Management Chapter 5
valuable
A resource or capability is said to be __________________ if it allows the firm to exploit opportunities or negate threats in the environment
strengths, weaknesses, opportunities, and threats
SWOT
Porter
asserted that a successful strategy requires a firm to stake out a market position aggressively and that different strategies involve distinctly different approaches to competing and operating the business
PESTEL and industry analysis
external analysis tools
stronger
the ________________ the competitive forces are, the lower the profit potential for an industry's firm
VRIO
valuable, rare, inimitable, and organization The ability to identify whether an organization has _________ resources will also likely explain their competitive position
strategic focus
when an organization is clear about its mission and vision and has a coherent, well-articulated strategy for achieving those
cost leadership
"overall lower cost" a strategy in which an organization attempts to gain a competitive advantage by reducing its costs below the costs of competing firms strategy where a firm's competitive advantage is based on the bet that it can develop, manufacture, and distribute products more efficiently than competitors low-cost broad-based market strategy
Porter's competitive strategy
1. overall cost leadership 2. differentiation 3. focus on a particular market niche
core competencies
A particular bundle of resources and capabilities that provide unique competitive advantage to the firm resources and capabilities that serve as a sources of a firm's competitive advantage over rivals distinguish a company competitively from rivals and emerge over time through an original process of accumulating and learning how to deploy different resources and capabilities the activities the company performs especially well compared with competitors that add unique value to its goods or services over a long period of time
rare
A resources is ____________ simply if it is not widely possessed by other competitors The resource must not be widely possessed in the industry The more exclusive a firm's access to a particular valuable resource, the greater the benefit
inimitable
A resources is ___________________ if it is difficult to imitate or to create ready substitutes for. It is difficult for another firm to acquire it or to substitute something else in its place
strategy
A specific _______________ captures and communicates how vision and mission will be achieved and the goals and objectives that will be measured to assure that the organization is on the right path to achieving them
attractive
An _______________ industry has high entry barriers, suppliers and buyers with little bargaining power, few competitive threats from product substitutes, and relatively moderate rivalry
unattractive
An _______________ industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product substitutes, and intense rivalry among competitors
Business Strategy
Asks: "How should we compete?" focuses on how a given business needs to compete to be effective
Corporate strategy
Asks: "What business/businesses should we be in? How does being in one business help us compete our other business?" looks at the organization as a portfolio
co-opetition
Augmenting either organic or acquisitive growth is growth through partnerships with other organizations. Sometimes such partnership-based growth is referred to as ______________________, because an organization cooperates with others, even some competitors, in order to compete and grow
cost leadership, focused cost leadership, differentiation, focused differentiation
By positioning in either broad scope or narrow scope and a low-cost strategy or differentiation strategy, an organization will fall into one of the following generic competitive strategies:
industry environment
Compared with the general environment, the ________________________ _____________________ has a more direct effect on the firm's strategic competitiveness and above-average returns
arenas
Facet of strategy diamond that has traditional view of strategy Answers to strategy questions about ____________ tell managers and employees where the firm will be active
economic logic
Facet of strategy diamond that has traditional view of strategy explains how the firm makes money tells us how profits will be generated above the firm's cost of capital
differentiators
Facet of strategy diamond that has traditional view of strategy include elements that are unique to the firm such that they provide a competitive advantage in its current and future arenas could be something related to an organization's tangible or intangible assets can also be found in capabilities - how the organization does something
capabilities
Firm's 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 based on developing, carrying, and exchanging information and knowledge through the firm's human capital critical to forming competitive advantage Example: Knowledge possessed by human capital
five fources of competition
Following a study of the ___________ _______________ _____ __________________, the firms can develop the insight required to determine an industry's attractiveness in terms of its potential to earn adequate or superior returns on its invested captial
differentiated
Industries with many companies that have successfully _______________ their products have less rivalry, resulting in lower competition for individual firms. However, when buyers view products as commodities, rivalry intensifies
Five Forces
One of the most well-known frameworks used to analyze industries is Porter's ______________ _____________. Analyzes the attractiveness of an industry by considering ______________ _____________ within a market that impact industry profitability (1) barriers to entry and the threat of potential new entrants (2) buyer power (3) supplier power (4) threat from substitutes (5) rivalry among industry competitors recognizes that suppliers can become a firm's competitors (by integration forward), as can buyers (by integrating backward)
PESTEL
Political, Economic, Sociocultural, Technological, Environmental, Legal directs managers to collect information about, and analyze, each environmental dimension to identify the broad range of threats and opportunities facing the organization provides managers with a good sense of the broad macro-environment
realized strategy
The actual strategy that is implemented and comes to fruition as a consequence of implementation and other internal and external factors only partly related to that which was intended
switching cost
The effect of __________________ _________ is identical to that described for differentiated products: The lower the buyers' ___________ _______, the easier it is for competitors to attract buyers through pricing and service offerings High __________ ___________ at least partially insulate the firm from rivals' efforts to attract customers
traditional
The first three facets of the strategy diamond - arenas, differentiators, and economic logic - might be considered the _____________________ facets of strategizing in that they cover the basics: (1) external environment (2) internal organization (3) some fit between these elements has positive performance consequences
arenas differentiators economic logic
The first three facets of the strategy diamond are traditional in the sense that they address three longstanding hallmarks of strategizing. Strategy matches up market needs and opportunities (located in _____________) with unique features of the firm (shown by its ________________) to yield positive performance (________________ ______)
new entry
The likelihood of _________ ____________ is a function of the extent to which barriers to entry exist
barriers to entry the retaliation expected from current industry participants
The more difficult it is for other firms to enter a market, the more likely it is that existing firms can make relatively high profits. The likelihood that firms will enter an industry is a function of 2 factors:
Diversification
The number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another exists when an organization participates in multiple businesses that are in some way distinct from each other purpose is to spread out risk and opportunities over a larger set of businesses
storage costs
The pattern of excess capacity at the industry level, followed by intense rivalry at the firm level is observed frequently in industries with high _____________ _____________.
internal analysis
The primary purpose for ___________________ _________________ is to understand the unique resources, capabilities, and core competencies of organizations that may enable them to outperform their competitors over time
Intended strategy
The strategy conceived by managers (top management team) and the impetus for intial attempts at strategy implementation rationality is limited and the ______________ _______________ is the result of a process of negotiation, bargaining, and compromise, involving many individuals and groups within the organization
power of buyers
The stronger the ___________ _____ ___________ in an industry, the more likely it is that they will be able to force down prices and reduce the profits of firms that provide the product
power of suppliers
The stronger the _____________ ____ __________________ in an industry, the more difficult it is for firms within that sector to make a profit because suppliers can determine the terms and conditions on which business is conducted
power of substitutes
This ______________ _____ ___________________ refers to the ease with which buyers can switch to another product in a different industry that accomplished the same goal as the industry's goods and services - such as using aluminum cans rather than glass or plastic bottles to package a beverage
Chief learning officer (CLO)
To help firms develop an environment in which knowledge is widely spread across all employees, some organizations have created the new upper-level managerial position of ______________________. This highlights a firm's belief that "future success depends on competencies that traditionally have not been actively managed or measured - including creativity and the speed with which new ideas are learned and shared."
corporate strategy and business strategy
Two aspects of strategic management:
trade-off discipline
Two prevalent views of strategy where focus is a key component are strategy as ___________________ and strategy as _______________.
high profits
Using Porter's analysis, firms are likely to generate ___________ _______ if: (1) the industry is difficult to enter (2) there is limited rivalry (3) buyers are relatively weak (4) suppliers are relatively weak (5) there are few substitutes
low profits
Using Porter's analysis, firms are likely to generate ___________ _______ if: (1) the industry is easy to enter (2) there is a high degree of rivalry between firms within the industry (3) buyers are strong (4) suppliers are strong (5) it is easy to swithc alternatives
growing
When a market is _______________, firms try to use resources effectively to serve an expanding customer base ________________ markets reduce the pressure to take customers from competitors
general environment
When appraising the external environment of the organization, managers often start with its _________________ __________________ - composed of trends and dimensions in the broader society that influence firms and industries An understanding of this provides insight into potential industries that may grow or decline in the future
Rivalry
___________ in the 5-forces framework refers to the degree of competition between existing firms The higher the degree of _____________, the more difficult it is for existing firms to generate high profits intensity affected by: (1) numerous competitors (2) slow industry growth (3) high fixed costs (4) lack of differentiation (5) high strategic stakes (6) high exit barriers Intense ____________ are common in industries with many competitors
competitive rivalry
____________________ ____________ is likely to be high when it is important for several of the competitors to perform well in the market
sustainable competitive advantage
a competitive advantage that will exist after all attempts at strategic imitation have ceased organization's strengths cannot be easily duplicated or imitated by other firms, nor made redundant or less valuable by changes in the external environment
deliberate
a plan of action, flowing from the intended strategy, that an organization chooses and implements to support its vision, mission, and goals
strategy diamond
a tool that helps individuals understand how clearly and completely they have crafted a strategy and how to effectively communicate it relates to both business and corporate strategy and provides a checklist of what elements an effective strategy should cover framework comprising five facets for understanding the content of a strategy: (1) arenas (2) differentiation (3) vehicles (4) staging and pacing (5) economic logic
opportunities
asses factors external to the business that could enable a business to exist/prosper dynamics or trends that are opportunities for the entire industry rather than the company being analyzed
intangible resources
assets that are rooted deeply in the firm's history and have accumulated over time Because they are embedded in unique patterns of routines, they are relatively difficult for competitors to analyze and imitate -- knowledge, trust between managers and employees, ideas, the capacity for innovation, managerial capabilities, organizational routines, scientific capabilities, and the firm's reputation for its goods or services and how it interacts with people
tangible resources
assets that can be seen and quantified -- production equipment, manufacturing plants, and formal reporting structures
Competitive scope
breadth of a company's target market (broad = mass market; narrow = niche market)
Cost leadership
competitive strategy low-cost, broad based efficient in engineering tasks, production operations, and physical distribution and minimize costs in marketing and R&D
focused low cost
competitive strategy low-cost, narrowly focused market strategy focus on a particular buyer segment or a particular geographic segment and must locate a niche market that wants or needs an efficient product and is willing to forgo extras to pay a lower price for the product
focused differentiation
competitive strategy marketing of a differentiated product to a narrow market, often involving a unique product and a unique market viable for a company that can convince consumers that its narrow focus allows it to provide better goods and services than its competitors
Differentiation
competitive strategy strategy that involves marketing a unique product to a broad-based market - consumers may be willing to pay a higher price for a product they perceive as different company must develop and maintain a product perceived as different enough from the competitors' products to warrant the price difference
focus strategy
concentrates on meeting the specialized needs of its customers - servicing either industrial buyer or consumers, but not both A strategy in which an organization concentrates on a specific regional market, product line, or group of buyers in combination with its pursuit of either an overall cost leadership or differentiation strategy
staging and pacing
constitute the fifth and final facet of the strategy diamond reflect the sequence and speed of strategic moves helps firms think about timing and next steps, instead of creating a strategy that is a static monolithic plan helps to reconcile the designed and emergent portions of strategy
differentiation
does not allow a firm to ignore costs; it makes a firm's products less cost susceptible to cost pressures from competitors because customers see the product as unique and are willing to pay extra to have the product with the desirable features may lead to customer brand loyalty, resulting in customers being less sensitive to changes in price
Threats
factors beyond the firm's control that could place the strategy or business at risk These are considered external because managers typically have no control over them, but may benefit from having to plan to respond to them
vehicles
fourth facet of the strategy diamond refer to how firms pursue a new arena through internal means, through help from a new partner or some outside source, or even through acquisition this is where organizations determine if they plan to grow organically, acquisitively, or through a combination of both
Substitute products
goods or services from outside a given industry that perform similar or the same functions as a product that the industry produces present a strong threat to a firm when customers face few, if any, switching costs and when the ______________ _________'s price is lower or its quality and performance capabilities are equal to or greater than those of the competing product
high exit barriers
include economic, strategic, and emotional factors, causing companies to remain in an industry when the profitability of doing so is questionable
value chain
internal analysis tool that dissects the organization and then identifies area of unique strength or weaknesses also called capabilities suggests internal areas of strength
value chain and VIRO
internal analysis tools
Entry barriers
make it difficult for new firms to enter an industry and often place them at a competitive disadvantage even when they are able to enter also increase the returns for existing firms in the industry
Industry analysis
maps out the different relationships that the organization might have with suppliers, customers, and competitors provides information about the organization's competitive environment and key industry-level factors that seem to influence performance
value
measured by a product's performance characteristics and by its attributes for which customers are willing to pay
value chain
primary and support activities that an organization uses to create value in the form of products and services useful tool for taking stock of organizational capabilities outlines key activities that differentiate the value added capabilities that differentiate some firms from others
emergent strategy
primary determinant of realized strategy decisions that emerge from the complex processes in which individual managers interpret the intended strategy and adapt to changing external circumstances A pattern of action that develops over time in an organization in the absence of vision, mission, and goals, or despite mission and goals, or in addition to what was conceived of in the intended and deliberate strategies
Strategic management
relates to choices managers make to achieve specific goals and objectives that fulfill a firm's mission and vision in a quest to attain long-term organizational performance reflects the firm's actions to achieve its its mission and vision as seen by its achievement of specific goals and objectives examines how actions and events involving top executives, firms, and industries influence a firm's success or failure
resources
spectrum of individual, social, and organizational assets core competencies that create a competitive advantage are often created through the unique bundling of several ________________
Differentiation strategy
strategy where competitive advantage is based on superior products or service (low cost, customer service, product quality, unique style) strategy in which an organization seeks to distinguish itself from competitors through the perceived quality of its products or services
strategy formation
synonymous with business planning and strategic planning. The stet of processes involved in creating or determining the strategies of the organization focuses on content of strategies
imitation
the concept of ____________ includes any form of acquiring the lacking resource or substituting a similar resource that provides equivalent benefits
organization
the fourth VRIO criterion that determines whether a resource or capability is the source of competitive advantage recognizes that mere possession or control is necessary but not sufficient to gain an advantage. The firm must likewise have __________________ of the capability to exploit the resources the firm is able to capture any value that the resource or capability might generate - control systems, reporting relationships,, compensation policies, and management interface with both customers and value-adding functions in the firm
synergy
the interaction of two or more activities, creating a combined effect greater than the sum of the individual efforts The idea is that the combination of several businesses is stronger than they would be individually because they either do things more cheaply or of higher quality as a result of their combination under a common owner
strategy implementation
the method by which strategies are operationalized or executed within the organization; it focuses on processes through which strategies are achieved Tells managers how they should go about putting the desired strategy into action
deliberate and emerging factors
the realized strategy is a function of __________________________ and _____________________ ___________________
business strategy
the set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or market
corporate strategy
the set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets answers strategy questions related to "What business or businesses should we be in?" and "How does our business X help us compete in business Y?" involves synergy and diversification
SWOT analysis
tool to help organizations understand internal strengths and weaknesses and external opportunities of the environment What can we do? what do we want to do? What might we do? What do others expect us to do?
related and unrelated
two main types of diversification
unrelated diversification
type of diversification that occurs when a firm engages in businesses in different industries that lack similarities between each other
related diversification
type of diversification that occurs when a firm operates multiple businesses within the same industry
organic
type of growth rate of a company excluding any growth from takeovers, acquisitions or mergers challenging because the organization is on its own to put together everything needed to fuel growth
acquisitive
type of growth that refers precisely to any growth from takeovers, acquisitions, or mergers fuel rapid growth, but are challenging to negotiate and put into place
VIRO
value, rarity, Imitability, organization framework that suggests that a capability, or resource, is likely to yield a ;competitive advantage to an organization when it can be shown that it is valuable, rare, difficult to imitate a, and supported by the organization helps predict whether strengths will give a competitive advantage
