Capstone Exam Chapter 1 - 5

components of a good strategy are

- a diagnosis of the competitive challenge - a guiding policy to address the competitive challenge - a set of coherent actions to implement the firm's guiding policy

5 ways to measure/assess competitive advantage

- accounting profitability - shareholder value creation - economic value creation - the balanced scorecard - the triple bottom time

to help a firm achieve a competitive advantage, each distinct activity performed needs to either:

- add incremental value to the product or service offering - lower it's relative cost

strategy formulation and implementation can be broken down into three distinct areas

- corporate - business - functional

PESTEL framework groups the factors in the firms general environment into six segments

- political - economic - sociocutural - technological - ecological - legal

popular business models include:

- razor-razor-blades - subscriptions - pay-as-you-go - freemium - wholesale - agency - bundling

what strategy is not

1. grandiose statements - example "we will be No. #1" 2. a failure to face a competitive challenge - example: blockbuster didn't address NetFlix, Redbox, amazon prime, and Hulu (number two applies to firms that are acting like an ostrich with their head in the ground hoping the problem will go away) 3. operational effectiveness, competitive benchmarking, or tactical tools - examples:"pricing strategy,""operations strategy,""brand strategy" (number three also refers to best practices like (optimizing inventory)that are not sources of advantage

AFI (analysis, formulation, implementation)

A - where are we now? (analysis) F - where do we want to go? (formulation/vision) I - how will we get there? (strategy implementation)

discrete and specific firm activities

_____ and _____ are the basic units with which to understand competitive advantage because they are the drivers of the firms relative costs and level of differentiation the firm can provide to its customers

economic value creation

a careful analysis of the value chain allows managers to obtain a more detailed and fine-grained understanding of how the firms breaks down into a distinct set of activities that help determine perceived value and the costs to create it

competitive advantage

a firm that achieved superior performance relative to other competitors in the same industry or the industry average

sustainable competitive advantage

a firm that is able to outperform its competitors or the industry average over a prolonged period. Sustainable advantage is the even better target Exp. Apple (smartphone industry) - Sustainable competitive advantage over Samsung - Has lasted over a decade

competitive disadvantage

a firm underperforms its rivals or the industry average

SWOT analysis

a framework that allows managers to synthesize insights obtained from an internal analysis of the company's strengths and weaknesses with those from an analysis of external opportunities and threats to derive strategic implications

AFI strategy framework

a model that links three interdependent strategic management tasks - analyze, formulate, and implement - that together, help managers plan and implement a strategy that can improve performance and result in competitive advantage

complement

a product, service, or competency that adds value to the original product offering when the two are used in tandem

weakness

a resource is a __________ if it is not valuable

resource

a strength and a core competency if it is valuable, rare, and costly imitate, and the firm is organized to capture at least part of the economic value created

strategic positioning

a unique position within an industry that allows the firm to provide value to customers while controlling costs. The managers' theory usually includes ideas about strategic positioning How is Dick's Sporting Goods positioned as compared to Academy Sports? How is Lexus positioned as compared to Mercedes-Benz?

primary activities

add value directly as the firm transforms inputs into outputs - from raw materials through production phases to sales and marketin and finally customer service, specifically - supply chain management - operations - distribution - marketing and sales - after-sales service

supporting activities

add value indirectly. These activities include: - research and development - information systems - human resources - accounting and finance - firm infrastructure including processes, policies, and procedures

customer-oriented vision statements

allow companies to adapt to changing environments - focus employees on problem solving for the customer

Porter's five forces model

allows strategic leaders to analyze all players using a wider industry lens, which in return enables a deeper understanding of an industry's profit potential

porter's five forces model

allows strategic leaders to analyze all players using a wider industry lens, which in return enables a deeper understanding of an industry's profit potential

SWOT analysis

allows the strategist to evaluate a firms current situation and future prospects by simultaneously considering interns and external factors

PESTEL framework

allows us to scan, monitor, and evaluate changes and trends in the firms macroenvironment

willingness to pay

amount of total perceived consumer benefits equals the maximum ____________

strategic management

an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage

What is a good strategy?

analysis of the firm's internal and external environments - analysis of the firm's internal and external environments a guiding policy to address the competitive challenge - effective guiding policy - backed by strategic commitments (investments; changes) a set of coherent actions to implement the firm's guiding policy - implementation

external opportunities and threats

are in the firms general environment and can be captured by PESTEL and Porter's five forced analysis

firms activities

are one of the key interns drivers of performance differences across firms

strategic decision

as long-term commitments that are not easily reversible

dynamically

business models evolve

vision

captures an organizations aspirations and spells out what is ultimately wants to accomplish

strategic group model

clusters different firms into groups based on a few key strategic dimensions

the key to successful strategy is to

combine a set of activities to stake out a unique strategic position with an industry

internal strength and weaknesses

concern resources, capabilities, and competencies

strategy formulation

concerns the choice of strategy in terms of where and how to compete

strategy implementation

concerns the organization, coordination, and integration of how work gets done

functional strategy

concerns the question of how to implement a chosen business strategy. Different corporate and business strategies will require different activities across various functions

corporate strategy

concerns the questions relating to where to compete as to industry, markets, and geography

business strategy

concerns the questions relating to where to compete. Three generic business strategies are available:cost leadership, differentiation, or value innovation

business strategy

concerns the questions, relating to where to complete. Three generic business strategies are available: cost leadership, differentiation, or value innovation

strategy formulation and implementation cab be broken down into three distinct areas

corporate business functional

external stakeholders

customers, suppliers, alliance partners, creditors, unions, communities, media, and governments at various levels

value chain

describes the internal activities a firm engages in when transforming inputs into outputs

mission

description of what an organization actually does - the products and services it plans to provide, and the markets in which it will complete

business model

details how the firm conducts its business with its buyers, suppliers, and partners

activities

distinct actions that enable firms to add incremental value at each step by transforming inputs into goods and services

value creation - costs =

economic contribution - the greater, the better - enhances the likelihood of a competitive advantage tradeoffs necessary - how to allocate resources - which activities to pursue

SWOT analysis

encourages managers to scan the interns and external environments, looking for any relevant factors that might affect the firms current or future competitive advantage

Porter's Five Forces Model

has 5 keys competitive forces that all managers need to consider when analyzing the industry environment and formulating competitive strategy - threat of entry - power of suppliers - power of buyers - threat of substitutes - rivalry among existing competitors

strategic leaders

have a strong influence on setting an organizations, vision, mission, and values

Porter's five forces model

helps us to determine an industry's profit potential

porter's five forces model

helps us to determine an industry's profit potential

razor-razor-blade

initial product is often sold at a loss or given away for free in order to drive demand for complementary goods

strategy

is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors. It is also deciding what to do and what not to do. Think of it as managers' theories about how to gain and sustain competitive advantage. what will win? Why so?

strategy

is about creating superior value, while containing the cost to create it, or by offering similar value at lower costs

Strategy

is sometimes referred to as a "science of success and failure". The primary objective is to improve performance

strategy

is the art and science of success and failure

strategic group model

is used to explain the differences in firm performance within the same industry

mission

it defines how the vision is accomplished and is often introduced with the preposition "by"

coherent actions

may be thought of as tactics or maneuvers that are a reflection of policy (a formulated strategy)

strategic management process

method put in place by strategic leaders to formulate and implement a strategy, which can lay the foundation for a sustainable competitive advantage

to achieve superior performance, companies compete for resources:

new ventures: financial and human capital existing companies: profitable growth charities: donations universities: the best students and professors sports teams: championships celebrities: media attention

product-oriented vision statements

often constrain this ability - focus employees on improving existing products and services

stakeholder

organizations, groups, and individuals can affect or are affected by a firm's actions have an interest in the performance and survival of the firm

competitive advantage

providing goods or services consumers value more highly than those of its competitors or providing goods or services similar to the competitors' at a lower price

successful strategy

requires combining activities competitive advantage has to come from: - performing different activities or - performing the same activities differently than rivals Exp. Walmart - strategic activities strengthen its position as cost leader - big stores, low overhead, low wages

business model

stipulates how the firm conduct its business with its buyers, suppliers, and partners in order to make money

internal stakeholders

stockholders, employees (including executives, managers, and workers), and board members

strategic leadership

strategic leaders have the power and influence to direct others. The behaviors/styles of executives influence others to achieve the vision, carry out the mission. We will see executives' backgrounds, experiences, personality, and perceptions influence their decisions

strategic management process

strategic planning - a formal, top-down planning approach scenario planning - a formal, top-down planning approach strategy as planned emergence - begins with a strategic plan, but is less formal

the strategy process consists of two parts

strategy formulation strategy implementation

scenario planning

strategy planning activity in which top management envisions different what-if scenarios to anticipate plausible future in order to derive strategic-responses

strategic leadership

successful use of power and influence directing the activities of others pursuing an organization's goals enabling organizational competitive advantage

vision

succinctly identifies the primary long-term objective of the organization. Pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target, while leaving room for individual and team contributions

competitive advantage

superior performance relative to other competitors in the same industry or the industry average

freemium

the basic features of a product or service are provided free of charge, but the user must pay for premium services such as advanced features or add-ons

gain competitive advantage

the greater difference between value creation and cost, the greater the firms economic contribution and the more likely it will

profitability and market share

the rewards of superior value creation and capture measures of competitive advantage

strategic group

the set of companies that pursue a similar strategy within a specific industry

power

the strategic leaders ability to influence the behavior of other organizational members to do things, including things they would not do otherwise

business model

the translation of strategy into action takes place in the firms______, which details the firms competitive tactics and initiatives

strategic commitments

to be effective, firms need to back their vision and missions with

competitive parity

two or more firms that perform at the same level. Not all get to competitive advantage Ford and Chevrolet may be thought of as examples of companies in a state of competitive parity (despite what their fans might think!)

subscription-based

user pays for access to a product or service during the payment term

pay as you go

user pays for only the services her or she consumes

first step in gaining and sustaining a competitive advantage

vision mission values

values

what commitments do we make, and what guardrails do we put in place, to act both legally and ethically as we pursue our vision and mission?

mission statement

what organization does; products/services it provides; markets it competes