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Chapter 1 & 2 Textbook Notes

by: Audrey Broussard

Chapter 1 & 2 Textbook Notes ISDS 3115

Audrey Broussard
GPA 3.64

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About this Document

Textbook notes on chapters 1 & 2 including some graphs
International Operations Management
Strategic, Mangement
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This 14 page Bundle was uploaded by Audrey Broussard on Wednesday September 7, 2016. The Bundle belongs to ISDS 3115 at Louisiana State University taught by Kelle in Fall 2016. Since its upload, it has received 11 views. For similar materials see International Operations Management in Information System & Decision Sciences at Louisiana State University.

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Date Created: 09/07/16
MGT 3830 Chapter 1 CHAPTER 1: WHAT IS STRATEGY? Outline: 1.1- What strategy is: Gaining & Sustaining Competitive Advantage § What is competitive advantage? § Industry vs. firm effects determining performance 1.2- Stakeholders & Competitive Advantage § Stakeholder strategy § Stakeholder impact analysis 1.3- The AFI Strategy Framework 1.4- Implications for the Strategist Learning Objectives: 1.1- Explain the role of strategy in a firm’s quest for competitive advantage 1.2- Define competitive advantage, sustainable competitive advantage, competitive disadvantage, & competitive parity 1.3- Differentiate the roles of firm effects in industry effects in determining performance 1.4- Evaluate the relationship between stakeholder strategy & sustainable competitive advantage 1.5- Conduct a stakeholder impact analysis Strategic Management: integrated field combining analysis, formulation, and implementation in the quest for competitive advantage, enabling you to view the firm in entirety, think like a general manager, & position the firm for superior performance 1.1 What Strategy Is: Gaining & Sustaining Competitive Advantage Strategy: set of goal-directed actions a firm takes to gain & sustain superior performance relative to competitors § Compete for resources (new: financial & human capital old: profit growth) § Good strategy has 3 elements 1. Diagnosis of competitive advantage 2. Guiding policy to address competitive advantage 3. Set of coherent actions to implement competitive advantage MGT 3830 Chapter 1 The Competitive Challenge § Clear & critical diagnosis of competitive challenge o Example: Twitter needs to become more critical & informative to advertisers & less niche-like A Guiding Policy § Formulate an effective guiding policy in response, consistent & backed up to strategic commitments like investment or changes to incentives o If not consistent, employees do not make daily decisions well & stakeholders become frustrated Coherent Actions § Clear guiding policy of coherent actions prevent consequence of confusion & employee turnover What is Competitive Advantage? § Always relative, not absolute § Assessed by comparing performance benchmark Competitive advantage: superior performance relative to other competitors of the same industry Sustainable competitive advantage: outperforming competitors or the industry average over a prolonged period of time Competitive disadvantage: underperformance relative to other competitors in the same industry Competitive parity: performance of 2+ firms at the same level § Firm needs to provide goods & services highly valued or lower priced than competitors § For successful entrepreneurs, shareholder value & profit are consequences of valuable goods & services § Strategy is about creating superior value at controlled cost o “Strategic positioning” o Greater difference between value & cost = greater “economic contribution” o Leadership & product differentiation MGT 3830 Chapter 1 o Tradeoffs mean must decide what not to do § Successful strategy combine key activities for unique position § Strategy is NOT 1. Grandiose statement of desire 2. Failure to face competitive challenge 3. Operational effectiveness, benchmarking, tactics Industry vs. Firm Effects Determining Performance Industry effects: firm performance due to structure of industry Firm effects: firm performance due to actions of managers § Industry effects include barriers to entry & exit, number & size of companies, types of goods & services o 20% of profitability due to industry o firm effects contribute to 55% of profitability Other 25% Firm Industry 55% 20% 1.2 Stakeholders & Competitive Advantage § Good strategy generates value of society o Provide goods & services at practical price & profitability § Value creation foundation for benefits of successful economy § Strategic failures is expensive Black Swan event: highly improbable but high-impact event § Implicit trust relationship between corporations & society o ENRON, global recession of 2008 o Occupy Wall Street overcome income disparate, ethics, ecology 1. Managerial actions affect economic well-being globally 2. Stakeholders are affected by a firm’s actions MGT 3830 Chapter 1 Stakeholders: organizations, groups, & individuals that can affect or are affected by a firm’s actions Stakeholder Strategy § Vested claim & interest in continued performance of firm o Internal: stockholders, employees, board members o External: customers, suppliers, partners, community, government, media, etc. § Exchange relationships with stakeholders Stakeholder strategy: integrative approach to managing a diverse set of stakeholders effectively in order to gain & sustain a competitive advantage § Analyze & manage how various stakeholders interact to jointly create & trade value § Benefits for performance o Cooperative, share information o Increased trust & lowered cost o Organizational adaptability & flexibility o Negative outcomes reduced, predictability increased o Rewarding & strong reputations Stakeholder Impact Analysis § Effectively balance the needs Stakeholder impact analysis: decision tool with which managers can recognize, prioritize, & address the needs of different stakeholders, enabling the firm to achieve competitive advantage while acting as a good corporate citizen § 5 step process of 3 attributes (power, legitimate, urgency) 1. Power over company to do something normally would not 2. Legitimate claim when legally valid or appropriate 3. Urgent claim requiring immediate response Corporate social responsibility: a framework that helps a firm recognize & address the economic, legal, social, & philanthropic expectations that society has of the business enterprise at a given point MGT 3830 Chapter 1 1. Who are our stakeholders? 2. What are their interests & claims? 3. Opportunities & threats? 4. STEEP responsibilities? 5. Address concerns? 1.3 The AFI Strategy Framework § Highly interdependent & occur simultaneously 1. Explains & predicts differences in performance 2. Helps managers formulate & implement a strategy for superior performance Getting Started Implementation External & Internal Analysis Gaining & sustaining a Advantageve Corporate Business Strategy Strategy MGT 3830 Chapter 1 Part 1: Analysis § What is strategy? § Strategic Leadership: managing the process § External: industry structure, competitive forces, strategic groups § Internal: resources, capabilities, core competencies § Competitive advantage, firm performance, business models Top Questions: • What role do strategic leaders play? • What are the firm’s mission, vision, & values? • What is the firm’s process for creating strategy? • What effects to external forces have on the firm’s potential to gain & sustain a competitive advantage? • How does the firm make money? How can one assess & measure the competitive advantage? What is the relationship between advantage & firm performance? Part 2: Formulation § Differentiation, cost leadership, blue oceans § Innovation & entrepreneurship § Vertical integration & diversification § Strategic alliances, mergers, acquisitions § Globally competing Top Questions: • How should the firm compete? • Where should the firm compete? Part 3: Implementation § Organization design, structure, control § Corporate culture, governance, business ethics Top Questions: • What will be the organizational design? • What are the corporate governances & business ethics? MGT 3830 Chapter 1 1.4 Implications for the Strategist § Strategy is the art & science of success & failure § Appreciate the fact that competition is everywhere § Empowering the actions that influence performance § Making decisions under complexity & uncertainty MGT 3830 Chapter 2 CHAPTER 2: STRATEGIC LEADERSHIP – MANAGING THE PROCESS Outline: 2.1- Visions, missions, & values 2.2- Strategic Leadership § What do strategic leaders do? § How do you become a strategic leader? § Formulating the strategy across levels 2.3- The Strategic Management Process § Top-down strategic planning § Scenario planning § Strategy as planned emergence: top-down & bottom-up 1.4- Implications for the Strategist Learning Objectives: 2.1 Describe the roles of vision, mission, & value in the strategic management process 2.2 Evaluate the strategic implications of product-oriented & customer-oriented visions 2.3Explain why anchoring a firm in ethical core values is essential for long term success 2.4Outline how managers become strategic leaders 2.5Describe the roles of corporate, business, & functional managers in strategic formulation 2.6 Evaluate top-down strategic planning & strategy as planned emergence 2.1 What Strategy Is: Gaining & Sustaining Competitive Advantage Strategic management process: method put in place by strategic leaders to formulate & implement a strategy, which can lay the foundation for a sustainable competitive advantage Strategic leadership: Executive’s use of power & influence to direct the activities of others when pursuing an organization’s goals Vision: what do we ultimately want to accomplish? Mission: how will we accomplish our goals? MGT 3830 Chapter 2 Values: what commitments do we make & what guardrails do we put in place to act both legally & ethically as we pursue our vision & mission? Vision Vision: statement about what an organization ultimately wants to accomplish, capturing the companies aspirations § Motivate employees to aim for the same target, find meaning in work § Learning from mistake, create stretch goal or “strategic intent” § Visionary companies often outperform competitors in long run § People need to find meaning in work because of more hours Mission Mission: description of what an organization actually does – products & services to sell & markets in which to compete Strategic commitments: actions to achieve the mission that are costly, long term oriented, & difficult to reverse § “put your money where your mouth is” Values Core value statements: statement of principles to guide an organization as it works to achieve its vision & fulfill its mission, for both internal conduct & external interactions; often includes explicit ethical considerations § Touchstone for employees to understand company culture § Provide employees with moral compass to help restore conflict § Customer-oriented statements allow companies to adapt to changing environments § Product-oriented statements constrain adaptability o Employees problem solve for customer Product-Oriented Vision Statement § Myopic view of competitive landscape Customer-Oriented Vision Statement § Identify a critical need but leave open means on how to meet need Moving from product to customer oriented vision statement § Sometimes edit vision statement after achieving transformation o Product oriented vision statement & performance not related MGT 3830 Chapter 2 § If vision is customer oriented, internal stakeholders invested in the vision, or organizational structure aligned to vision, then statement & performance are related Organizational Core Values: ethical standards & norms that govern the behavior of individuals within a firm or organization 1. Form solid foundation on which a firm can build its vision & mission, laying groundwork for success 2. Serve as guardrails for staying on track § Without commitment & involvement from top management, statements remain PR exercise o Lived & demonstrated with integrity 2.2 Strategic Leadership § Why can some leaders create great companies or manage them to greatness while others lead them to decline or demise? What do strategic leaders do? Other Phone Calls 7% 6% Emails 7% Working Alone Meetings 13% 67% How do you become a strategic leader? Upper echelon theory: conceptual framework that views organizational outcomes – strategic choices & performance levels – as reflections of the values of the members of the top management team MGT 3830 Chapter 2 § Leadership actions reflect characteristics like age, education, experiences § Strong leadership is the result of innate abilities & learning Level 5 leadership pyramid: conceptual framework of leadership progression with 5 distinct & sequential levels 5. Executive 4. Effective Leader 3. Competent Manager 2. Contributing Team Member 1. Highly Capable Indiviual 1. Productive contribution, motivation, talent, knowledge & skill 2. Use capability to work with others & achieve team objectives 3. Efficient & effective in organizing resources to accomplish goals. Does Right 4. Present compelling vision & mission to guide group toward superior performance. Does Right. 5. Builds enduring greatness through willpower & humility. Formulating Strategy Across Levels:Corporate, Business, Functional § Top management team primarily determines a firm’s ability to gain & sustain a competitive advantage through pursued strategy Strategic Formulation: concerns the choice of strategic in terms of where & how to compete Strategic Implementation: concerns the organization, coordination & integration of how work gets done “execution of strategy” MGT 3830 Chapter 2 1. Corporate strategy: where to compete in terms of industry, markets, & geography 2. Business strategy: how to compete with cost differentiation or value 3. Functional strategy: how to implement chosen strategy § Corporate executives allocate resources, set overarching strategic objectives, monitor performance, & make adjustments Strategic business units (SBUs): stand alone division of a larger conglomerate with its own profit & loss responsibility § Within each SBU is different functions (accounting, finance, HR, etc) Native advertising: online ads attempting to present as natural occurring & not search driven 2.3 The AFI Strategy Framework 1. Strategic planning 2. Scenario planning 3. Strategy as planned emergence Top-down Strategic Planning Top-down strategic planning: rational data driven strategy process through which top management attempts to program future success § Tie allocation of annual corporate budget to strategic plan & monitor ongoing performance § Rest on assumption that we can predict the future from the past o Works well if environment does not change § Shortcomings: formulation separate from implementation, info flows one way, not know the future, vision can be wrong Scenario Planning § Contingency plans to address wide range of situations Scenario planning: strategic planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic response § AFI elements in a continuous loop § Goal is to create multiple executable plans MGT 3830 Chapter 2 1. What resources & capabilities do we need to compete in each scenario? 2. What strategic initiative should we put in place to respond to each scenario? 3. How can we shape our expected future environment? § Build portfolio of different options & further integrate information Dominant strategic plan: strategic option top managers decide mostly matches the current reality & is then executed § Performance feedback help determine if modification is necessary Strategy as Planned Emergency Top-down & Bottom-up Illusion of control: tendency by people to overestimate their ability to control events § Strategy should be based on inspiring vision & hard data § Front-line employees have unique insight because customer interactions Analysis Formulation Intended, top-down strategy Implementation Unrealized strategy Realized strategy Bottom-up emergent autonomous actions, serendipity, source allocation Intended strategy: outcome of rational & structured top-down strategic plan Realized strategy: combination of intended & emergent strategy Emergent strategy: any unplanned strategic initiative bubbling up from the bottom of the organization MGT 3830 Chapter 2 Strategic initiative: any activity a firm pursues to explore & develop new products & processes, markets, or ventures 1. Autonomous actions: strategic initiatives undertaken by lower-level employees on their own volition & often in response to unexpected situations 2. Serendipity: any random event, pleasant surprise, & accidental happenstance that can have a profound impact on a firm’s strategic initiatives 3. Resource-allocation process (RAP): the way a firm allocates its resources based on predetermined policies, which can be critical in shaping its realized strategy Planned emergence: strategy process in which organizational structure & systems allow bottom-up strategic initiatives to emerge & be evaluated & coordinated by top management 2.4 Implications for the Strategist § Need inspiring vision & mission backed by ethical values o Customer-oriented/problem-defining vision statements correlated with long-term success § Implement effect strategic management processes § Employee involvement create meaningful work


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