A set of related actions that managers take to increase their company’s performance.

Creating competitive advantage through effective management of the strategy-making process.

Selecting strategies based on analysis of an organization’s external and internal environment.

Putting strategies into action.

Equity capital invested with no guarantee that stockholders will recoup their cash or earn a decent return.

Returns that shareholders earn from purchasing shares in a company.

The return a company makes on the capital invested in the enterprise.

The increase in net profit over time.

The achieved advantage over rivals when a company’s profitability is greater than the average profitability of firms in its industry.

A company’s strategies enable it to maintain above-average profitability for a number of years.

The conception of how strategies should work together as a whole to enabl the company to achieve competitive advantage.

Managers who bear responsibility for the overall performance of the company or for one of its major self-contained subunits or divisions.

Managers responsible for supervising a particular function, that is, a task, activity, or operation, such as accounting, marketing, research and development (R&D), information technology, or logistics.

A company that competes in several different businesses and has created a separate, self-contained division to manage each.

A self-contained division that provides a product or service for a particular market.

The purpose of the company, or a statement of what the company strives to do.

The articulation of a company’s desired achievements or future state.

A statement of how employees should conduct themselves and their business to help achieve the company mission.

The comparison of strengths, weaknesses, opportunities, and threats.

Formulating plans that are based upon “what-if” scenarios about the future.

Systematic errors in decision making that arise from the way people process information.

A cognitive bias that occurs when decision makers who have strong prior beliefs tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong.

A cognitive bias that occurs when decision makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project is failing.

Use of simple analogies to make sense out of complex problems.

A bias rooted in the tendency to generalize from a small sample or even a single ,vivid anecdote.

A cognitive bias rooted in the tendency to overestimate one’s ability to control events.

A bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine.

A technique in which one member of a decision- making team identifies all the considerations that might make a proposal unacceptable.

The generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.

Identification of past successful or failed strategic initiatives to determine whether those initiatives will work for project at hand.

Effectiveness of Strategies

-> Profitability (ROIC)

-> Profit Growth

                                  -> Shareholder Value

• Corporate Level -> Head Office
• Business Level -> Division A, B, C
• Functional Level ->Business Functions

Markets A, B, C

1. Select the corporate mission and major corporate goals.

2. Analyze the organization’s external competitive environment to identify opportunities and threats.

3. Analyze the organization’s internal operating environment to identify the organization’s strengths and weaknesses.

4. Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organization. They should be congruent and constitute a viable business model.

5. Implement the strategies.

• They are precise and measurable. Measurable goals give managers a yardstick or standard against which they can judge their performance.

• They address crucial issues. To maintain focus, managers should select a limited number of major goals to assess the performance of the company. The goals that are selected should be crucial or important ones.

• They are challenging but realistic. They give all employees an incentive to look for ways of improving the operations of an organization. If a goal is unrealistic in the challenges it poses, employees may give up; a goal that is too easy may fail to motivate managers and other employees.

• They specify a time period in which the goals should be achieved, when that is appropriate. Time constraints tell employees that success requires a goal to be at- tained by a given date, not after that date. Deadlines can inject a sense of urgency into goal attainment and act as a motivator. However, not all goals require time constraints.

directed at improving the efficiency and effectiveness of operations within a company, such as manufacturing, marketing, materials management, product development, and customer service. 

encompass the business’s overall competitive theme, the way it positions itself in the marketplace to gain a competitive advantage, and the different positioning strategies that can be used in different industry settings— for example, cost leadership, differentiation, focusing on a particular niche or segment of the industry, or some combination of these. 

Address how to expand operations outside the home country in order to grow and prosper in a world where competitive advantage is determined at a global level. 

Answer the primary questions: What business or businesses should we be in to maximize the long-run profitability and profit growth of the organization, and how should we enter and increase our presence in these businesses to gain a competitive advantage?