strategy

ways stakeholder management benefits firm performance

cooperative stakeholders reveal info, trust lowers transaction costs, leads to flexibility, more predictable returns, stronger reputation

external stakeholders

customers suppliers, alliance partners, creditors, unions, media and the government

Steps to a good strategy

diagnosis of the competitive challenge (analysis) Guiding policy (formulation) Coherent actions (implementation)

What is strategy

goal-directed actions to gain and sustain superior performance relative to (competitors and past performance over time)

threat of substitutes

goods/services that provide same purpose, usually from outside focal industry, awareness and availability, price and performance

what a strategy is not

grandiose statements, a failure to face a competitive challenge, operational effectivness

managers must make conscious trade-offs

how to allocate resources, which activities to pursue

intangible resources

human, innovation, reputational, intellectual property

network effects

increases in the value of a product to each user, including existing users, as the total number of users rises

stakeholder strategy

integrative method of managing diverse set of stakeholders to gain and sustain competitive advantage

entrepreneurship

introduces creativity and innovation into the strategic management process -> creative value-added problem solving under conditions of extreme uncertainty and resource constraints

mod 4

womp

resource immobility

a firm has resources that tend to be sticky and do not move easily from firm to firm

dynamic capabilities

a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage its resources in its quest for competitive advantage

Two critical assumptions of RBV

- resource heterogeneity - resource immobility

conduct

strategy or behaviors given the structure

swot internal analysis

strengths, weaknesses

Results of the Five Forces Analysis

- Helps identify attractive and unattractive industries - highlights specific threats and opportunities - Basis for strategic decision making and innovation

firm effects

- attribute firm performance to strategic leaders' actions - more important than industry effect

two key insights about 5 forces model

- competition is viewed more broadly in the 5 forces model - profit potential is a function of the 5 competitive forces

2 generic business-level strategies to achieve superior create value creation resulting in SCA

- differentiation or cost leadership

the 5 forces model helps strategic leaders understnd

- the profit potential of different industries - how they can position their firms to gain and sustain competitive advantage

industry effects

-describe the economic structure of the industry - elements in common to all - entry and exit barriers, number and size of companies, and types of products and services offered

2 missing elements of pestel

-international (hospitable market conditions, learn from new markets) -competitive (innovations from rivals in and out of industry, market dynamics)

resource heterogeneity

A firm is bundle of resources and capabilities that differ across firms

a unique strategic position

A successful combination of strategic activities

If French Provincial Decor LLC obtains an 18 percent return on invested capital, which of the following will help determine if it has a competitive advantage over other furniture companies?

Comparing the return to the return on invested capital obtained by other firms in the industry will help determine if French Provincial Decor LLC has a competitive advantage. Competitive advantage is always relative, not absolute.

Tony's Pizza Shop is able to net $10,000 a week; this makes the shop profitable. Its number one competitor, Leo's Pies, is also profitable, netting $12,000 a week. Lil Anthony's Pizza Palace nets $13,000 a week. Since Tony's Pizza Shop is profitable, we can conclude that it has a competitive advantage in its industry.

False—competitive advantage is only achieved by generating above average returns, relative to competition.

The average cost of production for a bottle of mineral water in the industry is $5 while its average price is $8. Forever Spring Inc. manufactures the same product for $3 per bottle and sells it for $8 per bottle. Which of the following statements is most likely true of ForeverSpring Inc. in this scenario?

ForeverSpring Inc. most likely has a competitive advantage in the industry. A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage.

Sugar & Sweet Sodas has seen its market share erode in recent years, as consumers increasingly turn toward healthier beverage choices such as unsweetened sparkling water. Hoping to rekindle interest in sugary sodas, Sugar & Sweet decides to produce a limited run of "throwback" cans using labeling first introduced in the 1980s. What is wrong with this strategy?

It fails to face the competitive challenge.

PESTEL

Political Economic Social Technological Environmental Legal

Goal of competitive advantage

Sustain advantage over a prolonged period of time

Giorgia's and Florentine's are two restaurants serving Italian cuisine. While Giorgia's focuses on providing quick, affordable pasta dishes for the lunch crowd, Florentine's focuses on serving home-style dishes in an upscale, romantic setting. Why have both companies been able to gain a competitive advantage?

They each pursued distinct strategic positions.

VRIO

Valuable Rare Inimitable Organized to exploit

Threat of new entrants

barriers to entry: economies of scale, capital requirements, network effects, gov policy

isolating mechanisms

barriers to imitation that prevent rivals from competing away the advantage a firm may enjoy

Structure

monopoly, oligopoly, perfect competition

intensity of rivalry

number and size of competitors, standardization of products, costs to buyers of switching to another product, growth in demand for products, levels of unused production capacity, high fixed costs and highly perishable products, difficulty of leaving the industry

supplier power

number or concentration and size of suppliers, credible threat of forward integration, differentiated materials, quality of relationships

SWOT External Analysis

opportunities and threats

competitive advantage has to come from

performing different activities, performing the same activities differently than rivals

tangible resources

physical, financial, organizational

performance

predictable outcomes

cost leadership

provide goods or services similar to those of competitors but at a lower price

differentiation

provide goods or services that consumer value more than its competitors offerings at a similar price

RBV (Resource Based View)

provides a method to study how a firm's internal resources and capabilities are a source of competitive advantage

strategic groups insights

rivalry is strongest within the group - strategic groups are affected differently by macro forces - some strategic groups are more profitable than others

internal stake holders

stockholders, employees, and board members

SCP industrial organization model

structure - conduct - performance

competitive advantage

superior performance relative to other firms in the same industry (industry average)

5 forces model of competition

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

core competencies

unique strengths embedded deep within a firm that allows it to differentiate its products and services from its rivals (creates higher value for customers or lower cost to consumers)