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What's the second step of a case analysis?

Identify industry and competitors • Use other sources and classifications (SIC and NAICS) to guide thinking, but make your own assessment. • Consider the question "where would the firm's customers go if the firm did not exist?" when determining competitors. • It is sometimes useful to draw a picture to illustrate firms inside and outside of the industry. • Provide market shares if possible. Compute relative market shares if market share data is not readily available.

What are the 8 factors of intensity among incumbent firms?

1. concentration of competitors 2. high fixed or storage costs 3. slow industry growth 4. lack of differentiation or low switching costs 5. capacity augmented in large increments 6. diversity of competitors 7. high strategic stakes 8. high exit barriers

What are the 6 perspectives on managerial ethics?

1. The Utilitarian view: Anticipated outcomes and consequences should be the only considerations when evaluating an ethical dilemma. 2. The self-interest view: benefits of the decision-maker(s) should be the primary considerations. 3. The rights view: evaluate organizational decisions on the extent to which they protect basic individual rights. 4. The justice view: all decisions will be made in accordance with pre-established rules or guidelines. 5. The integrative social contracts view: decisions should be based on existing norms of behavior, including cultural, community, or industry factors. 6. The religious view: decisions should be based on personal or religious convictions.

What are four characteristics of strategic decisions?

1. Based on a systematic, comprehensive analysis of internal and external factors. 2. Long-term and future-oriented - usually several years to a decade or longer. 3. Seek to capitalize on favorable situations outside the organization. 4. Involve choices and trade-offs. • Strategic decisions are typically made by a top management team, although the CEO alone is usually held responsible.

what are the 6 explanations for unethical behavior?

1. Individuals deny responsibility, rationalizing that they have no other choice but to participate in unethical behavior. 2. Individuals deny injury, suggesting that the unethical behavior did not really hurt anyone. 3. Individuals deny rights of the victims, rationalizing that "they deserve what they got anyway." 4. Individuals engage in social weighting by making carefully controlled comparisons. 5. Individuals can appeal to higher values by suggesting that justification of the unethical behavior is due to a higher order value. 6. Individuals may invoke the metaphor of the ledger, arguing that they have the right to engage in certain unethical practices because of other good things they have done.

What are the five characteristics of successful strategy?

1. Understand the competitive environment. 2. Understand how resources translate into strengths and weaknesses. 3. The strategy is consistent with the mission and goals of the organization. 4. Plans for putting the strategy into action are designed before it is implemented. 5. Possible future changes (strategic control) are evaluated before the strategy is adopted.

What are the 7 factors of threat of entry?

1. economies of scale 2. brand identity and product differentiation 3. capital requirements 4. switching costs 5. access to distribution channels 6. cost disadvantages independent of size 7. government policy

What are the five strategic dimensions of the internet?

1. movement toward information symmetry 2. the internet as a distribution channel 3. speed 4. interactivity 5. potential for cost reductions and cost shifting

What is liquidation?

Liquidation is the strategy of last resort, and terminates the business unit by selling its assets. In effect, liquidation represents a divestment of all the firm's business units and should be adopted only under extreme conditions.

What is the third step of a case analysis?

Potential profitability of the industry • Apply porter's five forces model in detail • Analyze the industry, not the firm. Firm-specific issues will be considered later in the SWOT analysis. • Make a judgment (positive, negative, or neutral) about the effect of each force on the potential for profits. • Provide a summary of overall industry profitability.

What is the fourth step of a case analysis?

industry successes and failures • What firms in the industry have succeeded and failed in the past? The same company may have succeeded and failed at different times in the past. • Why did these firms succeed or fail? • Based on these examples, identify any critical success factors (CSFs) for the industry.

What are porter's five forces?

o Intensity of rivalry among firms o Threat of new competitors o Threat of substitute products/services o Bargaining power of buyers o Bargaining power of suppliers • Collectively, the five forces determine an industry's potential for profitability. However, forces do not guarantee that an individual firm will be profitable or unprofitable.

What is a business model?

• A business model explains how the organization seeks to earn a profit by selling its goods. • Progressive firms often devise innovative business models that extract revenue-and ultimately profits-from sources not identified by competitors.

What is horizontal diversification?

• A firm is engaging in horizontal related diversification when it acquires a business outside its present scope of operation, but with similar or related core competencies, the firm's key capabilities and collective learning skills that are fundamental to its strategy, performance, and long-term profitability.

What is horizontal integration?

• A firm that acquires other companies in the same line of business is engaging in horizontal integration • Doing so allows a firm operating in a single industry to grow rapidly without moving into other industries.

What is the agency problem?

• A situation in which a firm's managers - the "agents" of the owners - fail to act in the best interest of the shareholders. The extent to which this problem occurs is widely debated. • The problem is rooted in moral hazard, when the parties in an arrangement - such as owners and managers - do not share equally in the risks and benefits. • It is complicated by adverse selection, the inability of shareholders to identify the precise competencies and personal attributes of top managers when they are hired.

What is an industry?

• An industry is a group of companies that produce competing products or services. • Rivals often share critical success factors - elements of the strategy that promote (but do not guarantee) success within a given industry. • A primary industry consists of a firm's most direct competitors. A secondary industry also includes less direct rivals. • The old SIC system and its successor, the NAICS, can be used as a starting point. Outside sources can help define an industry, but top managers must make their own determination.

What are some limitations of porter's five forces?

• Assumes a clear, recognizable industry and does not consider partner firms. • Assumes that large firms cannot influence the industry structure. • Assumes industry factors, not firm resources, are primary profit drivers. • Difficult to apply to firms operating in multiple countries where industry environments vary considerably.

When do buyers have bargaining power?

• Buyers are concentrated or each one purchases a significant percentage of total industry sales. • The products that the buyers purchase represent a significant percentage of the buyers' costs. • The products are standard or undifferentiated. • Buyers face few switching costs • Buyers earn low profits, creating pressure for them to reduce their purchasing costs. • Buyers have the ability to become their own suppliers (backward integration) • The industry's product is relatively unimportant to the quality of the buyers' products or services. • Buyers have complete information

What are some criticism's of boards?

• CEO Duality - When the CEO also serves as the chairman of the board - represents a potential conflict of interest. • Some boards simply "rubber stamp" top management's proposals. • Evidence suggests that many boards are becoming more responsive and assertive in their responsibilities.

What are the 3 options for a corporate profile?

• Compete in a single industry: allows a firm to specialize, but "all eggs are in a single basket." • Compete in related industries: allows a firm to develop synergy among the business units. Synergy occurs when the combination of two organizations results in higher effectiveness and efficiency than would otherwise be generated separately. • Compete in unrelated industries: minimizes risk through diversification.

What is the sarbanes-oxley act?

• Covers public firms in the United States • Requires that both the CEO and the CFO certify every report that contains company financial statements. • Restricts membership of the firm's audit committee to outsiders • Prohibits firms from extending personal loans to board members or executives.

What are demographics?

• Demographic forces are outcomes of changes in the characteristics of a population, such as: o Age o Gender o Ethnic origin o Race • Currently, most industrialized countries are experiencing an aging of their populations • Changes such as this create segmented markets, which can be used to gain competitive advantages.

What are the goals of stakeholders?

• Different stakeholders have different ideas about organizational goals and most stakeholders attempt to influence goals to some degree.

What is a divestment?

• Divestment- selling one ore more of a firm's business units - may be necessary when the industry is in decline, or when a business unit drains resources from more profitable units, is not performing well, or is not synergistic with other corporate holdings.

What are global concerns?

• Firms operating in multiple countries must address multiple sets of social forces. • Social forces are influenced by national culture, the generally accepted values, traditions, and patterns of behavior in a society. Firms should recognize these cultural differences. • Some firms struggle because their managers consciously refer to their own cultural values as a standard of judgment, a phenomenon known as the self-reference criterion.

What are 3 options for corporate strategies?

• Growth (increase in size) • Stability (retain current size) • Retrenchment (decrease in size)

How has the internet altered strategy?

• Has the Internet created new business models or just altered the old ones? • Although the Internet plays a substantial role, critics challenge the notion that "new business models" are needed to compete in the "new economy." Michael Porter and others argue that the market forces that governed the traditional economy have not disappeared in the Internet economy.

What are some forms of influence on strategic management?

• Industrial organization (IO), a branch of microeconomics, emphasizes the influence of the industry environment on the firm. • Resource-based theory views performance primarily as a function of a firm's ability to utilize its resources and emphasize the development of a distinctive competence. • Contingency theory represents a middle ground perspective that views organizational performance as the joint outcome of environmental forces and the firm's strategic actions.

Whats the difference between intended and realized strategies?

• Intended Strategy- What management originally plans. • Realized Strategy- What management actually implements. • Intended and realized strategies typically differ because of unforeseen events, better information that was not available when the strategy was formulated, and/or an improvement in top management's ability to assess its environment.

What is intensity of rivalry among incumbent firms?

• Intense competition can result in price wars, advertising battles, new product introductions or modifications, and even increased customer service or warranties. • Eight factors that influence rivalry intensity are presented in the following slides.

What is the economical section in the PESTEL model?

• Interest rates, Inflation (the Fed), Monetary policy, Exchange rates, GDP, unemployment, Energy costs.

What are some growth strategies?

• Internal growth - expanding by internally increasing its size and sales. • External growth - acquiring other companies. • A merger occurs when two or more firms, usually of roughly similar sizes, combine into one through an exchange of stock. • An acquisition is a form of merger whereby one firm purchases another, often with a combination of cash and stock. • External growth can usually occur more quickly than internal growth, but integrating newly acquired entities into the current organization can be difficult. • The pursuit of external growth can enable a firm to modify its corporate profile. • Growth is not necessarily the best strategic alternative for every healthy organization.

What are the industry life cycle stages?

• Introduction: low demand, developing consumer awareness, emerging technology • Growth: maturing technology, demand increase, many repeat customers • Shakeout: industry growth cannot sustain all competitors • Maturity: demand is saturated, firms seek new uses/customers for product offerings. • Decline: demand stalls as customers seek new, safer, higher quality substitutes.

What's the difference between disaggregation and reaggregation?

• Large firms exist because they can perform most tasks-raw material procurement, production, human resource management, sales, and so forth-more efficiently than they would otherwise be performed if they were "outsourced" to the open market. • Today, many progressive firms have "disaggregated" by no longer perform all of their functional activities, but instead "reaggregate" by searching for partners who can perform some of the activities more efficiently.

What is the political-legal section in the PESTEL model?

• Legislation (laws) o Tax, intellectual property, trade (international), distribution, environmental, labor, safety, anti-trust, contract, consumer lending. • Elections • Political stability

What are managerial ethics?

• Managerial ethics refers individual responsibility to make business decisions that are legal, honest, moral, and fair. • Agreeing on what is "legal" and "honest" is usually not be difficult. • Agreeing on what is "moral" and "fair" has proven to be more of an issue.

What is market share?

• Market share represents the proportion of industry sales attributed to a particular rival. • When data is not readily available or a firm wishes to focus on only a subset of the industry, relative market share---the firm's percentage of sales in an "industry" restricted to select competitors---is a useful measure

What is the global imperative?

• Most firms are involved globally to some extent. • The basis for global involvement is comparative advantage, the idea that certain products may be produced more cheaply or at a higher quality in particular countries due to cost or technology advantages.

What is the threat of entry?

• New entrants threaten the hold existing firms have on an industry and thereby tend to lower profits. The likelihood that prospective competitors will join an industry depends on barriers to entry. • Firms often erect entry barriers to keep potential competitors out of the industry. • Seven factors that affect the threat of entry are presented in the following slides.

What is outsourcing and offshoring?

• Outsourcing - contracting out a firm's non-core, non-revenue-producing activities to other organizations primarily to reduce costs. • Offshoring - relocating some or all of a firm's manufacturing or other business processes to another country to reduce costs - is similar to outsourcing, but enables the firm to retain control of the operations abroad instead of relinquishing them to other firms. • Cost-cutting is the incentive for both outsourcing and offshoring

When does management serve its own interests?

• Perspective #1 on the agency problem o Executives seek to grow the firm because compensation tends to increase with firm size. o Executives diversify the firm to increase prospects for survival at the expense of profitability.

When do management and stockholders share the same interests?

• Perspective #2 on the agency problem o Since managers' livelihoods are directly tied to the success of the firm, they tend to manage it in the best interest of the shareholders. o Stock options can support this perspective by "turning the managers into owners."

What are the pro's and con's of takeovers?

• Pro: takeovers provide a needed system of checks and balances. • Pro: the threat of a takeover can pressure managers to operate their firms more efficiently. • Con: the need to pay back large loans can cause management to overemphasize the short term. • Con: extra debt required for an LBO can lead to bankruptcy.

What is the technological section of the PESTEL model?

• Scientific improvements and innovations • The internet is arguably the most pervasive technological force affecting most industries.

What is social responsibility?

• Social responsibility refers to the expectation that business firms should serve both society and the financial interests of the shareholders. • Ethics is about the individual; social responsibility is about the firm.

What is the social section in the PESTEL model?

• Societal values • Trends • Demographics • Traditions • Religious practices • Concern for the environment

What is a stability strategy?

• Stability - attempting to maintain the present size and scope of operations - may be more attractive than growth when: 1. Industry growth is slow or non-existent. 2. Costs associated with growth exceed its benefits 3. Growth may place great strains on quality and customer service. 4. Large, dominant firms may not want to risk prosecution for monopolistic practices.

What are an organizations mission, goals, and objectives?

• Stakeholders - individuals or groups who are affected by or can influence an organization's operations. • Mission - the reason for the fir's existence. • Goals - desired ends toward which efforts are directed • Objectives - specific, often quantified, versions of goals.

What is corporate Governance?

• Strategic decisions are typically made by owners in small privately-held firms. It's much more complicated in large corporations. • Corporate governance refers to the board of directors, institutional investors (pension and retirement funds, mutual funds, banks, insurance companies, among other money managers), and large shareholders known as blockholders who monitor firm strategies to ensure effective management.

What is pressure from substitute products?

• Substitute products come from outside of the industry, not from competitors. • How narrowly (or broadly) an industry is defined has an impact on what is considered a substitute. • Substitutes can influence prices if consumers truly see two or more entities as substitutes, i.e. long-distance travel.

What is a sustainable strategic management?

• Sustainable strategic management (ssm) is a broader notion of social responsibility and refers to the strategies and related processes that promote superior performance from both market and environmental perspectives. • The SSM perspective seeks to integrate the needs to earn profits and to serve society.

What is a takeover?

• Takeover: a purchase of a controlling quantity of shares of a firm by an individual, a group of investors, or another organization. • Leveraged buyout (LBO): takeovers that rely heavily on borrowed funds.

What is the BCG Growth-share matrix?

• The Boston Consulting Group (BCG) Matrix is corporate portfolio framework that examines the relationships among business units held by a single firm. There are four kinds of businesses with the matrix: 1. Stars - high growth potential and high market share 2. Question marks - high growth potential, but low market share 3. Cash cows - low growth potential, but high market share 4. Dogs - low growth potential and low market share

What is a corporate level strategy?

• The corporate-level strategy is the strategy top management formulates for the overall corporation. • Strategies are also formulated at the business (competitive) and functional levels. (These are discussed in the following two chapters.)

What is strategy as an art?

• The lack of environmental predictability and the fast pace of change render elaborate strategy planning as suspect at best • Strategic managers should emphasize creativity and innovation. • Strategies should be developed like a potter molds clay.

What is Strategic management?

• The mission is a broadly defined but enduring statement of purpose that identifies the scope of an organization's operations and its offerings to the various stakeholders. • Strategy refers to top management's plans to develop and sustain competitive advantage so that the organization's mission is fulfilled. • Competitive advantage is a state whereby a firm's successful strategies cannot be easily duplicated by its competitors. Maintaining a sustained competitive advantage over time can be challenging.

What is strategy as a science?

• The scientific approach is the most widely recognized view of strategy. • Strategic managers are encouraged to systematically assess the firm's external environment and evaluate the pros and cons of myriad alternatives before formulating strategy. • The scientific approach is more prominent in this course.

When do suppliers have bargaining power?

• The supplying industry is dominated by one or a few companies. • There are few or no substitute products • The buying industry is not a major customer of the suppliers • Suppliers are capable of becoming their own customers (forward integration) • Suppliers' products are differentiated or have built-in switching costs, reducing the ability of buyers to play one supplier against another.

What is step 1 of case analysis?

• This step provides background information and creates the context for the analysis. • When and how did the organization form? • Is the company public or private? • What is the firm's mission? • What is the firm's basic business model?

What is vertical integration?

• Vertical integration refers to merging various stages of activities in the distribution channel. • When a firm acquires its suppliers (expanding "upstream"), it is engaging in backward integration, whereas a firm acquiring its buyers (expanding "downstream") is engaging in forward integration. • Strategic alliances - often called partnerships - occur when two or more firms agree to share the costs, risks, and benefits associated with pursuing new business opportunities.

What is conglomerate diversification?

• When a corporation acquires a business in an unrelated industry to reduce cyclical fluctuations in cash flows or revenues, it is pursuing conglomerate (unrelated) diversification.

What is a retrenchment strategy?

• When performance is disappointing, however, a retrenchment strategy may be appropriate, in which a firm deliberately reduces its size. • A retrenchment strategy is often accompanied by a reorganization process known as corporate restructuring.

What are the pro's and con's of corporate social responsibility?

• Whether a firm has a social responsibility (and if so, to what degree) is widely debated. • ARGUMENTS FOR A CSR focus on the need for firms to "give back" to the community. • they highlight both the influence and resources available to firms in terms of advertising, product development, and community involvement. • The triple bottom line is the notion that firms must maintain and improve social and ecological performance in addition to economic performance. • ARGUMENTS AGAINST A CSR emphasize that firm should be active socially only when doing so enhances profits o Managers don't know what in the best interest of society and they shouldn't spend shareholder resources on such endeavors. o Firms don't need to "give back" because they already serve society by providing needed products, jobs, and tax revenues. • Either way, considering stakeholder perspectives - at least to some extent - is generally good business and can stave off government regulation.