integrated business policy exam 2

what are the five segments of crossing the chasm framework

technology enthusiasts early adopters early majority late majority laggards

value chain primary activities

Firm activities that add value directly by trans-forming inputs into out-puts as the firm moves a product or service horizontally along the internal value chain.

value chain support activities

Firm activities that add value indirectly, but are necessary to sustain primary activities.

What happens to firms during shakeout stage

Firms begin to intensely compete. • Weaker firms forced out. • Industry consolidation. • Only the strongest competitors survive.

total return to share olders is an _________ and ________ ________ performance metric

external and forward looking

in differentiation power of suppliers risks

Erosion of margins

Question 1 of balance score card

How do customers view us?

Question 4 of balance score card

How do shareholders view us?

in differentiation power of buyers benefits

Protection against decrease in sales prices, because well-differentiated products or services are not perfect imitations

in differentiation threat of entry risks

Erosion of margins • Replacement

Innovation can _______ and _________ value

create, destroy

early majority group leads way to

increased demand.

during the decline stage industries have 4 options and they are

Exit, Harvest, maintain, consolidate

ROA

return on assets

Early majority and late majority make up

the largest customer segment

Question 2 of balance score card

How do we create value ?

Four steps of the innovation process

Idea, Invention, Innovation, Imitation

Working Capital Turnover

which is a measure of how effectively capital is being used to generate revenue.

How to calculate market cap

(Market cap = Number of outstanding shares × Share price).

Blue oceans represent

-untapped market space -creation of additional demand -opportunities for highly profitable growth

jet blue stuck in middle example

. JetBlue attempts to achieve parity or even out-compete differentiators in the U.S. airline industry along the competitive factors such as different seating classes (e.g., the high-end Mint offer-ing discussed in the ChapterCase), higher level of in-flight amenities, higher-quality bever-ages and meals, plush airport lounges, and a large number of international routes (mainly with global partner airlines). JetBlue, however, looks more like a low-cost leader in terms of the ability to provide only a few connections via hubs domestically, and it recently has had a poor record of customer service, mainly because of some high-profile missteps as docu-mented in the ChapterCase. JetBlue's reliability is somewhat mediocre, but it does provide a larger number of convenient point-to-point flights than a differentiator such as Delta, but fewer than a low-cost leader such as SWA.

In a 90 percent learning curve, per-unit cost drops

10 percent every time output is doubled

innovation ecosystem

A firm's embeddedness in a complex network of suppliers, buyers, and complementors, which requires interdependent strategic decision making.

sustainable strategy

A strategy along the economic, social, and ecological dimensions that can be pursued over time without detrimental effects on people or the planet.

tangible assess are primary to focus of accounting data what is important to a competitive advantage

intangibles

The business model is how you

intend to make money

a good example of industry in maturity stage is

Airlines The large number of bankruptcies as well as the wave of mega-mergers, such as those of Delta and Northwest, United and Continental, and American Airlines and US Airways, are a consequence of low or zero growth in a mature market characterized by significant excess capacity.

consolidate (decline stage)

Although market size shrinks in deline industry some firms may choose to buy rivals allowing firm to stake out strong position

radical innovation

An innovation that draws on novel methods or materials, is derived either from an entirely different knowledge base or from a recombination of the existing knowledge bases with a new stream of knowledge.

Which of the following statements correctly compares Apple and Microsoft in 2016? A) Apple had a higher return on revenue than Microsoft. B) Apple had a higher return on invested capital than Microsoft. C) Microsoft had higher total sales than Apple. D) Microsoft had a lower cost structure than Apple.

Apple had a higher return on invested capital than Microsoft.

part 1 A firms strategic leader must be able to accomplish this task

Assess the performance of their firm accurately

second characteristic to be a disruptive organization

Initially, its performance is inferior to the existing technology, but its rate of technologi-cal improvement over time is faster than the rate of performance increases required by different market segments. In Exhibit 7.12, the solid upward curved line captures the new technology's trajectory, or rate of improvement over time.

first characteristic to be a disruptive organization

It begins as a low-cost solution to an existing problem.

Blue Ocean Strategy

Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.

Wholesale:

Buying or selling something in large quantities at lower prices products sold at discount

example of learning curve

By moving further down a given learning curve than competitors, a firm can gain a com-petitive advantage. Exhibit 6.7 shows that Firm B is further down the 90 percent learning curve than Firm A. Firm B leverages economies of learning due to larger cumulative output to gain an advantage over Firm A.

5 Stages of Industry Life Cycle

introduction, growth, shakeout, maturity, decline

what does incremental innovation target

It targets existing markets using existing technology.

part 2 A firms strategic leader must be able to accomplish this task

Compare and benchmark their firm's performance to other competitors in the same industry or against the industry average

complements

Complements add value to a product or service when they are consumed in tandem. Finding complements, therefore, is an important task for strategic leaders in their quest to enhance the value of their offerings. example is smartphone and celluar devices needing phone plan like AT&T

crossing-the-chasm framework

Conceptual model that shows how each stage of the industry life cycle is dominated by a different customer group.

step 1 to respond to disruptive organization

Continue to innovate in order to stay ahead of the competition. example- Amazon is an example of a company that has continuously morphed through innova-tion,81 from a simple online book retailer to the largest ecommerce company, and now to include stores on the ground in the grocery sector. It also offers a personalized digital assistant (Alexa), consumer electronics (Kindle tablets),

Indroduction Stage

Core competency: research and development. • Necessary to create a product category that will attract customers. • Can be very capital-intensive (high costs). Barriers to entry are high. Strategic objective: market acceptance & future growth.

early majority book definition

Customers coming into the market in the shakeout stage of the industry life cycle. Pragmatists that are mainly concerned with whether adopting a new technological in-novation serves a prac tical purpose or not.

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pay for access

imitation

If an innovation is successful in the marketplace, competitors will attempt to imitate it. Success attracts attention and with it competition

Razor-razorblades:

pay for replacements

economies of scale

Decreases in cost per unit as output increases.

Growth Stage

Demand increases rapidly. • First-time buyers rush to purchase. • Proof of concept has been demonstrated.

economic value created

Difference between value (V) and cost (C), or (V - C).

Step 3 to respond to disruptive organization

Disrupt yourself, rather than wait for others to disrupt you. example A firm may develop products specifically for emerging markets such as China and India, and then introduce these innovations into developed markets such as the United States, Japan, or the European Union. This process is called reverse innovation83 and allows a firm to disrupt itself.

factors that cause the chasm or make it difficult for industries to enter next stage

Each customer group responds differently to a technological innovation. This is due to differences in the psychological, demographic, and social attributes observed in each unique customer segment significant differences between the early customer groups—who enter during the introductory stage of the industry life cycle—and later customers—who enter during the growth stage—can make for a difficult transition between the different parts of the industry life cycle.

Laggards

Enter the market during the decline stage. • 16% of total market potential. Adopt a new product only if necessary (reluctant). Generally don't want new technology. Typically not pursued as future customers. • Demand is small. • Early and late majority are at this time moving on to different products and services.

Early Adopters

Enter the market during the growth stage. • 13.5% of the total market potential. Demand is driven by imagination and creativity. • Ask themselves, "What can this new product do for me or my business?" To capture these customers: • Directly communicate the product's potential.

crossing the chasm framework - Technology Enthusiasts

Enter the market during the introductory stage. • Smallest market segment, 2.5% of the total market potential. Have an engineering mind. Proactively pursue new technology. Enjoy using beta versions. Tinker with product imperfections. Provide free feedback and suggestions.

late majority

Enter the market during the maturity stage. • 34% of the total market potential. Not as confident in their ability to master the technology: • Wait until standards have emerged. • Do not like uncertainty. Represent the majority of the market. Buy from well-established firms with a strong brand.

Early Majority

Enter the market during the shakeout stage. • 34% of the total market potential. or one third • Decision criteria, a strong sense of practicality. "What Can This Do For Me?" • Weigh the benefits and costs carefully. • Rely on endorsements of others.

A successfully implemented blue ocean strategy allows firms two pricing options: option 1

First, the firm can charge a higher price than the cost leader, reflecting its higher value creation and thus gener-ating greater profit margins.

A successfully implemented blue ocean strategy allows firms two pricing options:

First, the firm can charge a higher price than the cost leader, reflecting its higher value creation and thus generating greater profit margins. Second, the firm can lower its price below that of the differentiator because of its lower-cost structure. If the firm offers lower prices than the differentiator, it can gain market share and make up the loss in margin through increased sales.

example of not being early majority

Fisker Automotive, a California-based designer and manufacturer of premium plug-in hybrid vehicles, fell into the chasm because it was unable to transition to early adopters, let alone the mass market. Between its founding in 2007 and 2012, Fisker sold some 1,800 of its Karma model, a $100,000 sports car, to technology enthusiasts. It was unable, however, to follow up with a lower-cost model to attract the early adopters into the market. In addition, technology and reliability issues for the Karma could not be overcome. By 2013, Fisker had crashed into the first chasm (between technology enthusiasts and early adopters), filing for bankruptcy. The assets of Fisker Automotive were purchased by Wanxiang, a Chinese auto parts maker.

in differentiation Rivalry among existing competitors risks

Focus of competition shifts to price • Increasing differentiation of product features that do not create value but raise costs • Increasing differentiation to raise costs above acceptable threshold

what are Disadvantages of the Balanced Scorecard

Focused on implementation, • Not formulation How to get back on track if deviations occur. Lacks guidance: • Which metrics to use? • How to address setbacks?

return on risk capital

From an investors' or shareholders' perspective, the measure of competitive advantage that matters most is the

differentiation strategy

Generic business strategy that seeks to create higher value for customers than the value that competitors create, while containing costs. • Offers unique features. • Charges higher prices.

Step 2 to respond to disruptive organization

Guard against disruptive innovation by protecting the low end of the market example- Intel introduced the Celeron chip, a stripped-down, budget version of its Pentium chip, to prevent low-cost entry into its market space. More recently, Intel followed up with the Atom chip, a new processor that is inexpensive and consumes little battery power, to power low-cost mobile devices.82 Nonetheless, Intel also listened too closely to its exist-ing personal computer customers such as Dell, HP, Lenovo, and so on, and allowed ARM Holdings, a British semiconductor design company (that supplies its technology to Apple, Samsung, HTC, and others), to take the lead in providing high-performing, low-power-consuming processors for smartphones and other mobile devices.

Jimmy can be categorized under the late majority customer segment. Which of the following behaviors is he most likely to exhibit? A) He will be confident in her ability to master any new technology. B) He will prefer to buy from well-established brands rather than unknown new ventures. C) He will not rely on endorsements by the early majority or early adopters. D) He will buy beta versions of new products and technology.

He will prefer to buy from well-established brands rather than unknown new ventures.

examples of disruptive innovations

Laptop computers disrupted desktop computers; now tablets and larger-screen smart-phones are disrupting laptops. Educational organizations such as Coursera and Udacity are disrupting traditional universities by offering massive open online courses (MOOCs), using the web to provide large-scale, interactive online courses with open access.

what are Advantages of the Balanced Scorecard

Links and communicate strategic vision to responsible parties. Translates vision into measurable goals. Designs and plans business processes. Implements feedback and organizational learning to modify and adapt strategic goals when indicated. Alerts to needed strategic goal adaptation.

How does Business Level Strategy determine a firm's strategic position?

Managers need to address strategic trade-offs that arise between V and C. • Differentiation and Cost Leadership are very distinct. • In addition, determine the scope: Pursuit of market niche or broader scope.

Which of the following is a disadvantage of measuring firm performance through total return to shareholders and firm market capitalization? A) Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term. B) These tools fail to indicate how the stock market views all available public information about a firm's expected future performance. C) These tools measure competitive advantage in absolute terms rather than relative terms. D) Only the book value of the share prices is taken into account when applying these measures, and not the market value.

Market volatility makes it difficult to assess firm performance through these measures, particularly in the short term.

Jonathan is the owner of a landscaping company that caters to a very wealthy clientele. His company has struggled to differentiate itself from the other high-end landscapers in the area, but because he has hired several expensive but highly qualified team members, Jonathan is unable to shift to a cost-leadership strategy. Which strategy is most likely to achieve a competitive advantage? A) Offer similar services as competitors but raise prices to increase profits. B) Lower prices but continue employing high-paid expert gardeners. C) Narrow the scope of competition and focus on unique features such as the use of organic materials. D) Maintain prices but replace all the expert employees with less-skilled workers to control costs.

Narrow the scope of competition and focus on unique features such as the use of organic materials.

example of early adopters

people putting thousands of dollars to reserve tesla model S or X without test driving it

2 metrics in the question how do we create value

One useful metric is the percentage of revenues obtained from new product introductions. A second metric, aimed at assessing a firm's external learning and collaboration capability, is to stipulate that a certain percentage of new products must originate from outside the firm's boundaries.

In the maturatity stage

Only a few large firms remain. • They enjoy economies of scale. • Process innovation has reached a maximum.

in differentiation Rivalry among existing competitors benefits

Protection against competitors if product or service has enough differential appeal to command premium price

in differentiation threat of entry benefits

Protection against entry due to intangible resources such as a reputation for innovation, quality, or customer service

in differentiation power of suppliers benefits

Protection against increase in input prices, which can be passed on to customers

in differentiation threat of substitutes benefits

Protection against substitute products due to differential appeal

Feran is the founder of an innovative "impromptu catering" business that provides elegant, healthy party food and decorations on less than 24 hours' notice. The company has grown by over 150 percent in the past year. Feran credits some of the company's success to studying the strategies of prominent social entrepreneurs, such as Wikipedia's Jimmy Wales. What can Feran do to exemplify the social entrepreneurship model? A) Launch a social media platform for food lovers. B) Provide free weekly catered meals for the homeless. C) Seek investments from venture capitalists. D) Buy out his closest competitors to ensure a competitive advantage.

Provide free weekly catered meals for the homeless.

Why Incumbent Firms Tend to Focus on Incremental Innovation

Reinforce established Structure

in differentiation threat of substitutes risks

Replacement, especially when faced with innovation

what are value chain support activities

Research and development (R&D). Information systems. Human resources. Accounting and finance. Firm infrastructure including processes, policies, and procedures.

A successfully implemented blue ocean strategy allows firms two pricing options: option 2

Second, the firm can lower its price below that of the differentiator because of its lower-cost structure. If the firm offers lower prices than the differentiator, it can gain market share and make up the loss in margin through increased sales.

Economies of scale allow firms to

Spread their fixed costs over a larger output. Employ specialized systems and equipment. Take advantage of certain physical properties.

balance scorecard

Strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals

what are value chain primary activities

Supply chain management. Operations. Distribution. Marketing and sales. After-sales service.

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? A) The firm's number of outstanding shares is 25 million. B) The firm pays an annual dividend of 10 percent. C) The firm's total return to shareholder is $5 billion. D) The firm's economic value created is $5 billion.

The firm's number of outstanding shares is 25 million.

business-level strategy

The goal-directed actions managers take in their quest for competitive advantage when competing in a single product market

risk capital (return on risk capital)

The money pro-vided by shareholders in ex-change for an equity share in a company; it cannot be recovered if the firm goes bankrupt.

during shakeout stage

The rate of growth declines

The total amount an investor reaps from investing. Why are quarterly projections so important?

The return on risk capital is the reliant on company performance in the two ways to make money.

People (Triple Bottom Line)

The social dimension emphasizes the people aspect, such as PepsiCo's initiative of the whole person at work

example of learning curve with numbers

To be more precise, as shown in Exhibit 6.7, Firm A produces eight aircraft and reaches a per-unit cost of $73 mil-lion per aircraft.28 Firm B produces 128 aircraft using the same technology as Firm A (because both firms are on the same [90 percent] learning curve), but given a much larger cumulative output, its per unit-cost falls to only $48 million. Thus, Firm B has a clear com-petitive advantage over Firm A, assuming similar or identical quality in output

innovation

concerns the commercialization of an invention.12 The success-ful commercialization of a new product or service allows a firm to extract temporary monopoly profits.

Question 3 of balance score card

What core competencies do we need?

While the domestic airline industry is in the maturity stage of the industry life cycle, the internet-enabled appliance industry is in its growth stage. Which of the following can be inferred from the given data? A) The number of competitors will be greater in the domestic airline industry than the internet-enabled appliance industry. B) The internet-enabled appliance industry is ahead of the domestic airline industry in the industry life cycle. C) While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants. D) The mode of competition will be price-based in the internet-enabled appliance industry and will be nonprice-based in the domestic airline industry.

While the domestic airline industry is mostly free from excess capacity, the internet-enabled appliance industry will have new entrants.

4 questions to ask in business level strategy

Who are the customer segments we will serve? What customer needs, wishes, and desires will we satisfy? Why do we want to satisfy them? How will we satisfy them?

The steeper 80 percent learning curve indicates

a 20 percent drop every time output is doubled

Economic value created is the differnece between

a buyer's willingness to pay for a product or service and the firm's total cost to produce it

COGS / Revenue, indicates how efficiently

a company can produce a good

Tablette Corp. is a consumer electronics company known for its affordable mobile devices that follows a cost-leadership strategy. In this scenario, Tablette Corp. should ideally compare its strategic position with A) a company that sells small kitchen appliances at affordable prices. B) a consumer electronics company that sells high-end devices. C) a consumer electronics company popular among price-conscious customers. D) an online company that sells customized electronics accessories.

a consumer electronics company popular among price-conscious customers.

3 P's (triple bottom line)

people, planet, profit

Assume that the market for print book publishing has entered the maturity stage. Which of the following would most likely exist during this stage? A) a few start-up publishers B) many small to midsized publishers C) a few large publishers D) one large publisher

a few large publishers

what doe a balance scorecard helps managers ___________

acheive their strategic objectives

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

add incremental value to the product or service offering or lower its relative cost.

The goal of a differentiation strategy is to a

add unique features that will increase the per-ceived value of goods and services in the minds of consumers so they are willing to pay a higher price.

Standard (growth stage)

an agreed-upon solution about a common set of engineering features and design choices

Disruptive Innovation:

an innovation that leverages new technologies to attack existing markets from the bottom up

incremental innovation

an innovation that squarely builds on an established knowledge base and steadily improves an existing product or service

working capital entails the amount of money a company can deploy in the short term, calculated

as current assets minus current liabilities.

Tough Guy's Inc. is a chain of gyms. It offers a fitness package that allows its members to use the gym facilities for 12 months by paying only for 10 months. Included in the package are two health check-ups and a gym kit. These add-ons by themselves are not very valuable, but as a package they can enhance the perceived value of the service offerings. In this case, Tough Guy's primary value driver is A) economies of scale. B) learning-curve effects. C) availability of complements. D) experience-curve effects.

availability of complements.

The Experience Curve attempts to capture

both learning and process improvements.

The translation of STRATEGY into action takes place in the

business model

What are the 2 ways to make money

capital gains and current income

Market Capitalization

captures the total dollar market value of a company's outstanding shares at any given point in time

in the shakeout stage The winners in this increasingly competitive environment are often firms that stake out a strong position as

cost leaders

Benny's Closet Inc. is an apparel company that caters to highly price-conscious customers. Through its simple apparel designs, acceptable quality levels, and minimal customer service, the company has been able to sell its merchandise at the lowest prices in the industry. Which of the following generic business strategies is Benny's Closet applying? A) cost-leadership B) differentiation C) niche marketing D) product diversification

cost-leadership

marvel switch to blue ocean create

creative committee unique financing scheme creating their own universe

marvel switch to blue ocean raise

creative culture storytelling and emotional connection

invention

describes the transformation of an idea into a new product or process, or the modification and recombination of existing ones. The practical application of basic knowledge in a particular area frequently results in new technology

if a firm's ROIC is less than the cost of capital the firm _________ __________

destroys value

If firms spend too much time on radical innovations it will

disrupt the existing distribution of all the above.

Demand coming from just two groups—early and late majority—

drives most industry growth and firm profitability.

what chasm did blackberry fall into

early majority and late majority

A firm incurs $400 to manufacture a computer. In the market, customers are willing to pay a maximum of $600 for the computer priced at $500. The difference of $200 ($600 minus $400) is the A) consumer surplus. B) total return to shareholders .C) customer lifetime value. D) economic value created.

economic value created.

Focus on the triple-bottom line

economic, social and ecological performance

Learning by doing allows a firm to lower its per-unit costs by moving down a given learning curve, while experience-curve

effects based on process innovation allow a firm to leap-frog to a steeper learning curve, thereby driving down its per-unit costs.

What is Apple's differential appeal? Reputation for Innovation, Quality and Customer Experience.

eliminate variety of models price, number of buttons, reduce buisness applications, reduce pc-like performance, raise mobile internet platform style and fun ease of use and create

As a research scholar, Linda had built a helicam as part of her project. The helicam could capture aerial images. Realizing the potential use of this product in movie production and military and rescue operations, she started a new venture where she could customize these helicams to fit the specific needs of the buyers and sell them. Linda can be best described as a(n) A) entrepreneur. B) category captain. C) franchisor. D) early adopter.

entrepreneur.

Maintain (decline Stage)

example Marlboro brand continuing to support marketing efforts at a given level despite the US cigarette consumption has been declining

in the decline stage Demand

falls rapidly

how do share holders view us answers

final perspective in the balanced scorecard is the shareholders' view of financial performance (as discussed in the prior section). Some of the measures in this area rely on accounting data such as cash flow, operating income, ROIC, ROE, and, of course, total returns to shareholders. Understanding the shareholders' view of value creation leads managers to a more future-oriented evaluation.

ROIC is a popular metric because it is a good proxy for ___________ ________.

firm profitability.

Harvest (decline Stage)

firm reduces investments in product support and allocates only a minimum of human and other resources

Bath & Chill is a spa that caters to the needs of a small percentage of highly health-conscious consumers. It offers state-of-the-art treatments in a luxurious setting. Since there are very few spas that offer the same unique services, customers are willing to pay a premium price for its products and services. In this scenario, Bath & Chill is following a A) product diversification strategy. B) liquidation strategy. C) broad differentiation strategy. D) focused differentiation strategy.

focused differentiation strategy.

All of the following are generic business-level strategies except A) broad differentiation. B) focused cost-leadership. C) focused marketing strategy. D) broad cost-leadership.

focused marketing strategy.

organizational inertia firms grow and establish hey rely more heavily on

formalized processes and structures.

As a rule of thumb, if a firm's ROIC is greater than its cost of capital, it ___________ __________

generates value

Bundling:

grouping two or more products together and pricing them as a unit more then one product sold at a discount

An emphasis on incremental innovations strengthens the incumbent firm's position and thus maintains

high entry barriers

marvel switch to blue ocean eliminated

hollywood styled operations big offices high salaries

The balanced-scorecard framework is a tool for strategy ________, not ________. A) implementation; formulation B) analysis; sustainability C) formulation, implementation D) sustainability, economic value creation

implementation; formulation

Standards can emerge from the bottom up through competition in the market-place or be

imposed from the top down by government or other standard-setting agencies such as the Institute of Electrical and Electronics Engineers (IEEE)

in differentiation power of buyers risks

in differentiation power of buyers benefits

The goal of differentiation strategy is to

increase perceived value of goods/services so customers are willing to pay a higher price.

PPE / Revenue.

indicates how much of a firm's revenues are dedicated to cover plant, property, and equipment, which are critical assets to a firm's operations but cannot be liquidated easily.

Long-term Assets / Revenue.

indicates how much of each dollar a firm earns in revenues is tied up in long-term assets. Such assets include anything that cannot be turned into cash or consumed within one year.

SG&A / Revenue.

indicates how much of each dollar that the firm earns in sales is invested in sales, general, and administrative (SG&A) expenses. Generally, this ratio is an indicator of the firm's focus on marketing and sales to promote its products and services

R&D / Revenue

indicates how much of each dollar that the firm earns in sales is invested to conduct research and development. A higher percentage is generally an indicator of a stronger focus on innovation to improve current products and services, and to come up with new ones.

Working Capital / Revenue.

indicates how much of its working capital the firm has tied up in its operations.

To formulate an effective business strategy, managers need to keep in mind that competitive advantage is determined jointly by

industry and firm effects.

Idea

is often presented in terms of abstract concepts or as findings derived from basic research. Basic research is conducted to discover new knowledge and is often published in academic journals. This may be done to enhance the fundamental understanding of nature, without any commercial application or benefit in mind

economic incentive

it has strong incentives to defend its strategic position and market power.

what chasm is galaxy and iphone

late majority and laggards

The core competencies for competitive advantage in the growth stage tend to shift toward

manufacturing and marketing capabilities.

Key success factors at the shakeout stage are the

manufacturing and process engineering capabilities that can be used to drive costs down.

winner-take-all markets

markets where the market leader captures almost all of the market share and is able to extract a significant amount of the value created

Karat Packaging has entered a stage in which the demand for their innovative fax machines has declined. Now most customers are buying replacement parts or buying their second fax machine from the firm. What stage in the industry life cycle does this scenario describe? A) growth stage B) maturity stage C) shakeout stage D) decline stage

maturity stage

marvel switch to blue ocean reduce

middle management full price movie stars company onwed physical infrastructure

product features

most important levers that strategic leaders can adjust is product features, thereby increasing the perceived value of the product or service offering.

ROIC equation

net profits/ invested capital

After the creation of social networking websites were introduced, their value increased exponentially as the number of users increased. This is the positive effect of a(n) A) network effect. B) confirmation effect. C) impression management effect. D) user effect.

network effect.

radical innovation targets

new markets by using new technologies.

product innovation

new or recombined knowledge embodied in new products

process innovation

new ways to produce existing products or deliver existing services process improvement ensues

A disruptive innovation leverages ________ technologies, while architectural innovations are based on ________ technologies. A) new; existing B) existing; novel C) drastic; new D) required; established

new; existing

A blue ocean strategy allows a firm

offer a differ-entiated product or service at low cost.

Technology Enthusiasts also good example is

often pay a premium price to have the latest gadget. The endorsement by technology enthusiasts validates the fact that the new product does in fact work. google glass

customer service

perceived value of their firms' product or service offerings by focusing on customer service. For example, the online retailer Zappos earned a reputation for superior customer service by offering free shipping both ways: to the customer and for returns.11 Although several online retailers now offer free shipping both ways, Zappos has done so since its inception in 1999, that is, long before more recent imitators

Facebook has become one of the largest media companies in the world, valued at nearly 50 billion in 2019, but hasn't produced a single piece of content. Facebook is an example of a A) pipeline business. B) platform business C) strategic business unit. D) a typical value chain driven business.

platform business

Susan wants to create a networking site that would connect local artists to homeowners who are looking for unique and original art. She knows that network effects will play a big role in her success and doesn't want to build her business using a linear value chain. Susan would best be served by employing a(n) A) pipeline business model. B) innovative social networking website. C) razor-razor blade business model. D) platform business model.

platform business model.

the R&D emphasis in the growth stage tends to shift to

process innovation for improved efficiency

Connell Inc. has been successful at differentiating itself from competitors by claiming a premium price for its digital cameras based on superior image quality and advanced technology. In this scenario, which of the following is the key value driver? A) product features B) economies of scale C) low-cost input factors D) customer service

product features

Value Drivers a mangers manipulates what are the three

product features customer service customization and complements.

price becomes a more important competitive weapon in the shakeout stage because

product features and performance requirements tend to be well established.

Customer service and ________ are two of the value drivers that managers can utilize when trying to improve a firm's differentiation strategic position. A) product uniqueness B) experience curve C) cost of input factors D) economies of scale

product uniqueness

in the growth stage

product/ service standards emerge

Agency:

products sold on commission

Managers can justify using the balanced-scorecard framework because research show that both ________ and ________ performance dimensions are important when examining the effectiveness of a firm's strategy. A) economic, stock price B) quantitative, qualitative C) customer survey, peer evaluation D) financial, accounting

quantitative, qualitative

answer to question what core competencies do we need

question focuses managers internally to identify the core competencies needed to achieve their objectives and the accompanying business processes that support, hone, and leverage those competencies.

the market in maturity stage

reached maximum size. • Industry growth is zero or negative

Triple Bottom Line

recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth

Demand in the maturity stage is

replacement or repeat purchases.

organizational inertia

resistance to changes in the status quo.

ROE stands for

return on equity

ROIC stands for

return on invested capital

ROR

return on revenue; the comparison of a business's annual profit compared to its annual revenues expressed as a percentage

total return to shareholders

return on risk capital that includes stock price appreciation plus dividends received over a specific period

The customer's perspective concerning the company's products and services links directly to

revenues and profits

ROR indicates how much the firm's sales is converted into profits.

sales is converted into profits.

In this stage weaker competitors are forced out or

shakeout

Exit (decline Stage)

some firms are forced to leave industry due to bankruptcy or liquidation example US textile Factory due to foreign low cost competition

The key objective for firms during the growth phase is to

stake out a strong strategic position not easily imitated by rivals.

A high percentage of R&D/Revenue ratio indicates a(n) A) strong focus on innovation to improve current products and services. B) inefficiency in the management to focus on new products. C) strong focus on marketing and sales to promote products and services. D) negligent investment toward research and development.

strong focus on innovation to improve current products and services.

It also shows the conse-quence of a blue ocean strategy gone bad

stuck in the middle

Fresher Corp. produces electric bathroom fragrance diffusers and sells the electric outer device at a market rate price. However, they lock their clients into a two-year agreement to purchase the perfume refills solely from them on a monthly basis. Which of the following business models does this best illustrate? A) subscription-based B) peer-to-peer C) crowdsourcing D) freemium

subscription-based

Freemium:

subscriptions that provide some content for free pay for extra features add-ons

The types of assets that are the primary focus of accounting data but are no longer most important to competitive advantage are A) market brand value. B) organizational culture. C) intangible. D) tangible.

tangible.

example of early majority

tesla roadster and model S received a strong endorsement as the 2013 Motor Trend Car of the Year and the highest test scores ever awarded by Consumer Reports. This may help in crossing the chasm to the early majority, because consumers would now feel more comfortable in considering and purchasing a Tesla vehicle

Tom is attempting to measure how his customers views his firm. To do this, he uses the balanced-scorecard framework because he knows that A) customer surveys will help him determine future industry attractiveness. B) this will guarantee his company a sustainable competitive advantage. C) the framework will help him increase his stock price. D) the customer perspective is directly linked to firm revenues and profits.

the customer perspective is directly linked to firm revenues and profits.

Planet (Triple Bottom Line)

the ecological dimension emphasizes the relationship between business and the natural environment

Profits (Triple Bottom Line)

the economic dimension captures the necessity of businesses to be profitable to survive

Value drivers contribute only if

the increase in value exceeds the increase in costs.

value innovation

the simultaneous pursuit of differentiation and low cost in a way that creates a leap in value for both the firm and the consumers; considered a cornerstone of blue ocean strategy

Which of the following is a firm effect that has an impact on the competitive advantage of a firm? A) the exit barriers within the industry in which the firm operates B) the number of companies operating in the industry in which the firm operates C) the intensity of rivalry among existing companies in the firm's chosen industry D) the value and the cost position of the firm relative to its competitors

the value and the cost position of the firm relative to its competitors

One of the reasons that big box retailers like Home Depot are able to achieve economies of scale is that A) they have both broad and narrow economies of scope. B) they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently. C) they are able to take advantage of market size and spread investment losses over many locations. D) they have been able to protect themselves from the threat of buyer power by increasing input prices.

they are able to take advantage of physical properties and maximize their scale efficiencies by stocking more merchandise and handling inventory more efficiently.

How do we create value answers

this question challenges managers to develop strategic objectives that ensure future competitiveness, innovation, and organizational learning. The answer focuses on the business processes and structures that allow a firm to create economic value.

In particular, the ratio measures how effectively a company uses its _______ _______ _________, which consists of two components:

total invested capital

Pay as you go:

users pay for only the services they consume

During the decline stage

• Innovation efforts cease. • If a breakthrough emerges, it leads to a new industry or resets the life cycle. • Strong pressure on prices.

The focus of competition in differentiation strategy tends to be on:

• Unique product features. • Service. • New product launches. • Marketing and promotion.

for differentiation strategy Competitive advantage achieved when:

• Value - Cost > Competitors.