Mqm 385 exam 1
Vision
- A Successful Vision - is an enduring word picture of what the firm wants to be and expects to achieve in the future. - stretches and challenges its people. - reflects the firm's values and aspirations. - is most effective when its development includes all stakeholders. - recognizes the firm's internal and external competitive environments. - is supported by upper management decisions and actions.
Analyzing the Internal Organization
- Unique resources, capabilities, and competencies (required for sustainable competitive advantage. By studying the internal environment, firms identify what they can do.
Basis of segmentation: Consumer Markets
1. Demographic factors (age, income, sex, etc.) 2. Socioeconomic factors (social class, stage in the family life cycle) 3. Geographic factors (cultural, regional, and national differences) 4. Psychological factors (lifestyle, personality traits) 5. Consumption patterns (heavy, moderate, and light users) 6. Perceptual factors (benefit segmentation, perceptual mapping)
Every organization has groups of people that it must establish and manage relationships with to be successful. These groups include: a. customers. b. shareholders and investors. c. employees. d. all of these
D. All of these
Assessing
Evaluating timing and importance of future events for the company
The Value-Creating Potential of Primary Activities: Support:
Firm infrastructure H.R. Management technological development procurement
Why Outsource?
Firms that are engaging in effective outsourcing increase their flexibility, mitigate risk, and reduce their capital investments
Scanning
Identifying early signals
Define Market segmentation
Market segmentation is a process used to cluster people with similar needs into individual and identifiable groups.
Monitoring
Ongoing observation of certain events
What is sustainable competitive advantage
People, culture, processes, knowledge, technology, capital, sustainability
Forecasting
Predicting events in the future
Resources
Resources- Are a firm's assets, including people and the value of its brand name that represent inputs into a firm's production process: capital equipment, skills of employees, brand names, financial resources, talented managers
What is value chain?
Shows how a product moves from the raw-material stage to the final customer. Allows a firm to understand the parts of its operations that create value and those that do not.
The Strategic Management Process
The Strategic Management Process- is the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Vertical Integration (Forward and Backward)-
Vertical integration exists when a company produces its own inputs (backward integration) or owns its own source of output distribution (forward integration).
Which of the following would be considered an example of a tangible resource? a. A process for moving raw materials more quickly through the plant b. A secret recipe for a dish c. A pharmaceutical company's team of research and development (R&D) scientists d. A network of distribution centers in strategic locations around the world
d. A network of distribution centers in strategic locations around the world
Which category of the general environment and its trends does this reflect? unliever, which in October called out the low-fat champion as a reason for its weak third quarter sales, this month launched a new ben and jerry's brand that apes halo top's trademark approach to displaying calorie count. Despite its well- advertised emphasis on health and wellness, Nestle may be behind the curve here
sociocultural
Basis of Segmentation: Industrial Markets
1. End-use segments (identified by SIC code) 2. Product segments (based on technological differences or production economics) 3. Geographic segments (defined by boundaries between countries or by regional differences within them) 4. Common buying factor segments (cut across product market and geographic segments) 5. Customer size segments
The I/O Model of Above-Average Returns Assumptions:
1. I/0 model assumptions- The external environment imposes pressures and constraints that determine strategic choices. 2. Similarity in strategically relevant resources causes competitors to pursue similar strategies. 3. Resource differences among competitors are short-lived due to resource mobility across firms. 4. Strategic decision makers are rational and engage in profit-maximizing behaviors.
The Resource-Based Model of Above-Average Returns Assumptions
1. Resource base model assumptions- Firms acquire different resources. 2. Firms develop unique capabilities based on how they combine and use resources. 3. Resources and certain capabilities are not highly mobile across firms. 4. Differences in resources and capabilities are the bases of competitive advantage and a firm's performance rather than its industry's structural characteristics.
Differentiation Strategy
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them. - Focus is on nonstandardized products Appropriate when customers value differentiated features more than they value low cost
Focused Cost Leadership Strategy
A focused cost leadership strategy requires competing based on price to target a narrow market "Focused Cost Leadership" A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.
Focused Strategies
An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment. - Particular buyer group—youths or senior citizens - Different segment of a product line—professional craftsmen versus do-it-yourselfers - Different geographic markets—East coast versus West coast • Types of focused strategies - Focused cost leadership strategy - Focused differentiation strategy
What is Strategy?
A strategy is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Value chain analysis and purpose
A template that firms use to: • Understand their cost position. • Identify multiple means that might be used to facilitate implementation of a chosen business-level strategy. • To perform an activity in a manner that is superior to the way competitors perform it, or • To perform a value-creating activity that competitors cannot compete.
Define Business Level Strategy:
An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
Mission
An Effective Mission - specifies the present business or businesses in which the firm intends to compete and customers it intends to serve. - has a more concrete, near-term focus on current product markets and customers than the firm's vision. - should be inspiring and relevant to all stakeholders. - Is externally focused
Cost Leadership Strategy
An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors. • Product Characteristics - Relatively standardized (commoditized) products - Features broadly acceptable to many customers - Lowest competitive price
Outsourcing versus Offshoring
Outsourcing: The purchase of a value-creating activity from an external supplier - Few organizations possess the resources and capabilities required to achieve competitive superiority in all primary and support activities. • By performing fewer capabilities: - A firm can concentrate on those areas in which it can create value. - Specialty suppliers can perform outsourced capabilities more efficiently. Offshoring: deciding to outsource from a foreign supplier
a telecommunications company is impacted by government regulations of the wireless spectrum, cell tower locations and internet accessibility. The company decides to hire a lobbying firm to represent its interests with the U.S. government, specifically the FCC, FTC, and Congress. This is an example of a company managing ____ forces in the macroenvironment. A. global B. technological C. political/ legal D. social
C. political/ legal
Capabilities
Capabilities- Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state - Emerge over time through complex interactions among tangible and intangible resources - The foundation of many capabilities lies in: • The unique skills and knowledge of a firm's employees • The functional expertise of those employees • Knowledge sharing - Capabilities are often developed in specific functional areas or as part of a functional area Examples of firms capabilities: distribution (effective use of logistics management techniques), human resources (motivating, empowering and retaining employees), management information systems (effective and efficient control of inventories through point- of purchase data collection methods)
Classification of Stakeholders
Classifications of Stakeholders- Capital market shareholders- shareholders, major suppliers of capital (ex. Banks) Product market shareholders- primary customers, suppliers, host communities, unions Organizational shareholders- employees, managers, nonmanagers
Core Competencies
Core Competencies- Activities that a firm performs especially well compared to competitors. - Activities through which the firm adds unique value to its goods or services over a long period of time. - Resources and capabilities that are the sources of a firm's competitive advantage: • Distinguish a firm competitively and reflect its personality. Emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities
Creating Value
Creating Value- By exploiting their core competencies or competitive advantages, firms create value. • Value is measured by: - Product performance characteristics - Product attributes for which customers will pay • Firms create value by innovatively bundling and leveraging their resources and capabilities. • Superior value Above-average returns
Which category of the general environment and its trends does this reflect? Healthcare is becoming increasingly important of people older than 65 is growing larger in many nations throughout the world
Demographic
Segments of the General Environment
Demographic Segment, Economic Segment, Political/Legal Segment, Sociocultural Segment, Technological Segment, Global Segment, Physical Environment Segment.
External Environmental Analysis - The General, Industry, and Competitor Environments:
General environment ◦ Focused on the broader society (broad context) Industry environment ◦ Focused on factors and conditions directly influencing a firm's profitability within an industry Competitor environment ◦ Focused on predicting the dynamics of competitors' actions, responses and intentions
The Competitive Landscape including:
Global Economy-is one in which goods, services, people, skills, and ideas move freely across geographic boarders Technology and Technological Changes - 3 categories technology diffusion and disruptive technologies, information age and increasing knowledge intensity
Hyper-competition
Hyper competition describes competition that is excessive such that it creates inherent instability and necessitates constant disruptive change for firms in the competitive landscape
Primary and Support Value chain activities-
Inbound Logistics - Activities used to receive, store, and disseminate inputs to a product • Operations - Activities necessary to convert the inputs provided by inbound logistics into final product form • Outbound Logistics - Activities involved with collecting, storing, and physically distributing the product to customers • Marketing and Sales - Activities completed to provide the means through which customers can purchase products and to induce them to do so. • Service - Activities designed to enhance or maintain a product's value • Each activity should be examined relative to competitor's abilities and rated as superior, equivalent or inferior.
Industry Environment Analysis
Industry Environment Analysis - Threat of New Entrants, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitute Products, Intensity of Rivalry among Competitors, Interpreting Industry Analyses, Competitor Analysis.
Focused Differentiation Strategy:
Offering unique features that fulfill the demands of a narrow market A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: - Adapt quickly to environmental changes. - Learn new skills and technologies more quickly. - Effectively leverage its core competencies while competing against its rivals.
Stakeholders
Stakeholders are the individuals, groups, and organizations that can affect the firm's vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm's performance.
Strategic Leaders
Strategic Leaders- Strategic leaders are people located in different areas and levels of the firm using the strategic management process to select strategic actions that help the firm achieve its vision and fulfill its mission.
Core Competences - Four Criteria of Sustainable Competitive Advantage:
The four criteria for determining if resources provide sustainable competitive advantage: - Value- help a firm neutralize threats or exploit opportunities - Rarity- are not possessed by many others - Costly-to-imitate- historical: a unique and a valuable organizational culture or brand name Ambiguous cause: the causes and uses of a competence are unclear Social complexity: interpersonal relationships, trust and friendship among managers, suppliers and customers - Non-substitutability- no strategic equivalent: firm- specific knowledge, organizational culture, superior execution of the chosen business model
Integrated cost leadership/ differentiation strategy
The integrated cost leadership/differentiation strategy involves engaging in primary value-chain activities and support functions that allow a firm to simultaneously pursue low cost and differentiation.
Issues with outsourcing
There are concerns associated with outsourcing. Two significant ones are the potential loss in a firm's ability to innovate and the loss of jobs within the focal firm. When evaluating the possibility of outsourcing, firms should anticipate possible effects on their ability to innovate in the future as well as the impact of losing some of their human capital. On the other hand, firms are sometimes able to enhance their own innovation capabilities by studying how the companies to which they've outsourced complete those activities. Because a focal firm likely knows less about a foreign company to which it chooses to outsource, concerns about potential negative outsourcing effects in these cases may be particularly acute, requiring careful study and analysis as a result.
Purpose of Business Level Strategy
To position itself, the firm must decide whether it intends to: - Perform Value Chain activities differently or - Perform different Value Chain activities as compared to its rivals.
Types of Resources
Types of Resources: - Tangible resources • Financial resources • Physical resources • Technological resources • Organizational resources -Intangible resources • Human resources • Innovation resources • Reputation resources
Which of the following capabilities meets the criteria for being a core competency, in that it is rare, valuable, costly to imitate, and nonsubstitutable? a. A company history and brand b. The human resources function c. The CEO d. A manufacturing facility
a. A company history and brand
Which of the following represents a risk for companies pursuing a cost leadership strategy? a. Competitors' innovations resulting in their ability to drive costs lower b. Buyers choosing to purchase lower-priced products during a recession c. Counterfeit versions of a company's products d. Pricing that is higher than customers' perceived value of a quality product
a. Competitors' innovations resulting in their ability to drive costs lower
Market segmentation is a part of all business-level strategies and is used to determine which customers to serve. This is most critical for which business-level strategies? a. Focused differentiation and focused cost leadership strategies b. Differentiation and focused differentiation strategies c. Broad segment and integrated cost leadership/differentiation strategies d. Cost leadership and focused cost leadership strategies
a. Focused differentiation and focused cost leadership strategies
Research indicates that a competitive advantage in logistics is a primary strategy that creates the most value for a cost leadership strategy. Which of the following value-creating activities should be a focus for a company pursuing a cost leadership strategy? a. Supply chain b. Customer service c. Human resources d. Marketing
a. Supply chain
Value is measured by: a. a product's performance characteristics and by its attributes for which customers are willing to pay. b. the inputs required to produce a product, including human, physical, and financial capital. c. the amount of investment required to achieve a competitive advantage. d. the price of a product set by the manufacturer to be sold in a retail environment.
a. a product's performance characteristics and by its attributes for which customers are willing to pay.
A business-level strategy is: a. an integrated and coordinated set of commitments and actions to gain an advantage by exploiting core competencies. b. the actions a firm takes by selecting and managing a group of different businesses competing in different product markets. c. a marketing and positioning program designed to explain a business to its customers. d. a set of actions and commitments through which a company sells its goods and services outside of its domestic market.
a. an integrated and coordinated set of commitments and actions to gain an advantage by exploiting core competencies.
Outsourcing is the: a. purchase of a value-creating activity or support function activity from an external supplier. b. decision to manufacture in a foreign country, at a facility owned by the company, because it offers lower wages. c. decision by a company to purchase a supplier's company, bringing its capabilities into the company. d. decision to pay less for a value-creating activity through a supplier.
a. purchase of a value-creating activity or support function activity from an external supplier.
A vision statement differs from a mission statement in that it: a. speaks in broad terms of what the company ultimately would like to achieve. b. is realistic, achievable, and measurable. c. should be completed after a company formulates its strategic plan. d. identifies which business and what customers the company intends to serve.
a. speaks in broad terms of what the company ultimately would like to achieve.
TaylorTech, a high-quality metals finishing company, is struggling with its margins. TaylorTech has raw materials delivered to its foundry in Pittsburgh, where the company melts the metals into castings. The firm then polishes them as a value-added process before selling the custom castings to customers. Its unique process is rare in the United States, is very secretive, and results in a more efficient cast that commands a premium price. Unfortunately, the casting process is becoming more expensive due to increased wage pressure from the workers specializing in casting. With these issues, TaylorTech has to make a decision. Which of the following is the most viable option for TaylorTech to increase its margins? a. Stop offering the polishing process b. Outsource the casting process c. Hire less-skilled workers d. Lay off team members across the company
b. Outsource the casting process
Which of the following represents a criticism of the industrial organization (I/O) model of above-average returns? a. The model puts too much emphasis on the effectiveness and personality of the firm's managers and not enough on the characteristics of the industry. b. The model assumes that most firms operating in an industry have similar valuable resources that are mobile across companies, which is not necessarily true. c. Research indicates that 20 percent of a firm's profitability is explained by the industry in which it chooses to compete. d. The model suggests that firms must adopt strategies to address the structural characteristics of the industry in which they operate.
b. The model assumes that most firms operating in an industry have similar valuable resources that are mobile across companies, which is not necessarily true.
A capability can be considered costly to imitate when: a. it requires an investment of half of the company's financial assets. b. it is developed because of unique historical conditions. c. there are costs associated with purchasing it, as in outsourcing. d. other companies possess the same capability.
b. it is developed because of unique historical conditions
A firm should study its internal organization as part of the strategic management process because: a. the firm is required to report its results to the government. b. it provides the insights the firm requires to match what the firm can do with what the firm might do when formulating strategies. c. without this study, strategic leaders do not have a working understanding of how their business operates. d. it is the only method for identifying threats and opportunities to the business.
b. it provides the insights the firm requires to match what the firm can do with what the firm might do when formulating strategies.
The industrial organization (I/O) model of above-average returns: a. is critical to competing in the global economy and the information age because of its emphasis on organizational development. b. puts emphasis on the external environment, which plays a role in determining a company's ability to achieve above-average returns. c. concentrates on the internal assets, resources, and capabilities of a firm to direct its strategic management process. d. is a new approach to strategic management that emphasizes technological advancement.
b. puts emphasis on the external environment, which plays a role in determining a company's ability to achieve above-average returns.
In a focus strategy, a company: a. focuses on a broad, integrated group of customers. b. selects a more narrow group, or niche, of customers on which to concentrate its efforts. c. produces goods or services with features that are acceptable to customers at the lowest cost. d. produces goods or services that customers perceive as being different in ways that are important to them.
b. selects a more narrow group, or niche, of customers on which to concentrate its efforts.
Differentiation strategies are successful in addressing the competitive force of the bargaining power of suppliers because: a. the company is operating at such high volumes that it can leverage its buying position to receive lower prices. b. the higher margins of the firm can reduce the influence of increases in supplier costs. c. they prevent new companies from entering into the industry through economies of scale. d. brand loyalty is a byproduct of this strategy, leading customers to choose the company's product over its rivals' products.
b. the higher margins of the firm can reduce the influence of increases in supplier costs.
An oil company develops an innovative refining process that reduces the time required to produce gasoline by 25 percent. The company has identified its unique process as a core competency. Which of the following strategies would be most beneficial for the company to pursue and would best be aligned with the firm's internal analysis? a. Differentiation strategy b. Focused differentiation strategy c. Cost leadership strategy d. Integrated cost leadership/differentiation strategy
c. Cost leadership strategy
An apparel company is considering a change in its business-level strategy. The company has been making premium T-shirts known for their catchy slogans aimed at millennial customers. It wants to expand operations to include multiple casual clothing lines that will appeal across generations. The board of directors wants to clearly understand the risks of moving forward with this change. Which of the following would be a risk for the firm's new strategy? a. Social trends away from casual clothing and toward more formal attire b. Lack of suppliers to provide enough raw goods to fulfill orders for a broader market c. Customers not placing enough value on the product to warrant premium prices d. Inability to pay workers enough to attract them to work for the company
c. Customers not placing enough value on the product to warrant premium
Which of the following could be a definition of strategic competitiveness? a. A solid company with predictable sales and profitability every year, delivering predictability for its shareholders b. A start-up company with an innovative new product that changes an industry c. The ability of a firm to outperform its rivals by forming and executing a strategy that creates value for its stakeholders d. The status of a company with the largest top-line sales number in an industry
c. The ability of a firm to outperform its rivals by forming and executing a strategy that creates value for its stakeholders
Which of the following might be a definition for a value-generating activity? a. A service the company provides to customers that they pay for b. A customer promotion or sale c. The core competencies that a company holds that make it possible for it to serve customers in a different way from its competitors d. A new machine that reduces energy costs within a company
c. The core competencies that a company holds that make it possible for it to serve customers in a different way from its competitors
Car manufacturers have a large lead time on new products. if an idea for a feature on a vehicle is developed, it will likely be two years before consumers know about it and can decide if they want to buy it. Consumer trends are sometimes short lived as they are always evolving. which external environmental analysis element is a primary focus of car manufacturers? a. monitoring b. assessing c. forecasting d. scanning
c. forecasting
As part of its selection of a business-level strategy, a firm will decide which customers it will serve and what goods or services it will use to satisfy customers' needs. It must determine: a. which functional teams and strategic leaders will be responsible for implementation of the business-level strategy. b. when it will implement its strategies to best optimize its exposure to customers and achieve a competitive advantage. c. how it will satisfy those customers' needs using its core competencies to implement value-creating strategies. d. where it will locate its resources and facilities to best serve its targeted customers and obtain the lowest costs of production
c. how it will satisfy those customers' needs using its core competencies to implement value-creating strategies.
An intangible resource is one that is: a. based on optimism and planning, a resource that a company is in the process of establishing. b. created to fill a void in a company so that it might more easily compete with its rivals. c. rooted deeply in the company history, is gathered over time, and is difficult for competitors to analyze or imitate. d. a service that a company provides to satisfy customers' needs.
c. rooted deeply in the company history, is gathered over time, and is difficult for competitors to analyze or imitate.
Hypercompetition describes a competitive landscape in which: a. there are thousands of companies competing within the same industry for the same group of customers. b. the industry has a high cost of entry in capital investment, research and development (R&D), or hiring of talented employees. c. the industry is constantly changing with global competition and innovative competitors. d. the business is dominated by a single company, pushing all competitors to imitate its strategies and develop similar resources.
c. the industry is constantly changing with global competition and innovative competitors.
The strategic management process is the: a. identification of the industry in which a company should compete due to the attractiveness of that industry's profitability. b. utilization of the resource-based model of above-average returns to identify the internal resources a company should leverage to achieve strategic competitiveness. c. way that businesses formulate initiatives to create superior value for customers, then implement those initiatives to out-perform term-31competitors. d. analysis of internal and external forces at work on a company that may prevent it from achieving average returns.
c. way that businesses formulate initiatives to create superior value for customers, then implement those initiatives to out-perform competitors.
Capabilities are the: a. human capital, through knowledge and experience, applied to producing products. b. advanced degrees that are held by members of the senior leadership team. c. physical attributes of the company, including its buildings, machinery, and other assets. d. combination of tangible and intangible resources to complete the organizational tasks required to produce, distribute, and service the goods or services for customers.
d. . combination of tangible and intangible resources to complete the organizational tasks required to produce, distribute, and service the goods or services for customers.
Which of the following strategies could be implemented to improve a company's richness in its customer relationships? a. A baby products sale announced through a mailed postcard to the company's entire database of customers b. A radio and billboard advertising campaign featuring a celebrity endorsing the company's product c. A customer loyalty program with multiple fine-print requirements d. Email updates on shipping status and satisfaction surveys following the arrival of a product
d. Email updates on shipping status and satisfaction surveys following the arrival of a production
In the resource-based model of above-average returns, a core competency is something that: a. prevents a company from producing above-average returns. b. positions strategic leaders for success in managing people, processes, and resources. c. a company is really good at internally and for which customers are willing to pay a premium. d. gives a company an edge over the competition, something that the company possesses that its competitors do not have, and something that is too difficult or costly for competitors to copy or produce an alternative.
d. gives a company an edge over the competition, something that the company possesses that its competitors do not have, and something that is too difficult or costly for competitors to copy or produce an alternative.
In the resource-based model of above-average returns, differences in company performance can be attributed to the: a. structural characteristics of the company's industry. b. strength and effectiveness of managers. c. effective implementation of pricing strategies. d. unique capabilities and resources of the company
d. unique capabilities and resources of the company
Richness:
depth and detail of two-way flow of information between the firm and the customer
Affiliation
facilitation of useful interactions with customers
Customer Reach
firm's access and connection to customers
What is Competitive Advantage?
is achieved when a firm's current and potential competitors either are not able to simultaneously formulate and implement its value-creating strategy, are unable to duplicate the benefits of the strategy, or find the strategy too costly to imitate.
Components of internal analysis
resources (tangible and intangible), capabilities, core competencies, discovering core competencies- four criteria of sustainable advantages (valuable, rare, costly to imitate, non-substitutable)- value chain analysis (outsource), competitive advantage, strategic competitiveness
Capital market stakeholders are most satisfied when a company's: a. employees have a low turnover rate and receive salaries that are higher than the labor market. b. returns align with the amount of risk they incurred by investing in a company or lending the company money. c. leadership team is earning performance-based compensation. d. product market stakeholders are dissatisfied.
returns align with the amount of risk they incurred by investing in a company or lending the company money
The Value-Creating Potential of Primary Activities: Primary activities
service marketing and sales outbound logistics operations inbound logistics
Which category of the general environment and its trends does this reflect? many collaborative robots resemble motorized fitted with shelves and touch screens. they use sensors to navigate past people and forklifts
technological
What is competitive scope?
• Broad Scope - The firm competes in many customer segments. • Narrow Scope - The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others.