strategic management exam 1

Identify competitive advantage as residing in a network of firm activities

- each primary activity the firm performs should add incremental value directly by transforming inputs into outputs. support activities sustain primary advantage - a network of primary and supporting firm activities can create a strategic fit that can lead to competitive advantage - a strategic activity system conceives of a firm as a network of interconnected activities. firms need to upgrade their value activities over time, in response to changes in the external environment and to moves of competitors

Conduct a SWOT analysis

- formulating a strategy that increases the chances of gaingin and sustaining a competitive advantage is based on synthesizing insights obtained from an internal analysis of the company's strengths and weaknesses with those from an analysis of exernal opportunities and threats - a SWOT analysis by itself is insufficient to guide strategy formulation

a resource is organized to capture value if

-it has an effective organizational structure-it has coordinating systems

core competencies

-unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage -allow a firm to differentiate its products and services from those of its rival -results in: creating higher value for the customer or offering products and services at lower cost

intangiable resources

1. resources that do not have physical attributes and thus are invisible-culture-knowledge-brand equity-reputation-intellectual property (patents, designs, copyrights, trademarks, and trade secrets)

Tangible Resources

1. resources that have physical attributes and thus are visible-labor-capital-land-buildings-plant-equipment-supplies

potential of new entrants

A company's power is also affected by the force of new entrants into its market. The less time and money it costs for a competitor to enter a company's market and be an effective competitor, the more an established company's position could be significantly weakened. An industry with strong barriers to entry is ideal for existing companies within that industry since the company would be able to charge higher prices and negotiate better terms.

Generate a strategic group model to reveal performance differences between clusters of firms in the same industry.

A strategic group is a set of firms within a specific industry that pursue a similar strategy in their quest for competitive advantage. Generally, there are two strategic groups in an industry based on two different business strategies: one that pursues a low-cost strategy and a second that pursues a differentiation strategy .Rivalry among firms of the same strategic group is more intense than the rivalry between strategic groups: intra-group rivalry exceeds inter-group rivalry. Strategic groups are affected differently by the external environment and the five competitive forces.Some strategic groups are more profitable than others. Movement between strategic groups is restricted by mobility barriers—industry-specific factors that separate one strategic group from another.

VRIO Framework

A theoretical framework that explains and predicts firm-level competitive advantage. -valuable -rare -icostly to imitate -organized to capture the value of the resources

AFI strategy framework

Analysis(vision, mission, values; external analysis; internal analysis) Formulation(Corporate strategy; business strategy; functional strategy) Implementation(structure, culture, control; corporate governance, business ethics)

Competition in the industry

As we can see the competition in the industry . It refers to the number of competitors and their ability to undercut a company. The larger the number of competitors, along with the number of equivalent products and services they offer, the lesser the power of a company.

Apply a balanced scorecard to assess and evaluate competitive advantage.

Balanced-scorecard attempts to provide a more integrative view of competitive advantage by harnessing multiple internal and external performance dimensions to balance financial and strategic goals.Managers develop strategic objectives for the scorecard approach by answering 4 questions:(1) How do customers view us?(2) How do we create value?(3) What core competencies do we need?(4) How do shareholders view us?

Define business-level strategy and describe how it determines a firms strategic position.

Business Level Strategy- The goal-directed actions managers take to achieve a competitive advantage in a single market .Business level strategy determines strategic position.Strategic Position- strategic profile based on value creation and cost in a specific product market.Must make strategic trade-offs or choices between cost or value position.

Use the why, what, who, and how of business models framework to put strategy into action.

Business Model- details the competitive tactics and initiative and explains how the firm intends to make money (Razor-razorblades, subscription, pays as you go, freemium, etc..) •Who: which customer segments will we serve? •What: customer needs, wishes, and desires will we satisfy? •Why: do we want to satisfy them?•How: will we satisfy our customers' needs?

Describe the strategic role of complements in creating positive-sum co-opetition.

Co-opetition (cooperation among competitors) can create a positive-sum game, resulting in a larger pie for everyone involved. Complements increase demand for the primary product, enhancing the profit potential for the industry and the firm. Attractive industries for co-opetition are characterized by high entry barriers, low exit barriers, low buyer and supplier power, a low threat of substitutes, and the availability of complements.

Describe the roles of corporate managers and strategy formulation and implementation

Corporate executives must provide answers to the question of where to compete - in industries, markets, and geographies - and how to create synergies among different business units

Examine the relationship between cost drivers and the cost-leadership strategy.

Cost-Leadership Strategy- Products or services are similar in value to competitors but are delivered at a lower cost. Economies of Scale- Decrease cost per unit as output increases Cost of input factors- lowering the cost of raw materials, labor, IT services, etc...Learning-curve Effects- Learning how to be more efficient producing the same output Experience-curve Effects- Improvements in process & technology while output is constant (a new production process) Economics of Scope: Economies of scope are "efficiencies formed by variety, not volume". For example, a gas station that sells gasoline can sell soda, milk, baked goods, etc. through their customer service representatives and thus achieve gasoline companies economies of scope.

Examine the relationship between value drivers and differentiation strategy.

Differentiation Strategy- seeks to create higher value than competitors (charges higher prices) 1)Product Features- Adding unique product attributes to differentiate products and charge higher prices 2)Complements- Products that add value to another product when consumed in tandem (smartphone and service plan) .3)Customer Service

Apply a triple bottom line to assess and evaluate competitive advantage.

Economic, social, and ecological (aka people, profits, & planet) make up the triple bottom line. Positive results in all three areas leads to sustained competitive advantage. By using triple bottom line, managers audit their company's fulfillment of its social and ecological obligations to stakeholders such as employees, customers, suppliers, and communities in as serious a way as they track its financial performance.

Why anchoring a firm in ethical core values is essential for long-term success.

Ethical core values form a solid foundation on which a firm can build its vision and mission, and thus lay the groundwork for long-term success.

describe the roles of functional managers and strategy formulation and implementation

Functional managers are responsible for implementing business strategy within a single functional area

describe the roles of general managers and strategy formulation and implementation

General managers in strategic business units must answer the strategic questions of how to compete in order to achieve superior performance. They must manage and align the firms different functional areas for competitive advantage

Evaluate scenario planning

In scenario planning, managers envision what if scenarios and prepare contingency plans that can be called upon when necessary

Appraise the role of industry dynamics and industry convergence in shaping the firm's external environment.

Industries are dynamic—they change over time. Different conditions prevail in different industries, directly affecting the firms competing in these industries and their profitability. In industry convergence, formerly unrelated industries begin to satisfy the same customer need. Such convergence is often brought on by technological advances.

Apply shareholder value creation to assess and evaluate competitive advantage

Investors are primarily interested in total return to shareholders, which includes stock price appreciation plus dividends received over a specific period.

a resource is valuable if

It enables the firm to exploit an external opportunity.It enables the firm to offset an external threat.It enables a firm to increase its economic value creation (V - C).

power of suppliers

It is affected by the number of suppliers of key inputs of a good or service, how unique these inputs are, and how much it would cost a company to switch to another supplier.

a resource is rare if

Only one or a few firms possess itExample: Beats ElectronicsProduct PlacementVast Celebrity Endorsement

Generate a PESTEL analysis to evaluate the impact of external factors on the firm.

PESTEL analysis stands for "Political, Economic, Social, and Technological, Environmental and Legal analysis". It is a part of the external analysis when conducting a strategic analysis or doing market research and gives a certain overview of the different macroenvironmental factors that the company has to take into consideration.

Apply Porter's five competitive forces to explain the profit potential of different industries.

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis is frequently used to identify an industry's structure to determine corporate strategy. The Five Forces model is named after Harvard Business School professor, Michael E. Porter. Profit potential of different industries:- The five forces are frequently used to measure competition intensity, attractiveness, and profitability of an industry or market.

Evaluate the two critical assumptions behind the resource-based view.

Resource Heterogeneity-A firm is bundle of resources and capabilities that differ across firms Resource Immobility-A firm has resources that tend to be "sticky" and that do not move easily from firm to firm

Evaluate strategy as planned emergence

Strategic initiatives can be the result of talked on planning or can emerge through a bout of my process from deep within the organization. They have the potential to shape a firms strategy .A Firms realized strategy is generally a combination of its top down intended strategy and bottom up emergent strategy, resulting in planned emergence

threat of substitutes products

Substitute goods or services that can be used in place of a company's products or services pose a threat. Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms. When close substitutes are available, customers will have the option to forgo buying a company's product, and a company's power can be weakened.

Power of Buyers

The ability that customers have to drive prices lower or their level of power is one of the five forces.

Examine how competitive industry structure shapes rivalry among competitors.

The competitive structure of an industry is largely captured by the number and size of competitors in an industry, whether the firms possess some degree of pricing power, the type of product or service the industry offers (commodity or differentiated product), and the height of entry barriers. A perfectly competitive industry is characterized by many small firms, a commodity product, low entry barriers, and no pricing power for individual firms. A monopolistic industry is characterized by many firms, a differentiated product, medium entry barriers, and some pricing power. An oligopolistic industry is characterized by few (large) firms, a differentiated product, high entry barriers, and some degree of pricing power. A monopoly exists when there is only one (large) firm supplying the market. In such instances, the firm may offer a unique product, the barriers to entry may be high, and the monopolist usually has considerable pricing power.

Explain the five choices required for market entry.

The more profitable an industry, the more attractive it becomes to competitors, who must consider the who, when, how, what, and where of entry. The five choices constitute more than parts of a single decision point; their consideration forms a strategic process unfolding over time. Each choice involves multiple decisions including many dimensions. Who includes questions about the full range of stakeholders, and not just competitors; when, questions about the industry life cycle; how, about overcoming barriers to entry; what, about options among product market, value chain, geography, and business model; and where, about product positioning, pricing strategy, and potential partners.

How you can become a strategic leader

Think strategically. Begin with understanding the complex relationship between your organization and its environment. ... Act strategically. ... Influence strategically.

Evaluate top down strategic planning

Top down strategic planning is a sequential, linear process that works reasonably well when the environment does not change much

economic value created

V (MINUS) C - Difference between value (V ) and cost (C) ,- difference between a buyer's willingness to pay for a product or service and the firm's total cost to produce it.

sustainable competitive advantage

a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

competitive parity

a firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristic.

competitive advantage

an advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices

Resources

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

The strategic implications of product-oriented vision statement

define a business in terms of a good or service provided.

strategic implications of a customer-oriented vision statements.

define business in terms of providing solutions to customer needs.

activities

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

a resource is costly to imitate if

firms that do not possess the resource are unable to develop or buy the resource at a reasonable price

relationship between economic value creation and competitive advantage

fundamental in strategic management - provides the foundation upon which to formulate a firm's competitive strategy for cost leadership or differentiation - a firm has a competitive advantage when it creates more economic value than rival firms.

the role of vision in a firms strategy

is to know what you want to become

the role of a mission in the firms strategy

is to know who they are and what they value

Capabilities

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

identify different conditions that allow firms to sustain their competitive advantage

several conditions make it costly for competitors to imitate another firm's resources or capability that underlie its competitive advantage :1. better expectations of future resource value (or simply luck) 2. path dependence 3. casual ambiguity 4. social complexity

the role of a value in the firms strategy

to know the beliefs

Outline how dynamic capabilities can help a firm sustain competitive advantage

to sustain a competitive advantage, any fit between a firm's internal strengths and the external environment must be dynamic. this is accomplished through the ability to create, deploy, modify, reconfigure, or upgrade the resource base.

competitive disadvantage

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

Assess the relationship between stakeholder strategy and sustainable competitive advantage..

•Stakeholders are individuals or groups that have a claim or interest in the performance and continued survival of the firm. They make specific contributions for which they expect rewards in return. •Internal stakeholders include stockholders, employees (for instance, executives, managers, and workers), and board members. •External stakeholders include customers, suppliers, alliance partners, creditors, unions, communities, and governments at various levels .•Several recent black swan events eroded the public's trust in business as an institution and in free -market capitalism as an economic system. •The effective management of stakeholders—the organization, groups, or individuals that can materially affect or are affected by the action of a firm—is necessary to ensure the continued survival of the firm and to sustain any competitive advantage.

Assess the risks of a blue ocean strategy, and explain why it is difficult to succeed at value innovation.

■ A successful blue ocean strategy requires that trade-offs between differentiation and low cost be reconciled. ■ A blue ocean strategy often is difficult because the two distinct strategic positions require internal value chain activities that are fundamentally different from one another. ■ When firms fail to resolve strategic trade-offs between differentiation and cost, they end up being "stuck in the middle." They then succeed at neither business strategy, leading to a competitive disadvantage.

Assess the benefits and risks of differentiation and cost-leadership strategies vis-à-vis the five forces that shape competition

■ The five forces model helps managers use generic business strategies to protect themselves against the industry forces that drive down profitability. ■ Differentiation and cost-leadership strategies allow firms to carve out strong strategic positions, not only to protect themselves against the five forces, but also to benefit from them in their quest for competitive advantage. ■ Exhibit 6.7 details the benefits and risks of each business strategy.

Evaluate value and cost drivers that may allow a firm to pursue a blue ocean strategy.

■ To address the trade-offs between differentiation and cost leadership at the business level, managers must employ value innovation, a process that will lead them to align the proposed business strategy with total perceived consumer benefits, price, and cost .■ Lowering a firm's costs is primarily achieved by eliminating and reducing the taken-for-granted factors on which the firm's industry rivals compete. ■ Increasing perceived buyer value is primarily achieved by raising existing key success factors and by creating new elements that the industry has not yet offered .■ Managers track their opportunities and risks for lowering a firm's costs and increasing perceived value vis-à-vis their competitors by use of a strategy canvas, which plots industry factors among competitors (see Exhibit 6.10).