Capstone Exam Chapter 1 - 5
components of a good strategy are
- a diagnosis of the competitive challenge - a guiding policy to address the competitive challenge - a set of coherent actions to implement the firm's guiding policy
5 ways to measure/assess competitive advantage
- accounting profitability - shareholder value creation - economic value creation - the balanced scorecard - the triple bottom time
to help a firm achieve a competitive advantage, each distinct activity performed needs to either:
- add incremental value to the product or service offering - lower it's relative cost
strategy formulation and implementation can be broken down into three distinct areas
- corporate - business - functional
PESTEL framework groups the factors in the firms general environment into six segments
- political - economic - sociocutural - technological - ecological - legal
popular business models include:
- razor-razor-blades - subscriptions - pay-as-you-go - freemium - wholesale - agency - bundling
what strategy is not
1. grandiose statements - example "we will be No. #1" 2. a failure to face a competitive challenge - example: blockbuster didn't address NetFlix, Redbox, amazon prime, and Hulu (number two applies to firms that are acting like an ostrich with their head in the ground hoping the problem will go away) 3. operational effectiveness, competitive benchmarking, or tactical tools - examples:"pricing strategy,""operations strategy,""brand strategy" (number three also refers to best practices like (optimizing inventory)that are not sources of advantage
AFI (analysis, formulation, implementation)
A - where are we now? (analysis) F - where do we want to go? (formulation/vision) I - how will we get there? (strategy implementation)
discrete and specific firm activities
_____ and _____ are the basic units with which to understand competitive advantage because they are the drivers of the firms relative costs and level of differentiation the firm can provide to its customers
economic value creation
a careful analysis of the value chain allows managers to obtain a more detailed and fine-grained understanding of how the firms breaks down into a distinct set of activities that help determine perceived value and the costs to create it
competitive advantage
a firm that achieved superior performance relative to other competitors in the same industry or the industry average
sustainable competitive advantage
a firm that is able to outperform its competitors or the industry average over a prolonged period. Sustainable advantage is the even better target Exp. Apple (smartphone industry) - Sustainable competitive advantage over Samsung - Has lasted over a decade
competitive disadvantage
a firm underperforms its rivals or the industry average
SWOT analysis
a framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses with those from an analysis of external opportunities and threats to derive strategic implications
AFI strategy framework
a model that links three interdependent strategic management tasks - analyze, formulate, and implement - that together, help managers plan and implement a strategy that can improve performance and result in competitive advantage
complement
a product, service, or competency that adds value to the original product offering when the two are used in tandem
weakness
a resource is a __________ if it is not valuable
resource
a strength and a core competency if it is valuable, rare, and costly imitate, and the firm is organized to capture at least part of the economic value created
strategic positioning
a unique position within an industry that allows the firm to provide value to customers while controlling costs. The managers' theory usually includes ideas about strategic positioning How is Dick's Sporting Goods positioned as compared to Academy Sports? How is Lexus positioned as compared to Mercedes-Benz?
primary activities
add value directly as the firm transforms inputs into outputs - from raw materials through production phases to sales and marketin and finally customer service, specifically - supply chain management - operations - distribution - marketing and sales - after-sales service
supporting activities
add value indirectly. These activities include: - research and development - information systems - human resources - accounting and finance - firm infrastructure including processes, policies, and procedures
customer-oriented vision statements
allow companies to adapt to changing environments - focus employees on problem solving for the customer
Porter's five forces model
allows strategic leaders to analyze all players using a wider industry lens, which in return enables a deeper understanding of an industry's profit potential
porter's five forces model
allows strategic leaders to analyze all players using a wider industry lens, which in return enables a deeper understanding of an industry's profit potential
SWOT analysis
allows the strategist to evaluate a firms current situation and future prospects by simultaneously considering interns and external factors
PESTEL framework
allows us to scan, monitor, and evaluate changes and trends in the firms macroenvironment
willingness to pay
amount of total perceived consumer benefits equals the maximum ____________
strategic management
an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
What is a good strategy?
analysis of the firm's internal and external environments - analysis of the firm's internal and external environments a guiding policy to address the competitive challenge - effective guiding policy - backed by strategic commitments (investments; changes) a set of coherent actions to implement the firm's guiding policy - implementation
external opportunities and threats
are in the firms general environment and can be captured by PESTEL and Porter's five forced analysis
firms activities
are one of the key interns drivers of performance differences across firms
strategic decision
as long-term commitments that are not easily reversible
dynamically
business models evolve
vision
captures an organizations aspirations and spells out what is ultimately wants to accomplish
strategic group model
clusters different firms into groups based on a few key strategic dimensions
the key to successful strategy is to
combine a set of activities to stake out a unique strategic position with an industry
internal strength and weaknesses
concern resources, capabilities, and competencies
strategy formulation
concerns the choice of strategy in terms of where and how to compete
strategy implementation
concerns the organization, coordination, and integration of how work gets done
functional strategy
concerns the question of how to implement a chosen business strategy. Different corporate and business strategies will require different activities across various functions
corporate strategy
concerns the questions relating to where to compete as to industry, markets, and geography
business strategy
concerns the questions relating to where to compete. Three generic business strategies are available:cost leadership, differentiation, or value innovation
business strategy
concerns the questions, relating to where to complete. Three generic business strategies are available: cost leadership, differentiation, or value innovation
strategy formulation and implementation cab be broken down into three distinct areas
corporate business functional
external stakeholders
customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels
value chain
describes the internal activities a firm engages in when transforming inputs into outputs
mission
description of what an organization actually does - the products and services it plans to provide, and the markets in which it will complete
business model
details how the firm conducts its business with its buyers, suppliers, and partners
activities
distinct actions that enable firms to add incremental value at each step by transforming inputs into goods and services
value creation - costs =
economic contribution - the greater, the better - enhances the likelihood of a competitive advantage tradeoffs necessary - how to allocate resources - which activities to pursue
SWOT analysis
encourages managers to scan the interns and external environments, looking for any relevant factors that might affect the firms current or future competitive advantage
Porter's Five Forces Model
has 5 keys competitive forces that all managers need to consider when analyzing the industry environment and formulating competitive strategy - threat of entry - power of suppliers - power of buyers - threat of substitutes - rivalry among existing competitors
strategic leaders
have a strong influence on setting an organizations, vision, mission, and values
Porter's five forces model
helps us to determine an industry's profit potential
porter's five forces model
helps us to determine an industry's profit potential
razor-razor-blade
initial product is often sold at a loss or given away for free in order to drive demand for complementary goods
strategy
is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. It is also deciding what to do and what not to do. Think of it as managers' theories about how to gain and sustain competitive advantage. what will win? Why so?
strategy
is about creating superior value, while containing the cost to create it, or by offering similar value at lower costs
Strategy
is sometimes referred to as a "science of success and failure". The primary objective is to improve performance
strategy
is the art and science of success and failure
strategic group model
is used to explain the differences in firm performance within the same industry
mission
it defines how the vision is accomplished and is often introduced with the preposition "by"
coherent actions
may be thought of as tactics or maneuvers that are a reflection of policy (a formulated strategy)
strategic management process
method put in place by strategic leaders to formulate and implement a strategy, which can lay the foundation for a sustainable competitive advantage
to achieve superior performance, companies compete for resources:
new ventures: financial and human capital existing companies: profitable growth charities: donations universities: the best students and professors sports teams: championships celebrities: media attention
product-oriented vision statements
often constrain this ability - focus employees on improving existing products and services
stakeholder
organizations, groups, and individuals can affect or are affected by a firm's actions have an interest in the performance and survival of the firm
competitive advantage
providing goods or services consumers value more highly than those of its competitors or providing goods or services similar to the competitors' at a lower price
successful strategy
requires combining activities competitive advantage has to come from: - performing different activities or - performing the same activities differently than rivals Exp. Walmart - strategic activities strengthen its position as cost leader - big stores, low overhead, low wages
business model
stipulates how the firm conduct its business with its buyers, suppliers, and partners in order to make money
internal stakeholders
stockholders, employees (including executives, managers, and workers), and board members
strategic leadership
strategic leaders have the power and influence to direct others. The behaviors/styles of executives influence others to achieve the vision, carry out the mission. We will see executives' backgrounds, experiences, personality, and perceptions influence their decisions
strategic management process
strategic planning - a formal, top-down planning approach scenario planning - a formal, top-down planning approach strategy as planned emergence - begins with a strategic plan, but is less formal
the strategy process consists of two parts
strategy formulation strategy implementation
scenario planning
strategy planning activity in which top management envisions different what-if scenarios to anticipate plausible future in order to derive strategic-responses
strategic leadership
successful use of power and influence directing the activities of others pursuing an organization's goals enabling organizational competitive advantage
vision
succinctly identifies the primary long-term objective of the organization. Pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target, while leaving room for individual and team contributions
competitive advantage
superior performance relative to other competitors in the same industry or the industry average
freemium
the basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons
gain competitive advantage
the greater difference between value creation and cost, the greater the firms economic contribution and the more likely it will
profitability and market share
the rewards of superior value creation and capture measures of competitive advantage
strategic group
the set of companies that pursue a similar strategy within a specific industry
power
the strategic leaders ability to influence the behavior of other organizational members to do things, including things they would not do otherwise
business model
the translation of strategy into action takes place in the firms______, which details the firms competitive tactics and initiatives
strategic commitments
to be effective, firms need to back their vision and missions with
competitive parity
two or more firms that perform at the same level. Not all get to competitive advantage Ford and Chevrolet may be thought of as examples of companies in a state of competitive parity (despite what their fans might think!)
subscription-based
user pays for access to a product or service during the payment term
pay as you go
user pays for only the services her or she consumes
first step in gaining and sustaining a competitive advantage
vision mission values
values
what commitments do we make, and what guardrails do we put in place, to act both legally and ethically as we pursue our vision and mission?
mission statement
what organization does; products/services it provides; markets it competes