Strategic Management Exam 1, 1. Strategic Management and Strategic Competitiveness, Strategic Leadership, Strategic management Chapter 2, Strategic Management - Chapter 3
Resource based model of above average returns
assumes that each organization is a collection of unique resources and capabilities. Resources -> Capabilities -> Competitive Advantage -> An attractive industry -> strategy formulation and implementation -> Superior returns
drivers of competitive behavior
awareness, motivation, ability
Porter Five Forces of Competition Model
bargaining power of suppliers, threats of new entrants, bargaining power of customers, threats of substitutes, competitive rivalry with the industry
Slow-cycle markets
Competitve advantages are shilded from imitation for long periods of time. I.e.: Disney's Copyrights
Awareness
The extent to which competitors recognize the degree of their mutual independence that results from market commonality and resource similarity
Economics of Scope
Cost savings that occur when a firm transfers capabilites and competencies developed inone of its businesses to another of its businesses
Financial economies
Create value through efficient internal capital allocations and purchase of other corporations and "restructuring of assets" (get rid of underperformers)
The Challenge of Internal Analysis
Decisions are Are non-routine, Have ethical implications, Significantly influence the firm's ability to earn above-average returns.
Seven Segments of the general envrionment
Demographic Economic Political/legal Sociocultural Technological Global Physical
Risks associated with using business-level strategy
Depends on the strategy; i.e.: low cost is risk because of lower quality OR distinctiveness can lead to being "too expensive"
Value Chain Analysis
Determining each stage of the value chain activities to seeif they add value
Resource similarity
The extent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount
motivation
The firm's incentive to take action or to respond to a competitor's attack, relate to perceived gains and losses
Large diversified businesses often face what is known as the "conglomerate discount." This discount means that investors:
believe that the value of conglomerates is less than the value of the sum of their parts.
The communications industry is broadly defined as encompassing all of the following EXCEPT:
book retailers
Which of the following is NOT a value-creating activity associated with the differentiation strategy?
Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency.
Nonsubstitutable Capabilities
capabilities that do not have strategic equivalents based on - Firm-specific knowledge -Organizational culture -Superior execution of the chosen business model
Rare Capabilities
capabilities that few if any competitors possess
Costly to imitate
capabilities that other firms cannot easily develop because of historical, ambiguous cause, and social complexity
Multimarket competition occurs when firms:
compete against each other in several geographic or product markets.
demographic segment
concerned with a pop size, age structure, geographic distribution , ethnic mix and income distribution.
Market commonality
concerned with the number of markets with which thefirm and a competitor are involved
Greenleaf Property Management has been earning below-average returns for the last three years. Which one of the following statements is true?
Greenleaf will not be able to minimally satisfy all stakeholders.
Dragonfly, publishers of children's books, has purchased White Rabbit, another publisher of children's books. Both companies' books are sold to the same retail stores and schools. Their content is different because Dragonfly produces children's literature, whereas White Rabbit focuses on child-level nonfiction scientific and nature topics. Which of the following statements is probably TRUE about this acquisition?
This is a horizontal acquisition.
Political segment
The arena in which organizations and interest groups compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations
Strategic Group
a set of firms emphasizing similar strategic deme signs and using a similar strategy
strategic group
a set of firms emphasizing similar strategic dimensions and using a similar strategy.
Mutual forbearance is:
a type of competition-reducing strategy.
Business-level strategy
an integrated and coordinated set of commitments set and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
value chain activities
are activities or tasks the firm completes in order to product products and then sell, distribute, and service those products in ways that create value for customers.
Core competencies
are capabilities that serve as a source of competitive advantage for a firm over its rivals
complements
are companies or networks of companies that sell complementary goods that are compatible with the local firm's good or service.
Corporate-level core competencies
are complex sets of resources and capabilities that link different businesses, primary through managerial and technological knowledge, experience and expertise.
It is important to emphasize that almost all strategic management process decisions have ______ because they are related to how a firm interacts with its stakeholders.
ethical dimensions
Vertical Integration
exists when a company produces its own inputs (backwards integration) or owns its own source of output distribution (forward integration)
Market Power
exists when a firm is able to sell its product above the existing competitive level or to reduce the costs of its primary and support activities below the competitive level, or both.
quality
exists when the firm's goods or services meet or exceed customers' expectations.
Synergy
exists when the value created by business units working together exceeds the value that those same units create working independently.
Multipoint competition
exists when two or more diversified firms simultaneously compete in the same product areas or geographical markets.
Competitors
firms operating in the same market, offering similar products, and targeting similar customers
McDonald's, Hilton International, and Subway all heavily rely on the ____ strategy.
franchising cooperative
integrated cost leadership/differentiation strategy
involves engaging in primary value-chain activities and support functions that allow a firm to simultaneously pursue low cost and differentiation
social captial
involves relationships inside and outside the firm that help in efforts to accomplish tasks and create value for stakeholders.
market commonality (pg. 148)
is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
The use of strategic alliances:
is more frequent than other types of cooperative strategies.
Global economy
is one of which goods, services, people, skills, and ideas move freely across geographic borders
market segmentation
is process used to cluster people with similar needs into individual and identifiable groups
strategic leadership
is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.
resource similarity (pg. 148)
is the extent to which the firm's tangible and intangible resources are comparable to a competitor's in terms of both type and amount.
Strategic management process
is the full set of com- mitments, decisions, and actions required for a firm to achieve strategic competitive- ness and earn above-average returns.
Globalization
is the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders. Globalization is a product of a larger number of firms competing against one another in an increasing number of global economies.
Competitive rivalry
is the ongoing set of competitive actionsand competitive responses that occur among firms as they maneuver for market position
BP, in response to the Deepwater Horizon oil spill, expected increased scrutiny from which of the following segments of the general environment?
political/legal
Using a single- or dominant business corporate level strategy may be
preferable to seeking a more diversified strategy, unless a corporation can develop economies of scope or financial economies between business, or unless it can obtain market power through additional levels of diversification
All of the following are considered generic business-level strategies EXCEPT:
product diversification.
Support Activities
provide the assistance necessary for the primary activities to take place
outsourcing
purchase of a value creating activity from an external supplier
physical environment segment
referes to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes.
competitive dynamics (pg. 144)
refers to all competitive behaviors- that is, the total set of actions and responses taken by all firms competing within a market.
Corporate-level strategy
specifies actions a firm takes to gain competitive advantage by selecting and managing a group of different businesses competing in different product markets.
Economies of Scope
are cost savings a firm creates by successfully sharing resources and capabilities or transferring one or more corporate-level core competencies that were developed in one of its businesses to another of its businesses.
Financial Economies
are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.
Intangible Resources
assets that are rooted deeply in the firm's history, accumulate over time, and are relatively difficult for competitors to analyze and imitate
Tangible Resources
assets that can be observed and easily quantified
Core Rigidities
the inability to be open to change; may result in from willling to not change a core competency
economic environment
the nature and direction of the economy in which a firm competes or may compete
competitive rivalry (pg. 144)
the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market positions.
The basic types of operational economies through which firms seek value from economies of scope are:
the sharing of value chain activities and support functions.
Global Segment
think International- trade, etc.
What is a dog in The Boston Consulting Group's Market Share/market growth matrix?
"Dogs" are low market share and low growth rate.
Assessing
"How did we do?" and then make changes
Three Primary Stakeholder Groups
Capital Market Stakeholders, Product Market Stakeholders, and Organizational Stakeholders
What is a cash cow in The Boston Consulting Group's Market Share/market growth matrix?
Cash cows have high relative market share and low growth rate.
What are the three value types?
Chain, Shop, Network
Corporate Level Strategy
Company wide, and speicifies actions taken by the firm to gain a competitive advantage by selecting business competing indifferent product markets
Strategic Competitiveness
Compare to strategy of your peers
Primary Activities
involved with a product's physical creation, its sale and distribution to buyers, and its service after the sale
Risk
is an investor's uncertainty about the economic gains or losses that will result from a particular investment.
Factors that are the primary drivers of 21st-century landscape
Globalization and rapid technological change
strategic change
is change brought about as a result of selecting and implementing a firm's strategies
sociocultural segment
society's attitudes and cultural values.
An analysis of society's attitudes and values would be conducted when studying the ______ segment of the general environment.
sociocultural
Dominant Business
A company in which 70-95% of revenue comes from a single business.
Characteristics of Capabilities
-Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state -Emerge over time through complex interactions among tangible and intangible resources -Often are based on developing, carrying and exchanging information and knowledge through the firm's human capital
Core Competencies
-Resources and capabilities that are the sources of a firm's competitive advantage: -Distinguish a company competitively and reflect its personality. -Emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities. -Activities that a firm performs especially well compared to competitors. -Activities through which the firm adds unique value to its goods or services over a long period of time.
The foundation of many capabilities lies in:
-The unique skills and knowledge of a firm's employees -The functional expertise of those employees
What is a question mark or wildcat in The Boston Consulting Group's Market Share/market growth matrix?
"Question marks/wildcats" have low market share but high growth rate.
What is a star in The Boston Consulting Group's Market Share/market growth matrix?
"Stars" have high relative market share and high growth rate.
Stakeholders
- Can affect the development of the firm's vision and mission - Are affected by the strategic outcomes achieved by the firm - Can have enforceable claims on the firm's performance - Are influential when in control of critical or valued resources
Classification of Stakeholders
- Capital market stakeholders: Shareholders and lenders both expect a firm to preserve and enhance the wealth they have entrusted to it. The returns they expect are commensurate with the degree of risk accepted with those investments - Product market stakeholders: Some might think that product market stakeholders (customers, suppliers, host communities, and unions) share few common interests. However, all four groups can benefit as firms engage in competitive battles. - Organizational stakeholders: Employees—the firm's organizational stakeholders—expect the firm to provide a dynamic, stimulating, and rewarding work environment.
Competitive Success Factors: Top Corporate Performers
- Have an entrepreneurial/opportunistic mindset - Are market/ customer-needs oriented - Make effective use of valuable competencies - Offer new and innovative products and services
Five Forces Model of Competition 2/2
- Industry profitability (i.e., rate of return on invested capital relative to cost of capital) is a function of interactions among the five forces. - Industry attractiveness equates to its profitability potential for earning above-average returns by: - producing standardized goods or services at costs below competitor costs (a cost leadership strategy). - producing differentiated goods or services for which customers are willing to pay a price premium (a differentiation strategy).
Global Competitive Landscape (Increasing)
- Market volatility and instability due to the rapid pace of change in markets - Blurring of market boundaries - Globalized flow of financial capital - Need for flexibility, speed, innovation, and integration in the use of technology - Strategic and operational complexity of global-scale competition - Rising product quality standards
The Resource-Based Model of Above-Average Returns 2/3
- Resources are inputs into a firm's production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers. In general, a firm's resources are classified into three categories: physical, human, and organizational capital. Described fully in Chapter 3, resources are either tangible or intangible in nature. Individual resources alone may not yield a competitive advantage. In fact, resources have a greater likelihood of being a source of competitive advantage when they are formed into a capability. - A capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. Capabilities evolve over time and must be managed dynamically in pursuit of above-average returns.80 Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals. - -- Core competencies are often visible in the form of organizational functions. For example, Apple's R&D function is likely one of its core competencies. There is little doubt that its ability to produce innovative new products that are perceived as valuable in the market- place is a core competence for Apple, as suggested in the earlier Strategic Focus.
I/O Model Assumptions
- The external environment imposes pressures and constraints that determine strategic choices. - Similarity in strategically relevant resources causes competitors to pursue similar strategies. - Resource differences among competitors are short-lived due to resource mobility across firms. - Strategic decision makers are rational and engage in profit-maximizing behaviors.
Global Competitive Landscape (Decreasing)
- Traditional time for adapting to change - Traditional sources of competitive advantage - Traditional managerial mindset
Strategic options in hypercompetitive environments
- Use of price-quality positioning to build market presence - Creation of new know-how and use of first-mover advantage - Protection or invasion of established geographic or product markets
Characteristics of Resources
-Are the source of a firm's capabilities. -Are broad in scope. -Cover a spectrum of individual, social and organizational phenomena. Alone, do not yield a competitive advantage.
To develop and use core competencies, managers must have:
-Courage -Self-confidence -Integrity -The capacity to deal with uncertainty and complexity -A willingness to hold people (and themselves) accountable for their work
What are some barriers of entry?
-Economies of scale -Product differentiation -capital requirements -switching costs -access to distribution channels -cost disadvantages independent of scale -government policy
Related Contrained
-Less than 70% of forms of sales from dominant busines, and all business share products, technology, and distirbution
Five forces of competition
1. Competitive rivarlry 2. Bargaining power of suppliers 3. Bargaing power of buyers 4. Threat of new entrants 5. Substitutes
The Resource-Based Model of Above-Average Returns 3/3
1. Firms acquire different resources. 2. Firms develop unique capabilities based on how they combine and use resources. 3. Resources and certain capabilities are not highly mobile across firms. 4. Differences in resources and capabilities are the bases of competitive advantage and a firm's performance rather than its industry's structural characteristics.
The external environment has 3 major parts
1. General environment (segments and elements in the broader society that affect industries and the firms competing in them) 2. The industry environment (factors that influence a firm, its competitive actions and responses, and the responses, and the industry's probability potential) 3. The competitor environment (in which the firm analyzes each major competitor's future objectives, current strategies, assumptions, and capabilities)
What's a product's life cycle
1. Introduction 2. Growth 3. Maturity 4. Decline
Five Forces Model of Competition 1/2
1. Substitutes 2. Buyers 3. Potential Entrants 4. Suppliers 5. Industry Rivalry The five forces model suggests that an industry's profitability (i.e., its rate of return on invested capital relative to its cost of capital) is a function of interactions among five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitutes, and potential entrants to the industry.
Technology and Technological Changes
1. Technology diffusion and disruptive technologies 2. The information age 3. Increasing knowledge intensity
Today's competitive markets (4)
1. The Global Economy 2. Globalization 3. Rapid Technological Change 4. Increasing Importance of Knowledge and People The globalization of industries and their markets and rapid and significant technological changes are the two primary factors contributing to the turbulence of the competitive landscape.
Single Business
95% or more of revenue comes from a single business (Soutwest)
Core Competence
A source of competitive advantage
Vision Statement
A successful vision: is an enduring word picture of what the firm wants to be and expects to achieve in the future. stretches and challenges its people. reflects the firm's values and aspirations. is most effective when its development includes all stakeholders. recognizes the firm's internal and external competitive environments. is supported by upper management decisions and actions. Ex: Our vision is to be the world's best quick service restaurant. (McDonald's) To make the automobile accessible to every American. (Ford Motor Company's vision when established by Henry Ford)
Outsourcing
Allowing another firm to take over a portion of your business operation
Mission Statement
An effective mission: specifies the business or businesses in which the firm intends to compete and customers it intends to serve. has a more concrete, near-term focus on current product markets and customers than the firm's vision: it may change over time. should be inspiring and relevant to all stakeholders. Be the best employer for our people in each community around the world and deliver operational excellence to our customers in each of our restaurants. (McDonald's) Our mission is to be recognized by our customers as the leader in applications engineer- ing. We always focus on the activities customers desire; we are highly motivated and strive to advance our technical knowledge in the areas of material, part design and fabrication technology. (LNP, a GE Plastics Company) It can change over time...
Business level strategy
An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
Tactical Competitive Action
Any action that is going to take less than a year
Strategic Competitive Action
Any action that is going to take longer than a year
Sociocultural Segment
Behavior, movements like the green movement/ health foods
The Resource-Based Model of Above-Average Returns 1/3
Building competitive advantage 1. Resources Physical, human, and organizational capital (tangible and intangible) 2. Capability An integrated set of resources 3. Core Competence A source of competitive advantage
How does a firm create value?
By focusing on the market
The Information Age
Dramatic changes in information technology have occurred in recent years. Personal computers, cellular phones, artificial intelligence, virtual reality, and massive databases (e.g., Lexis/Nexis) are a few examples of how information is used differently as a result of technological developments. An important outcome of these changes is that the abil- ity to effectively and efficiently access and use information has become an important source of competitive advantage in virtually all industries.
What are 2 ways to accomplish successful unrelated diversification
Efficiently allocating resources or Restructuring a target firm's assets and placing them under rigorous financial controls. Firms using the unrelated diversification strategy focus on creating financial economies to generate value.
Organizational Stakeholders
Employees Managers Nonmanagers
Organizational Stakeholders
Employees and Managers
Which of the following is an example of a strategic action?
Entry into the European market by Home Depot
Demographic Segment
Ethnicity, age, gender, etc.
Examples of Support Activities
Firm infrastructure, human resource management, technological development, procurement
Fast-cycle markets
Firm's capabilities that contribute to competitive advantages aren't shilded from imitation and where imitation is often rapid and inexpensive
Related diversification
Firms create value by building upon or extending resources, capabilities, and core compentencies
Resources As Core Competencies
How recourses become core competencies? 1. Costly to imitate 2. Rare 3. Valuable 4. Non substitutable
Which company below committed significant resources to enter the information services market and, given its success, was imitated by other competitors?
IBM
Examples of value-neutral reasons that firms choose to become more diversified
Incentives from tax and antitrust government policies, low performance, or uncertainties about future cash flow-- Diversification is sometimes pursued for value-neutral reasons.
capability
Integrated set of resources
Increasing Knowledge Intensity
Knowledge (information, intelligence, and expertise) is the basis of technology and its application. In the 21st-century competitive landscape, knowledge is a critical organiza- tional resource and is increasingly a valuable source of competitive advantage.59 Indeed, starting in the 1980s, the basis of competition began shifting from hard assets to intan- gible resources. For example, "Wal-Mart transformed retailing through its proprietary approach to supply chain management and its information-rich relationships with cus- tomers and suppliers."60 Relationships are an example of an intangible resource.
Related Linked
Less than 70% of revenue comes from dominant business and there are only limited links between businesses
Unrelated Diversification
Less than 70% revenue from dominant business, and there are no common links between businesses (Virgin)
Industrial organizational model
Look at the external model and determine how it is doing compared to the competition and choose an industry that has high profit margins if you want to see high returns
Scanning
Looking at trends, studying them (continuous)
Monitoring
Looking for Changes
Internal incentives to diversify
Low performance, uncertain future cash flows, synergy and firm risk reduction
Three levels of diversification
Low, Moderate to high, and Very High
Motives for managers to overdiversify
Managerial risk reduction, desire for increased compensation, build personal performance reputation, value creation, value neutral, and value reduction
Value
Measured by a product's performance characteristics and by its attributes for which customers are willling to pay
Standard Cycle
Moderate cost of limiation, may shield competitive advantages and competitive advantages are partially sustainable if their quality is continuously upgraded
Organizational Size: Small
More likely to launch competitive actions and be quicker doing so; they are perceived as nimble and flexible; Rely on speed and surprise to defend competitive advantage
General Enivronment
More macro i.e. future focus
Industry Environment
More micro i.e. specific
___ relates to the gains or losses a firm will experience if it attacks a rival or responds to an attack by a rival.
Motivation
Intangible Resources
Nonphysical assets, such as patents, trademarks, copyrights, goodwill and brand recognition,
Ethical Info Gathering
Obtaining publicly available information, attending trade fairs to obtain competitors brochures, viewing their exhibits, and listening to discussions about their products
SWOT External
Opportunity and Threats
Resources
Physical, human, and organizational capital
How can each one of the business level strategies be used to position the firm relative to the five forces of competition in a way that helps the firm earn above-average returns?
Pressure extended to and from company in different ways
Product Market Stakeholders
Primary customers Suppliers Host Communities Unions
Forecasting
Projecting what you think will happen
Moderate to High Diversifiaction
Related Constrained and Related Linked
Process of Sustainable advantages
Resources lead to capabilities which lead to core competencies which lead to competitive advantage which leads to strategic competitiveness
Late mover incentives
Respond with a significant amount of time after First-movers and Second-movers
External Analysis Process
Scanning Monitoring Forecasting Assessing
What are four parts of the external analysis process?
Scanning, monitoring, forecasting, and assessing. Effectively using the process helps the firm in its efforts to identify opportunities and threats.
Market power exists when a firm can:
Sell its products above the existing competitive level and/or reduce cost of its primary and suppor activities below the competitive level
Capital Market Shareholders
Shareholders Major suppliers of capital
Low Diversification
Single business and Dominant Business
Stakeholder
Someone who is affected or may be affected by an organization
Resource-based model
Start with RESOURCES, then to CAPABILITY and then to CORE COMPENTENCE
Capital Market Stakeholders
Stockholders, investors, and banks
The Work of Effective Strategic Leaders
Strategic Leaders: have a strong strategic orientation that relies on thorough analysis when taking action. are located at various levels throughout the firm. want the firm and its people to accomplish more. are innovative thinkers who promote innovation. can leverage relationships with external parties while simultaneously promoting exploratory learning. have an global mindset approach to management.
Two types of competitive action
Strategic and Tactical
SWOT Analysis
Strength, Weaknesses, Opportunities, Threats
SWOT Internal
Strengths and Weaknesses
Above Average Returns
Striving to be better
Product Market Stakeholders
Suppliers, retailers, consumers, and distributors
Technological Segment
The Institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and material
The I/O Model of Above-Average Returns - I/O (Industrial Organization)
The model specifies that the industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations. The firm's performance is believed to be determined primarily by a range of industry properties, including economies of scale, barriers to market entry, diversification, product differentiation, and the degree of concentration of firms in the industry. - External Environment - Attractive Industry - Strategy Formulation - Assets and Skills - Strategy Implementation - Superior Returns
Economic environment
The nature and direction of the economy in which a firm competes
Technology Diffusion and Disruptive Technologies
The rate of technology diffusion—the speed at which new technologies become avail- able and are used—has increased substantially over the last 15 to 20 years. Consider the following rates of technology diffusion: It took the telephone 35 years to get into 25 percent of all homes in the United States. It took TV 26 years. It took radio 22 years. It took PCs 16 years. It took the Internet 7 years. Disruptive technologies—technologies that destroy the value of an existing tech- nology and create new markets52—surface frequently in today's competitive markets. Think of the new markets created by the technologies underlying the development of products such as iPods, PDAs, WiFi, and the browser.
Why is it critical for the firm to create value?
To understand how the customer defines value
Competitive Dynamics
Total set of actions and responses take by all firms competing within a market
Context of Internal Analysis
Traditional Factors = labor costs, access to money, access to materials, protected or regulated markets Global mind set is important Look at bundles of heterogeneous resources (things your competitor doesn't have) Create leverage
Factors affecting liklihood of response
Type of competitive action, reputation of the actor, and how dependent are you on that market
Conditions affecting managerial decisions are
Uncertain, Complex, intraorganizational conflicts
Strategy
Understanding resources and how to develop and execute a plan
Very High Diversification
Unrelated Diversification
Four criteria of Sustainable Advantages
Valuable Rare Costly to imiate non-Substitutable
Four criteria of Sustainable Advantages
Valuable, Rare, Costly to imitate, nonsubstitutable
Relationship between a firm's customer and Business level Strategy
Who: customer. Defined by segmentation, demographics, etc. What: products needs that are satisfied How: using core compentencies
opportunity
a condition in the general environment that is exploited effectively helps a company reach strategic competitiveness.
threat
a condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness.
industry
a group of firms production products that are close substitutes.
By examining the ____ of Southwest Airlines, one can identify the strategic themes around which it has developed its business strategy. These themes include limited passenger service, high aircraft utilization, and highly productive ground and gate crews.
activity map
First-Mover Incentives
allocate funds for product innovation and development, aggressive advertising, advanced research and development, and Brand loyalty
Valuable Capabilities
allow the firm to exploit opportunities or neutralize threats in its external environment
Anti-trust legislation
an attempt to keep an industry from being consolidated so much that it is controlled by only a few players and tax laws
Competitors (pg. 144)
are firms operating in the same market, offering similar products and targeting similar customers.
Fast-cycle markets
are markets in which the firm's capabilities that contribute to competitive advantages aren't shielded from imitation and where imitation is often rapid inexpensive.
standard-cycle markets
are markets in which the firm's competitive advantages are partially shielded from imitation and imitation is moderately costly.
slow-cycle markets
are markets in which the firm's competitive advantages are shielded from imitation, commonly for long periods of time, and where imitation is costly.
average returns
are returns equal to those an investor expects to earn from other investments with a similar amount of risk
Average Returns
are returns equal to those an investor expects to earn from other investments with a similar amount of risk.
Above-average returns
are returns in excess of what an 5 investor expects to earn from other investments with a similar amount of risk.
above average returns
are returns in excess of what an investor expects to earn from other investments with a similar amount of risk
Certain regulatory changes (such as antitrust regulation and tax laws) create incentives or disincentives for diversification that:
are value-neutral.
The primary reason a firm uses a corporate-level strategy to become more diversifies is to
create additional value
What are the three value logics?
customer intimacy, operational excellence, product leadership
A differentiation strategy can be effective in controlling the power of substitutes in an industry because:
customers develop brand loyalty.
Intensified rivalry within an industry results in:
decreased average profitability across the industry.
General environment
demensions in the broader that influence an industry and the firms within it.
Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises "equal price" for all customers. Signature Cleaners appeals to women, which is market segmentation by ______ factors.
demographic
market dependence
denotes the extent to which a firm's revenue or profits are derived from a particular market.
Business Level Strategy
detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets.
As the threat of corporate failure increases due to relatedness between a firm's business units, firms may decide to:
diversify into less risky environments.
Unethical info gathering
eavesdropping, stealing, blackmailing, etc.
The I/O model is grounded in:
economics
Firms that have selected a related diversification corporate-level strategy seek to exploit:
economies of scope between business units
Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n):
equity strategic alliance.
New Jersey and New York have the highest state taxes in the United States. They also have high ratios of people moving out compared to people moving into the state. This impacts the ______ aspect of demographic analysis.
geographical distribution
Synergy exists when:
he value created by business units working together exceeds the value the units create when working independently.
The related diversification corporate-level strategy
helps the firm create value by sharing activities of transferring competencies between different businesses in the company portfolio
competitor analysis
how companies gather and interpret information about their competitors
Tangible Resources
include both fixed assets, such as machinery, buildings and land, and current assets, such as inventory.
A nationwide chain of pet stores wishes to identify the tradeoffs that its customers are willing to make between low-cost products such as generic pet foods and differentiated features such as pick-up and delivery of pets for grooming. The best technique for this firm to learn this information would be to use:
information networks.
Creating Value
innovatively bundling and leveraging their resources and capabilities. This is the source of above average returns for the firm
technological segment
institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, process and materials.
FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should:
internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.
Transferring core competencies
involves transferring core competencies developed in one business to another business. It also may involve transferring competencies between the corporate headquarters office and a business unit. Is often associated with related linked (or mixed related and unrelated) diversification, although firms pursuing both sharing activities and transferring core competencies can also use the related linked strategy.
later mover
is a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response.
second mover
is a firm that responds to the first mover's competitive action, typically through imitation.
first mover
is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position.
strategic action/strategic response
is a market-based move that involves a significant commitment of organization resources and is difficult to implement and reverse.
tactical action/tactical response
is a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse.
Strategic flexibility
is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment. Involves coping with the uncertainty and risks of hypercompetitive environments. Must first overcome built-up organizational inertia. Requires developing the capacity for continuous learning and applying the new and updated skills sets and competencies to the firm's competitive advantage.
A firm's mission:
is a statement of a firm's business in which it intends to compete and the customers it intends to serve.
Competitive action
is a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position.
competitive response
is a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action.
A cooperative strategy:
is a strategy in which firms work together to achieve a shared objective
balanced scorecard
is a tool firms use to determine if they are achieving an appropriate balance when using strategic and financial controls as a means of positively influencing performance
Strategic competitiveness
is achieved when a firm successfully formulates and implements a value-creating strategy.
Strategy
is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
differentiation strategy
is an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
focus strategy
is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
cost leadership strategy
is an integrated set of actions to product goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.
competitive behavior (pg. 144)
is the set of competitive actions and responses a firm takes to build or defend its competitive advantages and to improve its market position.
competitor intelligence
is the set of data and information the firm gathers to better understand and anticipate competitors' objectives, strategies, assumptions and capabilities.
Activity sharing negatives:
it's costly to implement and coordinate, may create unequal benefits for the divisions involved in the sharing, and can lead to fear managerial risk-taking behaviors
In general, compared with firms which compete in only one market, among firms which face one another in multiple markets there is:
less competitive rivalry.
A company using a narrow target market in its business strategy is:
limiting the group of customer segments served.
According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT:
low barriers to entry.
Competitors are more likely to respond to competitive actions that are taken by:
market leaders.
value
measured by a product's performance characteristics and by its attributes for which customers are willing to pay.
Value
measured by a products performance characteristics and by its attributes for which customers are willing to pay
Firms use the integrated cost leadership/differentiation strategy because:
most consumers want to pay a low price for products with somewhat highly differentiated features.
A general environmental analysis can be expected to produce all of the following EXCEPT:
objective answers.
multimarket competition (pg. 144)
occurs when firms compete agains each other in several product or geographic markets
J.C. Penney attempted the strategy ______ . But it couldn't out ______ Walmart, nor could it ______ Macy's and Target.
of integrated cost leadership; price; compete with
Global economy
one in which goods, services, people, skills, and ideas move freely across geographic borders. Relatively unfettered by artificial constraints, such as tariffs, the global economy significantly expands and complicates a firm's competitive environment.
product quality dimensions
performance, features, flexibility, durability, confromance, serviceability, aesthetics, perceived quality
PESTEL Analysis
political, environmental, social, tech, economic, legal
Awareness
refers to the extent to which competitors recognize the degree of their mutual interdependence that results from market commonality and resource similarity. Awareness affects the extent to which the firm understands the consequences of its competitive actions and responses. Tends to be greatest when firms have highly similar resources.
human capital
refers to the knowledge and skills of a firm's entire workforce. From the perspective of human capital, employees are viewed as a capital resource requiring continuous investment.
Ability
relates to each firm's resources and the flexibility these resources provide
Ability
relates to each firms resources and the flexibility they provide. Without available resources, the firm is not able to attack a competitor or respond to its actions.
A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ____ advantage.
relational
global segment
relevant new global markets, existing markets that are changing. important international political events, and critical cultural and institutional characteristics of global markets.
Late movers are those firms that:
respond to a competitive action a significant amount of time after the first mover's action and the second mover's response.
Second-Mover Incentive
responds to first movers competitive action, typically through imiatation
Examples of Primary Activities
service, marketing and sales, outbound logistics, operations, inbound logistics
Competitive Behavior
set of competitive actions and responses a firm takes to build or defend its competitive advantags and to improve its market position
industry environment
set of factors that directly influences a fit and its competitive actions and responses. Threats: New entrants, power of suppliers, power of buyers, substitutes and intensity of rivalry among competing firms.
Sharing activities usually involves
sharing tangible resources between businesses. It's usually associated with the related constrained diversification corporate-level strategy.
In some countries, the only legal way for foreign firms to invest in the country is through:
strategic alliance with a local firm.
A firm has achieved ______ when it successfully formulates and implements a value-creating strategy.
strategic competitiveness
A competitive action can be one of two types, either ____ or ____.
strategic; tactical
I/O Model of Above Average returns
suggests that firms can earn above-average returns by producing either standardized goods or services at costs below competitors. External Environment -> An attractive industry -> strategy formulation -> assets & skills -> strategy implementation -> superior returns
Strategic fit among many activities (in an activity map) is fundamental to:
sustainability of a firm's competitive advantage.
Physical Environment Segment
sustainability, physical buildings, etc.
Buyers are powerful when:
switching costs are low
A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance.
synergistic strategic alliance
All of the following are business-level cooperative strategic alliances EXCEPT:
synergistic strategic alliances.
Global mind-set
the ability to analyze, understand and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context
political/legal segment
the arena in which organizations and interest groups compete for attention, resources, and a voice overseeing the body of laws and regulations guiding interactions a,one nations as well as between firms and various local governmental agencies.
A firm is likely to respond to an attack by a competitor in all of the following situations EXCEPT when:
the attack is by a price predator.
service quality dimensions
timeliness, courtesy, consistency, convenience, completeness, accuracy
Counterfeiting goods and exporting them from China is:
unethical and illegal.
Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and energy and infrastructure. HWL makes no efforts to share activities or transfer core competencies among the businesses. HWL is following a strategy of__________diversification.
unrelated
competitive advantage
when a firm implements a strategy that creates superior value for customers and that competitors are unable to duplicate or find it too costly to try to imitate
Competitive Advantage
when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate.
Motivation
which concerns the firm's incentive to take action or to respond to a competitor's attack, relates to perceived gains and losses. A benefit of not having the motivation to engage in rivalry at a point in time with a competitor is that the firm that lacks motivation to compete against another firm retains resources that can be used for other purposes including competing against a different rival.
What is the experience curve
•Expect constant reduction in unit cost of production for each cumulative doubling in experience producing product. •X axis is cumulative units of production •Y axis is direct cost per unit
How do you compete?
•Play the existing game better- lower costs, improve quality, raise productivity, compress time, benchmark •Invent/shape the new game with new rules create new business models, create new industry concepts, create "next practices", exploit "inflection points", challenge orthodoxies