strategic mgmt

A group of companies offering products or services that are close substitutes is an ______ • Firms in the same industry are _______ • Several industries combine to create a _____ • Within industries, consumers with a common need group together to form a _____ ______ • Industry boundaries are ___ ___ and can change over time

industry competitors sector market segment not fixed

• Three main areas of a firm's overall value chain where cost differences with rivals can occur: 1. A firm's own internal activities 2. Value chain activities performed by suppliers 3. Value chain activities performed by forward channel allies

strategic Options for Remedying a Cost or Value Disadvantage

A ________ is a course of action that managers take in the effort to attain SUPERIOR PERFORMANCE.

strategy For business, superior performance is demonstrated through above average PROFITABILITY, as compared to others in the same industry.

➢ Is a cluster of industry rivals that have similar competitive approaches and market positions (adopting similar strategy)

• A Strategic Group

• _____ _____ _____ ➢ Seeks to explain difference in firm's performance within the same industry based on few strategic dimensions e.g. price/quality/locations/market segments/distribution channels/technology/R&D

• Strategic Group Mapping

❖ Buyer Bargaining Power ❖ Supplier Bargaining Power ❖ Potential New Entrants ❖ Rivalry among Competing Sellers

➢ Porter's Five Competitive Forces Analysis

____-____ _______ Strategies • Are a hybrid of low cost provider and differentiation strategies that: Involves giving customers more value for money by satisfying buyer expectations on key quality/features/ performance/service attributes while exceeding customer expectations on price. Is a powerful competitive approach with valueconscious buyers looking for a good-to-very-good product or service at an economical price. Create a "best-cost" status as the low-cost provider of a product or service with upscale attributes.

Best-Cost Provider

The Role of the _____ ___ _____ in the StrategyFormulation, Strategy-Execution Process: 1. Oversee the firm's financial accounting and reporting practices. 2. Diligently critique and oversee the company's direction, strategy, and business approaches. 3. Evaluate the caliber of senior executives' strategy-making and strategy-executing skills. 4. Institute a compensation plan for top executives that rewards them for actions and results that serve shareholder interests.

Board Of Directors

______ strategy • Is primarily concerned with building competitive advantage in a single business unit of a diversified company or strengthening the market position of a nondiversified single business company.

Business

Management's blueprint for delivering a valuable product or service to customers in a manner that will yield an attractive profit. It's the road map to money...

Business Model

_____ bargaining power is high when: ➢ Their costs of switching to competing brands or substitutes are relatively low. ➢ Their large size allows them to demand concessions. ➢ They are few in number, control market access or, if a buyer-customer is particularly important to a seller. ➢ Weak buyer demand creates a "buyers' market." ➢ Buyers are well informed about sellers' products, prices, and costs. ➢ Buyers pose a credible threat of integrating backward into the business of sellers.

Buyers

_______ _______ _______defines how the firm will satisfy buyer wants and needs at a price customers consider a good value.

Customer value proposition

Which of the following is not an element of a company's business strategy? A. Actions to respond to changing market conditions or other external factors B. Actions to strengthen competitiveness via strategic alliances and collaborative partnerships C. Actions to strengthen internal capabilities and competitively valuable resources D. Actions to manage the functional areas of the business E. Management actions to revise the company's financial and strategic performance targets

E

• Price sensitivity • Demand and supply • Availability of substitutes • Standardized or non-differentiated products • Costs of switching • Revenue or cost reliance • Knowledge of products and services • Threat of backward and forward integrations

Factors influencing Buyer and Supplier Bargaining Power

______ objectives Communicate targets for financial performance. Are lagging indicators that reflect past performance. Relate to revenue growth, profitability, and return on investment.

Financial

_______ (or Market Niche) Strategies • Are strategies developed especially for competing in a narrow piece of the total market as defined by geographic uniqueness or special product attributes. • Are appealing to smaller and medium-sized firms that may lack the breadth and depth of resources to tackle going after a whole market customer base.

Focused

____-____ strategies • Are concerned with actions related to particular functions or processes within a business (marketing strategy, production strategy, finance strategy, customer service strategy, product development strategy, and human resources strategy).

Functional-area

• A company's value-creating activities are enabled by its specific resources and capabilities. ➢ Resources and capabilities that are both valuable and rare provide a company with the necessary preconditions for competitive advantage. ➢ When these assets are deployed in the form of a value-creating activity, that potential is realized.

How Value Chain Activities Relate to Resources and Capabilities

1. Buyer bargaining power 2. Supplier bargaining power 3. Threat of substitutes from another industry 4. Threat of new entrants into the market. 5. Rivalry among competing sellers to attract customers.

Industry Attractiveness Analysis: Porter's Five Competitive Forces

• Show how a firm compares against its rivals, factor by factor or capability by capability. • Indicate whether a firm is at net competitive advantage or disadvantage against each rival. • Provide guidelines for designing wise offensive and defensive strategies. • Point to competitive weaknesses of the firm that will require defensive moves to correct.

Interpreting the Competitive Strength Assessments

____ ____ ____ are those competitive factors that most affect the ability of all firms in an industry to prosper.

Key Success Factors (KSFs)

A powerful competitive approach with pricesensitive buyers when a firm's offering: Has a lower cost than rivals—but not necessarily the absolutely lowest possible cost. Includes features and services that buyers consider essential. Is viewed by buyers as offering equivalent or higher value even if priced lower than competing products.

Low-Cost Provider Strategies

• Is the industry characterized by various product characteristics or customer wants, needs, or preferences that divide the market into distinct segments? *What Are the Industry's Dominant Economic Characteristics?

Market segmentation

• How big is the industry and how fast is it growing? • What does the industry's position in the life cycle (early development, rapid growth and takeoff, early maturity and slowing growth, saturation and stagnation, decline) reveal about the industry's growth prospects? *What Are the Industry's Dominant Economic Characteristics?

Market size and growth rate

_____ strategies • Are relatively narrow strategic initiatives and approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities such as materials purchasing or Internet sales.

Operating

______ ______ describes the firm's approach to determining a cost structure that will allow for acceptable profits given the pricing tied to its customer value proposition.

Profit formula

________ is typically measured using after tax return on invested capital

Profitability

• Analyzing the resources and capabilities of a company is a two-step process: 1. Identify the company's most competitively important resources and capabilities ❖ Skills or specialized expertise in a competitively important capability ❖ Valuable human assets or intellectual capital ❖ Valuable organizational tangible and intangible assets ❖ Competitively valuable alliances or cooperative ventures or networks 2. Apply the four tests of competitive power to ascertain which resources and capabilities can support a sustainable competitive advantage over rival firms.

Resource and Capability Analysis

• Is the geographic area over which most companies compete local, regional, national, multinational, or global? *What Are the Industry's Dominant Economic Characteristics?

Scope of competitive rivalry

_______ objectives Are related to a firm's market standing and competitive vitality. Are leading indicators of a firm's future financial performance and business prospects. If achieved, indicate that a firm's future financial performance will be better than its current or past performance.

Strategic

Is top management's view of "where we are going"— the firm's direction and its future product-marketcustomer-technology focus to stakeholders. Is distinctive and specific to a particular organization. Avoids use of generic, innocuous, and uninspiring language that could apply to most any firm. Definitively states how the company's leaders intend to position the firm beyond where it is today.

Strategic Vision

______ bargaining power is high when: ➢ The supplied item is not a commodity readily available from many suppliers. ➢ Industry members cannot switch their purchases to another supplier or switch to attractive substitutes. ➢ Certain required inputs are in short supply. ➢ Certain suppliers provide a differentiated item that enhances the desired performance, quality, or image of the industry's product. ➢ There is a threat of forward integration by the suppliers

Supplier

As a rule, the stronger the collective impact of the five competitive forces, the lower the combined profitability of industry participants. The stronger the forces of competition, the much harder it becomes for industry members to earn attractive profits. ....and thus, the less attractive the industry

The Collective Strengths of the Five Competitive Forces and Industry Profitability

• Management's organization-building challenge has two elements: 1. Attending to ongoing recalibration of existing capabilities and resources 2. Casting a watchful eye for opportunities to develop totally new capabilities for delivering better customer value and/or outcompeting rivals

The Importance of Dynamic Capabilities in Sustaining Competitive Advantage

1. Political - level of government interventions 2. Macroeconomic forces - changes in overall levels of demand - economy growth rate, interest rate, currency exchange, inflation rate 3. Sociocultural forces - changes in preferences and values, demographic trends - changes create both opportunities and threats 4. Technological forces - accelerated rate of innovation and change 5. Ecological forces - law of nature 6. Legal and regulatory forces - change in laws

The Macro-Environment Analysis - PESTEL

Strategic Fit -How well does the strategy fit the company's situation? Performance- Is the strategy producing good company performance? Competitive Advantage -Is the strategy helping achieve a sustainable competitive advantage?

The Three Tests of a Winning Strategy

•______ ___ ______ is high when: ➢Price is desirable ➢Performance is compatible ➢Costs of switching are low

Threat of Substitutes

_____ _____` analysis: A company is a chain of activities for transforming inputs into outputs that customers value

Value chain

Industry driving forces may favor the growth of some strategic groups and hurt the prospects of others. • External competitive pressures and intragroup competitive rivalries may cause the profit potential of different strategic groups to vary.

What Can Be Learned from Strategic Group Maps? •

Deals exclusively with management's game plan for competing successfully and securing a competitive advantage over rivals

What is a Competitive Strategy?

A _____ _______ is a proficiently performed internal activity that is central to a company's strategy and competitiveness.

core competence

The two elements of a company's business model are its (1) ______ _____ _______ and (2) its ______ ______

customer value proposition profit formula

A ____-____ ______ strategy—achieving a cost-based advantage over rivals.

low-cost provider

The _____ ______ of a firm focuses on its present business purpose—"who we are and what we do" Current product and service offerings Customer needs being served

mission statement

• Ideally, a company ______ ______ is sufficiently descriptive to: Identify the company's products or services. Specify the buyer needs it seeks to satisfy. Specify the customer groups or markets it is endeavoring to serve. Specify its approach to pleasing customers. Give the company its own identity.

mission statement Profit is not "who we are and what we do.", but more like an objective.

The ____ ____ _____ is high when: ➢ There are many competitors in the industry ➢ Competitors are equal in size and capability. ➢ Slow growth and declining demand of markets leading to excess capacity and inventory. ➢ Less costly for buyers to switch brands. ➢ The products of rival sellers have become more standardized. ➢ Products and services are direct subsitutes ➢ Industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume. ➢ Competitors have become dissatisfied with their market position. ➢ Strong outside firms acquire weak firms in the industry and launch aggressive, well-funded moves to build market share.

rivalry among sellers

The _________ that an organization's managers pursue have a major impact on its performance relative to its peers.

strategies

The ____ ___ _____ into the industry is high when: (ease of entry) ➢ Economies of scale is not needed ➢ Customer switching costs are low ➢ Capital requirements are low ➢ Existing members do not have brand loyalty, patented technology, access to raw materials and distribution channels, favorable geographical locations ➢ Absence of government regulations ➢ Low retaliation from existing members

threat of entrants

Determining a firm's overall ______ _____ requires answering two questions: 1. How does the company rank relative to competitors on each of the important factors that determine market success? 2. Does the company have a net competitive advantage or disadvantage versus its major competitors?

competitive position

• ___ ______ ______ concerns a firm's future business path—"where we are going or where do I want to take the company?" Markets to be pursued Future product/ market/customer/ technology focus

A strategic vision

The competitive moves and business approaches a company's management is using to grow the business, compete successfully, attract and please customers, conduct operations, respond to changing economic and market conditions, and achieve organizational objectives is referred to as its A. strategy. B. mission statement. C. strategic intent. D. business model. E. strategic vision.

A. strategy.

Which of the following is not something a company's strategy is concerned with? A. Managements choices about how to attract and please customers B. Managements choices about how quickly and closely to copy the strategies being used by successful rival companies C. Managements choices about how to grow the business D. Managements choices about how to outcompete rivals E. Managements action plan for conducting operations and improving the company's strategic and financial performance

B.

A company's strategy is most accurately defined as A. management's approaches to building revenues, controlling costs, and generating an attractive profit. B. management's game plan for growing the business, attracting and pleasing customers, conducting operations, and achieving financial and market performance objectives. C. management's concept of where we are headed? D. the business model that a company's board of directors has approved for outcompeting rivals and making the company profitable. E. the choices management has made regarding what financial plan to pursue.

B. management's game plan for growing the business, attracting and pleasing customers, conducting operations, and achieving financial and market performance objectives.

• Attractive competitive approaches to use whenever buyers' needs and preferences are too diverse to be fully satisfied by a standardized product or service. Involves offering differentiating features that clearly set the firm's products or services apart from rivals. Enhances profitability whenever the extra price the product commands outweighs the added costs of achieving the differentiation that is not easily copied or matched by rivals.

Broad Differentiation Strategies

1. Managers in all types of businesses must address the central strategic question: A. Where are we now? B. Where do we want to go from here? C. How are we going to get there? D. When will we know we are there? E. All of these

C. How are we going to get there?

Successful execution of a differentiation strategy allows a firm to:

Command a premium price Gain buyer loyalty to its brand increase sales

Is the resource or capability competitively (valuable)? Is the resource or capability (rare)-is it something rivals lack? Is the resource or capability (inimitable) or hard to copy? Is the resource or capability (non-substitutable) or is it vulnerable to substitution from different types of resources and capabilities?

Competitive Power Test (VRIN)

_______ ________ Capabilities cannot be easily bested, matched, or imitated by rivals. represent superior know-how and specialized abilities that require time to fully develop and perfect. result in a sustainable competitive advantage over rivals. *The Importance of Capabilities in Building and Sustaining Competitive Advantage

Competitively Valuable

______ strategy • Is orchestrated by the CEO and other senior executives and establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company. • Addresses the questions of how to capture cross-business synergies, what businesses to hold or divest, which new markets to enter, and how to best enter new markets—by acquisition, creation of a strategic alliance, or through internal development.

Corporate

A company's strategy consists of A. actions to develop a more appealing business model than rivals. B. plans involving alignment of organizational activities and strategic objectives. C. offensive and defensive moves to generate revenues and increase profit margins. D. competitive moves and approaches that managers have developed to grow the business, attract and please customers, conduct operations, and achieve targeted objectives. E. its strategic vision, its strategic objectives, and its strategic intent.

D. competitive moves and approaches that managers have developed to grow the business, attract and please customers, conduct operations, and achieve targeted objectives.

• Is a surplus of capacity pushing prices and profit margins down? • Is the industry overcrowded with too many competitors? *What Are the Industry's Dominant Economic Characteristics?

Demand-supply conditions

_____ _____ analysis has three steps: 1. Identifying the present driving forces, as only 3-4 factors qualify as real drivers of change. 2. Assessing how strongly the forces are, individually or collectively, impacting industry attractiveness by affecting demand, competition, and profitability. 3. Determining what strategy changes are needed to prepare for the impact of the driving forces.

Driving forces

When a firm's profitability is greater than the average profitability for all firms in its industry, it has a _______ _______ over its rivals

competitive advantage

• Expertise in a particular technology • Scale economies • Experience curve benefits • High capacity utilization • Strong network of wholesale distributors • Brand building skills Convenient retail locations

Examples of Industry Key Success Factors

External Environment Analysis • Macro-Environment ➢ ______ Analysis

PESTEL Analysis

• What role does advancing technology play in this industry? • Do most industry members have or need strong technological capabilities? Why? *What Are the Industry's Dominant Economic Characteristics?

Pace of technological change

A ____-____ provider strategy— a low cost-differentiation hybrid giving customers more value for the money by satisfying buyers' expectations on key quality/features/ performance/service attributes, while beating their price expectations.

best-cost

A _____ ______ strategy—seeking to differentiate products or services from rivals' in ways that will appeal to a broad spectrum of buyers.

broad differentiation

A company's _____ _____ sets forth how its strategy and operating approaches will create value for customers, while at the same time generate ample revenues to cover costs and realize a profit.

business model

A core competence that is performed with a very high level of proficiency is referred to as a ________ competence.

distinctive competence.

A _____ _____ strategy—concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals' products.

focused differentiation

A _______ ____-____ strategy—concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price.

focused low-cost