Strategic Mgmt Ch 3

When mapping strategic groups, focus on 3 factors:

- identify most important strategic dimensions (e.g. R&D expenditures) - choosing two key dimensions for horizontal and vertical axes to expose differences b/w competitors - graph the firms, indicating each firm's market share by size of bubble

most important strategic dimensions in identifying strategic groups

- product and service offerings - pricing - expenditures on R&D

examples of economies of scale

- spreading fixed costs over more units - benefit from a more specialized division of labor - more negotiating power vis-a-vis suppliers

Porter's Five Forces

Threat of new entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers, rivalry among existing competitors

strategic position

ability to create value for customers while containing cost

advantages incumbent firms possess independent of size:

brand loyalty, proprietary technology, preferential access to raw materials and/or distribution channels, favorable geographic locations, cumulative learning and experience effects

production costs are increased when

buyers demand higher quality and more service

ogliopolistic industry

consolidated w/ a few (large) firms, differentiated products, high barriers to entry, some degree of pricing power

co-opetition

cooperation by competitors to achieve a strategic obj, like Google and Samsung to combat Apple

when a company is a complementor to your company

customers value your product more when they can use it with the other company's product

deflation is a threat to economic growth b/c:

distorts expectations about the future and companies will stop investing in new production b/c they anticipate further price declines

exit barriers are composed of 2 factors

economic and social

sources of barriers of entry

economies of scale, network effects, customer switching costs, capital requirements, adv. independent of size, gov't policy, credible threat of retaliation

the Eurozone was originally created to

ensure continued peace and prosperity in Europe

although _____ coordination such as price fixing is illegal in the US, _____ coordination such as "an unspoken understanding" is not

explicit, tacit

perfect competition industry

fragmented w/ many small firms, a commodity product, ease of entry, little or no ability for each firm to raise prices

managers have less direct influence over external forces in the firm's _________ than those in the firm's _________

general environment, task environment

Why Five forces model was developed

help managers understand profit potential of different industries and how to position firms to gain comp. adv.

low/high exit barriers lead to intense rivalry?

high

hub-and-spoke model

high fixed costs, increased rivalry

stronger the 5 forces the (higher/lower) the industry's profit potential

lower

monopolistically competitive industry

many firms, differentiated product, some obstacles to entry, ability to raise prices for a unique product while retaining customers

economic growth rate

measure of the change in the amt of goods and services produced by nation's economy

switchiing costs

moving from one supplier to another

monopoly

one seller that offers unique product and high barriers to entry

4 main competitive structures

perfect competition, monopolistic competition, oligopoly, monopoly

PESTEL

political, economic, sociocultural, technological, ecological, legal

network effects

positive effect that one user of a product or service has on the value of that product or service for other users (e.g. Ebay)

tactics indicative of an industry w/ slow or negative growth

price discounts, frequent new product releases w/ minor modifications, intense promotional campaigns

mobility barriers

restrict movement b/w groups. In airline industry, offering international routes to restrict movement b/w hub-and-spoke and point-to-point airlines

shortcomings of strategic group model

static, doesn't show why there are performance differences among firms in the same strategic group

industry convergence

the process by which formerly unrelated industries begin to satisfy the same customer need

backward integration

when a buyer moves upstream in the industry value chain into the seller's business