BUSI 4940

When defining their industry, a company and its leaders may.....

1. Be cautious not to define the industry to broadly or they will not be able to engage customers with the most important needs being met by the industry 2. Leverage the NAICS code - a government code that defines industries 3. Be cautious not to define the industry to narrowly because entrants from another industry may encroach.

Every firm has a bundle of resources that are overall different from another firm. These resources can include:

1. Human capital such as people and knowledge 2. Physical assets such as plants and equipment 3. Intangible assets and resources like brand and reputation

Strategy is grounded in history for example.....

1. Sun Tzu was a Chinese general that used strategy in leading his army to win wars in 500 BC. 2. The word strategy comes from a Greek word meaning the art of the general.

When we define a firm's landscape we are referring to what?

1. The strategic group that the firm is part of 2. The product and geographic markets within the industry that the firm targets 3. The industry in which the firm competes

Rivalry is one of the most significant forces in any industry. Some of the factors that make some industries more or less competitive include:

1. The switching cost among companies within the industry 2. The fixed cost structure and the capacity of the industry 3. The power of the suppliers in the industry. 4. The number and size of direct competitors and substitutes

According to Michael Porter, there are two generic strategies that most companies select among to achieve competitive advantage. Which of these answers provides appropriate characterizations of the strategies. Read each answer carefully.

1. The two generic strategies are cost and differentiation. While there are two general generic strategies, companies can choose several versions of these strategies. For example, a company employing a low cost strategy might keep the price to the customer lower than but close to other competitors to enjoy a higher profit margin. 2.A business that has one store front is unlikely to be employing a low cost strategy to compete, especially if the company's product market focus is narrow/narrow. 3.WalMart operates with a low cost strategy, leveraging the size of the company (scale) to provide lower prices. A low cost strategy often but not always provides the customer with the lowest price alternative in the market. Having the lowest price does not necessarily suggest that WalMart has the lowest margin.

The goal of an industry analysis is:

1. To understand the key competitive forces that contribute to the industry dynamics and attractiveness. 2. Understand the broad environmental factors that might impact all industries but may impact the industry of study uniquely and influence that industry's profitability and overall attractiveness

This is a multiple answer question: Strategies are more likely to be successful when the plan explicitiy contains answers fo four questions.In others words, good strategies usually clearly answer these four questions. Select each of the four questions from the lecture and Video (What is Strategy). You must select all four to achieve credit for the question. Correct!

1. What resources and capabilities do we utilize to delver unique value 2. How do we sustain our value in the market 3. Where do we compete? 4. What unique value do we bring to the market we compete in?

Companies have different reasons for embarking on a process to determine new strategy for the firm. Some of the triggers of strategic decision making can include....

1. When a new CEO comes into an existing company 2. A natural planning cycle in a firm that happens every 3-5 years 3. When an external force impacts the company such that the existing strategies may no longer allow the company to sustain its growth

Which of the following statements about a company's resources is true?

Capabilities are how companies are able to gain value from assets. Assets by themselves do not produce value until they are employed. In the lecture we used the example of a bike (an asset) and riding the bike (a capability). Certain capabilities are likely to provide a more lasting advantage than assets.

At which level of strategy do we focus ion in this course? Select the best answer.

Corporate Level

High barriers to entry and a high threat of retaliation ________ the threat of new entrants and make the industry _________attractive (profitable).

Decrease, more

Tesla announced the launch of an EV truck in the near future. We discussed a number of reasons that electric vehicles have not met original demand forecasts. Which is not one of those reasons. Note if you feel they all are correct select the appropriate answer to reflect that:

Each of the answers provided is correct. There are no answers that answer the question.

For a capability to have the potential to provide a competitive advantage it must have 4 characteristics that are remembered through the acronym VRIO. Which is not a characteristic included in VRIO?:

Easy to imitate

When conducting an internal analysis on a firm, a number of measures are utilized. Measures of firm performance can be obtained from public sources for most companies. Some of the measures and the utility of the measures that are important include:

Employee turnover and job satisfaction - a measure of organizational health

A successful strategy is one that ultimately creates competitive advantage for the company. Competitive advantage means that the company is ahead of its competition because of some unique feature or in some cases being the first mover. WeWork is a company we read about (WSJ) and discussed in class. Based on the discussion in class it is clear that WeWork has a strong and insulated competitive advantage that should be sustainable for some time.

False

An important factor for a company to gain competitive advantage is having a unique value proposition. A value proposition is what the company provides to the buyer (customer) that is unique versus other options available to the customer. The value proposition must be both unique but also valuable or important to the customer. A unique feature is not important if it is not a feature valued by the customer. When companies do not have unique value propositions, competition becomes focused on price only which generally does not create an attractive industry because the average company cannot earn a decent return. This can create a commodity market. The Motel/Hotel industry is comprised of many companies that each have a unique value propositions which have led to significant competitive advantage in the industry as evidenced by companies with high market share and the ability to maintain premium pricing.

False

Capabilities are not resources but all resources are capabilities.

False

In the Video " What is Strategy", Ikea is used as an example. Their strategy and capabilities are discussed as providing high end custom designed American made furniture for customers in a narrow geographic market. Part of their strategy is a high level of customer service including free assembly.

False

Porter suggests there are two generic strategies that most companies employ to compete in industries. Companies within an industry can employ a differentiation strategy (one of the two types) by being the low cost producer. Scale, learning curve and low input costs can enable a lower price as their means to execute a differentiation strategy. WalMart provides a good example of a company employing a differentiation strategy.

False

Porter's Five Forces framework has been around since the 1980's and has been very effective in evaluating industry attractiveness. Changes in the dynamic nature of industries has not impacted the usefulness of the tool. The tool has no limitations.

False

Porter's Five Forces is a tool that helps us understand industry attractiveness. The purpose of the tool is to understand the industry's profitability. Industries that have the greatest profit potential allow companies to make the most money with the least effort. Porter's tool helps us understand what drives the profitability of an industry. This effective tool can be applied to any industry and the strength of each of the five forces for every industry will always be the same.

False

The attractiveness of an industry has been defined as the degree to which the top performing firm can earn superior profits.

False

The relative force (strength) of each of Porter's Five Forces will be the same for every industry.

False

When evaluating broad environmental factors (PESTEL), the factors often impact many industries but the way that the factors impact one industry may be different than another. For example, the importance and type of government regulation is different for the airline industry versus a food industry. For example, we discussed articles that highlighted the impact of tariffs and mass shootings. These two examples would most likely be considered as part of the "E" - Environmental force of PESTEL.

False

Operating performance is more about _____________ while organizational health is more about _________________.

Financial matters / Employee satisfaction and turnover

Financial ratios can be used in determining the financial and operating health of a firm

Financial ratios can be used by comparing a firm's ratios to other firms in the industry, to an average ratio in the industry or to prior year ratios of the firm.

Strategic decisions have certain characteristics.Which one of the following do not belong or apply.

Focused on providing short-term results

When we conduct an internal analysis of a firm we assess a number of elements. Which does not belong in the internal analysis:

Functional plans - the functions enable the implementation of the strategy

Which of the following statements is not accurate when thinking about industry life cycles.

In mature stages, growth is slow and often there is industry consolidation (mergers and acquisitions of competitors) resulting in fewer, bigger players like in the grocery industry. The Motel / Hotel Industry is fragmented (not concentrated)so it cannot be in its mature stage.

Porter's Five Forces tool :

Includes 5 forces: Buyer Power, Supplier Power, Industry Rivalry Among Existing Competitors, Threat of Substitutes, and New Entrants

A driver of change....

Is a force that impacts most firms in the industry and they often have to react to the force

The attractiveness of an industry...

Is something that we (in 4940) assess based on research concerning the industry of study and based on average profits for the industry

The General Environmental factors which are part of an external industry analysis include which of the following categories (note all of the categories may not be included in the answer):

Political, Economic, Social, Technological, Legal, Environmental

What does the organizational performance matrix illustrate?

The axes are operating performance and organizational health and we use the matrix to position the firm as a desired, complacent, troubled organization or a firm in crisis and relative to other firms in the industry.

If you look up the definition of strategy in a dictionary one of the definitions you will find is the art of planning a military operation.

True

Strategic Group Maps are a tool that companies can use to determine which competitors they need to pay most attention to and how to respond to competitive moves. Companies that compete head to head are in the same strategic group and watch each other's actions carefully while companies that are indirect competitors are in a different strategic group and may not be as important. A strategic group map includes an understanding of what the key drivers of variance are for the industry which are represented on the X and Y axis of the map. In the Motel/Hotel Industry it is more likely that Marriott and Hyatt are direct competitors and in the same strategic group then Marriott and Motel 6.

True

Supplier power is one of Porter's Five Forces. Supplier power can be strong when there are few suppliers to an industry. The video on Porter's Five Forces uses Microsoft as an example of a supplier to the personal computer industry. Microsoft can raise prices and because the personal computing industry has few options, the companies in the industry (PC manufacturers) have to accept the higher prices which can decrease the profit they make on the computer if they are unable to pass the higher component prices along to the buyer (consumer).

True

The desired outcome of a good strategy is competitive advantage. However, strategy has a life cycle. Successful companies can gauge when one strategy is running out of steam and begin work on new strategy before company performance is negatively impacted. Companies that are unable to create and implement successful strategies are likely to become obsolete.

True

The threat of new entrants is one of Porter's Five Forces. New entrants can force incumbent companies that may have enjoyed higher prices and profits to reduce prices. New entrants may also force incumbent companies to change the way they do business which requires the development of new capabilities like technology. These changes, while they may be good for the consumer, often create disruption and lower profitability for incumbent companies. An example of this is Tesla't recent announcement of the introduction of an EV truck.

True