Strat Final

resource-based view

-a model that sees types of resources as key to superior performance -tangible: labor, capital, land, buildings, plant equipment, supplies -intangible: culture, knowledge, brand equity, reputation, intellectual property -competitive advantage is more likely to spring from intangible rather than tangible resources -2 critical assumptions: 1) resource heterogeneity: a firm is a bundle of resources and capabilities that differ across firms competing in the same industry 2) resource immobility: a firm has resources that tend to be "sticky" and that do not move easily from firm to firm

vision

-a statement of some desired future state -"what?" -customer-oriented vision allows companies to adapt to changing environments and defines a business in terms of producing solutions to customer needs -product-oriented vision define a business in terms of a good or service provided and tends to force managers to take a more myopic view of the competitive landscape

platform business

-an enterprise that creates value by matching external producers and consumers in a way that creates value for all participants, and that depends on the infrastructure or platform that the enterprise manages -EX: Uber, Facebook, Microsoft, Apple, Amazon -effective use of technology allows platform firms to drastically reduce the barriers of time and space -advantages: scale more efficiently than pipelines by eliminating gatekeepers, unlock new sources of value creation and supply, benefit rom community feedback and network effects

isolating mechanisms: increasing the cost of imitation

-better expectations of future resource value -path dependence -legally protected (patents, exclusive rights) -social complexity -ambiguous cause

blue ocean strategy

-business-level strategy that successfully combines differentiation and cost-leadership activities using value innovations to reconcile the inherent tradeoffs -2 pricing options: 1) higher price than cost leading, reflecting higher value creation and thus generating greater profits margin 2) lower price below of the differentiator because of its lower-cost structure, gaining market share to make up for loss in margin through increased sales

decline stage of industry life cycle

-changes in external environment often take industries from maturity to decline -4 strategic options: exit, harvest, maintain, consolidate

focus strategy

-competitive scope is narrower -why focus?: a firm's core competencies may be best suited to serving a particular segment of the industry, large firms may overlook small niches, can be used to "sneak" into industries (e.g. Amazon acquiring Whole Foods) -risks: firms may be "out-focused" by innovative competitors, large competitors may enter niche market, preferences of niche customers may change, lack of economies of scale and bargaining power

how to respond to disruptive innovation?

-continue to innovate to stay ahead of the competition -guard against disruptive innovation by protecting the low end of the market -disrupt yourself, rather than wait for other to disrupt you

good strategy

-enables a firm to achieve superior performance relative to its competitors 1) analysis 2) strategy formulation 3) implementation

mission

-the reason for existences -what an organization does -"how?"

AFI Strategy

1) analysis 2) formulation 3) implementatio

Home Value Inc., Max Cart Inc., and Nice Necessities Inc. are three consumer-product retailing companies. Their products consist primarily of day-to-day items that are easy to imitate and sell. All three companies use the same resources and capabilities in the production and distribution of their products. Judging from the market conditions described in this scenario, which of the following statements is true? Any advantage that one firm has will be short-lived. Barriers to entry within the industry will be high. The industry structure will be far from perfect competition. Resource immobility of the firms will be low.

Any advantage that one firm has will be short-lived.

Which of the following provides an example of a firm in a red ocean? Goode Apparel offered clothing at a mid-range price but failed to differentiate its product as being of decent quality. Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive. Top Drawer Apparel offered clothing at a higher price than competitors and, as a result, failed to make a profit. Cheap Apparel offered clothing at a price matching that of its competitors and, as a result, it had lower profit margins.

Chique Apparel offered clothing at a low price but failed to differentiate its product as being exclusive.

Which of the following is a feature of the shakeout phase of the industry life cycle? The mode of competition shifts from price to non-price in this stage. There is rapid industry growth during this stage. Market demand in this stage primarily consists of first-time adopters. Competitive intensity within the industry increases.

Competitive intensity within the industry increases.

On which of the following tenets is the crossing-the-chasm framework, suggested by Geoffrey Moore, based? The number and size of competitors remain constant throughout the industry life cycle. The supply and demand sides of the market remain constant irrespective of the phase of the industry life cycle. Each stage of the industry life cycle is dominated by a different customer group. Industries tend to follow an unpredictable industry life cycle.

Each stage of the industry life cycle is dominated by a different customer group.

Which of the following scenarios best exemplifies a platform business? Devin purchases electronic parts from a variety of vendors and assembles them into inexpensive MP3 players that he sells to consumers. Gena founded a bike-based transportation company that offers environmentally-friendly rides to customers within a 25-mile radius. Raul operates a consulting firm in which businesses hire him to assess deficiencies in their organizational culture. Myra operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.

Myra operates an industrial test kitchen in which local growers bring their produce to local chefs, who use the kitchen to try new recipes and determine which produce to buy.

Which of the following businesses is most susceptible to negative network effects? Clover Technologies produces computer processing chips and sells them to a variety of manufacturers for use in smartphones and other devices. Pics Match is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos. Moonglow Shoes produces a line of lightweight running shoes that are endorsed by an Olympic gold medalist. Green Tools manufactures solar powered gardening implements and sells them online.

Pics Match is a social media platform where users upload photos to the site and are matched with other users who have taken similar photos.

Keeping in mind the five forces in the airline industry, which of the following best explains the difficulty airlines have in generating a profit? Consumers in the industry make decisions based on price, thus reducing the intensity of rivalry in the industry. Entry barriers in the industry are high, resulting in hardly any new airlines popping up. Suppliers have weak bargaining power because they offer products that are not differentiated. Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

Substitutes are readily available in the form of trains, buses, and cars, thus reducing the profit potential in the industry.

In developed economies, the electric car industry is in the introduction stage, and the industry for MP3 players is in the shakeout phase. What does this imply? The industry for electric cars will primarily pursue an integration strategy, whereas in the MP3 players industry, the focus will be on differentiation. The electric car industry will move to the growth stage, whereas the industry for MP3 players will enter the growth stage next. The mode of competition in the electric car industry will be based on price, whereas in the MP3 player industry, the mode of competition will be non-price based. The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

The industry for electric cars will focus more on product innovation, whereas in the MP3 player industry, the focus will be on process innovation.

patent

a contract between the government and an inventor, granting the inventor exclusivity regarding the invention for a certain amount of time -utility patent: 20 years -design patent: 14 years -plant patent

stakeholder impact analysis

a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders -power -legitimate claim -urgent claim

trademark

a distinguishing word, name, or symbol used to identify a product (10 year renewal)

strategic position

a firm's strategic profile base on the difference between value creation and cost (V-C)

core rigidity

a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed

industry analysis

a method to: 1) identify an industry's profit potential and 2) derive implications for a firm's strategic position within an industry

top-down strategic planning

a rational, data-driven strategy process through which top management attempts to program future success (AFI framework)

core values statement

a statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external actions

primary activites

add value directly as the firm transforms inputs into outputs (e.g. supply chain mgmt, operations, distribution, marketing and sales, after-sales service)

support activities

add value indirectly but are necessary to sustain primary advantage (e.g. R&D, information systems, human resources, accounting and finance, firm infrastructure including processes, policies, and procedures)

buyer-supplier relations

alliances, forward/background integration, exclusive contracts, ads/promotions

strategic initiative

an activity a firm pursues to explore and develop new product and processes, new markets, or new ventures

disruptive innovation

an innovation that leverages new technologies to attack existing markets from the bottom up

stakeholder strategy

an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage

strategic management

an integrative mgmt field that combines analysis, formulation, and implementation in the quest for competitive advantage 1) strategic planning 2) scenario planning 3) strategy as planned emergence

resources

any assets that a firm can draw on when formulating and implementing a strategy

serendipity

any random event, pleasant surprise, and accidental happenstance that can have a profound impact on a firm's strategic initiatives

1) risk of entry by potential competitiors

barriers to entry: -economies of scale: as firms expand output unit costs fall via cost reductions, discounts on bulk purchases, cost advantages/savings -brand loyalty makes it difficult for new entrants to take market share -absolute cost advantages: accumulated experience, lower financial risk, control of inputs -customer switching costs for buyers -government regulation

incremental innovation

builds on established knowledge base and steadily improves existing products

A _____ primarily details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market. functional-level strategy code of ethics business-level strategy mission statement

business-level strategy

resource-allocation process (RAP)

can be critical in shaping a business's realized strategy

In an industry, the threat of entry is high when technological know-how is industry specific. switching costs are high. expected returns are low. capital requirements are low.

capital requirements are low.

In the five forces model developed by Michael Porter, _____ is not defined narrowly as a firm's closest competitors but rather more broadly to include other factors in an industry like buyers, suppliers, potential new entry of other firms, and the threat of substitutes. a stakeholder a barrier to entry competition regulation

competition

A firm that achieves superior performance relative to other firms in the same industry or the industry average has a(n) competitive advantage. power position. equity leverage. balanced scorecard.

competitive advantage

innovation process

discovery, development, and transformation of new knowledge in a 4 step process captured in the 4 I's: -idea -invention -innovation: the commercialization of the invention -imitation

activities

distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services

radical innovation

draws on novel methods derived from a different knowledge base; targets new markets with new technologies

what is the goal of strategy?

economic gains in excess of what could be expected from other investments with a similar amount of risk

dynamic capabilities perspective

emphasizes a firm's ability to modify and leverage its resource base in a way that enable it to gain and sustain a competitive advantage in a constantly changing environment

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage? large cash holdings new production facilities enthusiastic company culture stockpile of supplies

enthusiastic company culture

A good strategy is a set of actions that enables a firm to achieve its own internal goals without regard to the external environment. true or false?

false

A lawyer may work on a retainer basis by which he or she provides office and consulting time, which includes court time and other legal fees related to the action. true or false?

false

The three main categories of patents are design, utility and provisional patents.

false

Intellectual property (IP) protections such as trademarks or patents are proven methods of establishing permanent barriers to imitation. true or false?

false- Intellectual property protections are temporary barriers to imitation. Once the protections expire, imitation becomes common.

A differentiator will always benefit when products have become commoditized. true or false?

false- The viability of a differentiation strategy is severely undermined when the focus of competition shifts to price rather than value-creating features. This can happen when differentiated products become commoditized and an acceptable standard of quality has emerged across rival firms.

Differentiation and cost leadership strategies are only effective in manufacturing industries. true or false?

false- These two business strategies are called generic strategies because they can be used by any organization—manufacturing or service, large or small, for-profit or nonprofit, public or private, domestic or foreign—in the quest for competitive advantage, independent of industry context.

firm effects

firm performance attributed to the actions managers take

industry effects

firm performance attributed to the structure of the industry in which the firm operates

shakeout stage of industry life cycle

firms begin to compete directly against one another for market share, so weak competitors don't survive and the industry consolidates

reducing competitive rivalry

form industry associations, consolidate, lobby govt

2) rivalry among established companies

intensity of rivalry is a function of: -industry competitive structure: # and size distribution of companies, consolidated (few companies) vs. fragmented (many companies compete) industries -demand conditions -cost conditions -height of exit barriers

Which of the following lists the stages of the industry life cycle in the correct order? introduction, growth, shakeout, maturity, and decline introduction, growth, maturity, shakeout, and decline introduction, shakeout, maturity, growth, and decline introduction, shakeout, growth, maturity, and decline

introduction, growth, shakeout, maturity, and decline

Economies of scale are cost advantages that accrue for firms with larger output. high fixed costs. low employee turnover. high capital risks.

larger output

To initiate a strategic move that allows a firm to open up new and uncontested market space through value innovation, managers must address four key questions when formulating a blue ocean business strategy. These questions focus on increasing cost and maintaining perceived customer benefits. lowering cost and maintaining perceived customer benefits. lowering cost and increasing perceived customer benefits. increasing cost and increasing perceived customer benefits.

lowering cost and increasing perceived customer benefits.

winner-takes-all markets

markets where the market leader captures almost all the market share and is able to extract a significant amount of the value created

architectural innovation

new product with existing technologies are reconfigured in a novel way to attack a new market

capabilities

organizaton and managerial skills necessary to orchestrate a diverse set of resources and deploy them strategically

trade secret

protection against other revealing or disclosing information that could e damaging to business (noncompete agreements signed by employees)

copyright

protects original works of authorship

organizational inertia

resistance to changes in the status quo

economies of scope

savings that come form producing 2 or more outputs at less cost than producing each output individually, despite using the same resources and technology

autonomous actions

strategic initiatives undertaken by lower-level employees on their own violation and often in response to unexpected situations

A traditional top-down strategic planning process typically begins with: employees at the operational level identifying problems within an organization. strategic leaders adjusting a company's vision and mission based on environmental analysis. employees who have close contact with customers taking autonomous actions. functional managers formulating functional strategies for their respective departments.

strategic leaders adjusting a company's vision and mission based on environmental analysis.

scenario planning

strategy planning activity in which top mgmt envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses

planned emergence

strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top mgmt

When a blue ocean strategy goes bad, a firm has neither a clear differentiation nor a clear cost-leadership profile. This situation is referred to as burned at the top. buried at the bottom. stuck in the middle. caught in the transition.

stuck in the middle.

competitive advantage

superior performance relative to other competitors in the same industry or the industry average

industry life cycle

the 5 different stages that occur in the evolution of an industry over time -intro -growth -shakeout -maturity -decline

business-level strategy

the goal directed actions managers take in their quest for competitive advantage when competing in a single product market

provisional patent application

the initial application to the U.S. Patent and Trademark office providing evidence of first to market

value innovation

the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers -lower costs: ELIMINATE, REDUCE -increase perceived consumer benefits: RAISE, CREATE

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? the value and the cost position of the firm relative to its competitors the exit barriers within the industry in which the firm operates the intensity of rivalry among existing companies in the firm's chosen industry the number of companies operating in the industry in which the firm operates

the value and the cost position of the firm relative to its competitors

VRIO framework

to have a competitive advantage, a firm's resources must be: -Valuable -Rare -costly to Imitate -firm itself must be Organized to capture the value of the resource

A design patent has a term of 14-years, beginning on the date of filing with the Patent and Trademark Office (PTO). true or false?

true

A patent is a contract between the government and an inventor. true or false?

true

Entrepreneurs, because of their lack of understanding of intellectual property, ignore important steps that they should have taken to protect these assets. true or false?

true

A video-streaming service provider such as Netflix is a complement to a manufacturer of streaming video devices such as Roku. true or false?

true- A complement is a product, service, or competency that adds value to the original product offering when the two are used in tandem. Complements increase demand for the primary product, thereby enhancing the profit potential for the industry and the firm.

A cost leader is the firm most likely to survive a price war.

true- A cost-leadership strategy is defined by obtaining the lowest-cost position in the industry while offering acceptable value. The cost leader, therefore, is protected from other competitors because of having the lowest cost. If a price war ensues, the low-cost leader will be the last firm standing; all other firms will be driven out as margins evaporate.

3) bargaining power of buyers

when buyers are most powerful: -buyers are dominant -buyer purchase in large quantities -switching costs for buyers are low -buyers can purchase from several supplying companies at once -buyers can threaten to enter the industry themselves (e.g. Rose Partyware case)

4) bargaining power of supplier

when suppliers are most powerful: -the product supplied is vital to the industry and has few substitutes -the industry is not an important customer to suppliers -switching costs for companies in the industry and significant -suppliers can threaten to enter their customers' industry

6) complements

-products that can help sell your products (e.g. excel helps sells computers) -high availability of complements increases profitability

growth stage of industry life cycle

-demand increases rapidly -as the size of the market expands, a standard signals the market's agreement on a common set of engineering features and design choices -prices fall -move from product to process innovation -as market demand increases, economies of scale kick in -differentiation or cost-leadership strategy

other sources of first-mover advantages

-exploit network effects and positive feedback loops -establish significant brand loyalty -enable economies of scale and learning effects -create switching costs for customers -accumulate valuable knowledge (and patents) -locking up distribution channels and suppliers

differentiation strategy

-generic business strategy that seeks to create higher value for customers than what competitors create, while containing costs -value provided by unique features and performance -superior quality -high customer service -prestige or exclusivity -rapid innovation -command premium price -creating value with differentiation by lowering buyer's subsequent costs and/or raising buyer's value -sustainability is created through barrier by perceptions of uniqueness and/or creating switching costs through differentiation -risks: customers may decide that the cost of uniqueness is too great, imitation/counterfeit, means of uniqueness may not be valued by customers

cost leadership strategy

-generic business strategy thats seeks to create the same or similar value for customers at a lower cost -determine and control cost drivers -reconfigure value chain as needed -learning curve effect occurs over time as output accumulates -experience curve = process innovation -risks: imitation, process technology innovations may eliminate cost advantages. focus on efficiency may blind firm to changes in customer preferences

introduction stage of industry life cycle

-high barriers to entry, small size of firms in market -emphasize unique product features -objective is to achieve market acceptance and seed future growth -Network Effects: the positive externality that one user of a product or service has on the value of that product for other users

Porter's five forces model

-identifies 5 forces that determine the profit potential of an industry and shape a firm's competitive strategy -why are some INDUSTRIES (NOT FIRMS) more profitable than others? -snapshot in time -stronger forces = weaker industry's profit potential -weaker forces = greater industry's profit potential 1) threat of entry 2) rivalry among existing firms 3) power of buyers 4) power of suppliers 5) threat of substitutes (extra -> 6) complements

maturity stage of industry life cycle

-oligopoly -market reached maximum size -decrease in market demand increases competitive intensity within the industry

5) substitute products

-the existence of close substitutes is a strong competitive threat because it limits the price -substitutes are a weak competitive force if an industry's products have few close substitutes

value chain

-the internal activities a firm engages in when transforming inputs into outputs -each activity adds incremental value

strategy

-the set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors -a clear strategic profile, in terms of product differentiation, cost, and customer service, allows each retailer to meet specific customer needs

core competencies

-unique strengths embedded deep within a firm that are critical to gaining and sustaining a competitive advantage -if not continuously nourished they will eventually lose their ability to yield a competitive advantage and competitors may develop superior skills

PESTEL model

categorizes and analyzes and important set of external factors that might impinge upon a firm (opportunities or threats) -Political: processes and actions of govt bodies (e.g. regulations) -Economic: growth rates, levels of employment, interest rates, price stability, exchange rates -Sociocultural: cultures, norms, and values (e.g. health trends and demographics) -Technological: application of knowledge to create new processes and products -Ecological: broad environmental issues -Legal: official outcomes of political processes as manifested in laws, mandates regulations, and court decisions

strategic tradeoffs

choices between a cost OR value position is necessary because higher value creation tends to generate higher costs

According to the crossing-the-chasm framework, the biggest chasm between customer segments is between early adopters and the mass market made up of the early majority and the late majority. true or false?

true- According to the crossing-the-chasm framework, each stage of the industry life cycle is dominated by a different customer group. Different customer groups with distinctly different preferences enter the industry at each stage of the industry life cycle. Such differences between customer groups lead to a big gulf or chasm into which companies and their innovations frequently fall. The largest chasm separates the early adopters from the early and late majority that make up the mass market.

The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities. true or false?

true- Core competencies emerge when managers skillfully combine tangible resources such as machinery and cash with capabilities such as an efficient company culture.

Cartech Inc. is a manufacturer of automobile parts, which it sells to retail auto supply stores. Its core competencies include superior design and engineering capabilities, as well as a highly integrated and efficient supply chain. To sustain its competitive advantage, Cartech should first diversify its product offerings by developing parts for construction equipment. attempt to cut costs by replacing assembly line workers with robots. upgrade its engineering department and improve its supply chain. seek to replicate its nearest competitor's competency in innovative marketing.

upgrade its engineering department and improve its supply chain.