Strategic Exam 1

Working through the Five Forces model aids strategy makers in assessing:

How to insulate the company from the strongest forces Identify attractive arenas for expansion Alter the competitive conditions so that they offer more favorable prospects for profitability

Key functional strategies of a company include all of the following except

Alliance and partnership as well as merger and acquisition growth strategies

Characteristics of an effectively worded strategic vision statement are most likely to include

Graphic, directional, and focused

Core Values

Guide the pursuit of the vision and mission

SOAR Framework for Competitor Analysis

Helpful for anticipating the actions of rivals in order to help a company prepare effective countermoves

Objectives need to spell out

How much of what kind of performance by when

5 Interrelated and Integrated Stages of strategic management

1. Developing a strategic vision 2. Setting objectives 3. Crafting strategy 4. Executing chosen strategy 5. Monitoring developments, evaluating performance, and initiating corrective adjustments

Board of Directors obligations

1. Ensure that the company issues accurate financial reports and has adequate financial controls 2. Critically appraise the company's direction, strategy, and execution 3. Evaluate the caliber of senior executives' strategic leadership skills 4. Institute a compensation plan for top executives that rewards them for actions and results that serve stakeholder interest

Questions to deduce Key Success Factors

1. On what basis do buyers of the industry's product choose between the competing brands of sellers 2. What resources and competitive capabilities must a company have to be competitively successful 3. What shortcomings are almost certain to put a company at a significant disadvantage

A company's strategy typically evolves over time, emerging from a blend of

1. Proactive deliberate actions on the part of company managers to improve the strategy 2. Reactive emergent responses to unanticipated developments and fresh market conditions

The strength of competition is a composite of five forces:

1. Rivalry within the industry 2. The threat of new entry into the market 3. Inroads being made by sellers of substitutes 4. Supplier bargaining power 5. Buyer power

A company's strategic vision concerns

A company's directional path and future product-customer-market-technology focus

Strategic group mapping

A valuable tool for understanding the similarities, differences, strengths, and weaknesses inherent in the market positions of rival companies

Defensive strategies to protect a company's position usually take one of two forms:

Actions to block challengers Actions to signal the likelihood of strong retaliation

Outsourcing can enhance a company's competitiveness whenever

An activity can be performed better or more cheaply by outside specialists The activity is not crucial to the firm's ability to achieve sustainable competitive advantage The outsourcing improves organization flexibility, speeds decision making, and cuts cycle time It reduces the company's risk exposure It permits a company to concentrate on its core business and focus on what it does best

The Value Net framework

Assists managers in sizing up the impact of cooperative as well as competitive interactions on their firm

A company's strategy should

Be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competitiveness

Differentiation strategy works best when

Buyers have Diverse product preferences When few other rivals are pursuing a similar differentiation approach When technical change is fast-paced and competing centers on rapidly evolving product features

2 broad types of objectives are required

Financial objectives & Strategic objectives

A winning strategy will pass three tests:

Fit Competitive Advantage Performance

Stretch objectives

Can spur exceptional performance and help build a firewall agains complacency and mediocre performance. Extreme ones, however, are only warranted in limited circumstances

In evaluating how well a company's strategy is working the best place to start is with a

Clear view of what that strategy entails

Successful differentiation allows a firm to

Command a premium price for its product Increase unit sales Gain buyer loyalty to its brand

The success of a company's strategy depends upon

Competing differently from rivals and gaining a competitive advantage over them

Once a company has settled on which of the five generic competitive strategit's to employ, attention turns to how strategic choices regarding _ can complement its competitve approach and maximize the power of its overall strategy

Competitive actions Timing of these actions Scope of operations

Strategy-making hierarchy 4 levels

Corporate (multi business strategy), Business (strategy for individual businesses that compete in a single industry), Functional (marketing, R&D, logistics), Operating (for key operating units, such as manufacturing plants)

Core Management Functions

Crafting and executing strategy

Companies that manage their alliances well generally:

Create a system for managing their alliances Build relationships with their partners and establish trusht Protect themselves from the threat of opportunism by setting up safeguards Make commitments to their partners and see that their partners do the same Make learning a routine part of the management process

Best-Cost strategy

Create competitive advantage on the basis of their capability to incorporate attractive or upscale attributes at a lower cost than rivals. Can be broad or focused.

A company's strategy

Game plan to attract customers, outperform its competitors, and achieve superior profitability

Most important strategic commitment a company makes

Deciding which of the five generic competitive strategies to employ Brood low-cost Broad differentiation Focused low-cost Focused differentiation Best cost

Mission Statement

Defines the company's current purpose

Focused Strategy

Delivers competitive advantage either by achieving lower costs than rivals in serving buyers constituting the target market niche or by developing a specialized ability to offer niche buyers an appealingly differentiated offering that meets their needs better that rival brands do

Strategy, at its essence, is about

Developing lasting success that can support growth and secure the company's future over the long term

Well-conceived visions are ___ and ___ to a particular organization and they avoid generic, feel-good statements that could apply to hundreds of organizations

Distinctive; specific

Competitive Advantage test

Durable competitive advantage

In contrast to an organization's vision, its mission should

Encompass both the purpose of the company and the basis of competition

Fit Test

External, internal, and dynamic consistency

T?F Developing social capital is risky for an organization due to the fact that social capital is specific to individuals and remains with the employee if he or she leaves the organization

False (it last for a long time)

T?F A firm's intangible resources refer to its capability to deploy tangible resources over time and leverage the resources effectively

False (resource bundle)

Six questions to consider in evaluating a company's a ability to compete successfully against market rivals

How well is the present strategy working? What is the company's overall situation, in terms of its internal strengths and weaknesses in relation to its market opportunities and external threats? What are the company's most important resources and capabilities and can they give the company a sustainable advantage? Are the company's cost structure and value proposition competitive? On an overall basis, is the company competitively stronger or weaker than key rivals? What strategic issues and problems merit front-burner managerial attention?

Value-Price-Cost Framework

Illustrates a company's business model (customer value proposition & profit formula)

Best-Cost strategy works best

In broad or narrow market segments with value-conscious buyers desirous of purchasing better products and services for less money

Broad differentiation

Incorporating attributes that set a company's product or service offereing apart from rivals in ways that buyers consider valuable and worth paying for

The purposes of a defensive strategy do not include

Increasing the risk of having to defend an attack

A blue-ocean strategy

Involves abandoning efforts to beat out competitors in existing markets and instead invent a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand

Competitive advantage is sustainable if

It persists despite the best efforts of competitors to match or surpass this advantage

Broad low-cost strategy

Low-cost advantage over rivals. company must do a better job than rivals of cost-effectively managing value chain activities and/or it must find innovative ways to eliminate cost-producing activities. An effective use of cost drivers is key.

Objectives of Horizontal mergers and acquisitions

Lowering costs Expanding geographic coverage Adding product categories Gaining new technologies or other resources and capabilities Preparing for the convergence of industries

Horizontal

More broadly within their focal market mergers and acquisitions (combinations of market rivals

Ethical Strategies

Must entail actions and behavior that can pass the test of moral scrutiny in the sense of not being deceitful, unfair, or harmful to others, disreputable, or unreasonably damaging to the environment

Vision

Of company's future

A company's strategic plan

Outlines the competitive moves and approaches to be used in achieving the desired business results

Performance test

Outstanding financial and market performance

When Low-Cost strategies work well

Price competition is strong and the products of rival sellers are virtually identical When there are not many ways to differentiate when buyers are price-sensitive or have the power to bargain down prices When buyer switching costs are low When industry newcomers are likely to use a low introductory price to build market share

Scope of the firm

Refers to the range of its activities, the breadth of its product and service offerings, the extent of its geographic market presence, and its mix of businesses. Expanded horizontally or vertically

A company's business model

Sets forth the logic for how its strategy will create value for customers and at the same time generate revenues sufficient to cover costs and realize profit

Balanced Scorecard approach

Setting both financial and strategic objectives

A company's strategy is NOT concerned with management's choices about how to

Stake out the same market position as successful rival companies

SWOT

Strengths and Competitive Assests - most logical and appealing building blocks for strategy Weaknesses - vulnerabilities that need correction External opportunities and threats - good strategy aims at capturing a company's most attractive opportunities and at defending agains threats to well-being

VRIN tests

The four tests of a resource's competitve power. Valuable, Rare, Inimitable, Nonsubstitutable

An industry's key success factors (KSFs)

The particular strategy elements, product attributes, operational approaches, resources, and competitive capabilities that all industry members must have in order to survive and prosper in the industry.

Strategic Plan

The sum of a company's strategic vision, mission, objectives, and strategy

A focused strategy based on either low cost or differentiation becomes increasingly attractive when

The target market niche is big enough to be profitable and offers good growth potential It is costly or difficult for multi segment competitors to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers There are one or more niches that present a good match for a focuser's resources and capabilities Few other rivals are attempting to specialize in the same target segment

T?F Competition tends to be more intense among firms within a strategic group than between strategic groups

True

Vertical

Up or down the industry value chain system that starts with raw-material production and ends with sales and service to the end customer

First step to understanding how a company is situated in its external environment

Using PESTEL analysis to identify which of factors is strategically relevant is the

Offensive strategy options for improving market position

Using cost-based advantage to attack competitors on the basis of price or value Leapfrogging competitors with next-generation technologies Pursuing continuous product innovation Adopting and improving the best ideas of others Using hit-and-run tactics to steal sales away from unsuspecting rivals Launching preemptive strikes

Thinking strategically about a company's external situation involves probing for answers to the following questions:

What are the strategically relevant factors in the macro-environment, and how do they impact an industry and its members? What kinds of competitive forces are industry memebers facing, and how strong is each force? What cooperative forces are present in the industry, and how can a company harness them to its advantage? What factors are driving changes in the industry, and what impact will they have on competitive intensity and industry profitability? What market positions do industry rivals occupy - who is strongly positioned and who is not? What strategic moves are rivals likely to make next? What are the key factors for competitive success? Is the industry outlook conducive to good profitability?

Competitive advantage

When a company provides buyers with superior value compared to rival sellers or produces its products or services more effiecntly

Profit formula

a plan for a cost structure that will enable the company to deliver the customer value proposition profitability

Customer value proposition

a plan for satisfying customer wants and needs at a price customers will consider good value

Elements of Business Model

customer value proposition and profit formula

Masterful strategies come from

doing things differently from competitors where it counts—out-innovating them, being more efficient, adapting faster—rather than running with the herd.