Strategic Management
What is threat of suppliers?
(bargaining power) degree to which firms in the supply industry are able to dictate terms to contracts and thereby extract some of the profit that would go to competitors in the focal industry
What is threat of buyers?
(bargaining power) degree to which firms in the buying industry are able to dictate terms on purchase agreements which extract some of the profit that would otherwise go to competitors in the focal industry
What factors influence supplier/buyer bargaining power?
supplier/buyer concentration importance of volume to supplier/buyer differentiation/customization switching costs threats of forward/backward integration presence of substitutes price sensitivity
What are the dynamic characteristics of competitive advantage?
environmental changes, industry evolution, technological change = industry's five forces model and R&C's (VRINE)
What are the challenges from environment?
environmental uncertainty and resource dependence
What are the factors influencing degree of rivalry?
exit barriers fixed costs industry growth product differentiation corporate stakes
What are the 2 components to successful strategies?
exploit current R&Cs and explore new R&Cs
What are the 2 determinants of competitive advantage?
external and internal perspective
Environmental uncertainty is a product of what 2 factors?
f (complexity, stability)
how can firms create value by using the value chain activities?
finding better ways to perform same activities or finding different ways to perform the same activities
how does a complementor provide externalities?
firm in one industry that provides products of services which tend to increase sales in another industry
What is an industry?
firm or group of firms that produce or sell the same or similar products of the same market
When is a R&C exploitable?
firm's ability to get the value out of any resource or capability that it may generate - firm must be organized to exploit its R&Cs -
What are dynamic capabilities?
firm's ability to modify, reconfigure, and upgrade R&Cs in order to strategically respond to or generate environmental changes
What are capabilities?
firm's skill at using its resources to create good services - combination of procedures and expertise on which a firm relies to produce goods and services
what is differentiation strategy?
focus on gaining competitive advantage by increasing the willingness of customers to pay for the products or services they sell - willingness to pay: principle of differentiation strategy by which customers are willing to pay more for certain product features
What is focused strategy?
focused low cost strategy and focused differentiation
What is ambitious vision?
forces firm to stretch by challenging competitors and by questioning the internal status quo
What is the 5 forces model?
framework for evaluating industry structure
The more exclusive the access to a valuable resource is....then...
greater the benefits of having it
What does a VRINE model do?
helps managers systematically test importance of particular R&C's and desirability of acquiring new R&Cs determines firm's strength and weaknesses
What is a strategic leader's perspective?
holistic consideration of the business and its environment
What is strategic positioning?
how managers situate a firm relative to its rivals along important competitive dimensions
how do you map strategic groups?
identify two strategic dimensions that most clearly differentiate firms (Firms, geographic scope, etc)
When is a R&C non substitutable?
if a competitor cannot achieve the same benefit of using different combination of resources and capabilities
When is a R&c inimitable?
if competitors cannot acquire the valuable and rare resource quickly or they face a cost disadvantage in doing so
When is R&C valuable?
if it enables firm to take advantage of opportunities or to fend off threats in its environment
What are strategic objectives?
statements of definable and measurable accomplishments that, when met, fulfill an organization's mission and vision
What is focused low cost strategy?
strategic position based on being low-cost leader in a narrow market segment
What is focused differentiation?
strategic position based on targeting unique products to relatively small segment
what is integrated positions?
strategic position in which elements of one position support strong standing in another
How to organizations minimize their dependence on resources?
strive to acquire control over them
What is mobility barrier?
structural barrier that blocks one's mobility between strategic groups
what is SCP paradigm?
structure-conduct-performance firms perform best when they select a strategy that fits the industry environment
What is a strategic group?
subset of firms which- because of similar strategies, resources, and capabilities- compete against each other more intensely than with other firms in an industry
differentiation sources are _____ for each other
substitutes
if R&C= valuable, rare, costly to imitate, exploitable?
sustainable competitive advantage
What factors influence threat of substitutes?
switching cost buyer inclination to substitute price-performance tradeoff of substitute variety of substitute
If R&C= valuable, rate but not costly to imitate?
temporary competitive advantage
What are the 2 components to strategic management?
Formulation and implentation
What is external perspective?
I/O of economics firm's competitive advantage and performance are primarily a function of industry attractiveness positioning the firm in an attractive industry
What level of strategic planning is the business-unit level?
Business strategy
What is implementation?
Design and use of organizational subsystems and resources to operate strategic goal
What is ambiguous vision?
Enables flexibility for changing strategy or implementation tactics
What are the steps in strategic management?
Mission objectives analysis (int or ext) strategic choice strategy implementation competitive advantage
What is strategy implementation?
Process of executing strategy
What are the building blocks to a firm's strategy?
Resources and capabilities
What are the primary activities of the value chain?
activities directly associated with manufacturing and distribution of a product
What are the support activities of a value chain?
activities that assist a firm in accomplishing its primary activities
What is the VRINE model?
analytical framework suggesting that a firm with R&Cs which are Valuable, Rare, Imitable, Non substitutable, and Exploitable will gain a sustainable competitive advantage
What are the 5 elements of strategy?
arenas vehicles differentiaters starging economic logic
What are the sources of differentiation?
attributes of its products and services (product features/product complexity/timing/location) relationship between itself and its customers (product customization/consumer marketing/product reputation) linkages within or between firms (linkages among functions within a firm/linkages with other firms/product mix/ distribution channels/ service and support)
What is Strategy?
central, integrated, externally focused concept of how the firm will achieve its objective/ how to gain competitive advantage
What is business strategy?
choice a firm makes when deciding how to compete against rivals within a particular industry
What is corporate strategy?
choice a firm makes when deciding in what business (markets) to be, and how to manage these businesses
if R&C= valuable but not rare?
competitive paritiy
Which level of strategic planning is the organization level?
corporate strategy
What are the 3 levels of strategic planning?
corporate strategy business strategy functional strategy
What is the blue ocean strategy?
create uncontested market space make competition irrelevant create and capture new demand break the value-cost trade-off align the whole system of a firm's activities in pursuit of differentiation and low cost
Why is there a problem with uncertainty?
decision makers do not have sufficient information about environmental factors
What is a mission statement?
declaration of what a firm is and what it stands for firm's fundamental value and purpose
What is threat of new entrants?
degree to which new competitors can enter an industry and intensify rivalry - condition under which it is more difficult to join or compete in an industry
What is threat of substitutes?
degree to which product of one industry can satisfy demand as those of another
real option approach considers both...
direct and delayed effects of a firm's strategies
What are technological discontinuities?
disruptive technology: breakthrough technology that destroys the competencies of incumbent firms in an industry
The process of developing, accumulating and losing R&Cs is inherently..._________
dynamic - integrating different R&C to create new revenue-producing products and services - re configuring or transferring R&Cs from one division to another
What are the factors influencing threat of entry?
economies of scale capital requirement product differentiation cost advantage independent of scale brand access to distribution government policy
What are the sources of cost advantage?
economies of scale learning technological advantages differential low-cost access for inputs product design (all leads to cost reduction)
what are the 4 stages to an industry life cycle?
embryonic, growing, mature and in decline
what are the threats to generic strategy?
imitation, new technology, inferior quality, risk of outsourcing= low cost advantage failing to increase buyer's willingness to pay higher price, underestimating costs of differentiation, over fulfilling buyer's needs, lower cost imitation= differentiation advantage
What are the 5 components to primary activities?
inbound logistics, production, outbound logistics, sales and marketing, after sales service
what are the 3 components to support activities?
infrastructure activities, technology and Human resource management
What are resources?
inputs used by firms to create products and services
What is the implementation framework?
intended strategy--> implementation levers and strategic leadership--> realized strategy or emergent strategy
What is threat of rivalry?
intensify competition within an industry complementors affected by number of firms and similarity of those firms
How can a firm maximize returns? (cost leadership and economic returns(
keep its prices at market level and reap higher margins than competitors --> Profit Margin or can sell products for lower prices while still maintaining the same margins as rivals --> Market share
What are the 2 ways a firm can gain competitive advantage over rivals?
low cost advantage and differentiation advantage
What are the traits to the in decline stage?
market contraction further consolidation and industry regeneration
What are the traits to the growing stage?
market expands beyond niche more competitors enter customer become better informed
What is environmental uncertainty?
need for information about environment
What is resource dependence?
need for resources from the environment
What are the traits to the embryonic stage?
niche market emphasis on problem solving technical uncertainty
What factors influence complementors?
number of complementors relative value added to mutual customers buyer perception of complements
valuable and rare R&C can only provide competitive advantage when/
only as long as they're difficult to imitate or subsitute
what are the types of real options?
option to defer option to grow option to contract option to shut down and restart option to abandon option to expand
What does it mean to have good implementation?
organization coordinates resources and capabilities, uses structure, systems, processes and strategic leadership, translates and intended strategy to bottom-line results
What is rare R&C?
when firm controls a valuable resource that is also rare, its in a position to gain competitive advantage.
What is formulation?
planning that leads to the development of organizational goal and specific statements of action
What are the 2 dimensions to a generic strategy?
potential source of competitive advantage and breadth of target market
What is strategic management?
process by which a firm manages the formulation and implementation of its strategy
What is strategy formulation?
process of developing strategy
What is differentiation strategy?
produce a differentiated product and charge sufficiently higher prices to more than offset the added costs of differentiation
what is low cost advantage?
product an essentially equivalent at a lower cost than its rivals - focus on gaining advantages by reducing its economic costs below all of its competitors
What are the traits to the mature stage?
proliferation of products beginnings of industry consolidation aggressive customers
How can firms maximize returns? (Differentiation and economic returns)
raise prices over those of competitors and reap benefits of higher margins--> Profit margin set prices at the industry average and gain market share because consumers will choose higher quality at the same price --> Market share
what are the components to creating new markets?
reduce create/add raise eliminate
What is internal perspective?
resource-based view firms are heterogeneous bundles of resources and capabilities developing valuable, inimitable and rate resources and capabilities
What are tradeoffs?
sacrificing features or services in order to drive costs down. Firms must maintain parity or proximity in satisfying the basic needs of buyers
What does real option approach provide?
same kind of flexibility that a stock option provides someone investing in stock
What is a vision?
sample statement of understanding of what the firm will be in the future
What are the roles that Leaders play?
scan firm's external and internal environments decide how to use R&Cs and how to configure value-chain activities, based on their assessment of those - identify R&Cs - specify R*Cs that will create advantage - locate an attractive industry in which to deploy them - select the strategy to get the most out of them - decide when to change a firm's mix of R&Cs and targeted markets
What is strategic management process?
sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy (generates competitive advantage)
If R&C =
then competitive disadvantage
What is managerial choice?
they study external environments locate an attractive industry with high potential identify strategy develop/acquire skills (KSF) needed to implement strategy
What are the components to 5 forces model?
threat of rivalry threat of entry threat of suppliers threat of buyers threat of substitutes
how can R&C rebundling be accomplished?
through alliances and acquisitions
What do valuable R&Cs have potential to contribute?
to normal profits
What is a value chain?
total or primary and support value-adding activities by which a firm produces, distributes, and markets a product
What is inter-organizational relationship?
tradeoff between resources and autonomy. Mutual dependence but unequal power distribution (unequal bargaining power)
What is the real option approach?
uncertainty leads to flexibility - owners of a real option have right, but not obligation to expand or contract their investment in a real asset at some future date
What does stuck-in- the-middle mean?
unsuccessful attempt to integrate both low-cost and differentiation position
What is a business strategy?
ways in which firm will compete against present and future rivals within a particular business