Chapter 6 Management

what is bargaining power of suppliers?

Bargaining power of suppliers is a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs. When companies can buy parts, materials, and services from numerous suppliers, the companies will be able to bargain with the suppliers to keep prices low.

Tangible assets of a firm

Balance sheet items Bigger generallyis better

what is bargaining power of buyers

Bargaining power of buyers is a measure of the influence that customers have on a firm's prices. If a company sells a popular product or service to multiple buyers, then the company has more power to set prices. By contrast, if a company is dependent on just a few high-volume buyers, those buyers will typically have enough bargaining power to dictate prices.

What is external analysis

Environmental scanning Strategic group Risk tolerance drives perspective/ interpretation of environment

What are firm level strategies concerned with?

Firm-level strategies are concerned with direct competition between firms.

• Bargaining power of suppliers

a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs

• Character of the rivalry

a measure of the intensity of competitive behavior between companies in an industry

• BCG matrix

a portfolio strategy developed by the Boston Consulting Group that categorizes a corporation's businesses by growth rate and relative market share and helps managers decide how to invest corporate funds

• Competitive inertia

a reluctance to change strategies or competitive practices that have been successful in the past

• Valuable resource

a resource that allows companies to improve efficiency and effectiveness

• Imperfectly imitable resource

a resource that is impossible or extremely costly or difficult for other firms to duplicate

• Rare resource

a resource that is not controlled or possessed by many competing firms

• Nonsubstitutable resource

a resource that produces value or competitive advantage and has no equivalent substitutes or replacements

• Diversification

a strategy for reducing risk by buying a variety of items (stocks or, in the case of a corporation, types of businesses) so that the failure of one stock or one business does not doom the entire portfolio

• Stability strategy

a strategy that focuses on improving the way in which the company sells the same products or services to the same customers

• Growth strategy

a strategy that focuses on increasing profits, revenues, market share, or the number of places in which the company does business

• Retrenchment strategy

a strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business

bargaining power of suppliers for lawn mowing company

all ubiquitous (generic) supplies so bargaining oower of supplier is low and this is profit friendly for lawn mowing

• Situational (SWOT) analysis

an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment

What is character of the rivalry

is a measure of the intensity of competitive behavior between companies in an industry. Is the competition among firms aggressive and cutthroat, or do competitors focus more on serving customers than on attacking each other? Both industry attractiveness and profitability decrease when rivalry is cutthroat.

w-t in swat

establish a defensive plan to prevent weaknesses from making firm highly susceptible to external threats

Character of rivalry for hostpital

local so there are not too many hospitals. pretty low in austin because only 2 hospitals but in Houston there are many hospitals so rivalry is more intense.

Threat of new entrance for new hostpitals is?

low which makes hospitals well off because the barriers to entrance are high giving less competition

bargaining power of the buyer for the lawn mowing service

given the elasticity of the need. if cost is too high we wont use a service. we will only pay so much because it is a want not a need. very low threshhold for switching. this is profit unfriendly

What are the three kinds of grand strategy?

growth, stability, and retrenchment/recovery

lawn mowing service character of rivalry

high competition for lawn mowing services so this isnt as good.

Threat of new entrance for a lawn mowing service is?

high, there is minimal capital investment so barriers to interest is low to this is bad for lawn mowing companies.

Bargaining power of suppliers for the hospital

hospitals need equipment and they must have some top notch tech and people want the best equipment for their health. you will pay top dollar to have the top machines so this is profit unfriendly because bargaining power of suppliers is high. low federal control.

s-t in swat

identify ways to use strengths to reduce vulnerability to current threats

• Distinctive competence

what a company can make, do, or perform better than its competitors

Organizational capabilities of a firm

Customer service Supply chain management Knowledge management

what is swot?

-A firm shouldn't judge opportunities just with financial measures -Competitive advantage often lies in identifying -Use information to evaluate companies

When does a competitive advantage become sustainable?

A competitive advantage becomes sustainable when other companies cannot duplicate the benefits it provides and have, for now, stopped trying.

what is a core firm

Core firms are the central companies in a strategic group

intangible assets of a firm

Intangible Assets Reputation Employee morale Learning culture

What do market commonality and resource similarity determine?

Market commonality and resource similarity determine whether firms are in direct competition and thus likely to attack each other and respond to each other's attacks.

External analysis -Remote environment -Industry environment

Opportunities Threats

What does portfolio strategy focus on?

Portfolio strategy focuses on lowering business risk by being in multiple, unrelated businesses and by investing the cash flows from slow-growing businesses into faster-growing businesses.

What is retrenchment?

Retrenchment strategy, shrinking the size or scope of a business, is used to turn around poor performance. If retrenchment works, it is often followed by a recovery strategy that focuses on growing the business again.

what is a secondary firm

Secondary firms are firms that use strategies related to but somewhat different from those of core firms.

external analysis (STEEP)

Social Technological Economic Ecological Political

What is a strategic group?

Strategic groups are not groups that actually work together. They are companies—usually competitors—that managers closely follow. More specifically, a strategic group is a group of other companies within an industry against which top managers compare, evaluate, and benchmark their company's strategic threats and opportunities.

Internal analysis

Strengths Weaknesses

What is the first step in a strategy making process?

The first step in strategy making is determining whether a strategy needs to be changed to sustain a competitive advantage.

what is the purpose of the growth strategy?

The purpose of a growth strategy is to increase profits, revenues, market share, or the number of places (stores, offices, locations) in which the company does business. Companies can grow in several ways. They can grow externally by merging with or acquiring other companies in the same or different businesses. Another way to grow is internally, by directly expanding the company's existing business or creating and growing new businesses.

what is the purpose of the retrenchment strategy

The purpose of a retrenchment strategy is to turn around very poor company performance by shrinking the size or scope of the business or, if a company is in multiple businesses, by closing or shutting down different lines of the business. The first step of a typical retrenchment strategy might include making significant cost reductions; laying off employees; closing poorly performing stores, offices, or manufacturing plants; or cutting or selling entire lines of products or services. After cutting costs and reducing a business's size or scope, the second step in a retrenchment strategy is recovery. Recovery consists of the strategic actions that a company takes to return to a growth strategy.

what is the purpose of the stability strategy

The purpose of a stability strategy is to continue doing what the company has been doing, just doing it better. Companies following a stability strategy try to improve the way in which they sell the same products or services to the same customers. Companies often choose a stability strategy when their external environment doesn't change much or after they have struggled with periods of explosive growth.

What advantages must me bet for a firm's to have a sustainable competitive advantage?

The resources must be valuable, rare, imperfectly imitable, and non-sustainable.

What is the second step step in a strategy making process?

The second step is to conduct a situational (SWOT) analysis that examines internal strengths and weaknesses as well as external opportunities and threats.

What is the third step in a strategy making process?

The third step involves choosing a strategy. Strategic reference point theory suggests that when companies are performing better than their strategic reference points, top management will typically choose a risk-averse strategy. When performance is below strategic reference points, risk-seeking strategies are more likely to be chosen.

what is the threat of new entrants?a

The threat of new entrants is a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry. If new companies can easily enter the industry, then competition will increase and prices and profits will fall. On the other hand, if there are sufficient barriers to entry, such as large capital requirements to buy expensive equipment or plant facilities or the need for specialized knowledge, then competition will be weaker and prices and profits will generally be higher.

what is the threat of substitute or services

The threat of substitute products or services is a measure of the ease with which customers can find substitutes for an industry's products or services. If customers can easily find substitute products or services, the competition will be greater and profits will be lower. If there are few or no substitutes, competition will be weaker and profits will be higher.

what is a transient firm

Transient firms are those changing their strategic position who may become core competitors or who may offer a new business model that results in major industry change

• Grand strategy

a broad corporate-level strategic plan used to achieve strategic goals and guide the strategic alternatives that managers of individual businesses or subunits may use

• Shadow-strategy task force

a committee within a company that analyzes the company's own weaknesses to determine how competitors could exploit them for competitive advantage

• Star

a company with a large share of a fast-growing market

• Cash cow

a company with a large share of a slow-growing market

• Question mark

a company with a small share of a fast-growing market

• Dog

a company with a small share of a slow-growing market

• Sustainable competitive advantage

a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

• Response

a competitive countermove, prompted by a rival's attack, to defend or improve a company's market share or profit

• Attack

a competitive move designed to reduce a rival's market share or profits

• Firm-level strategy

a corporate strategy that addresses the question, "How should we compete against a particular firm?"

• Industry-level strategy

a corporate strategy that addresses the question, "How should we compete in this industry?"

• Portfolio strategy

a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines

• Strategic dissonance

a discrepancy between a company's intended strategy and the strategic actions managers take when implementing that strategy

• Strategic group

a group of companies within an industry against which top managers compare, evaluate, and benchmark strategic threats and opportunities

• Threat of new entrants

a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry

• Threat of substitute products or services

a measure of the ease with which customers can find substitutes for an industry's products or services

• Bargaining power of buyers

a measure of the influence that customers have on a firm's prices

• Reactors

companies that do not follow a consistent adaptive strategy but instead react to changes in the external environment after they occur

• Defenders

companies using an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high-quality products and services to a well-defined set of customers

• Prospectors

companies using an adaptive strategy that seeks fast growth by searching for new market opportunities, encouraging risk taking, and being the first to bring innovative new products to market

• Analyzers

companies using an adaptive strategy that seeks to minimize risk and maximize profits by following or imitating the proven successes of prospectors

• Unrelated diversification

creating or acquiring companies in completely unrelated businesses

• Related diversification

creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures

w-o in swat

overcome company weaknesses to pursue opportunities

• Competitive advantage

providing greater value for customers than competitors can

s-o in swot

pursue opportunities that fit with company strengths

• Resources

the assets, capabilities, processes, employee time, information, and knowledge that an organization uses to improve its effectiveness and efficiency and create and sustain competitive advantage

Bargaining power of the buyer for a hospital

the buyer is typically insurance companies or government so the bargaining power for the government and insurance is high. this is profit unfriendly for the hospital

• Core firms

the central companies in a strategic group

• Market commonality

the degree to which two companies have overlapping products, services, or customers in multiple markets

• Resource similarity

the extent to which a competitor has similar amounts and kinds of resources

• Secondary firms

the firms in a strategic group that follow strategies related to but somewhat different from those of the core firms

• Core capabilities

the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs

• Corporate-level strategy

the overall organizational strategy that addresses the question, "What business or businesses are we in or should we be in?"

• Cost leadership

the positioning strategy of producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product or service at the lowest price in the industry

• Differentiation

the positioning strategy of providing a product or service that is sufficiently different from competitors' offerings that customers are willing to pay a premium price for it

• Focus strategy

the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment

• Acquisition

the purchase of a company by another company

• Direct competition

the rivalry between two companies that offer similar products and services, acknowledge each other as rivals, and act and react to each other's strategic actions

• Recovery

the strategic actions taken after retrenchment to return to a growth strategy

• Strategic reference points

the strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage

threat of substitutes for a lawn mowing service

there are alot of substitutes, do it yourself, kids can do it, or they can choose another company. this is bad.

threat of substitutes with a hostpital

there are not alot of substitutes for hospitals so this so this is good and profit friendly