5.3 Implications for the Strategist
In this chapter, we discussed how to measure and assess competitive advantage using three
traditional approaches: accounting profitability, shareholder value, and economic value
creation. We then introduced two conceptual frameworks to help us understand competitive
advantage in a more holistic fashion: the balanced scorecard and the triple bottom line.
Exhibit 5.11 summarizes the concepts discussed.
Several managerial implications emerged from our discussion of competitive advantage
and firm performance:
■ No best strategy exists—only better ones (better in comparison with others). We must
interpret any performance metric relative to those of competitors and the industry average.
True performance can be judged only in comparison to other contenders in the
field or the industry average, not on an absolute basis.
■ The goal of strategic management is to integrate and align each business function and
activity to obtain superior performance at the business unit and corporate levels. Therefore,
competitive advantage is best measured by criteria that reflect overall business
unit performance rather than the performance of specific departments. For example,
although (ถึงแม้ว่า) the functional managers in the marketing department may(บางที) (and should) care
EXHIBIT 5.11 /
How Do We Measure and Assess Competitive Advantage?
Competitive advantage is reflected in superior firm performance.
>> We always assess competitive advantage relative to a benchmark, either using competitors or the industry average.
>> Competitive advantage is a multifaceted concept.
>> We can assess competitive advantage by measuring accounting profit, shareholder value, or economic
value.
>> The balanced-scorecard approach harnesses multiple internal and external performance dimensions to
balance a firm’s financial and strategic goals.
>> More recently, competitive advantage has been linked to a firm’s triple bottom line, the ability to maintain
performance in the economic, social, and ecological contexts to achieve a sustainable strategy
5.3 Implications for the StrategistIn this chapter, we discussed how to measure and assess competitive advantage using threetraditional approaches: accounting profitability, shareholder value, and economic valuecreation. We then introduced two conceptual frameworks to help us understand competitiveadvantage in a more holistic fashion: the balanced scorecard and the triple bottom line.Exhibit 5.11 summarizes the concepts discussed.Several managerial implications emerged from our discussion of competitive advantageand firm performance:■ No best strategy exists—only better ones (better in comparison with others). We mustinterpret any performance metric relative to those of competitors and the industry average.True performance can be judged only in comparison to other contenders in thefield or the industry average, not on an absolute basis.■ The goal of strategic management is to integrate and align each business function andactivity to obtain superior performance at the business unit and corporate levels. Therefore,competitive advantage is best measured by criteria that reflect overall businessunit performance rather than the performance of specific departments. For example,although (ถึงแม้ว่า) the functional managers in the marketing department may(บางที) (and should) careEXHIBIT 5.11 /How Do We Measure and Assess Competitive Advantage?Competitive advantage is reflected in superior firm performance.>> We always assess competitive advantage relative to a benchmark, either using competitors or the industry average.>> Competitive advantage is a multifaceted concept.>> We can assess competitive advantage by measuring accounting profit, shareholder value, or economicvalue.>> The balanced-scorecard approach harnesses multiple internal and external performance dimensions tobalance a firm’s financial and strategic goals.>> More recently, competitive advantage has been linked to a firm’s triple bottom line, the ability to maintainperformance in the economic, social, and ecological contexts to achieve a sustainable strategy
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