Management 4842 Final Review

o Strategic group:

cluster of industry rivals that have similar competitive approaches and market positions. Strategic group mapping finds out who your closest rival is, gives a visual heatmap of competitors, andorganizes market or industry into competitor groups

Best practice-

commercial or professional procedures that are accepted or prescribed as being correct or most effective

Porter's Five forces. Name them and understand what makes each force more OR less intense in the competitive environmento Five forces:

competition from rival sellers, competition from potential new entrants to the industry, competition from producers of substitute products, supplier bargaining power, and customer bargaining power

o Focused Differentiation:

concentrating on an arrow buyer segmenter market niche an outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals products

o Focused differentiation:

concentrating on an arrow buyers segmenter market niche outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals products

o Focused low cost:

concentrating on the needs and requirements of a narrow buyer segment or market niche and striving to meet those needs at lower costs than rivals, thereby being able to serve niche members are a lower price

Ethical universalism-

concept in which ethical implications of an action applies universally to anyone regardless of circumstance; the ends justifies the means

o Outsourcing:

contracting out certain value chain activities that are normally performed in house to outside vendorso Advantages: you can obtain competencies you may not have or competencies that aren't competitive to youo Disadvantages: hollowing out of business. Outsourcing things that are competitively important means you lose that control

Attractiveness test-

ensure that diversification is directed towards an attractive industry

Cost of entry test-

ensures cost of entry does not capitalize all future profits; main one

TQM-

entails creating total quality culture, involving managers and employees at all levels, bent on continuously improving performance of every task and value chain activity, is a long-term race without a finish in which success comes slowly in small steps forward

o Backward integration:

entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system

o Forward integration:

entry into value chain system activities closer to the end user

Strong culture - -

has deeply rooted widely-shared values, behavioral norms, and operating approaches- insists that its values and principles be reflected in the decisions and actions taken by all company personnel

Unhealthy - -

has incompatible subcultures, poor strategy execution, poor performance - change resistant cultures, politicized cultures,- insular, inwardly focused cultures and unethical and greed-driven cultures

Fit Test:

how well does the strategy fit the company's situation?To pass, strategy must exhibit fit along three dimensions: external, internal, and dynamic

o Best cost strategy:

hybrid of low cost and differentiation strategies that aim at providing more desirable attributes while beating rivals on priceo Works best with more developed products. Products are differentiated to set them apart. Not a commodity. Something that has lots of different features desired by consumer, but consumers are still price consciouso Value conscious customers looking for a better product/service at an economical price.

Value chain:

identifies the primary activities and related support activities that create customer value. How the business provides value to the end user. Both primary and support activities can hold costdrivers

o Vertically integrated firm

is one that performs value chain activities along more that one stage of an industry's value chain system

o Competitive Advantage Test:

is the strategy helping the company achieve a sustainable competitive advantage?

Value chain analysis and benchmarking purpose

is to develop data for comparing a company's costs activity by activity against the costs of key rivals and to learn which internal activities are a source of cost advantage or disadvantage

Weak culture - -

lacks values and principles that are consistently preached or widely shared - has few or no traditions, beliefs, values, common bonds, or behavioral norms

o Focused low cost customers:

like deep discounts. Lower income areas that are densely populated (cheaper to rent/lease/advertise). You have a market that wants bare bones value, also have a company that cuts costs wherever they can while still preserving functional value

Benefits of Diversification-

minimizing risk of loss, preserving capital, generating returns

Better off test-

new business unit must gain a competitive advantage from its link with corporation and vice versa

o Focused differentiation buyers:

niche buyers, people who want specific features in a product, features are focused specifically on the needs of that focused market

What are the three steps of a SWOT analysis?

o 1.Define each part of the SWOT(list the swot) o 2. Analyze how we can make corrections or develop our own opportunities based on external environment o 3.Put into practice

What are the benefits/advantages and pitfalls of a differentiation strategy?

o Advantages: Good when buyers' needs are so diverse that you can differentiate your product to capture a substantial amount of market share. Technology changes are dynamic and provides more value to the customer o Disadvantages: over differentiation, higher costs, not advertising additional value, charging too high of a premium

o Difference between a merger and acquisition relates more to the details of ownership, management control, and financial arrangements than to strategy and competitive advantage.

o Advantages: access to patents, competencies, reduce need for research because you can gain it from the other company.o Disadvantages: lackluster results in acquisitions and mergers come from cultural differences causing issues, employee resistance to change

What is a low-cost leader's basis for competitive advantage (it's in the definition)? How is this competitive advantage achieved, what activities/tools are used?

o Controlling Cost Drivers,revamping valu echain,reducing labor costs,direct to user sales. o Learning curve effect to control cost drivers, cutting labor, cutting product lines, e-commerce. o Perform value chain activities more cost effectively than rivals, revamp firm's overall value chain to eliminate or bypass some cost-producing activities

What are the clearest indicators of good management with regard to strategy?

o Good strategy and good strategy execution are the most telling and trustworthy signs of good management

What are the two biggest factors that distinguish differences in the five generic competitive strategies?

o Market (broad vs focused, in between is best cost) o Competitive Advantage(low cost vs differentiation)

What is the basis of the broad differentiation strategy?

o Offering products that are unique in ways that are valuable to the customer

Strategic group mapping, how/why used?

o Strategic group mapping: technique for displaying the different market or competitive positions that rival firms occupy in the industry. Fast way to figure out who has the power depending on what factor you're looking at (ex quality/price/geographic coverage)

What is the primary focus that compels pursuit of focused strategies? What are customer characteristics of each type of focused strategy?

o They are concentrated attention on a narrow piece of the total market.Can be a geographic segment, customer segment, or product segment

What are the industry characteristics that make a differentiation strategy an attractive strategy to pursue?

o Works best when it's a product that people want but have different and interesting features. Works best with specialized products that have many ways to differentiate.

What industry/product characteristics make a low-cost strategy an attractive strategy to pursue?

o Works well with commodity type activities that are easily available

o Sustainable:

persists despite the best efforts of competitors to match or surpass this advantage

Tools of rivalry:

price, features, image, selection, customer service, company image

Benchmarking-

process of measuring performance of a company's products, services, or processes

Support activities:

provide value to the company, but not directly to customer. (product R&D, technology, and systems development, human resource management, general administration

Competitive advantage:

provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm

Culture-

refers to the shared values, ingrained attitudes, core beliefs and company traditions that determine norms of behavior, accepted work practices and styles of operating - is grounded in and shaped by its core values and ethical standards

o Broad differentiation:

seeking to differentiate the company's product offering from rivals with attributes that will appeal to a broad spectrum of buyers

o Kay Success factors:

strategy elements,product and service attributes,operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry

o ReasonsReasons to integrate vertically:

streamlines operations, improves cost efficiency. Forward integration defined. Backward integration defined.

o Broad Low cost:

striving to achieve lower overall costs than rivals on comparable products that attract a broad spectrum of buyers, usually by underproducing rivals.

Driving forces:

the major underlying causes of change in industry and competitive conditions. Underlying powers from the macroenvironment that can influence the success of a business

Strategy defined-

the set of actions that managers take to outperform the company's competitors and achieve superior profitability. Long term success that supports growth and secures the future.

o Pitfall:

they don't provide all the value that the best have, and they don't provide the lowest costs either.

o Threat of new entrants:

threat of entry depends on expected reaction of incumbent firms to new entry(i.e. retaliation) and barriers to entry

o Acquisition:

where one business takes over the operations, capital, everything of a business so that it becomes part of the acquirer. The acquirer's rules are followed. One company absorbs another company.

​​Balanced Scorecard approach defined:

widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing. Financial objectives are lagging indicators of strategic objectives.

o Buyer bargaining power: buyer bargaining power is stronger when:

- Buyer demand is weak - Products are standardized and undifferentiated, low cost to switch brand- Buyers are large and few in number comparative to number of suppliers-

Backwards integration is possible

- Buyers are informed about quality, prices, costs of suppliers -Buyers have the ability to postpone purchases- Buyers are price sensitive when they earn low profits or the product is a significant fraction of their purchases

Integrated Social Contracts Theory, define.

-Theory of business ethics originated by Thomas Donaldson and Thomas dunfee and heavily influenced by the social contracts theories of political philosophers such as Thomas locke and john

In what two ways can value chain analysis offer competitive advantage?

-Value chain analysis can reveal competitive differences against rivals, and value chain analysis can help identify the major components of a company's internal cost structure -Cost Advantage And Differentiation Advantage

How do a company's stated value and ethical standards relate to cultural building?

-codes of conduct based on ethical relativism can be ethically problematic for multinational companies by creating a maze of conflicting ethical standards

o Mergers

: come together as a marriage of two companies. Sometimes I will take one company's name because of brand image, sometimes create a new name.

o Types of key success factors (5)

: technology, manufacturing, distribution, marketing, other (patents, R&D, intellectual property

o Performance Test

:is the strategy producing superior company performance?

2 basic characteristic types of strategy

Competitive advantage, Sustainable

What are the two main drawbacks of unrelated diversification?

Demanding managerial requirements and being without the added source of competitive advantage

How to design strategy-facilitating policies and procedures.

Design an effective incentive compensation system is to tie rewards to performance outcomes that are directly linked to good strategy execution and to the achievement of financial and strategic objectives

Acquisition premium, define

Difference between estimated real value of company and actual price paid to obtain it; represents

Why should managers know what motivates employees?

So they will be able to adapt the best practice to fit the company's situation so they will be able to implement it and further improve it over time

Factors that increase rivalry

- buyer demand growing slowly or declining- Low cost to switch brands- Less product differentiation- Excess inventory/idle production capacity- Number and size of rivals increases-

Mission defined

- describes the scope and purpose of its present business ('who we are, what we do, why we are here'). Factual and logical

Business process reengineering

- involves radically redesigning and streamlining work effort, flows and processes to achieve dramatic improvements in performance, uses cross functional teams, cutting edge tech and info systems to reset and refocus organizations strategy

Vision defined

- portrays a company's aspirations for its future ('where we are going'). Should be emotional and motivate employees

Diversification, define, reasons to do so (why?), how to do so, benefits?

-A technique that reduces risk by allocating investments among various financial instruments, industries, and other categories; aims to maximize return by investing in different areas that would each react differently to the same event

What is necessary to understand in the managerial approach to implementing and executing strategy?

-Be customized to fit the particulars of a company's situation

Why do managers and employees behave unethically? (three reasons)

-Faulty oversight and self-dealing, pressure for short-term performance, weak or corrupt ethical

o Threat of substitution: Substitution threat is stronger when:

-Good substitutes are readily available and attractively priced-Substitutes have comparable or better performance features -Buyers have low costs in switching to substitutes

Main dilemma in deciding what business to acquire.

-Industry attractiveness

What is the main reason why strategies fail?

-Often because of poor execution—strategy execution is therefore a critical managerial endeavor Comprises the formal and informal arrangement of tasks, responsibilities, lines of authority and reporting relationships for the firm- designs contribute to creation of value for customers -parts aligned with one another and also matched to the requirements of the strategy- lowers operating costs through lower bureaucratic costs and operational efficiencie

Economies of scope

-Proportionate saving gained by producing two or more distinct goods, when the cost of doing so is less than that of producing each separately

Economies of scale

-Proportionate saving in costs gained by an increased level of production

What are the three components necessary in building an organization capable of good strategy execution?

-Staffing the organization, building core competencies and competitive capabilities, matching the organization structure to strategy

o Supplier Bargaining Power: strong supplier power when:

-Supply is short, products are differentiated, cost to switch brands is high, Good substitutes arenot available- Supplier industry is dominated by a few large companies- Buyers cannot self-manufacture the products they are buying- Their cost to buyers is small enough that price changes are less noticeable (ex. Small componentprice increase in a car)- Brand image/name, patents/copyrights/trademarks

What is one of the main skill types managers need to overcome challenges in execution strategy?

-Team effort

Three tests to determine if diversification would be beneficial.

Attractiveness test, cost of Entry test, Better Off test

Social Responsibility, define, what is the business case for such efforts?

Ethical framework and suggests that an entity has an obligation to act for the benefit of society at large; duty every individual has to perform so as to maintain a balance between the economy and the

What do financial performance measures indicate?

Financial performance measures are lagging indicators that reflect the results of past decisions and organizational activities. Past or current financial performance is not a reliable indicator of its future prospects.

3 tests of a winning strategy

Fit Test: Competitive Advantage Test: PerformanceTest

What are the clearest indicators of good management with regard to strategy?

Good strategy and good strategy execution are the most telling and trustworthy signs of good management

How are rewards used? What categories of rewards are used? Why are they important to strategy execution?

Providing incentives and engaging in motivational practices that facilitate good strategy execution, striking right balance between rewards and punishment for individual performance, linking employee rewards to strategically relevant organizational performances outcomes

What do strategic performance measures indicate?

Strategic performance measures indicate whether a company's market position and competitiveness are deteriorating, holding steady, or improving. Best and most reliable leading indicators of a company's future financial performance and business prospects are strategic outcomes that indicate whether the company's competitiveness and market position are stronger or weaker

Business ethics, define...different than societal ethics?

Study of proper business policies and practices regarding potentially controversial issues such as corporate governance, insider trading, etc.. Principles and guidelines that regulate corporate welfare within a society

How can managers best lead employees through symbolic actions?

Top executive and upper management behaviors, ceremonial events to honor exemplary employees,physical symbols that represent new culture

Primary activities:

add value to the customer directly. (supply chain management, operations, distribution, sales and marketing, service)

o Rivalry:

all other factors influence rivalry(threat of new entrants,threat of substitution,supplier bargaining power, buyer bargaining power

Six sigma-

all work Is process, all processes have variability, all processes create data that explain variability

o Best cost provider:

at the middle of all the other strategies. Striving to incorporate upscale product attributes at a lower cost than rivals. Being the best cost producer of an upscale, multi featured product allows a company to give customers more value for their money by underpricing rivals whose products have similar upscale, multi featured attributes

Ethical relativism-

belief that nothing is objectively right or wrong and that the definition of right or wrong depends on the prevailing view of a particular individual, culture or historical period

Unrelated Diversification-

business adds new or unrelated product lines or markets

Related Diversification-

business adds or expands its existing product lines or markets Benefits-

o Reasons to integrate vertically:

can expand a firm's range of activities. Access to new markets, access to more efficient production, can control quality of production, supply, amount of production and supply.

Barriers to entry:

capital, big companies already set up, laws and regulations, existing brand preferences, economies of scale, little distribution access or cost disadvantages