a picture that identifies the key activities of a firm and identifies the linkages between them (via lines)  Different industries have different profitability ROE  good to compare firms in the same industry  ROS  how well is a company getting from its sales (good for retail)  ROE  good for comparing firms with the same capital structure