Definitions of Terms for Chapter 1

Strategic Competitiveness- it is achieved when a firm successfully formulates and implements a value
creating strategy.

Strategy- is an integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage.

Competitive Advantage- when a firm implements a strategy that creates superior value for customers
and that its competitors are unable to duplicate or find too costly to imitate.

Above-average returns-are returns in excess of what an investor expects to earn from other investments
with a similar amount of risk.

Risk-is an investor’s uncertainty about the economic gains or losses that will result from a particular
investment.

Average returns – are returns equal to those an investor expects to earn form other investment with a
similar amount of risk.

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.

Hypercompetition-describes competition that is excessive such that it creates inherent instability and
necessitates constant disruptive change for firms in the competitive landscape.

Global economy-is one in which goods, services, people, skills, and ideas move freely across geographic
borders.

Globalization- is the increasing economic interdependence among countries and their organizations as
reflected in the flow of goods and services.

Perpetual Innovation- is a term used to describe how rapidly and consistently new, information-
intensive technologies replace older ones.

Strategic Flexibility-is a set of capabilities used to respond to various demands and opportunities existing
in a dynamic and uncertain competitive environment.

I/O Model-explains the external environment dominant influence on a firm’s strategic actions.

Resources- are inputs into a firm’s production process, such as capital equipment, the skills of individual
and employees, patents, finances, and talented managers.

Capability- is the capacity for a set of resources to perform a task or an activity in an integrative manner.

Core Competencies- are capabilities that serve as a source of competitive advantage for a firm over its
rivals.

Resource-Based Model- assumes that each organization is a collection of unique resources and
capabilities.
Knowledge-( information, intelligence, and expertise) is the basis of technology and its application.

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.

Strategic leaders-are people located in different areas and levels of the firm using the strategic
management process to select strategic actions that help the firm achieve its vision and fulfill its
mission.