MIE 480 Midterm
Statement or principles (values)
Increasingly expected by stakeholders Usually articulates beliefs of senior management Challenge is for employees to internalize espoused values • Each principle must be defined & explained • Management must regularly & continuously reinforce the principles, in word and deed
Company Value Chain
*Primary* Inputs Operations Distribution Marketing & Sales Service *Support* Finance, legal HR R&D Precurement
intellectual property
- A legal means of protecting tangible and intangible assets that are unique to the organization. This is accomplished through patents, copyrights, trademarks, and trade secrets.
Conducting an industry analysis
1. Define the industry boundaries • Narrow versus broad: do competitors have similar inputs, similar methods & approaches, similar product/service outputs, all of the above? 2. Examine Driving Forces - external factors that impact industry development and economics. 3. Conduct "Five Forces" analysis. Examine each of the five forces. • Use data & analysis, supplemented with your own experience and judgment. • Bargaining Power of Buyers/Suppliers o Concentration - 2 methods to measure o Switching costs - general factors, real and perceived • Substitutes - Determined by Price-Performance characteristics o Pay attention to encroaching influences coming from other "industries" 4. Draw conclusions • Determine attractiveness of industry (possibility of earning above-average profits) • Identify Key Success Factors o How is value created? How must we compete? o 3-5 KSFs max - this is a short list of truly difference makers 5. Complete competitive KSF analysis table • Determine how to measure each KSF • Must be able to quantify • Should not be just based on judgment or "eyeballing" 6. Draw strategy maps using paired combinations of KSFs • Pay attention the most to actions taken by those closest to you • Estimate trajectory - the past is indicative of the future - why? • What actions will they take to occupy the most likely space in the future? • Where is there open strategic space, and how do we get there?
resource analysis method
1. Develop a list of all resources and capabilities - both tangible and intangible. 2. Use the VRIST framework to determine which resources are extraordinary. 3. Consider ways to leverage extraordinary resources. a. Extending into additional customer segments or products / services. b. Replicating the resource elsewhere in your company to further enhance performance. c. Developing complementary resources.
Identify key success factors
1. How is value created for the customers 2. How must we compete against our rivals to succeed?
External environmental variables
1. Natural Environment includes physical resources, wildlife, and climate that are an inherent part of existence on Earth 2. Societal Environment mankind's social system that includes general forces that do not directly touch on the short-run activities of the organization that can, and often do, influence its long-run decisions 3. Task Environment includes those elements or groups that directly affect a corporation and, in turn, are affected by it.
Strategic imperatives in 21st century
1. Opportunity recognition - identifying and exploring where the market is heading 2. Value Creation - Understanding and delivering new values appreciated by both existing and new customers and other stakeholders
The field of strategy is generally defined as addressed five critical questions
1. Why are firms different 2. How are competitive differences sustained 3. What is special about strategic decisions 4. What is the nature of strategy in a multi business firm? 5. How is strategic performance measured?
insights about company strategy
1. detailed financial statement analysis 2. Identifying the economic logic(s) that may operate within an industry as a means of framing how companies operate 3. Identifying and evaluating important operational characteristics that portray how well companies appear to be addressing economic logics
resource pyramid
1. extraordinary resources 2. capabilites 3. ordinary resources 4. products and services 5. superior performance
nonfinancial performance dimensions
1. realizations that companies may create social, cultural, and knowledge value in addition to economic value 2. the emerging view that there are a variety of stakeholders who have interests in a company
financial dimensions
1. stockholder returns 2. market capitalization 3. sales revenue growth
Sources of value creation
5 locations • Internally 1) what unique internal activities make you distinctive? • Upstream 2) what unique suppliers are you working with? 3) what unique relationships have you created with suppliers? • Downstream 4) what unique customers are you working with? 5) what unique relationships have you created with customers?
Mission statement
A brief statement that summarizes how and where the firm will compete in the present
Value chain
A concept emphasizing that a company is an organization of interrelated activities designed to create value for stakeholders, and that the derivation of superior performance is better understood by focusing on what a company actually does
casual ambiguity
A condition that exists when the link between a business's resources and its competitive advantage are poorly understood
SWOT analysis
A form of analysis, resulting in a listing of a company's strengths, weaknesses, opportunities, and threats. It is a static view of the company at a particular point in tim
Activity-based costing
A managerial accounting method used to assign all direct and indirect costs to a particular activity.
Perfect competition
A marketplace in which there is perfect information, zero transactions costs and costless entry, so that all firms become virtually identical and no firm earns any profit
TOWS matrix
A matrix that compares a company's strengths and weaknesses against its opportunities and threats, providing general direction
common-sized statements
A method of financial analysis that facilitates comparisons between different size companies. For income statements set revenue for each company equal to 100 percent, and for balance sheets set each side of the balance sheet to 100 percent.
Resource based analysis
A method that examines the extent to which a company possesses resources that will allow it to achieve sustainable competitive advantage
value chain analysis
A method that identifies value-creating activities in a company, categorizes them into important subsets, develops information to understand how the activities create value and what their costs are, and pinpoints opportunities for enhanced value creation and cost reduction. It is a dynamic view of a company's activities.
Current financial statement analysis
A strategy involves a pattern of investments, asset allocations, and sets of activities in pursuit of a specific direction. These are manifested in financial statements, examination of which can reveal what companies are actually doing in the conduct of their business. It is helpful to develop "common sized" financial statements to compare competitors of different sizes.
Strategy map
A two-dimensional map showing the positions of competitors using a quantitatively defined set of criteria
Relationship between financial performance and a sustainable competitive advantage
Above average profitability - The goal of strategy is superior competitive performance. This should translate to above-average profitability and other superior measures of financial performance Long run performance - Strategy involves directions and investments that produce superior competitive position and superior performance over the long run. Corporations are challenged to maintain competitive performance in the short run, while developing superior performance in the long run.
Strategy planning hierarchy
Activities & Routines Objectives Strategic Plan Mission Vision
Internal value chain dimensions
Activities in every cell Both primary and support activities Identify specific activities, not general categories "Brewing technology" versus "R&D" Identify how coordination across value chain cells supports and amplifies activities Identify how connections with suppliers and customers create value
Outsourcing
Activities that are part of producing a company's products or services which are provided by other companies on a contractual basis
Connecting resources with strategy and value chain
An effective strategy requires a company to engineer consistent and mutually-reinforcing value creating activities. The value chain illustrates the activities companies engage in and the ways these activities are coordinated across departments and functions. Coordinating activities are usually critical Extraordinary resources are often intangibles Intangibles contribute to sustainability
environmental scanning
An overarching term encompassing the monitoring evaluation and dissemination of information relevant to the organizational development strategy
Strategic management process
Analysis - Careful external analysis of an industry and internal analysis of a company's strengths, resources and ways of creating value Formulation - Articulating vision, mission, goals, and a type of strategic approach to adopt Implementation - Putting strategy into effect by allocating resources, structuring the organization, and motivating employees Evaluation - Ensuring strategy-consistent actions across departments, and establishing performance metrics to ensure that progress is being made toward long term goals
Business leadership model
Applying this model, the perception of a gap between current and desired performance drives the need for strategy (to assess and design the business to address the gap) and for execution (to assess and build the organizational capabilities needed to deliver market results) A Performance Gap is a quantified statement of the shortfall between current business results and those that were expected An Opportunity Gap is a quantified assessment of the discrepancy between current business results and those that can be achieved in the marketplace
Sun Tzu
Arthur of the art of war, an ancient chinese book on military strategy
Describe the process of developing a vision statement
Assemble a small team Consider important questions Establish an event horizon
Nine box matrix
Attractiveness of the industry vs business unit's ability to compete within the industry
Explain the benefits and drawbacks of using SWOT analysis
Benefits: 1) easy to understand and use; 2)helpful in seeing how strengths and weaknesses align with opportunities and threats; 3) provides simple overall direction; 4) enables competitive comparisons using objective data; 5) provides a strong starting point for further in-depth strategic planning. Weaknesses: 1) often results in a long list of items, too many to effectively manage; 2) can over-simplify complex business processes; 3) possible confusion between strengths and weaknesses, and these can change over time; 4) may prompt companies to build on strengths that are less relevant to changing markets; 5) provides a static view without insight into the sources of strengths and weakness
Chapter 2
Chapter 2
Resources
Companies depend on 2 kinds of resources - ordinary and extraordinary • Ordinary resources are the customary resources required of any business to compete in its industry - both tangible and intangible. • Extraordinary resources are those that confer superior and sustainable competitive position. This is what companies should seek to develop.
Assess how the value chain perspective provides insight on sources of competitive advantages
Competitive advantage arises when competitors are unable to easily imitate a successful company. Such barriers to entry and barriers to mobility are often created through actions that a company engages in which its competitors cannot observe. In the value chain the support activities and the efforts to coordinate activities across the company are usually unobservable
Chapter 4 How competitive advantage is connected to company strategy and performance
Competitive advantage can be achieved in an industry that is not perfectly competitive, where there are differences among companies. In this environment some companies can earn higher profits than others. Strategy is about the sets of decisions and investments that result in a position of "above average profits
Five techniques for communicating vision and mission
Creating Narratives Acting as Role Models Establishing Specific Short-term objectives Personalizing Creating objects that display
Value Chain drawbacks
Depends on information systems to provide useful data. More focus internally, less focus on market
outline a practial model for analyzing which resources and capabilities will work to deliver competitive advantage
Develop a list of all resources and capabilities, including those which are tangible and intangible. Divide the list into those you believe are ordinary resources and those you believe may be extraordinary resources. Use the 5-point VRIST framework to determine which are truly extraordinary resources. Leverage the identified extraordinary resources: 1) extend into new products, services and/or customer segments; 2) replicate the resource elsewhere in the company to enhance performance; or 3) develop complementary resources. Assess the relevance of extraordinary resources for the Key Success Factors important in the industury
Industry definition can affect conclusions drawn from an industry analysis
Different industry definitions will result in different sets of competitors, and in different key success factors. Broadly-defined industries usually require companies to engage in a wider variety of value-creating activities that depend on developing broad and deep resource positions. Broadly-defined industries usually encounter international competition or require international development. Narrowly-defined industries allow companies to focus their resource investments and efforts more carefully.
Possible reasons for low usage of guiding statements
Diversification - many business units Complexity of developing statements Often involving entire company Requires deep understanding, making choices, and commitment to focus Indirect connection with performance
Key evaluation criteria
Does your strategy exploit your key resources and capabilities Do you have enough resources to pursue this strategy Will your envisioned differentiation be sustainable Are the elements of your strategy internally consistent Is your strategy implementable
Explain how dynamic changes in industries and competitive positions will impact a company's strategy.
Driving forces can produce changes in industries over time. This may lead to newly emerging key success factors that companies will need to invest in. External driving forces can also lead to the emergence of new industries whose products and services increasingly serve as substitutes to existing products and service
Companies that grow are more profitable
Economies of scale often occur at relatively small share of industry sales Seek profitability over revenue growth
Competitive advantage
Entire set of value chain activities Learning new best practices Support activities consistent with strategy Coordination across the company Opportunity recognition activities Connections upstream and downstream intangible and unobservable by competition
environmental scanning & industry analysis
Environmental scanning industry analysis CI forecasing The strategic audit Synthesis of external audience
Explain how principles and values can lead to superior performance
Establish trust Provides ethical boundaries of action leads to positive outcomes and avoids unhealthy outcomes Establishes distinctive platform compared with many competitors
Trended financial statement analysis
Evaluating a company's financial statements over time is like watching a movie of its strategy in actions (i.e. its pattern of investments, asset allocations, and sets of activities). It can reveal areas of activity where the company is moving very quickly, and can help determine whether its strategic objectives are being accomplished.
Strategy with leadership and ethics
Every aspect of strategy and the strategic management process depends on effective leadership. Articulating vision and establishing ethical guidelines are part of the responsibility of both leaders. However, employees down the totem pool see where the company is doing well or poorly, notice new opportunities, and see where ethical behavior and actions impact performance.
Chapter 5The difference between internal analysis and external analysis
External analysis examines industry structure and driving forces, in order to assess the attractiveness of an industry and identify key success factors that every company must attend to. External analysis can explain roughly 20% of the variation of performance of firms. Internal analysis can be conducted using SWOT analysis or value chain analysis. SWOT tends to present a static snapshot, while value chain tends to present a dynamic view. Internal analysis is intended to identify what a company is particularly adept at doing as well as possible points of weakness. Strengths and weaknesses usually arise because of activities and routines that companies engage in. Value chain analysis helps dig deeper to identify these activities and routines.
Explain how an industry is shaped by driving forces
External driving forces can have either beneficial effects on an industry (e.g. increasing target population) or detrimental effects (e.g. more government regulation; technology that obsoletes product
Explain the difference between resources and capabilities
Extraordinary resources are the foundation of sustainable competitive advantage. Capabilities are sets of tightly integrated activities, organizational skills, and internally developed routines that are based on and configured out of extraordinary resources. Capabilities provide a platform from which a variety of new products or services may be developed and multiple custome
Fredrick Taylor
Father of the "science of work" time and motion studies that haploid identify more efficient processes and ideas about structure and hierarchy
stockholders
For-profit companies are expected to produce positive financial returns for investors who buy their stock. A company's stock will be more attractive to investors if it produces above-average returns, without requiring investors to accept greater risk. This is consistent with the goal of strategy.
Driving forces
Forces outside the control of the company, but which the company must pay attention to
Forecasting
Formulate historical data as projection for the future Danger of assumptions Useful forecasting technique : Brainstorming, expert opinion, statistical modelling, prediction markets, scenario writing
High growth markets are always where the money is.
High growth markets attract other companies Might put certain suppliers in the "drivers seat" May not be suited to your company's core competencies
sources of durable advantages
Historical conditions Often based on original opportunity recognition e.g. locking up tangible resources Causal ambiguity Causes of advantage poorly understood Often based on tacit components Social complexity Many "moving parts" that interact Impossible to tell what each part does
How to employ strategy mapping techniques to indentify strategic groups in an industry
Identify key success factors in the industry. Plot the location of competitors on a graph using objective measures for two of the KSFs. Draw a circle for each competitor at its plot location, where the size of the circle represents the size of the company. Repeat these steps using other pairs of KSFs. Identify groups of competitors that are close to each other on the sets of grap
Conducting value chain analysis
Identify value chain activities Different from competitors' activities Potential to create strategic differences Evaluate value-creation characteristics & costs Executional drivers Structural drivers Identify improvements to capture greater value
Characteristics of strategic decisions
Ill-structured and non-routine Significantly affect all functions and overall company Involve significant commitment of resources Are difficult to reverse, both economically and psychologically Involve making a clear choice - what to do, and what not to do Easily identified with company success or failure
Value Chain Benefits
Illustrates derivation of strengths and weaknesses. dynamic More predictable path of development. Spotlights internal synchronization and consistency of effort.
P&Gs
Improve new product development capability Embed researchers in emerging nation communities to observe use & practices Create more vital contacts upstream with suppliers and scientists Results Enhanced opportunity recognition and value creation capabilities
Definition of impact investing
Investment with the objective to create positive social and / or environmental impact as well as some financial return
hypercompetition
Is a competition environment characterized by intense and rapid moves to create unsustainable competitive advantage among the rival.
Michael Porter
Leading proponent of the move from long-range planning to strategy. His two early books on the subject, Competitve strategy and Competitive advantage, described competitive strategy as "positioning a business to maximize the value of the capabilities that distinguish it from its competitors.
stakeholders
Many corporations today create value for other stakeholders, and thus embrace the idea of triple bottom line performance measurement. Non-financial measures of performance can lead to a stronger business and enhanced opportunity to accomplish strategic goals. employees / board suppliers, customers, communites
Five Common Strategy Mistakes
Marketing the same as strategy Competitive advantage is more than what you are good at Companies that grow are more profitable Growth or reaching 1 billion in revenue is a strategy High growth markets are always where the money is
Triple bottom line
Measuring performance in economic, social, and ecological terms
industry analysis
Method through which the examination of competitive determines whether
The principles of stager focused organizations
Mobilize change through executive leadership Translate the strategy to operational terms Align the organization to strategy Make strategy a continual process Make strategy everyones every day job
Vision statement
More compelling and overarching than the mission statement, an image of the organization in the future that motivates employees to focus their actions toward a common point
Impact investing
One own investment portfolio ought to be aligned to ones own values and aspirations Change of mindset from risk adjusted optimal return strategies to impact generation strategies
Executional drivers
Performance and cost dimensions of activities that are derived from the execution of the business activities - involving people, systems, routines, culture, and coordination - and usually have a fairly important learning dimension to them
Structural drivers
Performance and cost dimensions of activities that are derived from the strategic choices made about the underlying economic logic and structure of the business - such as the scale and scope of its operations, the complexity of its products or services, and its use of technology
tangible resources
Physical assets such as equipment, buildings, land, furniture, human resources, money, and patents.
value chain
Provides a systematic way of examining all the activities a firm performs and how those activities interact with each other to find a basis for competitive advantage
CHAPTER 3 How vision and mission statements can be used to provide effective direction for a firm
Provides direction and purpose defines immediate approach complements of strategy
metrics
Qualitative and quantitative measures that allow the firm to measure the effectiveness of its business strategy
Customary measures
ROE - best Revenue growth Common stock returns market capitalization
social complexity
Resources that may result from a socially complex phenomenon, something which cannot be systematically managed or influenced.
Current financial statements
Reveals patterns of investments and strategic behaviors Common-sized statements facilitate comparison of different size competitors
Key success factors
Rules of thumb for doing business in an industry that reflects the structural conditions of the industry
Scanning societal environment (STEEP analysis)
STEEP = Sociocultural, technological, economic, ecological, and political-legal
Explain the steps involved in developing an effective mission statement
Short Simple Company specific Actionable Measurable
Three ways to formulate strategy
Strategic thinking Formal Strategic planning Opportunistic strategic decision making
Non-profits and governments
Strategy is equally important in the management and administration of non-profits and governments that have important long term goals
Growth" or reaching "$1 Billion in revenue" is a strategy
Strategy is not actions or goals it is integrated actions that develops the positioning to obtain the goals
Importance today
Strategy is the glue that binds different parts of an organization together into a consistent approach to the marketplace. Strategy enables companies to create value and meet the growing desires of customers and other stakeholders. Delivers superior performance and encourages explicit consideration of ethics
relationship between strategy and financial statements
Strategy results in financial statements which reveals strategy
Competitive advantage is more than what you are good at
Strengths have to give you competitive advantage
History of strategy
Sun Tau, "The art of war Greece, strat and egos "art of the general" Fredrick Taylor, 1911 - science of work Alfred Chandler, 1962 - strategy and structure Jolts to US economy during 1970s and oil crisis Michael porter, 1980, - competitive strategy
The goal of strategy
Superior performance or substantial positive return or above average profitability or above average return on equity
Common stock returns
Takes into account both the dividends paid by a company to its shareholders as well as increases in the price of shares.
Sarbanes-Oxley Act
The legislative initiative enacted in 2002 that imposes stiff new demands on companies and their auditors to ensure that published financial statements are accurate
Dodd-Frank
The legislative initiative enacted in 2010
Market capitalization
The market value of outstanding shares of stock. Stock price multiplied by all outstanding shares.
Strategy
The overall concept for how a company organizes itself and all its activities in order to conduct business successfully, out-perform competitors, and deliver superior returns to its shareholders
Concentration ratio
The percentage of market share in the industry owned by the largest firms
Value creation
The primary goal of strategy. The value created is widely accounted for by all the stakeholders of the company
Economic profit
The residual income above and beyond normal profit that accrues to owners, deriving from the prowess of management n planning, supervision, and contro
Explain the impact that forces other than competition can have on company strategy and performance.
There are four forces internal to an industry, in addition to competition, than affect company strategy and performance: threat of new entrants, substitutes, bargaining power of suppliers, bargaining power of buyers. When any one of these four other forces is strong, it prompts incumbent competitors to spend more to develop new products or meet escalating demands, or to lower prices to remain more competitive. Each such effort reduces the profitability of incumbents. Customers are stolen away by new entrants and by substitute products and services, resulting in lower revenue to incumbent competitors. External driving forces can have either beneficial effects on an industry (e.g. increasing target population) or detrimental effects (e.g. more government regulation; technology that obsoletes product
Describe how value is created through a firm's internal
There are four ways to create value: 1) provide greater benefits for the same price; 2) provide the same benefits for a lower price; 3) provide greater benefits at an incremental price smaller than the gain in benefits; 4) broadening access to benefits to a broader audience without sacrificing current customers. Value can be created for both customers downstream and suppliers upstream. Value is created through primary and support activities that companies engage in, and through the extent to which all these activities are internally consistent and well- coordinated
Perform a value chain analysis
There are three steps in conducting a value chain analysis: 1) identify value chain activities; 2) evaluate the value characteristics and costs of these activities; 3) identify activities that allow the company to capture greater value, and those where further improvements are desirable and possible
Economic logic
This is a general description, or a "recipe," for how a successful company seeks to earn superior economic returns in its industry. You can identify the recipe by stepping back from the specific detailed activities that a company engages in, to describe in broad terms what it is trying to do.
intangible resources
Those resources and capabilities that are not physical in nature. They including relationships with key suppliers/businesses, the culture of the organization, the history of the business to date, and perhaps most importantly, the skills of the found
ordinary resources
Those resources or capabilities that are necessary to operate in an industry, but which do not confer competitive advanta
extraordinary resources
Those resources or capabilities that simultaneously exhibit the characteristics of: valuable, rare, durable, relatively non-substitutable, and non-tradable
Porter's Five Forces
Threat of new entrants Suppliers - bargaining power buyers - bargaining power of customers / buyers substitute - the threat of substitute products The industry - competition within the industry
toyota case study
Threat of new entrants - Weak Rivalry among existing firms - Very Strong Threat of substitute products or services - Weak Bargaining power of buyers - Strong Bargaining power of suppliers - Weak
chapter 6 Demonstrate how to compare the types of companies resources, and show which can generate competitive advanage
Two types of resources are used by companies in the design and execution of their strategy: ordinary and extraordinary. Ordinary resources are those which the company must possess and utilize roughly at parity with its competitors in an industry. Ordinary resources are not a source of competitive advantage. The lack of ordinary resources may put a company at a competitive disadvantage. Extraordinary resources are those which exhibit the VRIST dimensions: valuable, rare, cannot be imitated, cannot be substituted for, cannot be traded for. These are the foundation of sustainable competitive advantage because they confer the qualities of value, uniqueness and durability.
Idiosyncratic
Unique to the company and which cannot be reproduced by a competitor or imitated very easily.
Operating characteristics
Usually there exist key operational metrics that companies must pay attention to, given the economic logic they employ. These metrics tend to reveal which companies will do well financially, and which will struggle. Example in airline industry: cost per available seat mile.
Advantages of strategic management approach
Well understood conceptual framework strategic thinking capabilities widespread strategy adapts to changing conditions Review system focus on key areas motivational system to think strategically
Value Capture
When a company creates value by acting in ways that its competitors cannot or will not act.
Long-range planning
a traditional approach to planning used before 1980 that often extrapolated into the future what the company had done well in the past
SWOT Benefits
a. It is easy to understand and use. b. It suggests an overall direction for the firm. c. It provides a good starting point for a more in-depth discussion of the firm's strategy.
SWOT Drawbacks
a. It results in a concise list of items across the four categories. b. It provides a static view of the firm. c. It unambiguously distinguishes between strengths and weaknesses. *d. All of the above are potential SWOT analysis drawbacks.*
Recipe for a type of company
club store: pile high, mark it down luxury retailer: merchandise beautifully, pamper the customer
methods for financial statement
current financial statement comparisons common-sized finial statement comparison operating ratio comparisons trend analysis
Value chain activity drivers
executional drivers - work force involvement - total equality management - plant layout - capacity utilization - routines & coordination - culture Structural drivers - scale & scope - experience curve - complexity of products & services - technology utilization - capital intensity
SCP model
external shocks (tech breakthrough) changes in structure (economics of demand / economics of supply / industry chain cecomins) changes in conduct changes in perfromance Structure- Conduct-Performance
recipe for an industry
game consoles - installed base banks - net interest margin
different types of margins
gross margin operating income net income
Performance
key outcome of interest for those studying and managing strategy 1. Summary measures that reflect the impact of integrated efforts across the entire company 2. measures that can be compared to competitors 3. measures that account for longer period of time
List the categories of resources that companies may draw upon to develop competitive advantage
knowledge; social; human; financial; organizational; technology; physical.
Economies of scale
low unit costs that result from producing on a large scale
1970s-1980s
macro-economic shocks to the U.S. industries and technological advances led to foreign competition, share losses in many important industries, and the realization that long-range planning was sufficient
Dumbest idea in the world
maximizing shareholder value There is only one value definition of a business purpose - to create a customer
ROE
most common performance measure used by executives broken into three component ratios that provide insight on company profitability - COGS / sales asset productivity - current asset turnover financial leverage - current ratio
MACS framework
parent company's ability to extract value from the business unit, relative to other potential owners vs business unit's value-creation potential as a stand alone enterprise
identifying external strategic factors
probability of occurrence vs probable impact on corporation - high and high is large priority
experience curve
reductions in cost per unit that are achieve through the learning that occurs in cumulative production over time
Balanced scorecard
short term - financials internal - processses external - customers long-term - learning, innovation & growth
Corporate strategy
strategy involved in managing multiple business units under the same corporate banner
swot vs value chain
swot - what a company is, static snapshot value - what a company does, dynamic view
VRIST framework
used to identify extraordinary resources Valuable Rare Imitation Substitution Tradable
Marketing vs strategy
value propositions are not strategy strategy is mix of benefits aimed at meeting customers needs Distinctive value through distinctive activities
drawing a value chain
• Include both primary activities & support activities. • Identify activities in every cell, or are there some cells left blank? If so, why? • Define activities in specific terms; it helps understanding versus staying generic. • Include connections upstream with suppliers & downstream with customers. • Indicate how the company achieves consistency of activities across cells and internal coordination: are the activities inconsistent, independently consistent, mutually-reinforcing?
Purpose of industry analysis
• Is this industry attractive - can we earn "above average profits" here, or is it more perfectly competitive (where there are zero profits)? • What are the KSFs now - the "rules of the game" - what must we do in order to compete effectively? • What Driving Forces affect the entire industry that might change the rules of the game?
Categories of resources
• Knowledge • Social • Human • Financial • Organizational • Technology • Physical
Core idea of value chain
• Products and services do not define companies. • Products and services are merely the outcomes of how people act in companies. • Creating and capturing value is a result of how people act. • Companies competing in different ways have different activity sets. o e.g. Amazon vs. Barnes & Noble; Kodak vs. HP; Nucor vs. Arcelor Mittal • You can manage how people act.
Guiding statements
• Vision - what we want the company to become. • Mission - how the company competes in the present. • Principles - the moral and ethical foundations for the conduct of the company's business activities (both internal and external).
