start mgt
Explicit
direct communication and negotiation. illegal in most countries
Industry analysis
refers to an in-depth examination of key factors within a corporation's task environment
Economic forces
regulate the exchange of materials, money, energy, and information
Sociocultural forces
regulate the values, mores, and customs of society
Strategic window
(a unique market opportunity that is only available for a particular time) can occupy a propitious niche and discourage other competition
Reviewing objectives regularly can:
1) eliminate objectives that are inappropriately stated and 2) ensure that they are not too focused on short-term goals or that they are not so general that they provide little guidance
Corporate value chain analysis
1. examine each product lines value chain in terms of each activity involved 2. examine the linkage within each product lines value chain 3. examine the potential synergies among the value chains of different products
Porter's approach to Industry analysis
1.Leverage of suppliers 2.Superior or lower-cost substitute products 3.Competition among existing companies 4.Openness to new competitors 5.Buyers influence
If you wanted to calculate Intuit's profit margin for 2015, you would use which of the following:
365,000/4,192,000 after tax net income/ net sales
Chapter 5 discussed a number of strategic issues that managers may need to consider in each of the functional areas when they engage in internal scanning (looking at strengths and weaknesses of the firm). These include which of the following issues related to Research and Development (R&D):
???
1. Cost leadership
A company finds ways to design, produce and market comparable products more efficiently. The low price serves as a barrier to entry because of the leader's cost advantage. Typically increases market share
Genetically altered organisms
A convergence of biotechnology and agriculture is creating a new field of life sciences
Intuit's debt-to-equity ratio is 113% and ADP's is 589% so these ratios tell us that:
ADP is much more highly leveraged than Intuit's investors are in a more secure position
Given how we defined the soft drink industry in class and the definition for substitute products, if your firm produces Coca-cola, substitutes would include:
All of the above (pepsi, iced tea, water)
2. Growing health consciousness
Chile decided to ban toys that are included in various fast-food meals aimed at children in order to increase the fight against childhood obesity
A Strategic Factors Analysis Summary (SFAS) Matrix does which of the following:
Combines internal & external factors of a SWOT analysis in one table with weights for their importance
Product differentiation
Corporations such as Procter & Gamble and General Mills, which manufacture products such as Tide and Cheerios, create high entry barriers through their high levels of advertising and promotion
Suppose Heidi creates a downhill skiing company that saves money by: purchasing used towing equipment from failed skiing operations; relying on self-service equipment rental and self-service storage facilities (to reduce HR expenditures); and charging the lowest fees for daily ski passes, Heidi is pursuing the generic competitive strategy known as:
Cost focus
Michael porter proposed three "generic" strategies for outperforming other corporations:
Cost leadership Differentiation Focus
If an industry has high economies of scale, this means that:
Customers purchasing larger quantities of the industry's product pay lower prices
Royal Dutch Shell has been recognized as one of the most effective corporations to use scenarios as part of their environmental scanning and forecasting process. The use of scenarios involves:
Developing descriptions of likely future events that may impact the firm's performance
Ignoring question 19, if Heidi chooses to create a downhill skiing business for physically challenged children from ages 3-10, with equipment available to enable any of these children to ski (including quadriplegics in wheelchairs), specially designed ski lifts, and a higher-than-normal number of expert staff on the slopes to assist and encourage child skiers, this would indicate Heidi has chosen the generic competitive strategy known as:
Differentiation focus
SFAS (Strategic Factor Analysis Summary) combines the....
EFAS (External Factor Analysis Summary) and IFAS (Internal Factor Analysis Summary) Tables to summarize an organization's strategic factors
Suppose that Intuit's profit margin is .087 and the industry average is .05, then this says that Intuit is:
Earning more from each dollar of sales than their average competitors in the industry
If your firm is organized into departments for accounting, marketing, production/operations, finance and human resources, this would be an example of the organizational structure known as:
Functional structure
The smartphone industry as we defined it for our analysis in class, has:
High access to distribution channels
The soft drink industry, as we defined it in class, has ______ intensity of rivalry, due in part to __________________________.
High; low/declining growth in the industry & two very large firms competing to dominate the market
Changing pace and location of life
Instant communication via e-mail, cell phones, and overnight mail enhances efficiency, but also puts more pressure on people. Merging the personal computer with the communication and entertainment industries allows workers to telecommute from anywhere
Intuit's cash flow analysis shows us which of the following things:
Intuit has likely improved in their management of money owed to the company (receivables)
Intuit's price/earnings ratio is shown as 55.96 while H&R Block's P/E ratio is 15.93 (and the industry average is 33.08). This tells us that:
Investors are willing to pay much more for each dollar of Intuit's earnings than H&R Block or their competitors
Consumers, as buyers to the smartphone industry, have _______ bargaining power as buyers, due in part to ____________________________.
Low; high number of buyers, low volume of purchases by each buyer & no/low threat of vertical integration by buyers
Suppose a blue-jean manufacturing company, Baggy Backside's annual inventory turnover ratio is 24.5 and the industry average is 48.6 for 2015. Our strategic advice for Baggy Backsides should be to:
Look for ways to move their inventory faster such as sales, online promotions and so on
If Industry B has a high threat of new entrants, we would expect to see that it has:
Low barriers of entry
Bottlers and distributors in the soft drink industry have ________ bargaining power as buyers, due in part to _____________________________________.
Low; a large number of bottlers/distributors owned or contracted by firms in the industry
The smartphone industry has a ________ threat of new entrants, due in part to _______________________.
Low; high capital requirements for firms to enter and compete in the industry
5. Declining mass market
Niche markets are defining the marketers' environment. People want products and services that are adapted more to their personal needs. (Estee Lauder and Maybelline cosmetic products specifically made for African-Americans)
Ignore the information in questions 19 and 20 for answering this question. If Heidi decides to develop her business into a low-cost skiing facility aimed at families (allowing the whole family to ski all day for one low price), would this be an example of a blue ocean strategy?
No, definitely not
We said that service providers to the smartphone industry such as Verizon, T-Mobile, Sprint and so on have moderate or balanced bargaining power as buyers relative to firms in the industry, due to:
None of the above
Cost disadvantages independent of size
Once a new product earns sufficient market share to be accepted as the standard for that type of product, the maker has a key advantage. Microsoft's development of the first widely adopted operating system (MS-DOS) for the IBM-type personal computer gave it a significant competitive advantage over potential competitors. Its introduction of Windows helped to cement that advantage so that the Microsoft operating system is now on more than 90% of personal computers worldwide
Switching costs
Once a software program such as Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program because of the high training costs
The experience curve, an important factor to consider when analyzing a firm's operations, illustrates that:
Per unit production costs decrease as the firm doubles the volume of products it manufactures
Economies of scale
Scale economies in the production and sale microprocessors, for example, gave Intel a significant cost advantage over an new rival
7. Changing household composition
Single-person households, especially those of single women with children, could soon become the most common household type in the United States
Suppose Heidi decides to work with a company that designs downhill skiing equipment. She focuses her skiing business on providing a training facility for competitive skiers and the equipment design company agrees to make their equipment/gear available to the skiers at a significant discount. The skiers will agree to let both companies use their photos and video of them in marketing campaigns for the two firms. This is an example of the cooperative strategy known as:
Strategic alliance
Heidi has grown up working in her family's business ventures so she has a lot of knowledge of how to develop a firm's strategy, lead a company, and how the skiing industry operates (due to working in it for over 10 years); however, Heidi isn't aware of how much she really knows and cannot easily explain it to others. This provides Heidi's business with a valuable resource, a type of knowledge known as:
Tacit knowledge
If Intuit's profit margin is .087 that means that:
The company earns 8.7 cents on every dollar of sales
Alternative energy sources
The computerized management of crops to suit variations in land characteristics will make farming more efficient and sustainable It enables farmers to reduce costs, increase yields, and decrease environmental impact
Industry Evolution
The industry life cycle is useful for explaining and predicting trends among the six forces that drive industry competition. For ex, when an industry is new, people often buy the product, regardless of price, because it uniquely fulfills an existing need
Capital requirements
The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and Airbus
The concept of hypercompetition suggests that managers need to recognize that:
Their firm must continually work to maintain their competitive advantage in environments characterized by constant change and disequilibrium
Portable information devices and electronic networking
This trend is being accelerated by the development of cloud computing, in which a person can access their data anywhere through a Web connection
Top managers may analyze the set of activities involved in acquiring raw materials, building component parts, assembling the products, packing and shipping products, marketing and advertising, and service and repairs. This type of analysis would be known as a/an:
Value chain analysis
Virtual personal assistants
Very smart computer programs that monitor e-mails, faxes, and phone calls will able to take over routine tasks, such as writing a letter, retrieving a file, making a phone call, or screening requests
Number of competitors
When competitors are few and roughly equal in size, such as in the auto and major home appliance industries, they watch each other carefully to make sure they match any move by another firm with an equal countermove
Core competency
a collection of competencies that crosses divisional boundaries, is widespread within the corporation and is something that the corporation can do exceedingly well
Differentiation
a company provides a unique value to their buyer in terms of product quality, special features, or after-sale services. Differentiation creates a better entry barrier than does a lower-cost strategy so differentiation will typically create higher profits
5. Reputational risk
a company's impact on the environment can affect its overall reputation. The value of a company's brand could be at risk because of negative perceptions related to climate change
Core rigidity or deficiency
a core competency that was once a strength but is now a weakness
What do capabilities refer to?
a corporations ability to exploit its resources
Competency
a cross functional integration and coordination of capabilities
Competitive intelligence
a formal program of gathering information on a company's competitors
Industry
a group of firms that produces a similar product or service, such as soft drinks, or financial services
Strategic alliances
a long-term cooperative arrangement between two or more independent for mutual economic gain. 4 reasons to form an alliance: 1) obtain or learn new capabilities 2) obtain access to a specific market 3) reduce financial risk 4) reduce political risks
Cost focus
a low-cost strategy that focuses on a particular buyer group, segment of the market line, or a geographic market to serve a niche. company seeks a cost advantage in its target segment
Societal environment
a mankind's social system that includes general forces that don't directly touch on the short-run activities of the organization, but that can influence its long-term decisions. These factors affect multiple industries and are as follows:
Product or service characteristics
a product can be very unique, with many qualities differentiating it from others of its kind, or it may be a commodity, a product whose characteristics are the same, regardless of who sells it. For ex, most people choose a gas station based on location and pricing because they view gasoline as a commodity
Substitute product
a product that appears to be different but can satisfy the same need as another product (ex: texting is a substitute for e-mail, nutrasweet is a substitute for sugar, the internet is a substitute for video stores, and bottled water is a substitute for a cola) According to Porter, "substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge
Strategic group
a set of business units or firms that "pursue similar strategies with similar resources
Value-Chain partnerships
a strong and close alliance between a company or unit and key suppliers or distributors for a mutual advantage
corporate reputation
a widely help perception of a company by the General public 2 attributes:
Cirque du Soleil used a blue ocean strategy by doing which of the following:
a. Focusing on beating competitors such as traditional circuses in attracting customers b. Exploiting existing demand by offering higher value and pursuing a strategy of differentiation c. Creating uncontested market space and attracting customers who were not interested in circuses d. All of the above answer: D
Collusion
active cooperation of firms within an industry to reduce output and raise prices to get around the law of supply and demand (Explicit or tacit)
Politcal-legal forces
allocate power and provide constraining and protecting laws and regulations
An organization must reevaluate their current mission statement and objectives before?
alternative strategies can be generated and evaluated
Licensing arrangements
an agreement in which the licensing firm grants rights to another firm in another country or market to produce/sell a product
Joint venture
an alliance between two or more separate organizations to pursue an opportunity that needs a capability or resource from each other Disadvantages- loss control, lower profits, probability conflicts, and the transfer of tech advantages to the partner
Propitious niche
an extremely favorable niche that is so well suited to the firm's internal and external environment that other corporations are not likely to challenge. A niche is a propitious because it is just big enough for one firm to satisfy its demand
Entry barrier
an obstruction that makes it difficult for a company to enter an industry (ex: no new, full-line domestic automobile companies have been successfully established in the US since the 1930s because of the high capital requirements to build production facilities and to develop a dealer distribution network
Environmental scanning
an overarching term encompassing the monitoring, evaluation, and dissemination of information relevant to the organizational development of strategy
Rate of industry growth
any slowing in passenger traffic tends to set off price wars in the airline industry because the only path to growth is to take sales away from a competitor
Multidomestic industries
are specific to each country or group of countries. This type of international industry is a collection of essentially domestic industries, such as retailing and insurance
Sustainablility
argues that a firm's ability to continuously renew itself for long-term success and survival is dependent not only upon the greater economic and social system of which it is a part, but also upon the natural ecosystem in which the firm is embedded
Amount of fixed costs
because airlines must fly their planes on a schedule, regardless of the number of paying passengers for any one flight, some offer cheap standby fares whenever a plane has an empty seat
8. Increasing diversity of workforce and markets
between now and 2050, minorities will account for nearly 90% of population growth in the United States
4. Impact of millennials
born between 1977 and 1992 to the baby boomers and Generation Xers, this cohort is expected to have a strong impact on future products and services
3. shared with another..
business unit or alliance
how can a company respond to growth in an niche?
by increasing its operations capacity or through alliances with larger firms
how can a company remain competitively strong in a changing niche?
by investing heavily in the firms capabilities. A changing niche can be discovered through a situation analysis
What is one reason entrepreneurial and other firms locate close to competition forming clusters?
desire to build or upgrade core competency
High force
can be regarded as a threat because it is likely to reduce profits
Low force
can be viewed as an opportunity because it may allow the company to earn greater profits
3. appraise the profit potential of these...
capabilities and competencies in terms of their potential for sustainable competitive advantage and the ability to harvest the profits resulting from their use
corporate culture
collection of beliefs, expectations, and values learned and shared by a corporations members and transmitted from one generation to another
Two main type of cooperative strategies:
collusion and strategic alliances
Mission statements must provide a..
common thread (a unifying theme) for the corporation and a objectives should be reviewed constantly to ensure usefulness
1. Regulatory risk
companies in much of the world are already subject to the Kyoto Protocol, which requires the developed countries (and thus the companies operating within them) to reduce carbon dioxide and other greenhouse gases by an average of 6%
4. Litigation risk
companies that generate significant carbon emissions face the threat of lawsuits similar to those in the tobacco, pharmaceutical, and building supplies industries
Prospectors
companies with fairly broad product lines that focus on product innovation and market opportunities. This sales orientation makes them somewhat inefficient. They tend to emphasize creativity over efficiency (Frito Lay)
Defenders
companies with limited product line that focus on improving the efficiency of their existing operations. This cost orientation makes them unlikely to innovate new areas
Business model
company's method for making money in current business environment
Organizational analysis
concerned with identifying, developing, and taking advantage of an organization's resources and competencies
Business strategies could be...
cooperative or competitive
Reactors
corporations that lack a consistent strategy-structure-culture relationship. Their (often ineffective) responses to environmental pressures tend to be piecemeal strategic changes (major US airlines)
Analyzers
corporations that operate in at least two different product-market areas, one stable and one variable. In stable areas, efficiency is emphasized. In the variable areas, innovation is emphasized (Procter & Gamble)
When low-cost and differentiation strategies have a narrow market target, they are called
cost focus and differentiation focus
When low-cost and differentiation strategies have a broad mass-market target, they are called-
cost leadership and differentiation
Internal strategic factors
critical strengths and weaknesses that are likely to determine whether a firm will be able to take advantage of opportunities while avoiding threats
Consolidated industry
dominated by a few large firms, each of which struggles to differentiate its products from those of the competition (ex: automobile, petroleum, and major home appliance industries)
Explicit knowledge
easily articulated and communicated
Porter proposed that a firm's competitive advantage is defined by their Competitive Scope, which is?
either a broad or narrow market
1. may be an asset..
endowment
3. Product and technology risk
environmental sustainability can be a prerequisite to profitable growth. Carbon- friendly products using new technologies are becoming increasingly popular with consumers
VRIO Frame work
evaluates a firm's competencies
5. conglomerate structure
for large firms with many product lines in unrelated industries
3. Divisional structure
for large. firms product lines in several related industries
2. functional structure
for medium sized firms, several product lines
Annual report
from the year of the case are very helpful. They contain income statements, balance sheets, cash flow statements and notes to the financial statements indicating why certain actions were taken
Technological forces
generate problem-solving inventions
Government policy
governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as oil-drilling sites in protected areas
Financial leverage
helpful in describing how debt is used to increase the earnings available to common shareholders
Capacity
if the only way a manufacturer can increase capacity is in large increment by building a new plant (as in the paper industry), it will run that new plant at full capacity to keep its unit costs as low as possible- thus producing so much that the selling price falls throughout the industry
I
imitability
Smart, mobile robots
improvements in these areas mean that robots will be created to perform more sophisticated factory work, run errands, do household chores, and assist the disabled
SEC 10-K form
include detailed information not usually available in an annual report
SEX 14-A forms
include detailed information on members of a company's board of directors and proxy statements for annual meetings
SEC 10-Q form
include quarterly financial reports
Natural environment
includes physical resources, wildlife, and climate that are an inherent part of existence on Earth. These factors form an ecological system of interrelated life
Task environment
includes those elements or groups that directly affect a corporation and, in turn, are affected by it (ex: governments, local communities, suppliers, competitors, creditors, employees/labor unions, special-interest groups, trade associations)
Tactic
indirect communication through an informal system of signals. To be successful it needs: 1) small number of identifiable competitors 2) cost are similar amongst firms 3) needs to be one price leader 4) industry culture accepts cooperation 5) sales are characterized by high frequency of small order 6) large inventories 7) high entry barriers
SWOT approach is used to gather-
information for a situation analysis. swot is an effective way to get an idea of the organizations internal and external factors
SFAS Matrix
instead of the SWOT approach, an alternative way to gather information for a strategic analysis
5. identify resource gaps and..
invest in upgrading weakness
Reverse engineering
involves taking apart a competitor's product in order to find out how it works
Complementor
is a company (Microsoft) or industry whose product works well with a firm's (Intel's) product and without the product would lose much of its value Ex of complementary industries is the tire and automobile industries
Long run
it may be possible for a company, through its choice of strategy, to change the strength of one or more of the forces to the company's advantage (ex: Dell's early use of the internet to market its computers was an effective way to negate the bargaining power of distributors in the PC industry)
Height of exit barriers: Exit barriers
keep a company from leaving an industry. The brewing industry, for example, has a low percentage of companies that voluntarily leave the industry because breweries are specialized assets with few uses except for making beer
Differentiation focus
like cost focus, this strategy concentrates on a particular buyer group, product line segment, or a geographic market. a company or business unit seeks differentiation in a target market segment
4. Strategic business units
modification of the divisional structure
1. simple structure
no functional or product categories. For small, entrepreneur-dominate companies. one or two products
Tacit knowledge
not easily articulated or communicated (tacit is more valuable)
The Case Method
offers the opportunity to move from a narrow, specialized view that emphasizes functional techniques to a broader, less precise analysis of the overall corporation
Global industries
operate worldwide with MNCs making only small adjustments for country specific circumstances (ex: commercial aircraft, television sets, semiconductors, copiers, automobiles, watches, and tires)
O
organization
Mutual service consortia
partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop in their own. for companies that want to work together but not share core competencies
3. Expanding seniors market
people over age 55 will become an even more important market. The desire for companionship by people whose children are grown is causing the pet care industry to grow by more than 5% annually
R
rareness
Durability
rate at which a firm's underlying resources, capabilities or core competencies depreciate in value or become obsolete
1. Increasing environmental awareness
recycling and conservation
Strategy formulation
referred to as strategic planning and is concerned with developing a corporations mission, objectives, strategies, and policies.. beginning with the situation analysis
Diversity of rivals
rivals that have very different ideas of how to compete are likely to cross paths often and unknowingly challenge each other's position. This happens frequently in the retail clothing industry when a number of retailers open outlets in the same location- thus taking sales away from each other. This is also likely to happen in some countries or regions when multinational corporations compete in an increasingly global economy.
Value chain
set of value creating activities that begin with basic raw materials coming from suppliers moving on to a series of value added activities involved in producing and marketing a product or service ending with distributors getting the final goods into the hands of the ultimate consumer
Access to distribution channels
smaller new firms often have difficulty obtaining supermarket shelf space for their goods because larger retailers charge for space on their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand
2. combine the firms strengths into..
specific capabilities and core competencies
Industry matrix
summarizes the key success factors within a particular industry. The matrix gives a weight for each factor based on how important that factor is for success within the industry
2. Supply chain risk
suppliers will be increasingly vulnerable to government regulations- leading to higher component and energy costs as they pass along increasing carbon-related costs to their customers. Global supply chains will be at risk from an increasing intensity of major storms and flooding
What do resources include?
tangible assets human assets intangible assets
Transferability
the ability for competitors to get the resources you have
Replicability
the ability to duplicate resources and capabilities to imitate the other firm's success
capital budgeting
the analyzing and ranking of possible investments in fixed assets such as land, buildings, and equipment in terms of additional outlays and additional receipts that will result from each investment
Resources are an organization's assets and thus what?
the basic building blocks of the organization
What do capabilities include?
the business processes and routines that manage the interaction among resources to turn inputs into outputs
Ratio Analysis
the calculation of ratios from data in financial statements. It's done to identify possible financial strengths and weaknesses. A review of key financial ratios can help you asses a company's overall situation and pinpoint some problem areas
what does SWOT highlight?
the corporation's distinctive competencies (capabilities and resources that the firm possess) but it will also highlight the opportunities of the firm that they are not taking advantage due to lack of resources
If you took Intuit's current assets minus their inventory and divided this by their current liabilities, this would tell you ____ and it's a measure of ____
the degree to which Intuit can pay their short-term bills or obligations using their current assets; liquidity
6. Physical risk
the direct risk posed by climate change include the physical effects of droughts, floods, storms, and rising sea levels
4. select the strategy that best exploits...
the firm's cap and comp relative to external opportunities
1. identify and classify..
the firms resources in terms of strengths and weaknesses
Brand
the name given to a company's product which embodies all characteristics of that item
Situation analysis
the process of finding a strategic fit between external opportunities and internal strengths working around external threats and internal weaknesses
Imitability
the rate at which a firm's underlying resources, capabilities, or core competencies can be duplicated by others
STEEP Analysis
the scanning of sociocultural, technological, economic, ecological, and political-legal environmental forces
Transparency
the speed that other firms can understand the relationship between your resources and capabilities and your success
Short run
these forces act as constraints on a company's activities
Dynamic capabilities
those that are constantly being changed and reconfigured to make them more adaptive to an uncertain enviornment
New entrants
to an industry typically bring to it new capacity, a desire to gain market share and potentially substantial resources. They are threats to an established corporation- the threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors
V
value does it provide value and competitive advantage
Key success factors
variables that can significantly affect the overall competitive positions of companies within any particular industry. They typically vary from industry to industry and are crucial to determining a company's ability to succeed within that industry
Regional industries
when MNCs primarily coordinate their activities within regions, such as the Americas or Asia (ex: major home appliance industry)
Distinctive competencies
when core competencies are superior to competition
Fragmented industry
where no firm has large market share, and each firm serves only a small piece of the total market in competition with others (cleaning services)
business model is composed of 5 elements
who it serves, what it provides, how it makes money, how it differentiates and sustains competitive advantage, and how it provides its products/service
