Strategy Study

what are social objectives?

Real balanced scorecards include environmental sustainability and corporate social responsibility. -Pollution -Education -Fairness

What is PESTEL analysis?

can be used to assess the strategic relevance of the six principal components of the macro-environment: political, economic, social, technological, environmental, and legal forces.

What is a resource?

competitive asset that is owned or controlled by a firm

What is corporate strategy?

establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company.

What are strategic objectives?

relate to target outcomes that indicate a company is strengthening its market standing, competitive vitality, and future business prospects.

What are financial objectives?

relate to the financial performance targets management has established for the organization to achieve.

Common shortcomings in vision statements

vague or incomplete, not forward looking, too broad, bland or uninspiring, not distinctive, too reliant on superlatives

What is strategic intent?

when a company relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.

Questions for Assessing the Company's Industry and Competitive Environment

-Do macro-environmental factors and industry characteristics offer sellers opportunities for growth and attractive profits? -What kinds and strengths of competitive forces are present in the industry? -How will forces driving change in the industry impact its competitive intensity and profitability? -Which rivals are strongly positioned in the market and which are not? -What strategic moves are rivals likely to make next? -What are the key factors of competitive success? Does the industry outlook offer good prospects for profitability?

why crafting and executing strategy are important tasks

-Good strategy and good strategy execution are the most telling indicators of good management. -A better-conceived, competently executed strategy makes it more likely that a firm will be a standout performer in the marketplace. -How well a firm performs directly reflects the caliber of its strategy and the proficiency of its execution.

Crafting a strategy means asking:

-How to attract and please customers? How to compete against rivals? -How to position the firm in the marketplace and capitalize on attractive opportunities to grow the business? -How best to respond to changing economic and market conditions? -How to manage each functional piece of the business? -How to achieve the firm's performance targets?

What is Strategy

A strategy is a set of actions that a company's managers take to outperform the company's competitors and achieve superior profitability.

Choices to consider when making a strategy

-How to create products or services that attract and please customers -how to position the company in the industry -how to develop and deploy resources to build valuable competitive capabilities -how each functional piece of the business (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated -how to achieve the company's performance targets

Evaluating a Firm's Internal Situation

-How well is the firm's strategy working? -What are the firm's competitively important resources and capabilities? -Are the firm's cost structure and customer value proposition competitive? -Is the firm competitively stronger or weaker than key rivals? -What strategic issues and problems merit front-burner managerial attention?

Ideally, a company mission statement is sufficiently descriptive to:

-Identify the company's products or services. -Specify the buyer needs it seeks to satisfy. -Specify the customer groups or markets it is endeavoring to serve. -Specify its approach to pleasing customers. -Give the company its own identity.

The strength of competitive pressures from the sellers of substitute products depends on whether:

-Substitutes are readily available and attractively priced. -Buyers view the substitutes as comparable or better in terms of quality, performance, and other relevant attributes. -The costs that buyers incur in switching to the substitutes are high or low.

Industry suppliers can exert substantial bargaining power or leverage if:

-The supplied item is not a commodity readily available from many suppliers. -Industry members cannot switch their purchases to another supplier or switch to attractive substitutes. -Certain required inputs are in short supply. -Certain suppliers provide a differentiated item that enhances the desired performance, quality, or image of the industry's product. -They provide specialized equipment or services that yield cost savings to industry members in conducting their operations. -A large fraction of the costs of the buyer industry's product is accounted by the cost of a particular input. -Industry members are not major or large customers of suppliers. -It does not make good economic sense for industry members to vertically integrate backward.

Buyers gain bargaining leverage when:

-Their costs of switching to competing brands or substitutes are relatively low. -Their large size allows them to demand concessions. -They are few in number, control market access or, if a buyer-customer is particularly important to a seller. -Weak buyer demand creates a "buyers' market." -Buyers are well informed about products, prices, and costs. -Buyers can integrate backward into the business of sellers.

The threat of entrants into the marketplace presents significant competitive pressure when:

-There is a sizable pool of likely entry candidates. -Potential entrants have ample entry resources at their command. -Current industry participants are looking beyond their current markets for growth opportunities. -When the industry is growing, offers attractive profit opportunities, and its barriers to entry are low.

Questions to Ask in Identifying Industry Key Success Factors

-Which crucial product attributes do industry buyers consider when choosing between competing sellers? -Which resources and competitive capabilities must a company have to be competitively successful? -Which shortcomings are certain to put a company at a significant competitive disadvantage to its rivals?

What are the two distinct types of performance yardsticks for objective?

-financial objectives -strategic objectives

Responsibility of a COmpany's Board of Directors:

1) Oversee the company's financial accounting and financial reporting practices 2) Diligently critique and oversee the company's direction, strategy, and business approaches 3)Evaluate the caliber of senior executives strategy formulation snd strategy execution skills 4) Institute a compensation plan for top executives that rewards them for actions and results that serve shareholder interests

Measurable objectives are managerially valuable for three reasons:

1) They focus organizational attention and align actions throughout the organization 2) they serve as yardsticks for tracking a company's performance and progress 3) they motivate employees to expend greater effort and perform at a high level

What is the order of the Strategy making Hierarchy?

1) corporate strategy 2)Business strategy 3)functional-area strategies 4) operating strategies

What is involved in the framework for analysis of rival competitors?

1) current strategy - Rival's market position, competitive advantage basis, and its investments in infrastructure, technology, or other resources 2) objectives - Its performance on current financial and strategic objectives 3) capabilities - Its current set of capabilities and efforts to acquire new capabilities related to future strategic moves 4) assumptions - Views and beliefs of rival's top managers about their firm's strategic situation can strongly impact their future behaviors

Rivalry can be characterized by:

1) cutthroat (brutal) - Competitors engage in protracted price wars or employ other aggressive tactics mutually destructive to profitability. 2) Fierce (strong) - A vigorous market share battle reduces the profit margins of most industry rivals to bare-bones levels. 3) Moderate (normal) - Maneuvering among industry rivals, while lively and healthy, still allows most rivals to earn acceptable profits. 4) Weak - Industry rivals satisfied with their sales growth and market share rarely undertake offensives against their competitors.

Evolving strategy means

1) proactive moves to improve the company's financial performance and secure a competitive edge 2) adaptive reactions to unanticipated developments and fresh market conditions

two factors of new entry threat:

1)the expected reaction of incumbent firms to new entry 2) barriers to entry

5 Approaches to setting a company apart from rivals

1. A low-cost provider strategy 2. a broad differentiation strategy 3. A focused low-cost strategy 4. a focused differentiation strategy 5. a best-cost provider strategy

Steps to SWOT:

1. Analyze the macro-environment and 5 forces model (External) 2. Analyze resources and capabilities and/or use the value chain, consider KSFs 3. FIND A "FEW" CORE COMPETENCIES, consider "your" strategic group - - find out what you do best and capitalize it

What Does the Strategy-Making, Strategy-Executing Process Entail?

1. Develop a strategic vision. 2. Set objectives. 3. Craft a strategy. 4. Implement and execute the chosen strategy. 5. Evaluate and analyze the external environment and the firm's internal situation and performance.

The value of a SWOT analysis is in:

1. Drawing conclusions from SWOT listings about the firm's overall situation and 2.translating those conclusions into effective strategic actions that: •Better match the firm's strategy to its strengths and market opportunities •Correct problematic weaknesses •Defend against worrisome external threats.

three questions to distinguish a winning strategy from a so-so or flawed strategy

1. How well does the strategy fit the company's situation 2. Is the strategy helping the company achieve a sustainable competitive advantage? 3. Is the strategy producing good company performance? ---a) gains in profitability and financial strength ---b) advances in the company's competitive strength and market standing

There are three main areas of a firm's overall value chain where cost differences with rivals can occur.

1.A firm's own internal activities 2.Value chain activities performed by suppliers 3.Value chain activities performed by forward channel allies

Management's organization-building challenge has two elements.

1.Attending to ongoing strengthening and recalibration of existing capabilities and resources 2.Casting a watchful eye for opportunities to develop totally new capabilities for delivering better customer value and/or outcompeting rivals

Determining a company's overall competitive position requires answering two questions.

1.How does the company rank relative to competitors on each of the important factors that determine market success? 2.Does the company have a net competitive advantage or disadvantage versus its major competitors?

Analyzing the resources and capabilities of a company is a two-step process.

1.Identify the company's most competitively important resources and capabilities. 2.Apply the four tests of competitive power to ascertain which resources and capabilities can support a sustainable competitive advantage over rival firms.

Driving forces analysis has three steps:

1.Identifying the present driving forces, as only 3 to 4 factors qualify as real drivers of change 2.Assessing whether the drivers of change are, individually or collectively, acting to make the industry more or less attractive 3.Determining what strategy changes are needed to prepare for the impact of the driving forces

PESTEL more in-depth

1.Political factors - stability, treaties, capitalism 2.Economic conditions - recession, inflation 3.Sociocultural factors - racism, demographics 4.Technological factors - rate of change 5.Environmental forces - climate change, covid 6.Legal and regulatory factors - taxes, property rights, bureaucracy, rule of law

What are The two best indicators of how well a firm's strategy is working are:

1.Whether the firm is recording gains in financial strength and profitability 2.Whether the firm's competitive strength and market standing is improving

What is functional-area strategies?

Are concerned with actions related to particular functions or processes within a business (marketing strategy, production strategy, finance strategy, customer service strategy, product development strategy, and human resources strategy).

What are Operating Strategies?

Are relatively narrow strategic initiatives and approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities such as materials purchasing or Internet sales.

Why do companies need a distinctive strategy

Companies need a distinct strategy so they they are not the exact same as their competitors. Focusing on what sets them apart will give them a competitive advantage/edge.

Why are both cost structure and value important?

Delivering a profitable customer value proposition that maintains a competitive edge of over rivals requires effectively controlling the costs of differentiating features in industries where price competition is a dominant feature. -value chain analysis -benchmarking

Examples of intangible resources:

Human assets and intellectual capital, brand, image, and reputational assets, relationships, company culture

What is a strategic group?

It is a cluster of industry rivals that have similar competitive approaches and market positions.

What is strategic group mapping?

It is a useful technique for graphically displaying different market or competitive positions that rival firms occupy in the industry.

What is Business Strategy?

It is primarily concerned with strengthening the company's market position and building competitive advantage in a single business company or a single business unit of a diversified multibusiness corporation.

What is The Five-forces Model of Competition?

It is the most powerful and widely used tool for assessing the strength of the competitive forces that affect an industry's attractiveness. Includes: 1) competitive pressures stemming from buyer bargaining power 2) competitive pressures coming from companies in other industries to win buyers over to substitute products 3) competitive pressures stemming from supplier bargaining power 4) competitive pressures associated with the threat of new entrants into the market 5) competitive pressures associated with rivalry among competing sellers to attract customers. This is usually the strongest of the five competitive forces.

What are company values?

Provide guidance for desired actions and behaviors of employees as they conduct the company's business. the beliefs, traits, and behavioral norms that a company personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission.

Is the Company Able to Seize Market Opportunities and Nullify External Threats?

SWOT represents the first letter in: Strengths Weaknesses Opportunities Threats

two factors that inhibit the ability of rivals to imitate a firm's most valuable resources and capabilities.

Social complexity and causal ambiguity

Steps in a Competitive Strength Assessment

Step 1 List the industry's key success factors and other measures of competitive strength or weakness (6 to 10 measures). Step 2 Assign a weight to each measure of competitive strength based on its importance in shaping competitive success. (The sum of the weights for each measure must add up to 1.0.) Step 3 Calculate strength ratings by scoring each competitor on each strength measure (use a scale where 1 is weak and 10 is strong) and multiplying the assigned rating by the assigned weight. Step 4 Sum the weighted strength ratings on each factor to get an overall measure of competitive strength for each company being rated. Step 5 Use the overall strength ratings to draw conclusions about the size and extent of the firm's net competitive advantage or disadvantage and to take specific note of areas of strength and weakness.

What are the Relevant factors in the inner ring of a company's macro-environment?

Suppliers, Rival firms, new entrants, buyers, sociocultural forces

What is a sustainable competitive advantage?

This allows a company to attract a large number of buyers who have a lasting preference for its products or services over those offered by rivals despite the efforts of competitors to offset that appeal and overcome the company's advantage. The bigger and more durable the competitive advantage, the better a company's prospects for winning in the marketplace and earning superior long-term profits relative to rivals.

What is a business model?

This is management's blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit. 1) customer value proposition - the overall strategy and the company's approach to satisfying buyer wants and needs at a price customers will consider a good value 2) profit formula - the company's approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition.

Important questions about strategy

What must managers do, and do well, to make a company a winner in the marketplace? --Doing a good job of managing inherently requires good strategic thinking and good management of the strategy-making, strategy-executing process.

realized strategy

a combination of deliberate planned elements and unplanned emergent elements. Some components of a company's deliberate strategy will fail in the marketplace and become abandoned strategy elements.

What is benchmarking?

a potent tool for learning which companies are best at performing particular activities and then using their techniques (or "best practices") to improve the cost and effectiveness of a company's own internal activities. •How materials are purchased •How inventories are managed •How products are assembled •How customer orders are filled and shipped •How maintenance is performed

SWOT analysis

a simple but powerful tool for sizing up a firm's internal strengths and competitive deficiencies, its market opportunities, and the external threats to its future well-being.

What is a balanced scoreboard?

a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.

emergent strategy

any unplanned strategic initiative bubbling up from the bottom of the organization

What are the VRIN tests for sustainable competitive advantage?

asks if a resource or capability is valuable, rare, inimitable, and nonsubstitutable. -Is the resource or capability competitively valuable? -Is the resource or capability rare—something rivals lack? -Is the resource or capability inimitable or hard to copy? -Is the resource or capability vulnerable to substitution from different types of resources and capabilities? (first two tests determine is the resource or capability contributes to competitive advantage. The last two determine the degree to which the competitive advantage potential can be sustained.)

What is a mission statement?

conveys a company's purpose in language specific enough to give the company its own identity. Describes who we are, what we do, and why we are here

What is strategic vision?

describes where the company is going. the course and direction management has charted and the company's future product0customer-market-technology focus.

What is a resource bundle?

enable the superior performance of important cross-functional capabilities. Companies that lack a standalone resource that is competitively powerful may nonetheless develop a competitive advantage through resource bundle

What is a company's Macro-environment?

encompasses the broad environmental context in which a firm is situated and is comprised of six principal components: political factors, economic conditions, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions

Characteristics of a vision statement

graphic, directional, focused, flexible, feasible, desirable, easy to communicate

WHat is causal ambiguity?

hard to disentangle nature of complex processes. Causal ambiguity makes it very hard to figure out how a complex resource contributes to competitive advantage and therefore exactly what to imitate.

What is social complexity?

how do people in organization interact to create value (culture or trust-based relationships)

What is a value chain?

identifies the primary activities that create customer value and related support activities.

Examples of tangible resources:

physical resources, financial resources, technological resources, and organizational resources.

What is a strategic plan?

maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results. Occurs in the first three stages

What is a strategic inflection point?

occurs when significant changes in an industry require that management must evaluate the risks of changing the company's future direction rather than staying on its established course.

What are objectives?

organization's performance targets—the results management wants to achieve

What is stretch objective?

set performance targets high enough to stretch an organization to perform at its full potential and deliver the best possible results.

What is dynamic capability?

the ability to modify, deepen, or reconfigure the company's existing resources and capabilities in response to its changing environment or market opportunities.

What is a capability (competence)?

the capacity of a firm to competently perform some internal activity. Capabilities are developed and enabled through the deployment of a firm's resources.

What are driving forces?

the major underlying causes of change in industry and competitive conditions

What are key success factors?

the strategy elements, product attributes, competitive capabilities, or intangible assets with the greatest impact on future success in the marketplace. ---They include: •Specific product attributes •Necessary resources, competencies, and capabilities •Specific intangible assets •Competitive capabilities

What are short term objectives?

•Are targets to be achieved soon •Represent milestones or stair steps for reaching long-range performance

What are long term objectives?

•Are targets to be achieved within 3 to 5 years

Factors that determine a firm's prospects for attractive future profits in its industry include:

•Both the firm's and its industry's growth potential •Effects of internal industry competition •Effects of prevailing and future driving forces •The firm's competitive position in its industry vis-à-vis its rivals •The firm's competence in performing the industry's key success factors

The value chains of forward channel partners are relevant because:

•Costs and margins of the activities of distributors and retail dealers are part of the price the consumer pays and can strongly affect a firm's customer value proposition. •Accurately assessing the competitiveness of a firm's cost structure and value proposition helps its managers understand both an industry's value chain system and its internal value chain.

How value chains Improve the customer value proposition by:

•Engaging in cooperative advertising and promotions •Providing training for dealers, distributors, or retailers to improve the purchasing experience or customer service •Creating and enforcing operating standards for resellers or franchisees to ensure consistent store operations

Improving Internally Performed Value Chain Activities

•Implement the use of best practices throughout the firm. •Eliminate cost-producing activities by revamping value chain. •Relocate high-cost internal activities to lower-cost areas. •Outsource internal activities to vendors or contractors to perform them more cheaply than in-house. •Invest in productivity-enhancing, cost-saving technology. •Find ways around activities or items where costs are high. •Redesign products and/or components to economize on manufacturing or assembly costs. •Reduce costs in supplier or forward portions of value chain system to make up for higher internal costs.

Why a Sound, Well-Communicated Strategic Vision Matters

•It crystallizes senior executives' own views about the firm's long-term direction. •It reduces the risk of rudderless decision making by management at all levels. •It is a tool for winning the support of employees to help make the vision a reality. •It provides a beacon for lower-level managers in forming departmental missions. •It helps an organization prepare for the future.

What to look for when evaluating performance:

•Monitoring for disruptive developments •Evaluating the firm's recent performance •Making corrective adjustments to strategy •A firm's vision, objectives, strategy, and approach to strategy execution are never final. (usually done by the board of directors)

A company's strategy and business model:

•Must be well matched to its collection of resources and capabilities •Requires a tight fit with a company's internal situation •Is strengthened when exploiting resources that are competitively valuable, rare, hard to copy, and not easily trumped to rivals' equivalent substitute resources

Remedying Supplier-Related Cost Disadvantages:

•Pressure suppliers for lower prices. •Switch to lower-priced substitutes. •Collaborate closely with suppliers to identify mutual cost-saving opportunities. •Integrate backward into business of high-cost suppliers.

How value chains Combat forward channel cost disadvantages by:

•Pressuring dealer-distributors and other forward channel allies to reduce their costs and markups •Working with forward channel allies to identify win-win opportunities to reduce costs •Changing to a more economical distribution strategy or integrate forward into company-owned retail outlets

When Is the Competitive Force of Rivalry Most Intense among Competing Sellers?

•Rivals can boost market standing and business performance. •Competitors are equal in size and capability. •Market growth slows or declines and lower demand results in no growth opportunities, excess capacity and inventory. •It has become less costly for buyers to switch brands. •Products of rival sellers have become more standardized. •Industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume. •Competitors are dissatisfied with their market position. •Strong outside firms acquire weak firms in the industry and launch aggressive, well-funded moves to build market share.

Enhancing the Customer Value Proposition

•Select and retain best-quality performing suppliers. •Provide quality-based incentives to suppliers. •Integrate suppliers into the product design process.

Whether seller-buyer relationships represent a minor or significant competitive force in limiting industry profitability depends on:

•Some or many buyers having sufficient bargaining leverage to obtain price concessions and other favorable terms •The extent to which buyers are price sensitive

Managing the strategy execution process involves:

•Staffing the organization to provide needed skills and expertise •Allocating ample resources to activities critical to good strategy execution •Ensuring that policies and procedures facilitate rather than impede effective execution •Installing information and operating systems that enable personnel to perform essential activities •Pushing for continuous improvement in how value chain activities are performed •Tying rewards and incentives directly to the achievement of performance objectives •Creating a company culture and work climate conducive to successful strategy execution •Exerting the internal leadership needed to propel implementation forward

Managerial Purpose in Setting Objectives

•To convert the strategic vision into specific performance targets •To create yardsticks to track progress and measure performance

strategy changes over time due to

•Unexpected moves of competitors •Shifting buyer needs and preferences •Emerging market opportunities •Managers' new ideas for improving the strategy •Mounting evidence strategy is not working well

A company's value-creating activities are enabled by firm-specific resources and capabilities that are:

•Valuable, rare and necessary preconditions for competitive advantage •Effectively deployed in a value-creating activity

What is a company's external environment?

•industry and competitive environments in which it operates

What is a company's internal environment?

•the company's resources and organizational capabilities