BMGT 4930 Exam 2
Competitive rivalry is focused solely on the initial action and reactions of firms as they maneuver for an advantageous market share
True
Franchising
Used to compete in service industries - Not much risk
unrelated diversification
When a company enters an industry that lacks any important similarities with its existing industry
Related diversification
When a company moves into a new industry that has important similarities with the company's existing industry or industries - Sometimes will exploit a core competency to become more successful
Stuck in the middle
When costs are too high and features are not unique enough
Liability of forgiveness (international mkt)
You are at a competitive disadvantage compared to domestic companies
Two competitive dimensions are key to business-level strategy
- Competitive advantage - Scope of operations
Differentiation strategy
- Convinces customers to pay a premium price for its good & services by providing unique and desirable features - Advantages: ability to obtain prices, strong margins, buyer loyalty - Disadvantages: Customers may not be willing to pay extra, prefer a cheaper alternative, or find competitors imitating the preferred features
Global Strategy
- Cost Leadership - Centralized - Assumes markets are similar - Standardized products - Do best in related countries - Advantage: High Efficiency - Disadvantage: Low responsiveness (international strategy)
Types of business level strategies to choose from
- Cost leadership - Differentiation - Focused cost leadership - Focused differentiation
Buying companies that compete in a similar market, have a similar strategy, or produce a similar product is considered ____________ integration
Horizontal
Company strategy, structure, and rivalry (diamond model)
How challenging it is for companies to survive domestic competition
Mutual forbearance
Implicit agreement not to compete with one another
Multidomestic strategy
- Differentiation - Decentralized - Creates unique products - Best in unrelated countries - Advantage: Locally responsive - Disadvantage: Low efficiency (International strategy)
Value of Diversification
- Economies of scope - Market Power - Financial Economies
Cost leadership
- Offers products or services with acceptable quality and features to a broad set of customers at a low price - Ties into economies of scale - Advantages: withstanding competitive advantage, discouraging new entrants, attract a large market share - Disadvantages: Need to maintain a high sales volume, minimizes time for advertising/marketing/R&D
Drivers of international business
- Opening up to larger economies like China to - Increase opportunities - Gain cost advantages - Diversify business risk
Two types of competitor actions
- Strategic (long term & larger) - Tactical (short term & smaller)
Economies of scale
- The bigger I am, the better I can do this - Many cost leaders rely on this
Economies of scope
-Controlling the value chain by making more than you buy
Options for Competing in International Markets
-Exporting -Wholly Owned Subsidiary -Franchising -Licensing -Joint Venture -Strategic Alliance
Joint venture
2 or more firms create a NEW Entity
Diversification strategy
Companies using these are those that enter entirely new industries
Portfolio planning
A process that helps executives make decisions involving their firms' various industries - BCG Matrix: Cash cows, stars, question marks, dogs
The Diamond Model
Based on these conditions, you will be more or less successful internationally: - Demand conditions - Factor conditions - Related & supporting industries - Company strategy, structure, & rivalry
Coopetition
Compete & cooperate on projects
Multipoint competition
Competitors are overlapping in multiple areas
Offshoring
Attempt to reduce costs even though it's becoming popular to reshore jobs
Competitor actions
Awareness Motivation Capability - Higher these are, the better you can compete
Scope of operations consists of
Broad targeting Narrow targeting
Micro brewery strategy level
Business level
Tha goal of vertical integration is to minimize the power of_______
Buyers and suppliers
Nationalization
Challenge of entering international mkt - Company's assets in a country are seized be the national government due to political upheaval
Best-cost strategy
Charge relatively low prices and offer substantial differentiation
Early in Toyota's US market penetration, they chose to engage in a strategic alliance with GM focused on automotive technology development. This supply chain collaboration between end market rivals is indicative of what type of competitive dynamics interaction between firms?
Coopetition
What should drive the decision to employ a low-cost or differentiation strategy?
Core competencies
The central purpose of a _________________ strategy is to create more value as a whole unit than the organizations would be worth separate or under other ownership.
Corporate level strategy
Big brewery strategy level
Corporate strategy bc they focus on brand management
Competitive advantage consists of
Cost Uniqueness
Big brewery strategy perspective
Cost leadership
Wholly-owned subsidiary
Creating everything from the ground up the way you want it to be - Advantage: No need to change anything - Large scale investment
What concept within the diamond model refers to the size and nature of a firm's domestic customer base?
Demand conditions
Micro brewery strategy perspective
Differentiated
An organization with a particular focus on innovation and a large R&D budget is likely to employ what strategy?
Differentiation
Growing into new business areas with the purpose of creating value using excess resources is __________________.
Diversification
Motivations of an acquisition
Expansion (mkt power) Entry Barriers (easier to enter) New competencies Increase diversification
Inorganic growth
Expansion by mergers, acquisitions, or takeovers
What is the easiest mode for organizations to go international?
Exporting
Frontier Airlines focuses on ultra low-cost fares by servicing a smaller market segment than their broad market competitors. This is an example of what business level strategy?
Focused cost leader
Generic Strategy
General way of positioning a company within an industry
Market power
Increasing market share to gain more autonomy and buyer/supplier power
Acquisitions are considered to bewhat type of growth?
Inorganic
What is it called when a firm grants another company the right to create/manufacture a company's product in exchange for a fee?
Licensing
Colocation
Location together ex/ motor mile
What is a potential risk associated with cooperative relationships among firms?
Loss of operational control Loss of intellectual property being taken advantage of by partner
Dogs
Low shares, low-growth
Transnational Strategy
Mix of global and multidomestic Ex/ Coca-cola selling different flavors in different countries - Challenge: Hard to be both at once
Signs of a competitor
Mkt Commonality Resource similarity
In terms of corporate level strategy, how diverse should a corporation's portfolio of strategic business units be (in general)?
Moderately diverse
Vertical Integration
More about value chain, requires changing more, and gives you more control - A company gets involved in new portions of the value chain Ex/ Backward & Forward vertical integration
Licensing
Most frequently used in manufacturing industries - The right to create a company's product - Biggest risk is losing Intellectual Property
International Strategies (strategic business units)
Multidomestic Global strategy Transnational strategy
Early in Toyota's US market penetration, they chose to engage in a strategic alliance with GM focused on automotive technology development. This supply chain collaboration between end market rivals is indicative of what type of competitive dynamics interaction between firms?
Mutual Forbearance
Rivalry
Outcome of competitive actions
Strategic Alliance
Partners with NO NEW entity
Honda's ability to sell engines for automobiles, personal watercraft, motorcycles, and other applications is an example of:
Related diversification
Focused cost leadership
Requires competing based on price to target a narrow market Ex/ Spirit airlines
Strengths & weaknesses of microbreweries
Strength: Innovative, quality, increased demand Weaknesses: Weaker relationships, scaling issues (can't meet demand)
Strengths & Weaknesses of Big breweries
Strengths: Capital, Marketing, lobbying, relationships, control over planogram Weaknesses: Low innovation, low demand
Exporting in international markets
The easiest way to enter the international market - Involves creating goods within a company's home country & shipping them to another - Risk is MINIMAL - Success is limited
Factor Conditions of Porter's Diamond
The inputs present in a country shape firms' competitiveness ex/ raw materials
Demand conditions of diamond model
The nature of domestic customers, especially whether they have high expectations of the goods/services
Horizontal integration
companies trying to expand their presence in an industry by acquiring or merging with one of their rivals - Acquisition - Merger Advantages are: lowering costs and gaining access to new distribution channels ---- Market power and lower costs
product development
creating new products to serve existing markets
Stars
high growth, high market share
question mark
high growth, low market share
Market development
involves taking existing products and trying to sell them within new markets
A strategy is that is more focused on efficiency than unique value
low cost, low leader
Cash cows
low-growth, high-share businesses or products
Challenges of entering international markets
political risk, economic risk, cultural risk
Concentration strategies
strategies that involve trying to successfully compete only within a single industry
Focused differentiation
strategy requires offering unique features that fulfill the demands of a narrow market
Related & supporting industries (diamond model)
the extent to which companies' domestic suppliers & other complementary industries are developed and helpful
Market penetration
trying to gain additional share of a company's existing markets using existing products