Strategic & Entrepreneurial Thinking Midterm

Economies of Scale

cost advantages that accrue to firms with larger output

Social Complexity

describes situations in which different social and business systems interact

Customer switching costs

incurred by moving from one supplier to another

Rare

only one or a few firms possess the resource

resource immobility

resources tend to be "sticky" and don't move easily from firm to firm

Casual Ambiguity

the cause and effect of a phenomenon are not readily apparent

The perceived value that a company creates for consumers less the company's costs to create the value equals ______.

the economic value created

Network effects

the positive effect that one user of a product or service has on the value of that product for other users

An intended strategy is the outcome of a plan that has which of the following characteristics?

-Rational -Top-down -Structured

What should a vision do for an organization?

-Should inspire employees -Should make employees feel like their work is important

Analysis (AFI Framework)

-Strategic Leadership and the Strategy Process -External + Internal Analysis -Competitive Advantage, Firm Performance and Business Models

Aims of stakeholder strategy

-To manage various stakeholders effectively -To gain and sustain competitive advantage

Scenario Planning

-What-if questions -Top-down -Derive strategic responses to possible future changes

When a firm implements a strategy that leads to superior performance relative to other companies in the same industry, it is said to have achieved ______.

Competitive advantage

A statement of guiding principles that typically provides very specific ethical considerations is a(n) ______.

Core values statement

What must a firm do after diagnosing its specific competitive advantage?

Create an effective guiding policy

First step in strategic management process

Define the organizations: 1. Vision 2.Mission 3.Values

What is one of the benefits of pursuing a differentiation strategy when it comes to the power of suppliers?

Differentiation provides protection against an increase in input prices.

VRIO Framework

Value, Rarity, Imitability, Organization

Values

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

Vision

What do we want to accomplish ultimately?

Power of stakeholder

When a stakeholder is able to influence the company to do something it would otherwise not do

path dependence

a process in which the options one faces in a current situation are limited by decisions made in the past. Often, early events or random ones have a significant effect on final outcomes

During the shakeout stage of the industry life cycle, profits degrade for ______.

all but the most efficient firms

3 Value drivers

-Product features -Customer service -Complements

Stake holder impact analysis can help a company do :

-Act as a good corporate citizen -Achieve a competitive advantage

Factors that determine the intensity of rivalry

-Competitive industry structure -Industry growth -Strategic commitments -Exit barriers

Factors that increase buyer power:

-Few buyers and each buyer purchases large quantities relative to of the size of a single seller -Industry's products are standardized or undifferentiated -Buyers face low or no switching costs Buyers can credibly threaten to backwardly integrate into the industry

Oligopoly

-Few(large) Firms -Some pricing power -differentiated product -high entry barriers

monopolistic competition

-Many firms -Some pricing power -differentiated product -medium entry barriers

Monopoly

-One firm

Three most important stakeholder attributes to pay attention to

-Power -Urgency -Legitimacy

Perfect Competition

-many small firms -firms are price takers -commodity product -low entry barriers

5 steps of stakeholder analysis

1. Who are our stakeholders? 2. What are our stakeholders' interests and claims? 3. What opportunities and threats do our stakeholders present? 4. What legal, ethical, and philanthropic responsibilities do we have to our stake holders? (CSR framework) 5. What should we do to effectively address the stakeholder concerns?

Power of suppliers

1.Powerful suppliers can raise the cost of production by demanding higher prices for their inputs or by reducing the quality of the input factor or service level delivered 2.Powerful suppliers are a threat ton firms because they reduce the industry's profit potential by capturing a part of the economic value created.

Porter's Five Forces

1.Threat of entry 2. Power of suppliers 3. Power of Buyers 4. Threat of Substitutes 5. Rivalry among existing competitors

Organized to capture value

A firm must have in place an effective organizational structure and coordinating systems

AFI Framework

Analysis, Formulation, Implementation

advantages independent of size

Brand loyalty, preferential access, favorable locations, cumulative learning and experience

resource heterogeneity

Bundles of resources and capabilities differ across firms

Formulation (AFI Framework)

Business strategy, corporate strategy and global strategy

Comptetitive industry structure

Captured by: -number and size of competitors -degree of pricing power -type of product/service -height of entrance barriers

Government Policy

Government policies restrict or prevent new entrants

Mission

How do we accomplish our goals?

Capital requirements

How much capital is required to compete in this industry

Business-level strategy addresses which overarching question?

How should we compete?

Confirmation Bias

Individuals search only for information that confirms their existing beliefs and ignore evidence that contradicts those beliefs.

Which of the following tend to result from strong competitive rivalry?

Limits to the industry's profit potential

Threat of substitutes

Meet the same basic customer needs as the industry's product but in a different way. Products meet the needs but come from outside the industry

Implementation (AFI Framework)

Organizational Design, Corporate Governance and Business Ethics

Rivalry among existing competitors

Other four forces all exert pressure on this, stronger the forces, the stronger this threat is

Credible threat of retalitation

Potential entrants must anticipate how incumbent firms will react (price wars)

______ are the firm's current level of intangible resources.

Resource stocks

Individuals or groups who own shares of a company's stock

Share Holders

The groups or individuals who can impact or be impacted by a firm's actions are known as ______.

Stake Holders

Effective guiding policy is supported by and stays consistent through the use of ______.

Strategic commitments

What are autonomous actions?

Strategic initiatives that lower-level employees undertake of their own volition, often in response to unanticipated events

The power of buyers

The pressure an industry's customers can put on the producer's margins by demanding a lower price or higher product quality

Strategy

The set of actions a firm takes to achieve a competitive advantage

Which theory proposes that when faced with decisions, we tend to satisfice rather than optimize?

Theory of bounded rationality

A resource is considered ______ if it helps a firm to deal with an external threat.

Valuable

Entry Barriers

economies of scale, network effects, customer switching costs, capital requirements, advantages independent of size, government policy, credible threat of retaliation

Valuable resource

enables the firm to exploit an external opportunity or offset an external threat. Enables firm to increase its economic value

The concept of a(n) ______ attempts to combine both learning effects and process improvements.

experience curve

Costly to imitate

firms that do not possess the resource are unable to develop or buy the resource at a reasonable price

Which are the four steps of the innovation process?

idea innovation invention imitation

A firm that successfully leverages network effects can ___

push its industry into the growth stage

Threat of entry

risk of potential competitors entering the industry. Depresses profit potential by: 1. Reducing industry overall profitability - incumbent firms might reduce prices to make it look less attractive to potential new competitors. 2. Increases spending among incumbent firms to satisfy existing customers

Economies of Scope

savings that come from producing two or more outputs at less cost than producing each output individually

Long Tail

when companies can obtain a large part of their revenues by selling a small number of units from almost unlimited units