Strategic Management (Chapters 1-4)

What is a strategic group?

- A cluster of industry rivals that employ similar competitive approaches, have product offerings that appeal to similar types of buyers, and thus occupy similar market positions.

What is the role of the knowledge economy in business?

- A company's value is not derived solely from its physical assets. Rather it is based on knowledge, know-how, and intellectual assets - all embedded in people. - Wealth is increasingly created by effective management of knowledge workers instead of by the efficient control of physical & financial assets.

What is strategic intent?

- A firm exhibits this when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective. - Example: YouTube video on Champion, was popular in the 80's and 90's then wasn't popular anymore and was seen at Walmart and such, but now it is more popular and it was bought by Sara Lee (famous for their desserts) and the company is 100 years old, Hanes owns Champion currently.

What are substitutes?

- A good that can be used in place of another. - Example: Tea and coffee

A resource is valuable and rare but neither difficult to imitate nor without substitutes. This should enable the firm to attain?

- A temporary competitive advantage.

What are examples of financial objectives?

- An x percent increase in annual revenues - Annual increases in after-tax profits of x percent - Annual increases in earnings per share of x percent - Annual dividend increases of x percent - Profit margins of x percent - Target return on equity (roe) - Upward trending stock price - Credit ratings of x - Internal cash flows of x dollars to fund capital investment

What is value creation?

- By innovatively building and leveraging their resources and capabilities; by exploiting their core competencies or competitive advantages, firms create value - It is measured by: Product performance characteristics, Product attributes for which customers are willing to pay. - Superior value -> above-average return

What is resource-based view (rbv) of the firm

- Combines an internal analysis of phenomena within a company. - With an external analysis of the industry and its competitive environment. - Resources can lead to a competitive advantage: - If they are valuable, rare, hard to duplicate. - When tangible resources, intangible resources, and organizational capabilities are combines.

What is a competitor analysis?

- Complementors: the network of companies that sell complementary products or services or are compatible with the focal firm's own product or service. Complementors expand the set of competitors that firms must evaluate when completing this. - Example: batteries -> d batteries, companies probably work together

What are the barriers to entry?

- Cost - Legal regulations - Quotas - Licensing - Trade agreements - Large players (incumbent) - Liability of newness - Certifications - Example: Oil industry

What do we mean by "strategy"?

- Defined by the specific market positioning, competitive moves, and business approaches that form management's answer to "What's our plan for running the company and producing good results?"

What are the dynamic capabilities (what to do)?

- Management's challenge in developing this, has two elements: - Attending to ongoing recalibration of existing competencies and capabilities - Casting a watchful eye for opportunities to develop totally new capabilities for delivering better customer value and/or outcompeting rivals. Keeping company competencies freshly honed and on the cutting edge is a strategically important top management rask - Example: core rigidity -> brands disappear such as, blackberry

What is strategy?

- Plan: goals/strategic direction; analysis, set of action > vision/mission - Competitive advantage (Sustainable) - what do you do better? - How to compete? - Uniqueness - Location - Process - Customer service - Person - Resource - Patents - Leadership - Special manufacturing process - First in the market - Above average return: exceed shareholder/investor expectations

What are examples of a value chain for a department store retailer?

- Primary Activities - Merchandise selection and purchasing - Store layout and product display - Advertising - Customer service - Support activities - Site selection - Hiring and training - Store maintenance - Administrative activities

What are examples of a value chain for a bakery goods maker?

- Primary activities - Supply chain management - Recipe development and testing - Mixing and baking - Packaging - Sales and marketing - Distribution - Support activities - Quality control - Human resource management - Administration

What are the key success factors (KSF)?

- The strategy elements, product attributes, resources, capabilities, and market achievements with the greatest impact on future competitive success in the marketplace. - They are important to competitive success that how well a firm measures up on each industry - It can spell the difference between being a strong competitor and a weak competitor - and sometimes between profit and loss.

What are tangible resources?

- They are assets that are relatively easy to identify: - Physical assets: plant & facilities, location, machinery & equipment. - Financial assets: cash & cash equivalents, borrowing capacity, capacity to raise equity. - Technological resources: trade secrets, patents, copyrights, trademarks, innovative production processes. - Organizational resources: effective planning processes & control systems.

What are organizational capabilities?

- They are competencies or skills that a firm employs to transform inputs into outputs; the capacity to combine tangible & intangible resources to attain desired ends. - Outstanding customer service. - Excellent product development capabilities. - Superb innovation processes & flexibility in manufacturing processes. - Ability to hire, motivate, & retain human capital.

What are intangible resources?

- They are difficult for competitors to account for or imitate - are embedded in unique routines & practices: - Human resources: trust, experience & capabilities of employees; managerial skills & effectiveness of work teams. - Innovation resources: technical & scientific expertise & ideas; innovation capabilities. - Reputation resources: brand names, reputation for fairness with suppliers; reliability & product quality with customers.

What are the capabilities?

- They can outsource certain activities to vendors/contractors with the resources/capabilities to help deliver higher customer value at the same or lower cost.

What are you not supposed to outsource?

- Trade secrets and patents because you don't want to lose strategic control.

What are Porter's Five Forces in interpreting industry analysis?

- Unattractive industry (low profit potential) - Low entry barriers - Suppliers and buyers have strong positions - Strong threats from substitute products - Intense rivalry among competitors - Attractive industry (high profit potential) - High entry barriers - Suppliers and buyers have weak positions - Few threats from substitute products - Moderate rivalry strong competitors - E.g., there are super high entry barriers for the cannabis industry, are there substitutes for cannabis?, it can't be cbd because that won't get you high

What are the firm resources and sustainable competitive advantages (four strategic attributes)?

- Valuable in formulating & implementing strategies to improve efficiency or effectiveness. - Rare or uncommon; difficult to exploit. - Difficult to imitate or copy due to physical. uniqueness, path dependency, causal ambiguity, or social complexity. - Difficult to substitute with strategically equivalent resources or capabilities.

What are examples of strategic objectives?

- Winning an x percent market share - Achieving lower overall costs than rivals - Overtaking key competitors on product performance or quality or customer service - Deriving x percent of revenues from the sale of new products introduced within the past five years - Having broader or deeper technological capabilities than rivals - Having a wider product line than rivals - Having a better-known or more powerful brand name than rivals - Having stronger national or global sales and distribution and capabilities than rivals - Consistently getting up-to-date products to market ahead of rivals

What is a strategic vision?

- Describes the route a company intends to take in developing and strengthening its business. It lays out the company's strategic course in preparing for the future.

What are the two objectives that a firm needs?

- Financial objectives: Outcomes focused on improving the firm's financial performance. - Strategic objectives: Outcomes focused on strengthening the firm's ability to attract and retain customers, compete more successfully against its rivals, and improve its future business prospects.

What is analyzing the internal organization?

- Having resources (tangible or intangible) - Tangible meaning it is easy to identify (physical, financial, technological, organizational) - Intangible meaning it is difficult to imitate (human resources, innovation, reputation resources)

What are the support functions?

- IT, R&D, customer service, quality control, administration, finance/accounting. - If failing, redesign or outsource (if not done right it's most likely not your core competency, so you hire another company to do it, so you focus on doing well.

What does a competitor do?

- If a complementor's a product or service is in a market into which the focal firm intends to expand, the complementor can represent a formidable competitor

What does a complementor do?

- If a complementor's product or service adds value to the sale of the focal firm's product or service, it is likely to create value for the focal firm.

What is the case for a balanced scorecard?

- Improved strategic performance fosters better financial performance. - It for measuring a firm's performance is optimal; its entails: - Setting both financial and strategic objectives. - Placing balanced emphasis on achieving both types of objectives. - An approach to measuring company performance gives managers a more complete and balanced view of a company's overall performance than does just looking at the latest financial outcomes.

What is a S.W.O.T?

- Is a basic technique for analyzing firm and industry conditions - Firm or internal conditions = strengths & weaknesses - Where the firm exercise or where it may be lacking - Environment or external conditions = opportunities & threats - Developments that exist in the general environment - Activities among firms competing for the same customers - Example: Low cost for Planes - time; AirTran; fleet 737, culture, hedge fuel, savings: Southwest airlines

What is the role of intellectual assets and intangible resources in evaluating ratios between market value and book value?

- It includes these assets: - Reputation - Employee loyalty & commitment - Customer relationships - Company values - Brand names - Experience & skills of employees

What are Porter's Five Forces (model)?

- It includes; threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competing firms.

What is the general environment?

- It is composed of factors that are both hard to predict and difficult to control: Demographic, sociocultural, political/legal, technological, economic, natural environment.

What is a mission statement?

- It is the vision of the foundation for the firm's mission. The firm's mission is more concrete than its vision. A mission specifies the business or businesses in which the firm intends to compete and the customers it intends to serve. - Examples: "Our mission is to give people the power to share and make the world more open and connected" (Facebook). "Today, our mission is to connect people with their world, everywhere they live and work, and do it better than anyone else....." (AT&T).

What is a balanced scoreboard?

- It is widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.

What is a vision statement?

- It's a snapshot of what a firm wants to be and would like to achieve. Reflection of the firm's values. - Examples: Mcdonalds brand mission is to be our customers' favorite place and way to eat and drink (2018). Ford's vision statement is "people working together as a lean, global enterprise for automotive leadership (2018).

What are the support activities?

- Product R&D, Technology, and Systems Development: Activities, costs, and assets relating to product R&D, process R&D, process design improvement, equipment design, computer software development, telecommunications systems, computer-assisted design and engineering, database capabilities, and development of computerized support systems. - Human Resource Management: Activities, costs, and assets associated with the recruitment, hiring, training, development, and compensation of all types of personnel; labor relations activities; and development of knowledge-based skills and core competencies. - General Administration: Activities, costs, and assets relating to general management, accounting and finance, legal regulatory affairs, safety and security, management information systems, forming strategic alliances and collaborating with strategic partners, and other overhead functions.

What is strategic grouping map?

- Reveals which companies are close competitors and which are distant competitors. - Some groups are more favorably positioned than others because they confront weaker competitive forces and/or because they stand to be favorably impacted by the industry's driving forces. - It is a valuable tool for understanding the similarities, differences, strengths, and weaknesses inherent in the market positions of rival companies.

What are the intensity of rivalry (indicators)?

- Same target market (market commonality) - Same strategy - Same supplier (resource similarity) - Same price/quality - # industry - Similarity of product offering

What are usually the five departments?

- Service follow up (post-purchase) - Outbound logistics/distribution - Manufacturing/operations - Inbound logistics/supply chain management - Marketing department

What are the primary activities?

- Supply Chain Management: Activities, costs, and assets associated with purchasing fuel, energy, raw materials, parts and components, merchandise, and consumable items from vendors; receiving, storing and disseminating inputs from suppliers inspection; inventory management. - Operations: Activities, costs, and assets associated with converting inputs into final product (producing, assembly, packaging, equipment maintenance, facilities, operations, quality assurance, environmental protection). - Distribution: Activities, costs, and assets dealing with physically distributing the product to buyers (finished goods warehousing, order processing, order picking and packing, shipping, delivery vehicle operations, establishing and maintaining a network of dealers and distributors). - Sales and Marketing: Activities, costs, and assets related to sales force efforts, advertising and promotion, market research and planning, and dealer/distributor support. - Service: Activities, costs, and assets associated with providing assistance to buyers, such as installations, spare parts delivery, maintenance and repair, technical assistance, buyer inquires, and complaints.

What is differentiation?

- The approach that a business takes to develop a unique product or service that customers will find better than similar products or services offered by its competitors?

The bargaining power of a buyer is likely to be greater than that of a supplier when?

- The buyer's profit margin is low.

What is risk?

- The exposure a company or organization has to factors that will lower its profits or lead to lead it to fail.

What is a value chain?

- The functions, tasks, and activities that a firm performs internally to create value for customers. - Consists of two broad categories of activities: - Primary activities that are foremost in the firm's scheme for creating and delivering value to customers. - Support activities that facilitate and enhance the performance of primary activities. - A firm has no sound business justification for performing an activity that does not result in greater value for customers

What are stakeholders?

- The individuals affected by the organization's actions, objectives, policies.

What is ambidexterity?

Can do internal/external activities simultaneously just as well = I/O paradigm