MGT EXAM 2

How do you manage strategic change?

4 things 1.Manage with ambidexterity 2.Top mgmt employ tools of strategic change management 3.Employ dynamic capabilities 4.Develop new capabilities

Competitive Advantage

A firm possesses a competitive advantage when it earns (or has the potential to earn) a persistently higher rate of profit.

Isolating Mechanisms

Barriers that prevent a firm's profits from being driven down by the competitive process (needed for sustained advantage)

Innovation Process

Creation Of (Basic Knowledge), Invention, Innovation, Diffusion (Supply and Demand Sides)

The number of firms in most industries tends to _______________ with the onset of the maturity stage of the industry life cycle.

Decrease Significantly

Dynamic capabilities:

are a firm's higher level ability to learn new capabilities

As an industry moves through the stages of the life cycle, overall strategies tend to:

change in most major aspects

An organization that engages in both exploitative and explorative activities in the same organizational units, with the same people employs

contextual ambiguity

An innovation diffuses

through the adoption of products by customers and the imitation by competitors

A firm's ability to respond quickly to external change depends upon

Accurate Information Readily available and a short product cycle time (A + B)

The difference between "evolutionary" and "revolutionary" standards strategies is:

Evolutionary strategies maintain compatibility with what went before

Isolating mechanisms are forces that tend to equalize profit rates among firms, i.e., phenomena that erode a firm's competitive advantage.

False, Because

Emphasis often shifts from process innovation to product innovation once a dominant design emerges.

False, Because once the shift occurs, it goes from process innovation to incremental innovation.

The industry life cycle consists of 4 stages: 1) Introduction, 2) Growth, 3) Plateau, and 4) Rejuvenation.

False, It includes Introduction, Growth, MATURITY, DECLINE.

In the context of innovation, lead-time refers to the period of time during which a firm is the market leader for a new product or service.

False, because

Research has shown that higher R&D output has a strong positive relationship with firm performance.

False, because

A key success factor in the maturity stage of the industry life cycle is a firm's ability to develop the necessary supporting capabilities to scale up production of its good/service.

False, because a firm's ability to support capabilities comes in the introduction stage of industry life cycle.

Sources of Uncertainty

Technological (Emergence of new technologies and outcomes of technological rivalries are difficult to predict) and Market (Customer acceptance and adoption of innovations notoriously difficult to predict)

Industry LifeCycle can vary on the basis of

Three Things: 1) duration 2) country 3) pattern

Sources of Network Externality

Three Things: 1)Products where users are linked to a network 2)Availability of complementary products and services 3)Economizing on switching costs

External changes can only give rise to competitive advantage when those changes differentially affect firms.

True

In the long run, competition eliminates differences in profitability between firms.

True

Two main factors drive industry evolution: demand growth and the production and diffusion of knowledge.

True (Demand Growth and the Production and diffusion of knowledge)

If a firm is able to establish clear property rights over its innovation, then there is an advantage in leading.

True (advantage)

Preconditions for profit?

Two Things: 1) Creation of Value For Customers 2) Appropriation of Value by the Firm

External Changes in a Firm

Two Things: 1)1.Heterogeneous endowments of resources and capabilities 2) Firms' abilities to respond to change More Turbulent, The More Sources for Change

Firms' abilties to respond to change are influnced by

Two Things: 1)Capability to anticipate change 2) Speed of Information and Cycle Times (Short)

Strategic Innovation

Usually involves some form of pioneering in one of three categories: Industry, Customer segments, or Competitive advantage

The key challenges for firms entering the growth stage of the industry life cycle include:

adapting product designs and manufacturing capabilities to accommodate large-scale production,obtaining sufficient resources and capabilities to support effective scaling-up of operations,scaling up output to meet demand (all the above)

Industry Innovation is driven

by Demand Growth and Knowledge

A cost leadership strategy means that a firm must

exploit sources of cost advantage in providing customers with a standardized product

If a strong regime of appropriability exists, the innovating firm

has the advantage in terms of capturing a significant portion of value created by the innovation

Cost advantage and Differentation are:

incompatible with each other because they require different strategies, R&Cs, organizational characteristics, etc

Competitive advantage and technology are linked by

innovation

Michael Porter's early work suggests that combining cost leadership and differentiation strategies

is likely to result in a firm becoming "stuck in the middle"

Standards emerge in markets that are subject to

network externalities

Differentiation is when a firm

offers customers something valuable and unique for which customers are willing to pay a price premium

Strategic innovation involves

pioneering along at least one of three dimensions: new industry, new customer segment, or a new source of competitive advantage

Uncertain imitability

refers to the idea that, when a would-be imitator cannot clearly understand the causes of a competitor's success, any attempt to imitate that strategy is subject to unknown success.

Once established, competitive advantage is

subject to erosion by competitors or new entrants

Successful Follower Stratergies are the ones that?

that initiate a new product's transition from niche market to mass market.

The idea that an organization's existing capabilities are path dependent means that:

the capabilities it possesses today are the result of the steps it has taken throughout his history

Coping with change is more difficult when

the change is competence-destroying, at the architectural level with disruptive technology

The extent to which an innovation leads to greater profit for the innovating firm depends upon

the creation of value for consumers by the innovation, the appropriation of value created from the innovation by the innovating firm, How quickly the innovation gets adopted by consumers

Fast Followers have the oppotunity to move to mass market because

they can sell the product by lowering cost and increasing quality.

The most successful follower strategies are

those that initiate a product's transition from niche market to mass market

network externality

value of a product to an individual customer depends on the number of other users of that product