Strategic Management Study Guide 1

Organizations protect themselves from buyer power and intense rivalry from competitors by doing what?

An overall low-cost position enables a firm to achieve above-average returns despite strong competition provides more flexibility to cope with demands from powerful suppliers for input cost increases. The factors that lead to a low-cost position also provide a substantial entry barriers position with respect to substitute products introduced by new and existing competitors.

Two questions on short-term solvency ratios. Know what they are (assess) and known as.

Current ratio = Current assets / Current liabilities Quick ratio = Current assets − Inventory / Current liabilities Cash ratio = Cash / Current Liabilities

The four key attributes of strategic management are what?

Directs the organization toward overall goals and objectives. Includes multiple stakeholders in decision making. Needs to incorporate short-term and long-term perspectives. Recognizes trade-offs between efficiency and effectiveness.

Firms must exercise two types of strategic control. What are these?

First, informational control requires that organizations continually monitor and scan the environment and respond to threats and opportunities. Second, behavioral control involves the proper balance of rewards and incentives as well as cultures and boundaries (or constraints).

Attracting, developing, and retaining human capital are highly interrelated activities, like a three-legged stool.

If one leg is weak or broken, the stool collapses. To illustrate such interdependence, poor hiring impedes the effectiveness of development and retention processes. In a similar vein, ineffective retention efforts place additional burdens on hiring and development.

How firms compete with each other and how they attain and sustain competitive advantages goes to the heart of strategic management.

In short, the key issue becomes to identify why some firms outperform others and enjoy such advantages over time.

In the current environment, collaboration and interdependence are vital to organizational success.

Individuals must share their knowledge and work constructively to achieve collective, not just individual, goals. Traditional systems evaluate performance from a single perspective (i.e., top down) and generally do not address the softer dimensions of communications and social skills, values, beliefs, and attitudes.

Asset utilization (or turnover) ratios are what?

Inventory turnover = Cost of goods sold/ Inventory Days' sales in inventory = 365 days / Inventory turnover Receivables turnover = Sales / Accounts receivable Days' sales in receivables = 365 days /Receivables turnover Total asset turnover = Sales / Total assets Capital intensity = Total assets / Sales

When firms enter foreign markets, they face both opportunities and pitfalls. What must managers do?

Managers must decide not only on the most appropriate entry strategy but also how they will go about attaining competitive advantages in international markets.

Profitability ratios include what?

Profit margin = Net income / Sales Return on assets (ROA) = Net income / Total assets Return on equity (ROE) = Net income / Total equity ROE = (Net income / Sales) × (Sales / Assets) × (Assets/ Equity)

Two questions on businesses that strives for a low-cost advantage must attain an absolute cost advantage relative to its rivals.

This is typically accomplished by offering a no-frills product or service to a broad target market using standardization to derive the greatest benefits from economies of scale and experience. However, such a strategy may fail if a firm is unable to attain parity on important dimensions of differentiation such as quick responses to customer requests for services or design changes

The five-forces model describes the competitive environment in terms of five basic competitive forces

Threat of new entrants Bargaining power of buyers Threat of substitute products or services Bargaining power of suppliers Rivalry among existing competitors

Dynamic capabilities are what?

a firm's capacity to build and protect a competitive advantage, which rests on knowledge, assets, competencies, complementary assets, and technologies. Dynamic capabilities include the ability to sense and seize new opportunities, generate new knowledge, and reconfigure existing assets and capabilities.

An overall low-cost position enables a firm to

achieve above-average returns despite strong competition.

Human resource management consists of what?

activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It supports both individual primary and support activities (e.g., hiring of engineers and scientists) and the entire value chain (e.g., negotiations with labor unions).

Service

all actions associated with providing service to enhance or maintain the value of the product.

Although general administration is sometimes viewed only as what?, it can be a powerful source of what?

as overhead, it can be a powerful source of competitive advantage

If employers do not provide incentives to:

attract and retain young workers, somebody else will. Thus, they will be at a competitive disadvantage.

Examples of overall cost leadership within primary value chain activities

based on creating a low-cost position. Here, a firm must manage the relationships throughout the value chain and lower costs throughout the entire chain. may involve the effective layout of receiving dock operations (inbound logistics), and support value chain activities may include expertise in process engineering (technology development).

The management of intellectual property (IP) involves what?

besides patents, contracts with confidentiality and noncompete clauses, copyrights, and the development of trademarks.

Human resource management

consists of activities involved in recruitment, hiring, training and development, and compensation of all types of personnel.

Among the major sources of entry barriers are

economies of scale, product differentiation, capital requirements, switching costs, and access to raw materials and distribution channels.

Firms must continually improve and grow as well as

find new ways to renew their organizations.

General administration consists of several activities, know what those are.

general management, planning, finance, accounting, legal and government affairs, quality management, and information systems

Competitive intelligence (CI) helps firms do what?

helps firms define and understand their industry and identify rivals' strengths and weaknesses. This includes the intelligence gathering associated with collecting data on competitors and interpreting such data. Done properly, competitive intelligence helps a company avoid surprises by anticipating competitors' moves and decreasing response time.

Organizations express priorities best through stated goals and objectives that form a

hierarchy of goals

Procurement

how the firm purchases inputs used in its value chain

Know that the five primary activities of an organization are. For example, inbound logistics, operations, etc. Its in the slides and text. Here's a hint, "airlines".

inbound logistics, operations, outbound logistics, marketing and sales, and service contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale.

Operations

include all activities associated with transforming inputs into the final product form

Outbound logistics

includes collecting, storing, and distributing the product or service to buyers

Environmental scanning involves what?

involves surveillance of a firm's external environment to predict environmental changes and detect changes already underway. This alerts the organization to critical trends and events before changes develop a discernible pattern and before competitors recognize them. Otherwise, the firm may be forced into a reactive mode.

explicit knowledge

knowledge that is codified, documented, easily reproduced, and widely distributed.

tacit knowledge

knowledge that is in the minds of employees and is based on their experiences and backgrounds.

Hiring is the first process in which all successful organizations must do what?

must engage to build and leverage their human capital

The financial position of a firm should

not be analyzed in isolation. Important reference points are needed. We will address some issues that must be considered to make financial analysis more meaningful: historical comparisons, comparisons with industry norms, and comparisons with key competitors.

Inbound logistics

primarily associated with receiving, storing and distributing inputs to the product.

Support activities in the value chain can be divided into four generic categories, know what those are.

procurement, technology development, human resource management, and general administration either add value by themselves or add value through important relationships with both primary activities and other support activities.

Marketing and sales activities

purchases of products and services by end users, and how to get buyers to make those purchases.

Technology development

related to a wide range of activities. •Effective research and development activities for process and product initiatives. •Collaborative relationships between research and development and other departments. •State-of-the-art facilities and equipment. •Excellent professional qualifications of personnel. •Use of data analytics.

Two questions on what processes are used to develop forecasts.

scanning, monitoring, and gathering competitive intelligence

Strategy analysis involves or consists what?

study of firms' external and internal environments and their fit with organizational vision and goals. It involves careful analysis of the overarching goals of the organization. It requires a thorough analysis of the organization's external and internal environment

How does the text define "effectiveness"?

tailoring actions to the needs of an organization rather than wasting effort, or "doing the right thing." Remember "doing the right thing".

Strategic management

the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

New knowledge is constantly created through

the continual interaction of explicit and tacit knowledge. Consider two software engineers working together on a computer code. The computer code is the explicit knowledge.

Given rapid and unpredictable change, leaders must create a learning organization so that

the entire organization can benefit from individual and collective talents.

Human capital is what?

the individual capabilities, knowledge, skills, and experience of a company's employees and managers.

Social capital what?

the network of friendships and working relationships between talented people both inside and outside the organization.

Executives must be careful to avoid spending so much:

time and effort tracking the actions of traditional competitors that they ignore new competitors. Further, broad environmental changes and events may have a dramatic impact on company viability.

Environmental monitoring tracks what?

tracks the evolution of environmental trends, sequences of events, or streams of activities. They may be trends that the firm came across by accident or ones that were brought to its attention from outside the organization. Monitoring enables firms to evaluate how dramatically environmental trends are changing the competitive landscape.

Strategic management involves the recognition of

trade-offs between effectiveness and efficiency. Some authors have referred to this as the difference between doing the right thing (effectiveness) and doing things right (efficiency).

Firms must compete for top talent. In attracting and selecting employees, firms must strive to select the best fit for both the employee and the firm. To reduce wasted time and effort in interviewing too many candidates while assuring a good candidate pool, a firm should do what?

use a pre interview quiz or "bozo filter" (e.g., Cooper Software).

Hierarchy of goals

vision, mission, and strategic objectives. What visions may lack in specificity, they make up for in their ability to evoke powerful and compelling mental images. On the other hand, strategic objectives tend to be more specific and provide a more direct means of determining if the organization is moving toward broader, overall goals.

Organizations can achieve mutual benefit through stakeholder symbiosis, what does this mean?

which recognizes that stakeholders are dependent upon each other for their success and well-being

One factor often central to an overall cost leadership strategy is the experience curve,

which refers to how business learns to lower costs as it gains experience with production processes. With experience, unit costs of production decline as output increases in most industries.

General administration

•Effective planning systems to attain overall goals and objectives. •Excellent relations with diverse stakeholder groups. •Effective information technology to coordinate and integrate value-creating activities across the value chain. •Ability of top management to anticipate and act on key environmental trends and events, create strong values, culture and reputation.

Two questions on when is a buyer group most powerful? (for example, when the buyer faces few switching costs, etc.)

•Purchasing standard products are in large volumes. •Profits are low & switching costs are few. •Backward integration is possible. •Buyer's product quality is not affected by industry product.