capstone gr 1
3 steps to a good strategy DPI
(1) defining the competitive challenges facing the organization; (2) providing an over arching approach on how to deal with the competitive challenges identified; and (3) effective implementation through a coherent set of actions.
Steps in Stakeholder Impact 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 economic, legal, ethical, and philanthropic responsibilities do we have to our stakeholders? 5. What should we do to effectively address the stakeholder concerns?
Evaluate the two critical assumptions behind the resource-based view.
1. resource heterogeneity: bundles or resources, capabilities, competencies that differ across firms 2. resource immobility: resources tend to be sticky and don't move from firm to firm
Examine how competitive industry structure shapes rivalry among competitors
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strategy as planned emergence
A firm's realized strategy is generally a combination of its top-down intended strategy and bottom-up emergent strategy, resulting in planned emergence.
Assess the risks of a blue ocean strategy, and explain why it is difficult to succeed at value innovation.
A successful blue ocean strategy requires that trade-offs between differentiation and low cost be reconciled. A blue ocean strategy often is difficult because the two distinct strategic positions require internal value chain activities that are fundamentally different from one another.
AFI framework- •(1) explains and predicts differences in firm performance, and (2) helps managers formulate and implement a strategy that can result in superior performance.
Analysis, Formulation, Implementation
Describe the strategic role of complements in creating positive-sum co-opetition
Complement - product, service or competency that adds value to the original product offering when the two are used in tandem Complements increase the demand for the primary product Companies can also be complementors to one another (Apple car play in the Audi) •Co-opetition - cooperation by competitors to achieve a strategic objective
Explain economic value creation and different sources of competitive advantage.
EV= V-C v= buyers willingness to pay
Strategy-
Gaining and sustaining a competitive advantage... A SET OF GOAL DIRECTED ACTIONS A FIRM TAKS TO GAIN AND SUSTAIN SUPERIOR PERFORMANCE RELATIVE TO COMPETITORS
LO 6-3 Examine the relationship between cost drivers and cost-leadership strategy.
In a cost-leadership strategy, the focus of competition is achieving the lowest possible cost position, which allows the firm to offer a lower price than competitors while maintaining acceptable value. Some of the unique cost drivers that managers can manipulate are the cost of input factors, economies of scale, and learning- and experience-curve effects.
Evaluate value and cost drivers that may allow a firm to pursue a blue ocean strategy.
•Successfully combining differentiation & cost-leadership •The metaphor of blue ocean means: •Untapped market space •The creation of additional demand •The opportunity for highly profitable growth •Uses value innovation to reconcile trade-offs •Changes the competitive landscape •Opens up new areas of competition •Requires the firm to: •Reconcile trade-offs •Increasing value •Lowering production costs •Pursue both business strategies simultaneously •Example: Toyota •Introduced lean manufacturing •Delivered higher quality cars at lower cost •
Compare and contrast tangible and intangible resources.
•Tangible resources have physical attributes and are visible. •Intangible resources have no physical attributes and are invisible. •Competitive advantage is more likely to be based on intangible resources.!!!!!!
Apply a balanced scorecard to assess and evaluate competitive advantage.
•The balanced-scorecard approach attempts to provide a more integrative view of competitive advantage. •Its goal is to harness multiple internal and external performance dimensions to balance financial and strategic goals. •Managers develop strategic objectives for the balanced scorecard by answering four key questions: (1) How do customers view us? (2) How do we create value? (3) What core competencies do we need? (4) How do shareholders view us?
LO 6-1 Define business-level strategy and describe how it determines a firm's strategic position.
•The goal-directed actions managers take •To achieve competitive advantage •In a single product market
Apply a triple bottom line to assess and evaluate competitive advantage. (related to stakeholder theory)
•Three dimensions—economic, social, and ecological, also known as profits, people, and planet—make up the triple bottom line. Achieving positive results in all three areas can lead to a sustainable strategy—a strategy that can endure over time. •A sustainable strategy produces not only positive financial results, but also positive results along the social and ecological dimensions.
Outline how dynamic capabilities can enable a firm to sustain a competitive advantage.
•To sustain a competitive advantage, any fit between a firm's internal strengths and the external environment must be dynamic. •Dynamic capabilities allow a firm to create, deploy, modify, reconfigure, or upgrade its resource base to gain and sustain competitive advantage in a constantly changing environment.
Identify competitive advantage as residing in a network of distinct activities.
•To sustain a competitive advantage, firms need to hone, fine-tune, and upgrade their strategic activity systems over time, in response to changes in the external environment and to moves of competitors. •A strategic activity system conceives of a firm as a network of interconnected firm activities.
differentiation strategy
•Unique features that increase value of goods & services •Consumers are willing to pay a higher price •The focus of competition: 1.Unique product features 2.Service 3.New product launches 4.Marketing and promotion
Apply a value chain analysis to understand which of the firm's activities in the process of transforming inputs into outputs generate differentiation and which drive costs.
•When a firm's set of distinct activities is able to generate value greater than the costs to create it, the firm obtains a profit margin (assuming the market price the firm is able to command exceeds the costs of value creation). Each activity the firm performs along the horizontal chain adds incremental value and incremental costs
5 level leadership pyramid HCCEE
•highly capable individual, contributing team member, competent manager, effective leader, and executive.
Sustainable Competitive Advantage:
Outperforming competitors in the industry over a prolonged period of time.
Pyramid of Social Responsibility
Philanthropic Ethical Legal Economic
PESTEL analysis (EXTERNAL)
Political: Processes and actions of government bodies (taxes, minimum wage, etc) Economic: Largely macro-economic factors (economic growth rates, unemployment, interest rates) Sociocultural: Societies cultural norms, demographic trends Technological: Innovations in product technology, application of knowledge to create new products and processes Ecological: Environmental issues (global warming) which can also provide business opportunities Legal: Official outcomes of political processes (laws, mandates, regulations)
resources
Resources are any assets that a company can draw on when crafting and executing strategy.
value chain: (horizontal)
The value chain describes the internal activities a firm engages in when transforming inputs into outputs
Apply Porter's five competitive force to explain the profit potential of different industries TBBTR
Threat of new entrants Bargaining power of buyers Bargaining power of suppliers Threat of substitutes products or services Rivalry among existing competitors
Competitive Disadvantage:
Underperformance in an industry when compared to competitors. Competitive Party: Performance of two or more firms at the same level.
VRIO framework: basis of competitive advantage....
Valuable: if resource gives opportunity to take advantage of ext opportunity or neutralize ext threat Rare: if # of firms that have resource is less than number of firms for perfect competition Costly to Imitate: if firms that don't have it are unable to buy or develop the resource at a comparable cost Organized: if firm is organized to capture its value
Explain the five choices required for market entry
Who are the key players? (Identify competitors and stakeholders) When in the industry life cycle should you enter? (Intro, growth, maturity, decline) How do we enter and what type of barriers do we need to breakdown? (find a niche market) What type of entry? (Product or service model) Where to enter? (Consider pricing strategy)
Competitive Advantage:
a firm that achieves superior performance relative to other competitors in the same industry or the industry average
5.2 Apply shareholder value creation to assess and evaluate competitive advantage.
•Investors are primarily interested in total return to shareholders, which includes stock price appreciation plus dividends received over a specific period. •Total return to shareholders is an external performance metric; it indicates how the market views all publicly available information about a firm's past, current state, and expected future performance. •Applying a shareholders' perspective, key metrics to measure and assess competitive advantage are the return on (risk) capital and market capitalization. •Stock prices can be highly volatile, which makes it difficult to assess firm performance. Overall macroeconomic factors have a direct bearing on stock prices. Also, stock prices frequently reflect the psychological mood of the investors, which can at times be irrational. •Shareholder value creation is a better measure of competitive advantage over the long term due to the "noise" introduced by market volatility, external factors, and investor sentiment.
implementation-
not important....organizational design, corporate governance and business ethics
•In a stakeholder impact analysis, managers pay particular attention to three important stakeholder attributes:
power, legitimacy, and urgency.
stakeholder impact analysis
provides a decision tool with which managers can recognize, prioritize, and address the needs of different stakeholders
Explain the role of strategic leaders and what they do
strategic leaders use formal and informal power to influence the behavior of other organizational members to do things, including things they would not do otherwise
Analysis
strategic leadership and strategy process, external analysis, internal analysis, competitve advamtage, buisness models
•To be effective, visions and missions need to be backed up by hard-to-reverse _____________ commitments and tied to ___________ fundamentals.
strategic, economic
two distinct modes of decision making.... evaluate and describe!
system 1- default... gut reaction.. automatic, fast, efficient, prone to biases that lead to error system 2- analytical and rational. applies logic. effortful, slow, deliberate.
dialectic inquiry
two teams. one develops a thesis and the other develops an antithesis. they present to a higher up, and the higher up picks one or the other or both and makes a synthesis.
mission
what an organizational actually does, what the business is, and why/how they do it
chapter 1- what is strategy/financial ratio chapter 2- strategic leadership chapter 3- external analysis chapter4- internal analysis chapter 5- competitive strategy/business models chapter 6- business strategy
yeet
Outline how you can become a strategic leader.
you need to devlop skills to move between the five leadership levels...
activities
•Activities are distinct and fine-grained business processes that enable firms to add incremental value by transforming input into goods and services.
capabilities
•Capabilities are the organizational and managerial skills necessary to orchestrate a diverse set of resources to deploy them strategically.
Differentiate among a firm's core competencies
•Core competencies are unique, deeply embedded, firm-specific strengths that allow companies to differentiate their products and services and thus create more value for customers than their rivals, or offer products and services of acceptable value at lower cost.
Conduct a SWOT analysis to generate insights from external and internal analysis and derive strategic implications.
•Formulating a strategy that increases the chances of gaining and sustaining a competitive advantage is based on synthesizing insights obtained from an internal analysis of the company's strengths (S) and weaknesses (W) with those from an analysis of external opportunities (O) and threats (T). •The strategic implications of a SWOT analysis should help the firm to leverage its internal strengths to exploit external opportunities, while mitigating internal weaknesses and external threats.
Use the why, what, who, and how of business models framework to put strategy into action.
•How companies do business is as important to ganiing and sustaining competitive advantage as what they do. •The why, what, who, and how framework guides managers through the process of formulating and implementing a business model.
Evaluate different conditions that allow a firm to sustain a competitive advantage.
•Several conditions make it costly for competitors to imitate the resources, capabilities, or competencies that underlie a firm's competitive advantage: (1) better expectations of future resource value (or simply luck), (2) path dependence, (3) causal ambiguity, (4) social complexity, and (5) intellectual property (IP) protection. These barriers to imitation are isolating mechanisms because they prevent rivals from competing away the advantage a firm may enjoy
5.1 Conduct a firm profitability analysis using accounting data to assess and evaluate competitive advantage.
-Return on Invested Capital (ROIC), roe, roa, ror ROIC = (Net profits/Invested capital) •Goal is ROIC > Cost of Capital •Most commonly used profitability ratio •Good proxy for firm profitability •How well a firm is using its invested capital (money) to generate returns BACKWORD LOOKING, FOCUSES ON tanible assets
why are ethical core values essential for long term success
-ethical core values underlie the vision statement to ensure the stability of the strategy, lay groundwork for longterm success. KEEP THE COMPANY ON TRACk...
Top-down strategic planning
A rational, data-driven strategy process through which top management attempts to program future success.
Differentiate the roles of firm effects and industry effects in determining firm performance
Industry Effects- Describes the underlying economic structure of the industry. Attributes performance to the industry in which the companies compete. (About 20% of firms profitability depends on a firms industry) Firm Effects- Attributes firm performance to the actions of strategic leaders. These are more important than industry effects and affect up to 55% of a firms performance.
Appraise the role of industry dynamics and industry convergence in shaping the firm's external environment
Industry structures are not stable overtime but rather dynamic. Consolidated industries tend to be more profitable firms have a tendency to change industry structure in their favor, making it more consolidated through horizontal mergers and acquisitions. Industry Convergence- A process whereby formerly unrelated industries being to satisfy the same customer need. (Old news printing companies working with social media for new ways to offer news)
Generate a strategic group model to reveal performance difference between clusters of firms in the same industry
Strategic Group Model- A framework that explains differences in firm performance within the same industry. Strategic Group- The set of companies that pursue a similar strategy within a specific industry. Mobility Barriers- Industry-specific factors that separate one strategic group from another. (In the model airlines are separated by their ability to offer international routes)
scenario planning
Strategy-planning activity in which managers envision different what-if scenarios to anticipate plausible futures.
LO 6-4 Assess the benefits and risks of differentiation and cost-leadership strategies vis-à-vis the five forces that shape competition.
The five forces model helps managers use generic business strategies to protect themselves against the industry forces that drive down profitability. Differentiation and cost-leadership strategies allow firms to carve out strong strategic positions, not only to protect themselves against the five forces, but also to benefit from them in their quest for competitive advantage.
LO 6-2 Examine the relationship between value drivers and differentiation strategy.
The goal of a differentiation strategy is to increase the perceived value of goods and services so that customers will pay a higher price for additional features. In a differentiation strategy, the focus of competition is on value-enhancing attributes and features, while controlling costs. Some of the unique value drivers managers can manipulate are product features, customer service, customization, and complements. Value drivers contribute to competitive advantage only if their increase in value creation (∆V) exceeds the increase in costs, that is: (∆V) > (∆C).
strategy is not
grandiose statements, competitive benchmarking, failure to face competitive challenge
traditional measures to assess firm performance
accounting profitability, shareholder value creation, economic value creation
stakeholder strategy
an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage
Strategic Management:
an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
inegrative frameworks to measure firm success: combining quantitative data with qualitative assessments
balanced scorecard triple bottom line
formulation
business strategy, corporate strategy
devil's advocacy
can help improve strategic decision making. key element that a separate team or individual carefuly scrutinize a proposed course of action and critique underly assumptions to bring about potential downsides
vision
captures an organization's aspirations. An effective vision inspires and motivates members of the organization
Compare and contrast the roles of corporate, business, and functional managers in strategy formulation and implementation.
corporate managers- provide answer of where to compete(industries, markets, geographies, how to create synergy among different business units) business managers- must answer how to compete.... manage firms different functional areas for competitive advantage functional managers- must implement business strategy within a single functional area
product oriented vision statements
define a business in terms of a good or service provided
customer oriented vision statements
define business in terms of providing solutions to customer needs (PROVIDE MORE FLEXIBILITY THAN product-oriented)
values
define ethical standards and norms that govern the behavior of individuals within the firm
