MGMT 371 Quiz 5

Support activities

-HR -Information Technology -Research & Development -Procurement --Actions required to sustain the firm that are not directly part of product or service creation

Primary activities

-Inbound Logistics -Operations -Marketing -Customer Service --Actions a firm takes to directly provide a product or service to customers

Porters Five Forces

-Industry Rivalry -Buyer Power -Threat of substitutes -Supplier Power -Threat of new entrants

Generally 2 sources of competitive advantage:

-Lower cost products -Differentiated products

Businesses has been going great, but you feel like it is time to expand. In your strategic analysis, you noticed that one of your vulnerabilities is supplier power. In particular, you have a very important supplier who leverages their power over you to extract higher prices than you want to give. Which strategic action should you take to fix this problem?

Backward vertical Integration (Your supplier is down the supply chain. By engaging in backward vertical integration, you are purchasing your supplier and making it part of your organization. Therefore, you less the effects of supplier power in your strategic plans.

Grand Strategy

Based on conditions in the business environment because firms generally want to grow unless something (recession) makes that difficult. Grand strategy and corporate strategy can overlap significantly

Generic Business level strategies

Basic methods of organizing firm value chain activities to compete in a product market that can be used by any sized firm in any industry

When conducting an internal analysis, it is important to_______________.

Be able to identify one primary activity as a distinctive competency. (Your company must be good at something that is a primary activity. It doesn't matter which one it is. but this is where profitability is generated for the firm.)

If you were trying to figure out what your competitors were doing so you could form an effective strategic response, which of the following should you do as an ethical manager?

Carefully analyze your competitors SEC filings (it is only ethical to use publicly available information to base a strategic response)

Internal Factors

Characteristics of the firm itself. EX: Sophisticated IT system

Macro Environment

Contains elements that can impact the firm but are generally beyond its direct control

Barriers to enty

Factors that makes it costly & prevent new firms from successfully competing in the industry. EX: Cost, Brand loyalty, Industry Growth

T/F: An investment analyst for Merrill Lynch, Henry Blodgett, regularly recommended investments to clients which he described in private emails as "junk" and "disaster". This resulted in a positive commission for him and a loss for his clients. This behavior was legal according to US law at the time. That means that this behavior should also be considered ethical as well.

False

T/F: Barriers to entry act to prevent competitors already in the industry from competing against your company

False; Barriers to entry exist to prevent NEW competitors from entry in the industry. It does nothing to help with current competitors

Competitive Environment

Includes components inside the firm and outside the firm

Strategic Management Process:

The set of activities that firm managers undertake in order to try to put their firms in the best possible position to compete successfully in the marketplace

Dog

These businesses units are doing poorly in a low-growth market and should be divested

Question Mark

These businesses units are not doing well in a high-growth market and the CEO will need to decide to invest or scrap the business

Star

These businesses units have high market share in a high-growth market. They are generating revenue, but the CEO should invest to keep growing market share

Cash Cow

These businesses units have high market share in a market that is not growing. CEO's should use the money they earn to invest in the Stars

External Factos

Things in the global environment that may impact a firms operations or success. EX: Rise in int. rates, or a natural disaster

Why do firms use PESTEL?

To understand what consumers are interested in and use VIRO to evaluate their own resources and capabilities so that they can figure out how to offer products and services that match those consumer interests and that are better in quality and price than the products offered by their competitors.

PESTEL

Tool that reminds managers to look at several distinct categories in the macro environment

Porters Five Forces

Tool used to examine different micro-environmental groups in order to understand the impact each group has on a firm in an industry.

Which of the following is an intangible barrier to imitation?

An effective and efficient operations team. (The only real intangible barrier to imitation is the people who work for you because it is impossible to identify how and why teams work the way they do.

Vision STMT

An expression of what a businesses founders want that business to accomplish

Micro environment

the actors close to the company that affect its ability to serve its customers - the company, suppliers, marketing intermediaries, customer markets, competitors, and publics

PESTEL

-Political Factors (Tax rates, Tariffs, Trade agreements, Labor & Environmental regulations) -Economic Factors (Employment levels, int. rates, exchange rates) -Sociocultural Factors (Demographic trends, Consumer pref., Market Diversity) -Technological Factors (The internet, phones, connectivity, automation) -Environmental Factors (Resource scarcity, Recycling, alternative energy sources) -Legal Factors (Contracts, Laws, intellectual property rights)

Strategic management is made up of several distinct activities (The strategy cycle):

-Strategic analysis -Develop Objectives -Create & Choose strategies -Implement strategies -Measure & Evaluate Performance -Vision & Mission

SWOT

-Strengths (inside firm) (Employees, Patents, Cash, Brand, Unique capabilities) -Weaknesses (inside firm) (Outdated technology, Employee skill gaps, High operating costs) -Opportunities (outside firm) (Undeserved markets, New social trends, Technological advances) -Threats (outside firm) (Competitor actions, Economic Downturns, Government regulations)

VIRO

-Valuable -Rare -Difficult to Imitate -Organized to Capture Value

Strategic Analysis

A SA of a firms external environment (the world, competitors) and internal environment (firm capabilities and resources) gives its managers a clear picture of what they have to work with and also what needs to be addressed when developing a plan for the firms success.

Cost Leadership Strategy

A firm offers customers its product or service at a lower price than its rivals can

Strategic Positioning

A firms decisions on how to serve customers and compete against rivals

Which of the following would give a company a sustainable competitive advantage?

A secret and proprietary method for enhancing the value of your product to customers that other companies don't know and will not be able to figure out for many years. (Always gonna be long term for SCA))

Maintaining your dedication to a set of ethics regardless of whether anyone is monitoring you or not is known as____________.

Integrity

You decide that you want to pursue a cost leadership strategy with your company. Which of the following should you pursue to ensure that your strategy is successful?

Invest in machinery that allows the most efficient production in the industry

Growth Strategy

Involves developing plans to increase the size of the firm in terms of revenue, market share or geographic reach

Mission STMT

More specific; takes the why of a vision stmt and gives a broad description of how the firm will try to make its vision a reality

Which of the following is a substitute for the information about politics that people receive from the television industry?

Newspapers

Differentiation Strategy

Opposite of Cost leadership; Firms do not look to spend as much as possible, but try to add value by differentiating products and services

An embargo would be considered what kind of force in a PESTEL analysis?

Political

Business level strategy

The framework a firm uses to organize its activities, and it is developed by the firms top managers. EX: Cost leadership and Differentiation

Switching costs

The penalty consumers face when they choose to use a particular product made by a different company

Value Chain

The progression of activities it undertakes to create a product or services that consumers will pay for

You're trying to decide whether to start a new business in the tea industry. You have an agreement to purchase one of the three most popular tea brands in the world. Although coffee is popular in the US, worldwide the market for tea is 4 times that of coffee and it is expanding at 8% per year, which is great. One of the reasons that this brand is so popular is that is has exclusive access to the best region in India to grow tea, so its teas are the highest quality. The ten year contract for these teas was signed 9 years ago, so it will be negotiated again soon. Although there is competition in the industry, tea is a differentiated product with different flavors and quality and each company has identifies and established their distinctive competency. Which of the five forces would you be most worried about in this scenario?

Power of Suppliers (The supplier here is the regional authority for the tea. There is a real threat to the firm because it has little choice between offerings and they cant switch to a different region easily. Threat of entry isn't bad because of brand loyalty. Threat of substitute isn't bad. Coffee exists, but tea is huge and expanding rapidly. Intensity of rivalry isn't bad because tea can be differentiated between rivals)

Resources & Capabilities

R: things a firm have to work with (Equip, facilities, Raw materials) C: Things a firm can do, such as deliver good customer services or develop innovative products to create value --Both are the building blocks of a firms plans and activities

Supplier Power

Refers to the balance of power in the relationship between firms and their suppliers in an industry

Buyer Power

Refers to the balance of power in the relationship between the firm and its customers

Limitations of SWOT

SWOT is not a comprehensive analytical tool, because the 4 categories are too broad. Likely to overlook key issues because it is difficult to identify or imagine everything that could be a threat to the firm.

International Strategy

Similar to corporate because it is concerned with the large-scale actions involved in entering a brand new geographic market. Focuses on how to successfully enter and compete in a foreign market.

Stability Strategy

Strategy for a company to maintain its current income, market share, or geographic reach. EX: Because of competition or economic factors

Strategic Objectives

The big-picture goals for the company; they describe what the company will do to fulfill its mission. EX: To launch a new product, increase profitability, or grow market share for the companys product

Corporate Strategy

The broadest level of strategy, and is concerned with decisions about growing, maintaining, or shrinking very large companies.