Discuss the underlying concepts that help executives make corporate strategic decisions.
What will be an ideal response?
The underlying strategic management concepts that guide corporate strategic decisions are core competencies, economies of scale, economies of scope, and transaction costs.
Core competencies are unique strengths embedded deep within a firm which help the company differentiate its products or services. Economies of scale occur when a firm's average cost per unit decreases as its output increases. Economies of scope are the savings that come from producing two (or more) outputs or providing different services at less cost than producing each individually, though using the same resources and technology. Transaction costs are all costs associated with an economic exchange. Applying the logic of transaction cost economics enables managers to answer the question of whether it is cost-effective for their firm to expand its boundaries through vertical integration or diversification.
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