Strategic Mgmt Ch 3
When mapping strategic groups, focus on 3 factors:
- identify most important strategic dimensions (e.g. R&D expenditures) - choosing two key dimensions for horizontal and vertical axes to expose differences b/w competitors - graph the firms, indicating each firm's market share by size of bubble
most important strategic dimensions in identifying strategic groups
- product and service offerings - pricing - expenditures on R&D
examples of economies of scale
- spreading fixed costs over more units - benefit from a more specialized division of labor - more negotiating power vis-a-vis suppliers
Porter's Five Forces
Threat of new entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers, rivalry among existing competitors
strategic position
ability to create value for customers while containing cost
advantages incumbent firms possess independent of size:
brand loyalty, proprietary technology, preferential access to raw materials and/or distribution channels, favorable geographic locations, cumulative learning and experience effects
production costs are increased when
buyers demand higher quality and more service
ogliopolistic industry
consolidated w/ a few (large) firms, differentiated products, high barriers to entry, some degree of pricing power
co-opetition
cooperation by competitors to achieve a strategic obj, like Google and Samsung to combat Apple
when a company is a complementor to your company
customers value your product more when they can use it with the other company's product
deflation is a threat to economic growth b/c:
distorts expectations about the future and companies will stop investing in new production b/c they anticipate further price declines
exit barriers are composed of 2 factors
economic and social
sources of barriers of entry
economies of scale, network effects, customer switching costs, capital requirements, adv. independent of size, gov't policy, credible threat of retaliation
the Eurozone was originally created to
ensure continued peace and prosperity in Europe
although _____ coordination such as price fixing is illegal in the US, _____ coordination such as "an unspoken understanding" is not
explicit, tacit
perfect competition industry
fragmented w/ many small firms, a commodity product, ease of entry, little or no ability for each firm to raise prices
managers have less direct influence over external forces in the firm's _________ than those in the firm's _________
general environment, task environment
Why Five forces model was developed
help managers understand profit potential of different industries and how to position firms to gain comp. adv.
low/high exit barriers lead to intense rivalry?
high
hub-and-spoke model
high fixed costs, increased rivalry
stronger the 5 forces the (higher/lower) the industry's profit potential
lower
monopolistically competitive industry
many firms, differentiated product, some obstacles to entry, ability to raise prices for a unique product while retaining customers
economic growth rate
measure of the change in the amt of goods and services produced by nation's economy
switchiing costs
moving from one supplier to another
monopoly
one seller that offers unique product and high barriers to entry
4 main competitive structures
perfect competition, monopolistic competition, oligopoly, monopoly
PESTEL
political, economic, sociocultural, technological, ecological, legal
network effects
positive effect that one user of a product or service has on the value of that product or service for other users (e.g. Ebay)
tactics indicative of an industry w/ slow or negative growth
price discounts, frequent new product releases w/ minor modifications, intense promotional campaigns
mobility barriers
restrict movement b/w groups. In airline industry, offering international routes to restrict movement b/w hub-and-spoke and point-to-point airlines
shortcomings of strategic group model
static, doesn't show why there are performance differences among firms in the same strategic group
industry convergence
the process by which formerly unrelated industries begin to satisfy the same customer need
backward integration
when a buyer moves upstream in the industry value chain into the seller's business