Strategic and Entrepreneurial Thinking Final

Patent Application

Introduction - Background and advantages of the invention - Problems that it overcomes - How it differs from existing offerings Description (including drawings) Claims - (defines the boundaries of an invention; infringement criteria)

Industry Life Cycle Order

Introduction Growth Shakeout Maturation Decline

First Movers

Introduction stage Advantages: First launches the product/service in the market 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 Locking up distribution channels & suppliers Disadvantages: Pioneering Costs Later entrants 'free-ride' on first-mover's investments R&D Costs Customer Education Costs Uncertainty regarding customer demand Investment in Obsolete Technology If the underlying technology is advancing rapidly, Late entrants may be able to "leap-frog" the technology.

Utility Patent

Inventions of new, useful, and unobvious processes, machines, compositions of matter and articles of manufacture Most common patent type Valid for 20 years EX: Inventions of computer software, medical equipment, and toothbrush

Ecological

Involve broad environmental issues EX: Pollution, global warming, sustainable economic growth

What are the benefits of a registered Trademark?

It provides notice to everyone that you have exclusive rights to the use of the mark throughout the territorial limits; It entitles you to sue in federal court for trademark infringement, which can result in recovery of profits, damages and costs; It establishes incontestable rights regarding the commercial use of the mark; Prevent importation of goods with a similar mark;

Legal

Laws, Industry Regulation, IP Right Protection

Architectural Innovation

Leverage existing technologies into new markets Require companies to reconfigure the components of the product to create new markets. Example: modular system design (e.g., motherboard)

What are the challenges platform owners face?

Loose relationships between external producers and platform companies Difficult to force external producers to act in the interests of platform companies Customers may use multiple platforms (multi-homing) Customers may contact external producers offline and get rid of platform companies

Economic

Macroeconomic environment Growth rates Employment levels Interest rates Price stability Currency exchange rates

Walmarts tightly linked supply chain allows it to

Maintain a low cost of operations

Decline Stage

Market contracts further demand falls Generally, remaining firms have four options: Exit through bankruptcy or liquidation Harvest: Reduce investment and maximize cash flow Maintain: Continue to support marketing activities Consolidate: acquire rivals, aiming for a monopoly

Growth Stage

Market growth accelerates (demand = high) A standard emerges Efficient and INefficient firms thrive (low competition) Production costs begin to fall Key Objective: stake out a strategic position that is not easily imitated by rivals

What is the purpose of a Platform?

Match-making among users and facilitate the exchange of goods, services, or social currency, thereby enabling value creation for all participants.

Suppose in an economy, the MP3 player industry is in the maturity stage, while the electric car industry is in the introduction stage. Which of the following statements is NOT correct?

Network effect is important in the MP3 player industry than that in the electric car industry

Design Patent

New, original and unobvious designs for articles of a manufacture; reflects the appearance of an object Valid for 15 years Affect how it looks, do not affect how it works EX: fonts, clothing, icons

Select the correct statement: Only intangible resources can be transferable across firms Resources are always easily transferable across different firms Resources are always easily transferable within the same firm across different geography

None of these

Maturation Stage

Oligopoly with only a few firms Market has reached maximum size Demand = replacement or repeat purchases New customers are rare

Open Source Software

Open source software is software with source code that anyone can inspect, modify, and enhance Firms increasingly participate in open source software (OSS) development

What are indirect network effects?

Platform or service depends on two or more user groups, such as producers and consumers, buyers and sellers, or users and developers. As more people from one group join the platform, the other group receives greater value. EX: Amazon, Ebay, Uber

PESTEL Analysis

Political Economic Social Technological Environmental Legal

Shareholders

Contribute capital and expect economic return Shareholders are always stakeholders Shareholders care about the economic performance of the company Can have short-term perspectives

Which of the following examples does NOT describe how cost leadership strategies can help firms respond to environmental threats

Cost leadership strategies can reduce customers' sensitivity to price

Social Factors

Customers approach life differently Demographics Culture Values Lifestyle

Applying for a Patent

1. Provisional Application 2. Patent Application (within next 12 months)

Definition of Competitive Advantage

A firm that outperform its competitors or the industry average over a prolonged period of time

What is Pipe?

A linear transformation with producers on one end and consumers on the other Begins with raw materials and ends with retailing and after-sales service and support

What is a Trademark?

A word, symbol, design, slogan or sound that identifies where the product comes from Can last indefinitely, but needs to be renewed every 10 years Differ from design patents due to the identification of the source of goods

Differentiation Strategy

Adding unique features that increase the perceived value of goods and services in the minds of consumers, so they are willing to pay a higher price (V increases). Levers that increase perceived value: Product features, customer service, complements, customization

What is a Platform?

Also known as a two-sided market A business that enables value-creating interactions between companies, external producers (complements) and consumers.

Assuming that all the following technologies are feasible and being implemented, which of them is LEAST likely to disrupt an existing industry?

Altrea added advanced camera technology to its premium line of smartphones so that they would take the highest-quality photos relative to all phones on the market.

Canon was able to redesign the copying machine so that it didn't need professional service—reliability was built directly into the machine, and the user could replace parts, such as the cartridge. What Xerox had not envisioned was the possibility that the components of the copying machine could be put together in an altogether different way that was more user-friendly. This example describes

Architectural Innovation

International Patents

Becoming increasingly important for US Companies USPTO has established the Office of International Patent Cooperation to decrease the uncertainty of IP rights and reduce costs. Cooperation with European, Japanese, and Korean Patent Office Filing in one office is valid in a large number of countries

What is the Blue Ocean Strategy?

Business-level strategy Successful combination of differentiation and cost leadership Value innovation - lowering costs AND increasing customer perceived value

Rivalry Among Established Companies

Competitive Rivalry refers to the competitive struggle between companies in the same industry to gain market share from each other. Intensity of rivalry is a function of: Industry Competitive Structure Number and size distribution of companies Consolidated versus fragmented industries Demand Conditions Growing demand - tends to moderate competition and reduce rivalry Declining demand - encourages rivalry for market share and revenue Height of Exit Barriers - prevents companies from leaving industry Write-off of investment in assets High fixed costs of exit Bankruptcy regulations

What is a non-competition agreement

Contract between employer and employee The employee agrees not to start a competing business or work for a competitor for a certain time after the employment relationship ends. Useful for employers if there is any possibility of trade secrets being passed on to competitors / being used for private gain.

The evolution of cell phones to software-centric smartphones is an example of

Disruptive Innovation

Provisional Application

Establishes a date of conception of the invention First-to-file rights to the patent (the completion of an application takes time)

What is a patent?

Exclusive right granted for an invention issued by the United States Patent and Trademark Office Grants the owner protection

"Net value created" by a transaction is the difference between Price and Cost

False

In the introductory stage of the industry life cycle, companies are facing a large market size.

False

Porter's five forces can be used to determine why a company is more profitable than another company

False

Resources alone can yield a competitive advantage to a firm

False

The variance of firms' return on invested capital is greater in inter-industry (across different industries) than intra-industry (within the same industry).

False

VRIO Framework

For a sustainable competitive advantage, a resource, capability or competency must be: Valuable Helps increase economic value creation (V-C). Rare Only one or a few companies have it. Inimitable (or "Imitation is costly") Difficult to copy or substitute. Barriers to imitate Competitors may not choose to imitate because of their different expectations of future resource value Intangible managerial skills Path Dependence It's difficult for other companies to follow the exact path Intellectual Property Protection Causal Ambiguity The cause of superior performance is unclear Social Complexity Reputation and trust among suppliers and customers Friendship and collaboration between employees Organizational culture, etc. Organized to capture value (the firm is ready to achieve competitive advantage) Embedded within an effective organization structure and coordinating system.

Plant Patent

For new varieties of plants Represent limited area of interest Valid for 20 years EX: U.S. Plant Patent Number 1 was issued to New Jersey resident Henry Bosenberg on August 18, 1931 for "New Dawn," a climbing plant, which bears champagne-colored roses and is "characterized by its everblooming habit." While the patent protection for the rose variety has long expired, the rose continues to be extremely popular and readily available today.

CordKing Electronics has entered a stage in which the demand for their innovative scanning pens has started soaring. More customers are buying their device from the firm as well as CordKing competitors than ever before. What stage in the industry life cycle does this scenario describe?

Growth Stage

Stakeout Stage

Growth rate declines Competitive intensity increases No longer an increasing pie, so the shares become more important Consolidation Weaker firms are acquired or exit through bankruptcy Winners are large and enjoy economies of scale

What are the 4 I's of Innovation

Idea, Invention, Innovation, Imitation

Incremental Innovation

Improves an existing product or service and targets existing markets The vast majority of innovations are actually incremental. Example: line extension (introduce a new product line in a category already familiar with its customers)

Bargaining Power of Buyers

Industry Buyers may be individuals or companies who ultimately use the product or intermediaries that distribute or retail the products. These buyers are most powerful when: Buyers are dominant. Buyers are large and few in number. Buyers purchase in large quantities. Buyers have purchasing power as leverage for price reductions. Switching costs for buyers are low. Buyers can play off the supplying companies against each other. Buyers can threaten to enter the industry themselves. Buyers produce themselves and supply their own product. Buyers can use threat of entry as a tactic to drive prices down

What is a Trade Secret?

Information that has either actual or potential independent economic value by virtue of not being generally known Subject to reasonable efforts to maintain its secrecy Valid for as long as the secret remains Differ from patents in terms of information disclosure

What is intellectual property?

Intangible property that involves creations of human intellect. EX: Inventions, designs, artistic work

Artificial intelligence algorithms are examples of

Intangible resources

Risk of New Entrants

Potential Competitors are companies that are not currently competing in an industry but have the capability to do so if they choose. Barriers to new entrants include: Economies of Scale - as firms expand output unit costs fall via: Discounts on bulk purchases - of raw material and standard parts Cost advantages/savings - of spreading costs over large volume Brand Loyalty Achieved by creating well-established customer preferences Difficult for new entrants to take market share from established brands Customer Switching Costs for Buyers - could be significant Government Regulation May be a barrier to enter certain industries

Net Value Captured

Price - Cost

Which of the following is NOT a risk of the differentiation strategy

Production cost might be a bit higher than the industry average

Differentiation and Porters 5 Forces

Reduce Threat of Entry: Can fend off new entrants by forcing them to bear additional costs to get customers to switch Reduce Threat of Suppliers Can more readily pass on price increases to customers; can absorb price increases due to higher margins Reduce Threat of Buyers Can reduce customer sensitivity to price increases and limit switching opportunities Reduce Threat of Substitutes Can increase own products' attractiveness; can offer complements Reduce Threat of Rivalry Rivalry is attenuated since firms can carve out unique positions; can avoid price wars

Cost Leadership and Porters 5 Forces

Reduce Threat of Entry: Can frighten off new entrants by forcing them to enter at a large scale or to enter with some other strategy rather than competing on costs Reduce Threat of Suppliers Will be less affected even if suppliers ask for a higher price Reduce Threat of Buyers Will be less affected even if buyers only pay a lower price Reduce Threat of Substitutes Can keep prices low and keep products attractive relative to substitutes Reduce Threat of Rivalry Can set prices well below rivals that they cannot match

Cost Leadership

Reducing cost below that of competitors while offering adequate or the same level of value (C decreases) Cost drivers: factors that firms can manipulate to keep their costs low Cost of input factors Raw materials Physical capital Labor Affected by the bargaining power of suppliers Economies of scale Learning curve

Political

Results from the processes and actions of government bodies that can influence the decisions and behavior of firms Influences on the firms' behaviors Public relations Global market entry decisions EX: Tax policy, regulation, corruption`

Mama Mia's' Pizza & Calzone has been trying to directly copy the strategies of Fuhgeddaboudit Pies. Even though it is evident that the success of Fuhgeddaboudit Pies' success comes from the freshness and variety of ingredients it uses, Mama Mia's Pizza & Calzone' has not been able to introduce the same types of produce into its recipes. This is because Fuhgeddaboudit's network of relationships with local growers, as well as its efficient supply chain, are very difficult to emulate. Which of the following barriers to imitation does this scenario best illustrate?

Social complexity

Definition of Strategy

Strategy is a comprehensive, goal-oriented plan a firm takes to gain and sustain superior performance relative to competitors Purpose of having a strategy: create and sustain a competitive advantage

Substitute Products

Substitute Products are products from different businesses or industries that satisfy similar customer needs Competitors' products are not substitute products The existence of close substitutes is a strong competitive threat. Substitutes limit the price that companies can charge for their product.

Bargaining Power of Suppliers

Suppliers are organizations that provide inputs such as material and labor into the industry. These suppliers are most powerful when: The product supplied is vital to the industry and has few substitutes. The industry is not an important customer to suppliers. Suppliers are not significantly affected by the industry. Switching costs for companies in the industry are significant. Companies in the industry cannot play suppliers against each other. Suppliers can threaten to enter their customers' industry. Suppliers can use their inputs to produce and compete with companies already in the industry. Companies in the industry cannot threaten to enter their suppliers' industry by making their own inputs.

Porter's 5 Force Analysis

Why some industries (NOT FIRMS) are more attractive/profitable than others The stronger that each of these five forces are, the more limited the ability of established companies to raise prices and earn greater profits within their industry 1. Risk of new entrants 2. Rivalry among established companies 3. Bargaining power of buyers 4.Bargaining power of suppliers 5. Substitute Products 6. Complements

Net Value Created

Willingness to Pay - Cost

If the resources of a firm are valuable, rare, organized but imitable, then the firm will have

Temporary Advantage

Technological

The application of knowledge to create new processes and products EX: AI Blockchain

Which of the following is NOT a competitive benefit experienced by the first mover firm in an industry?

The first mover will to able to better understand customer demand

PESTEL framework can be used to analyze

The general environment of a firm

What is a copyright?

The rights that creators have over their literacy and artistic works Prevent others from printing, copying, or publishing any original works of authorship Valid for the life of the author plus 70 years

What is a direct network effect?

The value of a product increased simply because the number of users increases EX: facebook, instagram, etc

Why does one open source?

To source knowledge from the crowd, and use the knowledge to develop other close-sourced products Provide complementary services and charge fees (e.g., version maintenance) Brand advertising by showing customers how powerful the companies are Open source is not always free: can use license to prevent commercial use by other companies (e.g., GPL license)

Red Ocean

Traditional Competition Market space is crowded Competition is a zero-sum game The production process is highly identical Competition is mainly focused on price Any market share gain comes at the expense of other competitors in the same industry

How do you protect a trade secret?

Train employees to refer sensitive questions to one person; Control information presented by employees in public; Use security procedures; Have nondisclosure agreements; Avoid faxing and e-mailing any sensitive information.

Disruptive innovation is often initially overlooked by large companies

True

Definition of Core Competencies

Unique strengths embedded deep within a firm Allow a firm to differentiate its products from those of its rivals, creating higher value for the customer or offering products and services of comparable value at lower cost Competitive advantage is frequently the result of a firm's core competencies Depend on the interplay of resources and capabilities

Blue Ocean

Untouched marketplace Possible to create additional demand Opportunities for highly profitable growth

Disruptive Innovation

Use new technologies to attack existing industries Initially overlooked by large companies Gradually meet customer demand and crowd out existing companies Example: MP3 player vs CD

Radical Innovation

Uses novel methods or materials to target new markets. Allow companies to create a temporary competitive advantage Example: introduction of car/airplane

Formulating a Blue Ocean Stategy

Value innovation - lower cost 1. Which of the factors that the industry takes for granted should be eliminated? (e.g., cut certain business) 2. Which of the factors should be reduced well below the industry's standard? (e.g., reduce advertisement fee) Value Innovation - Increased perceived consumer benefits 3.Which of the factors should be raised well above the industry's standard? (e.g., increase R&D expense) 4. Which factors should be created that the industry has never offered? (e.g., create new products)

Introduction/Embryonic

When an individual or company launches a successful innovation, a new industry may emerge. Characteristics: The innovators core competency is R&D High costs for the innovator (lack of economies of scale) High Price for the consumer Market size = small Growth = slow (demand is uncertain) Barriers to entry = high Number of firms = small Strategic objective: achieve market acceptance and seed future growth EX: through network effects Network Effects The value of a product increases, often exponentially, with the number of users EX: Amazon

By using strategic tools, one can determine

When to exit/enter an industry How attractive an industry is Which industry to enter

Stakeholders

Who currently have or potentially can have a material effect on a company Step 1: Who are our stakeholders Step 2: What are our stakeholders interests and claims? Step 3: What opportunities and threats do our stakeholders present? Step 4: What economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? Step 5: What should we do to effectively address the stakeholders' concerns?

Which of the following lists the stages of the industry life cycle in the correct order?

introduction, growth, shakeout, maturity, and decline

Whole Foods differentiates itself from competitors by offering top-quality foods obtained through sustainable agriculture. This business strategy implies that Whole Foods does NOT focus on:

lowering its costs compared to its competitors, while offering adequate value for its products and services

Smooth Fusion Inc. is a software company that has built and acquired numerous assets over the years. According to the resource-based view of a firm, which of the following assets of Smooth Fusion Inc. is LEAST likely to enable it to gain and sustain a competitive advantage?

the huge headquarters building owned by the company

The intensity of rivalry among established companies in an industry will be higher if

the industry is fragments