Strategic Management and Strategic Competitiveness

1. Define strategic competitiveness and above-average returns. What is the relationship between strategic competitiveness and returns on investment?

ANS:

Strategic competitiveness is achieved when the firm successfully formulates and implements a value-creating strategy. Above-average returns are returns in excess of what investors expect to earn from other investments with similar risk levels. Firms will only be able to earn above-average returns if they develop a competitive advantage. Competitive advantage derives from a strategy that competitors cannot duplicate or find too costly to imitate.

PTS: 1 DIF: Medium REF: 4-5 OBJ: 01-01

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Creation of Value | Dierdorff & Rubin: Strategic & systems skills

2. Hypercompetition is a characteristic of the current competitive landscape. Define hypercompetition and identify its primary drivers. How can organizations survive in a hypercompetitive environment?

ANS:

Hypercompetition is a condition of rapidly escalating competition based on price-quality positioning, competition to create new knowledge and establish first-mover advantage, and competition to protect or invade established product or geographic markets. In hypercompetition, firms aggressively challenge their competitors. Markets are assumed to be inherently unstable and changeable. The two primary drivers of hypercompetition are the global economy and rapid technological change. To survive in a hypercompetitive environment firms need strategic flexibility. This demands continuous learning which allows the firm to develop new skills so that they can adapt to the changing environment and to consistently engage in change.

PTS: 1 DIF: Hard REF: 9 OBJ: 01-02

NOT: AACSB: Business Knowledge & Analytical Skills | Management: Environmental Influence | Dierdorff & Rubin: Managing the task environment

3. Describe the industrial organization (I/O) model of above-average returns. What are its main assumptions? What is the key to success according to the I/O model?

ANS:

The I/O model of above-average returns argues that the external environment is the primary determinant of firm success, rather than the firm’s internal resources. The model has four underlying assumptions. First, the external environment is assumed to impose pressures and constraints that determine the strategies that would result in above-average returns. Second, most firms competing within a particular industry, or in a certain segment of the industry, are assumed to control similar strategically relevant resources and pursue similar strategies