Which of the following are required for a firm to achieve strategic competitiveness and earn above

Glossary Chapter 1 Above-average returns Above-average returns are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Average returns Average returns are returns equal to those an investor expects to earn from other investments with a similar amount of risk. Capability A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. Competitive advantage A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. Core competencies Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. Disruptive technologies Disruptive technologies can destroy the value of an existing technology and create new markets. Global economy A global economy is one in which goods, services, people, skills and ideas move freely across geographic borders. Globalization 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. Knowledge Knowledge (information, intelligence, and expertise) is gained through experience, observation and inference. Mission A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. Organizational culture 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. Perpetual innovation Perpetual innovation describes how rapidly and consistently new information-intensive technologies replace older ones. Profit pool A profit pool entails the total profits earned in an industry at all points along the value chain. Resources Resources are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers. Risk Risk is an investor’s uncertainty about the economic gains or losses that will result from a particular investment. Stakeholders 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 competitiveness Strategic competitiveness is achieved when a firm successfully formulates and implements a value-creating strategy. Strategic flexibility Strategic flexibility is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment. Strategic leaders 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. Strategic management process The strategic management process is the full set of commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above-average returns. Strategy A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. Technology diffusion Technology diffusion is the rate at which new technologies become available and are used. Vision Vision is a picture of what the firm wants to be and, in broad terms, what it wants to ultimately achieve.

A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two variants, cost focus and differentiation focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.

2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

References

• Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York.

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Which of the following are required for a firm to achieve strategic competitiveness and earn above

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