BUSI 4940: Chapter one summaryChapter one is titled ‘strategic management: creating competitive advantages’. The chapter begins by posing a fundamental question in how much credit or blame does a leader deserve? The chapter focusses on answering the question by highlighting on two perspectives of leadership. The first one is the romantic view whereby the leader is the driving force behind an organization, for instance, Steve jobs in apple and secondly, the external control perspective that cites external forces as determinants towards a company’s success, for instance, economic downturns. Leadership makes a difference in any company in that proactive ones constantly make changes in their company’s strategies that give their companies an edge compared to other companies. Another aspect of a leader who makes a difference is one that understands the company’s resources and capabilities. A thorough understanding of strategic management is also crucial to any leader.

Another concept discussed in the chapter is the definition of strategic management. Strategic management is classified into three levels: Analysis, formulation and the implementation. To come up with a strategic plan, a company’s leader should consider the competitive advantage that is both unique and valuable which cannot be copied by the competition. Also, key aspects in the company should be considered to ensure the success of a strategic plan such as the company’s goals, short term and long term perspectives as well as understanding what the company has to give up to ensure efficiency and effectiveness. However, the business environment is unpredictable in such a way that a company may make an intended strategy, but due to the business environment, they end up adopting an alternative approach.

Another concept introduced in the chapter is on corporate governance and stakeholder management. Corporate governance is the relationship among the various participants who determine the direction in which a company moves. Stakeholder management is viewed as zero-sum, where stakeholders compete for attention and as symbiosis where stakeholders receive mutual benefits.

BUSI 4940: Chapter two summary

Chapter 2 is titled “analyzing the external environment of a firm: creating competitive advantages.” The main concept introduced in the chapter is the analysis of the external environment of a firm. A firm that does not keep up with its external environment finds itself losing a competitive advantage, therefore creating an environmentally aware organization is crucial. The process of doing so is first doing an environmental scan, then monitoring the environment and finally gathering competitive advantage. When armed with these tools, a firm can be able to make forecasts of its external environment. Another way of keeping up with the external environment is the use of scenario analysis which involves the detailed assessment of the ways trends may affect an issue and lead to development of alternative futures. In order to get a snapshot of how a company is doing, a SWOT analysis is used. A SWOT analysis looks at the Strength, Weakness, Opportunities and Threats affecting a firm. A company needs to be aware of its strengths and the opportunities available to it as well as observing the weakness the company has and the threats that may affect it in the external environment.

The external environment has factors that are difficult to control, for instance, the political and economic aspects. One of the aspects of an external environment is the threats of new entrants in the companies industry. New entrants usually bring with them new ideas that are attractive to the customer base. For a company to be successful, they need to be aware of the threats and react accordingly to continue being competitive in its market segment. Other external factors that may affect the firm are the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services; the intensity of rivalry among competitors in the industry as well as how the internet and digital technologies affect competitive forces. The chapter concludes with ways in which a firm can do good industry analysis and therefore help the company be more aware of the external factors that may affect it.

BUSI 4940: Chapter three summary

Chapter 3 is titled ‘Assessing the internal environment of the firm.’ The chapter focuses on realizing how a company can maintain a competitive edge by optimizing the firm’s internal environment. The first concept introduced to assist in this endeavor is value chain analysis Value is what most amounts of buyers are willing to pay for what a firm produces. A value chain analysis is used to determine which areas a company gets more value and how it can get the most out of these areas. The value chain analysis has two types of activities the primary activities, for instance, outbound logistics and support activities that are related to technology, human resource management, and general administration. Also, understanding the interrelationships between different aspects of the value chain is critical for any manager. For example, a good manager will ensure what happens in one department is communicated to the other; for instance, when something happens in a firm’s marketing department, hence it is essential that the operation department knows.

Another concept introduced in the chapter is the Resource-based view of the firm. The concept is also used to get an idea of the competitive advantage a firm has. Successful companies are successful because they have mastered the art of learning how to master heir internal assets, and those resources can lead to a competitive edge. The resources are divided into tangible resources, intangible resources, organizational resources, and strategic resources. To protect company resources, companies can use various methods. The methods are the use of physical uniqueness, path dependency, casual ambiguity, and social complexity. A company’s ability to maintain originality will increase the value of the product, and hence the company has a competitive advantage over competitors. Finally, it is essential to evaluate the firm’s performance. Some of the ways of assessing performance are financial ratio analysis and using a balanced scorecard.

BUSI 4940: Chapter Four summary

Chapter four is titled ‘recognizing a firms intellectual assets: Moving beyond a Firms Tangible Resources’. In the chapter, the main idea is that the company value is the physical aspect and the intellectual assets the company has. The material resources that a company has are as important as the intellectual resources in that intellectual resources also add to its overall value. The intellectual resource is tied to people rather than the physical assets which a company has. In some cases, the intellectual value of a company can be higher than that of the physical assets that the company has. The measure of the company’s intangible assets is referred to as intellectual capital. For instance, an apple’s physical value is at 117.2 billion, while its market value is 510 billion.

Another concept we can get from the chapter is the central role of human capital. Human capital is part of the intangible resources available to a company divided into human capital and social capital. Human capital is the individual’s skills that the company’s employees have, while social capital includes the networks of relationships individuals have throughout the organization. Therefore, knowledge management is needed to use the knowledge the employees have into explicit knowledge documented. Another concept introduced is human capital. Human capital is the skilled people who work for you. A company has to find ways to target and recruit skilled resources, develop these skills, and retain human capital.

Attracting capital requires creating a social environment that is conducive for employees to work in and offer enough financial compensation that is attractive enough to bring the human capital to the company. The employees of a company should communicate effectively to disseminate information faster and work efficiently, and for this to happen, there should be effective communication between group members. The chapter introduces ways to make communication better by overcoming barriers to communication. Finally, the chapter concludes with ways to protect the intangible resources in a company’s strategic plan.

BUSI 4940: Chapter Five summary

Chapter Five is titled ‘creating and sustaining competitive advantage.’ In the chapter, we learn that Businesses compete for markets and hence the need to select a sustainable marketing strategy to the market. The business can either choose to use a low-cost position or a uniqueness perceived by the customers. In a low-cost leadership position, the firm will be required to create a value chain focused on managing a sustainable relationship with the business. In differentiation, the customers are given a diverse product and services, hence, can choose from a wider pool of commodities that satisfy their different needs. Some of the examples of companies that pursue leadership strategy include McDonald’s and Walmart. In the differentiation strategy, one can use the examples of Apple and Target. Hence, apple has different products than those found with the competitors; the unique feels of its devices and the unique designs make apple customers loyal to the brand.

In cost leadership, the firm aims to reduce the cost of all the activities that it is doing. The different individuals in the firm, including the marketing department, sales, advertising, value chain, and even the service providers, aim to reduce the cost to maximize return. In cost leadership, an experience curve is created with time. By improving competition, the business will demand loyalty from the customers, suppliers, stakeholders, and other market players. There are numerous ways to create a differentiation strategy that includes product development, technology, customer service, and many other innovative strategies.

The focus strategy exploits the business needs and aims to differentiate the target market to reduce costs. The resultant effect of this is improved loyalty by customers, suppliers, and even other stakeholders. The Focus can be faced with different disadvantages and may include: other company’s adaptation of the focus strategies; hence the business is unable to continue benefiting from the advantage it once enjoyed. Companies can choose to use a combination strategy that involves a mix of differentiation and low cost. The strategy can be done; nonetheless, the concept is hard to master. The internet digital strategy is also very efficient as technology allows for instant response in business. Hence, industries can use different strategies depending on the life cycle of the industries.

BUSI 4940: Chapter six summary

The chapter is titled ‘creating value through diversification.’ The chapter starts by stating that Businesses need to create value through diversification as it continues to grow. Initially, the use of differentiation and low cost is essential. Nonetheless, with increased growth, businesses need to succeed healthily. For example, the company seeks to create mergers, joint ventures, acquisitions, and internal development through diversification. A firm may choose to diversify in related or unrelated businesses that include concentration on one line of business or a complete shift from the business line into other economic activities. In related diversification, the company creates economies of scale, market power, and the same industry and line. The company can major in the best sector by creating synergy, increasing differentiation, negotiating power improvement by the customers, and grasping a higher market share. Hence, making a vertical integration or horizontal integration. In vertical integration, the business looks to reach other costs that other external persons previously handled, such as contract cost, monitoring cost, and negotiation costs. In horizontal integration, the company majors on matters that are within its grasp.

In diversification for unrelated products, the business can choose to be the parent or restructure based on the asset, capital, or management. For example, they are selling assets that are not being used, hence improving asset utilization efficiency to create income and value for the business. Diversification can be done through mergers, internal development, or acquisition to achieve the desired market portfolio. Mergers involve companies’ consolidation to become one while acquisition is buying another firm to become part of the original business. In strategic alliances, companies agree to collaborate and benefit from one another. For example, in reducing manufacturing cost, the companies can create sustainable innovations that benefit the businesses in reducing manufacturing costs. In internal development, the business grows on its own through corporate entrepreneurship. The different ways to grow are effective depending on the company and the tactics that it has in reaching their growth and development goals