What is strategic management and why is it important? - perfect grader

Strategy

Understanding resources and how to develop and execute a plan

Strategic Competitiveness

Compare to strategy of your peers

Above Average Returns

Striving to be better

Factors that are the primary drivers of the 21st-century landscape

Globalization and rapid technological change

Industrial-organizational model

Look at the external model and determine how it is doing compared to the competition and choose an industry that has high profit margins if you want to see high returns

Resource-based model

Start with RESOURCES, then to CAPABILITY and then to CORE COMPETENCE

Resources

Physical, human, and organizational capital

capability

Integrated set of resources

Core Competence

A source of competitive advantage

Stakeholder

Someone who is affected or may be affected by an organization

Three Primary Stakeholder Groups

Capital Market Stakeholders, Product Market Stakeholders, and Organizational Stakeholders

Capital Market Stakeholders

Stockholders, investors, and banks

Product Market Stakeholders

Suppliers, retailers, consumers, and distributors

Organizational Stakeholders

Employees and Managers

SWOT Internal

Strengths and Weaknesses

SWOT External

Opportunity and Threats

External Environment (using SWOT)

General Environment

More macro i.e. future focus

Industry Environment

More micro i.e. specific

External Analysis Process

Scanning
Monitoring
Forecasting
Assessing

Scanning

Looking at trends, studying them (continuous)

Monitoring

Looking for Changes

Forecasting

Projecting what you think will happen

Assessing

“How did we do?” and then make changes

Seven Segments of the general environment

Demographic
Economic
Political/legal
Sociocultural
Technological
Global
Physical

Demographic Segment

Ethnicity, age, gender, etc.

Economic environment

The nature and direction of the economy in which a firm competes

Political segment

The arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations

Sociocultural Segment

Behavior, movements like the green movement/ health foods

Technological Segment

The Institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and material

Global Segment

think International- trade, etc.

Physical Environment Segment

sustainability, physical buildings, etc.

Five forces of competition

1. Competitive rivalry
2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of new entrants
5. Substitutes

Example of Five forces of competition

Strategic Group

a set of firms emphasizing similar strategic deme signs and using a similar strategy

Ethical Info Gathering

Obtaining publicly available information, attending trade fairs to obtain competitors brochures, viewing their exhibits, and listening to discussions about their products

Unethical info gathering

eavesdropping, stealing, blackmailing, etc.

Value

Measured by a product’s performance characteristics and by its attributes for which customers are willing to pay

Why is it critical for the firm to create value?

To understand how the customer defines value

How does a firm create value?

By focusing on the market

Tangible Resources

include both fixed assets, such as machinery, buildings and land, and current assets, such as inventory.

Intangible Resources

Nonphysical assets, such as patents, trademarks, copyrights, goodwill and brand recognition,

Four criteria of Sustainable Advantages

Valuable
Rare
Costly to imitate
non-Substitutable

Value Chain Analysis

Determining each stage of the value chain activities to see if they add value

Value Chain Activities

Outsourcing

Allowing another firm to take over a portion of your business operation

Core Rigidities

the inability to be open to change; may result in from willing to not change a core competency

Business level strategy

An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets

Relationship between a firm’s customer and Business level Strategy

Who: customer. Defined by segmentation, demographics, etc.
What: products needs that are satisfied
How: using core competencies

Business-level Strategies

How can each one of the business-level strategies be used to position the firm relative to the five
forces of competition in a way that helps the firm earn above-average returns?

Pressure extended to and from a company in different ways

Risks associated with using business-level strategy

Depends on the strategy;
i.e.: low cost is a risk because of lower quality OR distinctiveness can lead to being “too expensive”

Competitors

firms operating in the same market, offering similar products, and targeting similar customers

Competitive rivalry

is the ongoing set of competitive actionsand competitive responses that occur among firms as they maneuver for market position

Competitive Behavior

set of competitive actions and responses a firm takes to build or defend its competitive advantags and to improve its market position

Competitive Dynamics

Total set of actions and responses take by all firms competing within a market

Market commonality

concerned with the number of markets with which thefirm and a competitor are involved

Resource similarity

The extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount

Awareness

The extent to which competitors recognize the degree of their mutual independence that results from market commonality and resource similarity

motivation

The firm’s incentive to take action or to respond to a competitor’s attack, relate to perceived gains and losses

Ability

relates to each firm’s resources and the flexibility these resources provide

Two types of competitive action

Strategic and Tactical

Strategic Competitive Action

Any action that is going to take longer than a year

Tactical Competitive Action

Any action that is going to take less than a year

First-Mover Incentives

allocate funds for product innovation and development, aggressive advertising, advanced research and development, and Brand loyalty

Second-Mover Incentive

responds to first movers competitive action, typically through imitation

Late mover incentives

Respond with a significant amount of time after First-movers and Second-movers

Organizational Size: Small

More likely to launch competitive actions and be quicker doing so; they are perceived as nimble and flexible; Rely on speed and surprise to defend competitive advantage

Factors affecting likelihood of response

Type of competitive action, reputation of the actor, and how dependent are you on that market

Slow-cycle markets

Competitive advantages are shielded from imitation for long periods of time. I.e.: Disney’s Copyrights

Fast-cycle markets

Firm’s capabilities that contribute to competitive advantages aren’t shielded from imitation and where imitation is often rapid and inexpensive

Standard Cycle

Moderate cost of limitation may shield competitive advantages and competitive advantages are partially sustainable if their quality is continuously upgraded

Business-Level Strategy

detail actions are taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets.

Corporate Level Strategy

Company-wide, and specifies actions taken by the firm to gain a competitive advantage by selecting business competing for indifferent product markets

Three levels of diversification

Low, Moderate to high, and Very High

Low Diversification

Single business and Dominant Business

Moderate to High Diversification

Related Linked

Less than 70% of revenue comes from dominant business and there are only limited links between businesses

Unrelated Diversification

Less than 70% revenue from the dominant business, and there are no common links between businesses (Virgin)

Related diversification

Firms create value by building upon or extending resources, capabilities, and core competencies

Economics of Scope

Cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to another of its businesses

Market power exists when a firm can:

Sell its products above the existing competitive level and/or reduce the cost of its primary and support activities below the competitive level

Financial economies

Create value through efficient internal capital allocations and purchase of other corporations and “restructuring of assets” (get rid of underperformers)

Anti-trust legislation

an attempt to keep industry from being consolidated so much that it is controlled by only a few players and tax laws

Internal incentives to diversify

Low performance, uncertain future cash flows, synergy, and firm risk reduction

Motives for managers to over diversify

Managerial risk reduction, desire for increased compensation, build personal performance reputation, value creation, value neutral, and value reduction

Today’s competitive markets (4)

1. The Global Economy
2. Globalization
3. Rapid Technological Change
4. Increasing Importance of Knowledge and People

The globalization of industries and their markets and rapid and significant technological changes are the two primary factors contributing to the turbulence of the competitive landscape.

Strategic competitiveness

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 it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.

Above-average returns

are returns in excess of what a 5 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 from other investments 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.

Global economy

one in which goods, services, people, skills, and ideas move freely across geographic borders. Relatively unfettered by artificial constraints, such as tariffs, the global economy significantly expands and complicates a firm’s competitive environment.

Globalization

is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders. Globalization is a product of a larger number of firms competing against one another in an increasing number of global economies.

Technology and Technological Changes

1. Technology diffusion and disruptive technologies
2. The information age
3. Increasing knowledge intensity

Technology Diffusion and Disruptive Technologies

The rate of technology diffusion—the speed at which new technologies become available and are used—has increased substantially over the last 15 to 20 years. Consider the following rates of technology diffusion:
It took the telephone 35 years to get into 25 percent of all homes in the United States. It took TV 26 years. It took radio 22 years. It took PCs 16 years. It took the Internet 7 years.

Online professional tutoring made easier at www.perfectgrader.com. At www.perfectgrader.com, we offer essay help and writing services tailored to help college students in the United States, Uk, Singapore, Austraria, and many other countries across the globe. www.perfectgrader.com not only helps students through a virtual platform but also provide an array of services for you as the client to converse with your tutor in real-time. Our services include Math help, essay writing services, research paper help and so much more. When it comes to service provision, Acemy-homework.com is an unmatched website. Hire a tutor to get homework and assignment help instantly Register at www.perfectgrader.com today and begin an exciting journey in academic proficiency

Disruptive technologies—technologies that destroy the value of an existing technology and create new markets52—surface frequently in today’s competitive markets. Think of the new markets created by the technologies underlying the development of products such as iPods, PDAs, WiFi, and the browser.

The Information Age

Dramatic changes in information technology have occurred in recent years. Personal computers, cellular phones, artificial intelligence, virtual reality, and massive databases (e.g., Lexis/Nexis) are a few examples of how information is used differently as a result of technological developments. An important outcome of these changes is that the ability to effectively and efficiently access and use information has become an important source of competitive advantage in virtually all industries.

Increasing Knowledge Intensity

Knowledge (information, intelligence, and expertise) is the basis of technology and its application. In the 21st-century competitive landscape, knowledge is a critical organizational resource and is increasingly a valuable source of competitive advantage.59 Indeed, starting in the 1980s, the basis of competition began shifting from hard assets to intangible resources. For example, “Wal-Mart transformed retailing through its proprietary approach to supply chain management and its information-rich relationships with customers and suppliers.”60 Relationships are an example of an intangible resource.

Strategic flexibility

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

Involves coping with the uncertainty and risks of hypercompetitive environments.
Must first overcome built-up organizational inertia.
Requires developing the capacity for continuous learning and applying the new and updated skills sets and competencies to the firm’s competitive advantage.

Global Competitive Landscape (Increasing)

- Market volatility and instability due to
the rapid pace of change in markets
- The blurring of market boundaries
- The globalized flow of financial capital
- Need for flexibility, speed, innovation,
and integration in the use of technology
- Strategic and operational complexity
of global-scale competition
- Rising product quality standards

Global Competitive Landscape (Decreasing)

- The traditional time for adapting to change
- Traditional sources of competitive advantage
- Traditional managerial mindset

Strategic options in hypercompetitive environments

- Use of price-quality positioning to build market presence
- Creation of new know-how and use of first-mover advantage
- Protection or invasion of established geographic or product markets

Competitive Success Factors: Top Corporate Performers

- Have an entrepreneurial/opportunistic mindset
- Are market/ customer-needs oriented
- Make effective use of valuable competencies
- Offer new and innovative products and services

The I/O Model of Above-Average Returns

The model specifies that the industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations. The firm’s performance is believed to be determined primarily by a range of industry properties, including economies of scale, barriers to market entry, diversification, product differentiation, and the degree of concentration of firms in the industry.
- External Environment
- Attractive Industry
- Strategy Formulation
- Assets and Skills
- Strategy Implementation
- Superior Returns

I/O Model Assumptions

- The external environment imposes pressures and constraints that determine strategic choices.

Online professional tutoring made easier at www.perfectgrader.com. At www.perfectgrader.com, we offer essay help and writing services tailored to help college students in the United States, Uk, Singapore, Austraria, and many other countries across the globe. www.perfectgrader.com not only helps students through a virtual platform but also provide an array of services for you as the client to converse with your tutor in real-time. Our services include Math help, essay writing services, research paper help and so much more. When it comes to service provision, Acemy-homework.com is an unmatched website. Hire a tutor to get homework and assignment help instantly Register at www.perfectgrader.com today and begin an exciting journey in academic proficiency
- Similarity in strategically relevant resources causes competitors to pursue similar strategies.
- Resource differences among competitors are short-lived due to resource mobility across firms.
- Strategic decision makers are rational and engage in profit-maximizing behaviors.

Five Forces Model of Competition 1/2

1. Substitutes
2. Buyers
3. Potential Entrants
4. Suppliers
5. Industry Rivalry

The five forces model suggests that an industry’s profitability (i.e., its rate of return on invested capital relative to its cost of capital) is a function of interactions among five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitutes, and potential entrants to the industry.

Five Forces Model of Competition 2/2

- Industry profitability (i.e., rate of return on invested capital relative to cost of capital) is a function of interactions among the five forces.
- Industry attractiveness equates to its profitability potential for earning above-average returns by:
- producing standardized goods or services at costs below competitor costs (a cost leadership strategy).
- producing differentiated goods or services for which customers are willing to pay a price premium (a differentiation strategy).

The Resource-Based Model
of Above-Average Returns 1/3

Building competitive advantage
1. Resources
Physical, human, and organizational capital (tangible and intangible)
2. Capability
An integrated set of resources
3. Core Competence
A source of competitive advantage

The Resource-Based Model
of Above-Average Returns 2/3

- Resources are inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers. In general, a firm’s resources are classified into three categories: physical, human, and organizational capital. Described fully in Chapter 3, resources are either tangible or intangible in nature.
Individual resources alone may not yield a competitive advantage. In fact, resources have a greater likelihood of being a source of competitive advantage when they are formed into a capability.
- A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. Capabilities evolve over time and must be managed dynamically in pursuit of above-average returns.80 Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals. - — Core competencies are often visible in the form of organizational functions. For example, Apple’s R&D function is likely one of its core competencies. There is little doubt that its ability to produce innovative new products that are perceived as valuable in the market- place is a core competence for Apple, as suggested in the earlier Strategic Focus.

The Resource-Based Model
of Above-Average Returns 3/3

Firms acquire different resources.
2. Firms develop unique capabilities based on how they combine and use resources.
3. Resources and certain capabilities are not highly mobile across firms.
4. Differences in resources and capabilities are the bases of competitive advantage and a firm’s performance rather than its

industry’s structural characteristics.

Resources As Core Competencies

How recourses become core competencies?
1. Costly to imitate
2. Rare
3. Valuable
4. Non substitutable

Vision Statement

A successful vision:
is an enduring word picture of what the firm wants to be and expects to achieve in the future.
stretches and challenges its people.
reflects the firm’s values and aspirations.
is most effective when its development includes all stakeholders.
recognizes the firm’s internal and external competitive environments.
is supported by upper management decisions and actions.

Ex:
Our vision is to be the world’s best quick service restaurant. (McDonald’s)
To make the automobile accessible to every American. (Ford Motor Company’s vision when established by Henry Ford)

Mission Statement

An effective mission:
specifies the business or businesses in which the firm intends to compete and customers it intends to serve.
has a more concrete, near-term focus on current product markets and customers than the firm’s vision: it may change over time.
should be inspiring and relevant to all stakeholders.

Online professional tutoring made easier at www.perfectgrader.com. At www.perfectgrader.com, we offer essay help and writing services tailored to help college students in the United States, Uk, Singapore, Austraria, and many other countries across the globe. www.perfectgrader.com not only helps students through a virtual platform but also provide an array of services for you as the client to converse with your tutor in real-time. Our services include Math help, essay writing services, research paper help and so much more. When it comes to service provision, Acemy-homework.com is an unmatched website. Hire a tutor to get homework and assignment help instantly Register at www.perfectgrader.com today and begin an exciting journey in academic proficiency

Be the best employer for our people in each community around the world and deliver operational excellence to our customers in each of our restaurants. (McDonald’s)
Our mission is to be recognized by our customers as the leader in applications engineer- ing. We always focus on the activities customers desire; we are highly motivated and strive to advance our technical knowledge in the areas of material, part design and fabrication technology. (LNP, a GE Plastics Company)

It can change over time…

Stakeholders

- Can affect the development of the firm’s vision and mission
- Are affected by the strategic outcomes achieved by the firm
- Can have enforceable claims on the firm’s performance
- Are influential when in control of critical or valued resources

Classification of Stakeholders

- Capital market stakeholders: Shareholders and lenders both expect a firm to preserve and enhance the wealth they have entrusted to it. The returns they expect are commensurate with the degree of risk accepted with those investments
- Product market stakeholders:
Some might think that product market stakeholders (customers, suppliers, host communities, and unions) share few common interests. However, all four groups can benefit as firms engage in competitive battles.

Online professional tutoring made easier at www.perfectgrader.com. At www.perfectgrader.com, we offer essay help and writing services tailored to help college students in the United States, Uk, Singapore, Austraria, and many other countries across the globe. www.perfectgrader.com not only helps students through a virtual platform but also provide an array of services for you as the client to converse with your tutor in real-time. Our services include Math help, essay writing services, research paper help and so much more. When it comes to service provision, Acemy-homework.com is an unmatched website. Hire a tutor to get homework and assignment help instantly Register at www.perfectgrader.com today and begin an exciting journey in academic proficiency
- Organizational stakeholders:
Employees—the firm’s organizational stakeholders—expect the firm to provide a dynamic, stimulating, and rewarding work environment.

Capital Market Shareholders

Shareholders
Major suppliers of capital

Product Market Stakeholders

Primary customers
Suppliers
Host Communities
Unions

Organizational Stakeholders

Employees
Managers
Nonmanagers

The Work of Effective Strategic Leaders

Strategic Leaders:
have a strong strategic orientation that relies on thorough analysis when taking action.
are located at various levels throughout the firm.
want the firm and its people to accomplish more.
are innovative thinkers who promote innovation.
can leverage relationships with external parties while simultaneously promoting exploratory learning.
have an global mindset approach to management.

Competitors (pg. 144)

are firms operating in the same market, offering similar products and targeting similar customers.

competitive rivalry (pg. 144)

the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market positions.

competitive behavior (pg. 144)

is the set of competitive actions and responses a firm takes to build or defend its competitive advantages and to improve its market position.

multimarket competition (pg. 144)

occurs when firms compete agains each other in several product or geographic markets

competitive dynamics (pg. 144)

refers to all competitive behaviors- that is, the total set of actions and responses taken by all firms competing within a market.

market commonality (pg. 148)

is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.

resource similarity (pg. 148)

is the extent to which the firm’s tangible and intangible resources are comparable to a competitor’s in terms of both type and amount.

drivers of competitive behavior

awareness, motivation, ability

Awareness

refers to the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity. Awareness affects the extent to which the firm understands the consequences of its competitive actions and responses. Tends to be greatest when firms have highly similar resources.

Motivation

which concerns the firm’s incentive to take action or to respond to a competitor’s attack, relates to perceived gains and losses. A benefit of not having the motivation to engage in rivalry at a point in time with a competitor is that the firm that lacks motivation to compete against another firm retains resources that can be used for other purposes including competing against a different rival.

Ability

relates to each firms resources and the flexibility they provide. Without available resources, the firm is not able to attack a competitor or respond to its actions.

Competitive action

is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position.

competitive response

is a strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action.

strategic action/strategic response

is a market-based move that involves a significant commitment of organization resources and is difficult to implement and reverse.

tactical action/tactical response

is a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse.

first mover

is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position.

second mover

is a firm that responds to the first mover’s competitive action, typically through imitation.

later mover

is a firm that responds to a competitive action a significant amount of time after the first mover’s action and the second mover’s response.

quality

exists when the firm’s goods or services meet or exceed customers’ expectations.

product quality dimensions

performance, features, flexibility, durability, confromance, serviceability, aesthetics, perceived quality

service quality dimensions

timeliness, courtesy, consistency, convenience, completeness, accuracy

market dependence

denotes the extent to which a firm’s revenue or profits are derived from a particular market.

slow-cycle markets

are markets in which the firm’s competitive advantages are shielded from imitation, commonly for long periods of time, and where imitation is costly.

Fast-cycle markets

are markets in which the firm’s capabilities that contribute to competitive advantages aren’t shielded from imitation and where imitation is often rapid inexpensive.

standard-cycle markets

are markets in which the firm’s competitive advantages are partially shielded from imitation and imitation is moderately costly.

PESTEL Analysis

political, environmental, social, tech, economic, legal

Porter Five Forces of Competition Model

bargaining power of suppliers, threats of new entrants, bargaining power of customers, threats of substitutes, competitive rivalry with the industry

SWOT Analysis

Strength, Weaknesses, Opportunities, Threats

The primary reason a firm uses a corporate-level strategy to become more diversifies is to

create additional value

Using a single- or dominant business corporate level strategy may be

preferable to seeking a more diversified strategy, unless a corporation can develop economies of scope or financial economies between business, or unless it can obtain market power through additional levels of diversification

Corporate-level strategy

specifies actions a firm takes to gain competitive advantage by selecting and managing a group of different businesses competing in different product markets.

Economies of Scope

are cost savings a firm creates by successfully sharing resources and capabilities or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its businesses.

The related diversification corporate-level strategy

helps the firm create value by sharing activities of transferring competencies between different businesses in the company portfolio

Sharing activities usually involves

sharing tangible resources between businesses. It’s usually associated with the related constrained diversification corporate-level strategy.

Transferring core competencies

involves transferring core competencies developed in one business to another business. It also may involve transferring competencies between the corporate headquarters office and a business unit. Is often associated with related linked (or mixed related and unrelated) diversification, although firms pursuing both sharing activities and transferring core competencies can also use the related linked strategy.

Activity sharing negatives:

it’s costly to implement and coordinate, may create unequal benefits for the divisions involved in the sharing, and can lead to fear managerial risk-taking behaviors

Market Power

exists when a firm is able to sell its product above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both.

Multipoint competition

exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets.

Vertical Integration

exists when a company produces its own inputs (backwards integration) or owns its own source of output distribution (forward integration)

Synergy

exists when the value created by business units working together exceeds the value that those same units create working independently.

Financial Economies

are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.

Corporate-level core competencies

are complex sets of resources and capabilities that link different businesses, primary through managerial and technological knowledge, experience and expertise.

What are 2 ways to accomplish successful unrelated diversification

Efficiently allocating resources or Restructuring a target firm’s assets and placing them under rigorous financial controls.
Firms using the unrelated diversification strategy focus on creating financial economies to generate value.

Examples of value-neutral reasons that firms choose to become more diversified

Incentives from tax and antitrust government policies, low performance, or uncertainties about future cash flow-
Diversification is sometimes pursued for value-neutral reasons.

Business-level strategy

an integrated and coordinated set of commitments set and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.

cost leadership strategy

is an integrated set of actions to product goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.

differentiation strategy

is an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.

focus strategy

is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment

integrated cost leadership/differentiation strategy

involves engaging in primary value-chain activities and support functions that allow a firm to simultaneously pursue low cost and differentiation

market segmentation

is process used to cluster people with similar needs into individual and identifiable groups

value

measured by a product’s performance characteristics and by its attributes for which customers are willing to pay.

value chain activities

are activities or tasks the firm completes in order to product products and then sell, distribute, and service those products in ways that create value for customers.

The external environment has 3 major parts

1. General environment (segments and elements in the broader society that affect industries and the firms competing in them)
2. The industry environment (factors that influence a firm, its competitive actions and responses, and the responses, and the industry’s probability potential)
3. The competitor environment (in which the firm analyzes each major competitor’s future objectives, current strategies, assumptions, and capabilities)

What are four parts of the external analysis process?

Scanning, monitoring, forecasting, and assessing.
Effectively using the process helps the firm in its efforts to identify opportunities and threats.

What are some barriers of entry?

-Economies of scale
-Product differentiation
-capital requirements
-switching costs
-access to distribution channels
-cost disadvantages independent of scale
-government policy

Core competencies

are capabilities that serve as a source of competitive advantage for a firm over its rivals

Resource based model of above average returns

assumes that each organization is a collection of unique resources and capabilities.
Resources -> Capabilities -> Competitive Advantage -> An attractive industry -> strategy formulation and implementation -> Superior returns

I/O Model of Above Average returns

suggests that firms can earn above-average returns by producing either standardized goods or services at costs below competitors.
External Environment -> An attractive industry -> strategy formulation -> assets & skills -> strategy implementation -> superior returns

Global economy

is one of which goods, services, people, skills, and ideas move freely across geographic borders

average returns

are returns equal to those an investor expects to earn from other investments with a similar amount of risk

above average returns

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

competitive advantage

when a firm implements a strategy that creates superior value for customers and that competitors are unable to duplicate or find it too costly to try to imitate

strategic leadership

is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

strategic change

is change brought about as a result of selecting and implementing a firm’s strategies

human capital

refers to the knowledge and skills of a firm’s entire workforce. From the perspective of human capital, employees are viewed as a capital resource requiring continuous investment.

social captial

involves relationships inside and outside the firm that help in efforts to accomplish tasks and create value for stakeholders.

balanced scorecard

is a tool firms use to determine if they are achieving an appropriate balance when using strategic and financial controls as a means of positively influencing performance

What’s a product’s life cycle

1. Introduction
2. Growth
3. Maturity
4. Decline

What is the experience curve

•Expect constant reduction in unit cost of production for each cumulative doubling in experience producing product.

What is a cash cow in The Boston Consulting Group’s Market Share/market growth matrix?

Cash cows have high relative market share and low growth rate.

What is a star in The Boston Consulting Group’s Market Share/market growth matrix?

“Stars” have high relative market share and high growth rate.

What is a dog in The Boston Consulting Group’s Market Share/market growth matrix?

“Dogs” are low market share and low growth rate.

What is a question mark or wildcat in The Boston Consulting Group’s Market Share/market growth matrix?

“Question marks/wildcats” have low market share but high growth rate.

What are the three value types?

Chain, Shop, Network

What are the three value logics?

customer intimacy, operational excellence, product leadership

How do you compete?

•Play the existing game better- lower costs, improve quality, raise productivity, compress time, benchmark
•Invent/shape the new game with new rules create new business models, create new industry concepts, create “next practices”, exploit “inflection points”, challenge orthodoxies

The use of strategic alliances:

is more frequent than other types of cooperative strategies.

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n):

equity strategic alliance.

All of the following are business-level cooperative strategic alliances EXCEPT:

synergistic strategic alliances.

In some countries, the only legal way for foreign firms to invest in the country is through:

strategic alliance with a local firm.

A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance.

synergistic strategic alliance

McDonald’s, Hilton International, and Subway all heavily rely on the ____ strategy.

franchising cooperative

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ____ advantage.

relational

A cooperative strategy:

is a strategy in which firms work together to achieve a shared objective

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should:

internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

Mutual forbearance is:

a type of competition-reducing strategy.

A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use:

information networks.

J.C. Penney attempted the strategy ______ . But it couldn’t out ______ Walmart, nor could it ______ Macy’s and Target.

of integrated cost leadership; price; compete with

Firms use the integrated cost leadership/differentiation strategy because:

most consumers want to pay a low price for products with somewhat highly differentiated features.

Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises “equal price” for all customers. Signature Cleaners appeals to women, which is market segmentation by ______ factors.

demographic

By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, and highly productive ground and gate crews.

activity map

Strategic fit among many activities (in an activity map) is fundamental to:

sustainability of a firm’s competitive advantage.

All of the following are considered generic business-level strategies EXCEPT:

product diversification.

Which of the following is NOT a value-creating activity associated with the differentiation strategy?

Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency.

A company using a narrow target market in its business strategy is:

limiting the group of customer segments served.

A differentiation strategy can be effective in controlling the power of substitutes in an industry because:

customers develop brand loyalty.

In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is:

less competitive rivalry.

___ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.

Motivation

Intensified rivalry within an industry results in:

decreased average profitability across the industry.

Which of the following is an example of a strategic action?

Entry into the European market by Home Depot

A competitive action can be one of two types, either ____ or ____.

strategic; tactical

Multimarket competition occurs when firms:

compete against each other in several geographic or product markets.

Late movers are those firms that:

respond to a competitive action a significant amount of time after the first mover’s action and the second mover’s response.

Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors?

IBM

Competitors are more likely to respond to competitive actions that are taken by:

market leaders.

A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when:

the attack is by a price predator.

Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that:

are value-neutral.

Dragonfly, publishers of children’s books, has purchased White Rabbit, another publisher of children’s books. Both companies’ books are sold to the same retail stores and schools. Their content is different because Dragonfly produces children’s literature, whereas White Rabbit focuses on child-level nonfiction scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?

This is a horizontal acquisition.

Synergy exists when:

he value created by business units working together exceeds the value the units create when working independently.

The basic types of operational economies through which firms seek value from economies of scope are:

the sharing of value chain activities and support functions.

As the threat of corporate failure increases due to relatedness between a firm’s business units, firms may decide to:

diversify into less risky environments.

Large diversified businesses often face what is known as the “conglomerate discount.” This discount means that investors:

believe that the value of conglomerates is less than the value of the sum of their parts.

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification.

unrelated

Firms that have selected a related diversification corporate-level strategy seek to exploit:

economies of scope between business units

The I/O model is grounded in:

economics

It is important to emphasize that almost all strategic management process decisions have ______ because they are related to how a firm interacts with its stakeholders.

ethical dimensions

A firm has achieved ______ when it successfully formulates and implements a value-creating strategy.

strategic competitiveness

A firm’s mission:

is a statement of a firm’s business in which it intends to compete and the customers it intends to serve.

Greenleaf Property Management has been earning below-average returns for the last three years. Which one of the following statements is true?

Greenleaf will not be able to minimally satisfy all stakeholders.

An analysis of society’s attitudes and values would be conducted when studying the ______ segment of the general environment.

sociocultural

According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT:

low barriers to entry.

Counterfeiting goods and exporting them from China is:

unethical and illegal.

BP, in response to the Deepwater Horizon oil spill, expected increased scrutiny from which of the following segments of the general environment?

political/legal

Buyers are powerful when:

switching costs are low

The communications industry is broadly defined as encompassing all of the following EXCEPT:

book retailers

New Jersey and New York have the highest state taxes in the United States. They also have high ratios of people moving out compared to people moving into the state. This impacts the ______ aspect of demographic analysis.

geographical distribution

A general environmental analysis can be expected to produce all of the following EXCEPT:

objective answers.

General environment

demensions in the broader that influence an industry and the firms within it.

industry environment

set of factors that directly influences a fit and its competitive actions and responses. Threats: New entrants, power of suppliers, power of buyers, substitutes and intensity of rivalry among competing firms.

competitor analysis

how companies gather and interpret information about their competitors

opportunity

a condition in the general environment that is exploited effectively helps a company reach strategic competitiveness.

threat

a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness.

demographic segment

concerned with a pop size, age structure, geographic distribution , ethnic mix and income distribution.

economic environment

the nature and direction of the economy in which a firm competes or may compete

political/legal segment

the arena in which organizations and interest groups compete for attention, resources, and a voice overseeing the body of laws and regulations guiding interactions a,one nations as well as between firms and various local governmental agencies.

sociocultural segment

society’s attitudes and cultural values.

technological segment

institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, process and materials.

global segment

relevant new global markets, existing markets that are changing. important international political events, and critical cultural and institutional characteristics of global markets.

physical environment segment

referes to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes.

industry

a group of firms production products that are close substitutes.

strategic group

a set of firms emphasizing similar strategic dimensions and using a similar strategy.

competitor intelligence

is the set of data and information the firm gathers to better understand and anticipate competitors’ objectives, strategies, assumptions and capabilities.

complements

are companies or networks of companies that sell complementary goods that are compatible with the local firm’s good or service.

Global mind-set

the ability to analyze, understand and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context

Value

measured by a products performance characteristics and by its attributes for which customers are willing to pay

Tangible Resources

assets that can be observed and easily quantified

Intangible Resources

assets that are rooted deeply in the firm’s history, accumulate over time, and are relatively difficult for competitors to analyze and imitate

Valuable Capabilities

allow the firm to exploit opportunities or neutralize threats in its external environment

Rare Capabilities

capabilities that few if any competitors possess

Costly to imitate

capabilities that other firms cannot easily develop because of historical, ambiguous cause, and social complexity

Nonsubstitutable Capabilities

capabilities that do not have strategic equivalents based on
- Firm-specific knowledge
-Organizational culture
-Superior execution of the chosen business model

Primary Activities

involved with a product’s physical creation, its sale and distribution to buyers, and its service after the sale

Support Activities

provide the assistance necessary for the primary activities to take place

Examples of Primary Activities

service, marketing and sales, outbound logistics, operations, inbound logistics

Examples of Support Activities

Firm infrastructure, human resource management, technological development, procurement

outsourcing

purchase of a value creating activity from an external supplier

Four criteria of Sustainable Advantages

Valuable, Rare, Costly to imitate, nonsubstitutable

Process of Sustainable advantages

Resources lead to capabilities which lead to core competencies which lead to competitive advantage which leads to strategic competitiveness

Context of Internal Analysis

Traditional Factors = labor costs, access to money, access to materials, protected or regulated markets
Global mind set is important

Creating Value

innovatively bundling and leveraging their resources and capabilities. This is the source of above average returns for the firm

The Challenge of Internal Analysis

Decisions are Are non-routine, Have ethical implications, Significantly influence the firm’s ability to earn above-average returns.

To develop and use core competencies, managers must have:

-Courage
-Self-confidence
-Integrity

Online professional tutoring made easier at www.perfectgrader.com. At www.perfectgrader.com, we offer essay help and writing services tailored to help college students in the United States, Uk, Singapore, Austraria, and many other countries across the globe. www.perfectgrader.com not only helps students through a virtual platform but also provide an array of services for you as the client to converse with your tutor in real-time. Our services include Math help, essay writing services, research paper help and so much more. When it comes to service provision, Acemy-homework.com is an unmatched website. Hire a tutor to get homework and assignment help instantly Register at www.perfectgrader.com today and begin an exciting journey in academic proficiency
-The capacity to deal with uncertainty and complexity
-A willingness to hold people (and themselves) accountable for their work

Conditions affecting managerial decisions are

Uncertain, Complex, intraorganizational conflicts

Characteristics of Resources

-Are the source of a firm’s capabilities.
-Are broad in scope.
-Cover a spectrum of individual, social and organizational phenomena.
Alone, do not yield a competitive advantage.

Characteristics of Capabilities

-Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state
-Emerge over time through complex interactions among tangible and intangible resources
-Often are based on developing, carrying and exchanging information and knowledge through the firm’s human capital

The foundation of many capabilities lies in:

-The unique skills and knowledge of a firm’s employees
-The functional expertise of those employees

Core Competencies

-Resources and capabilities that are the sources of a firm’s competitive advantage:
-Distinguish a company competitively and reflect its personality.
-Emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities.
-Activities that a firm performs especially well compared to competitors.
-Activities through which the firm adds unique value to its goods or services over a long period of time.

Order Similar Paper