Strategic Management 4513 ULTRA SUPER PACK
Environmental Monitoring
A firm's analysis of the external environment that tracks the evolution of environment trends, sequences of events, or streams of activities
Resources
A firm's assets, including people and the value of its brand name
Focus Strategy
A firm's generic strategy based on appeal to a narrow market segment within an industry
Overall Cost Leadership
A firm's generic strategy based on appeal to the industry-wide market using a competitive advantage based on low cost
Differentiation Strategy
A firm's generic strategy based on creating differences in the firm's product or service offering by creating something that is perceived industry-wide as unique and valued by customers
Competitive Advantage
A firm's resources and capabilities that enable it to overcome the competitive forces in the industry(ies)
Core Competencies
A firm's strategic resources that reflect the collective learning in the organization
Stakeholder Management
A firm's strategy for recognizing and responding to the interests of all its salient stakeholders
Competitive Risks of Focus Strategies
A focusing firm may be "outfocused" by its competitors, A large competitor may set its sights on a firm's niche market, Customer preferences in niche market may change to more closely resemble those of the broader market
Worldwide Functional Structure
A functional structure in which all departments have worldwide responsibilities
Industry
A group of firms producing products that are close substitutes
Agency Theory
A theory of the relationship between principals and their agents, with emphasis on two problems: 1. The conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents 2. The different attitudes and preferences toward risk of principals and agents
Porter's Five-Forces Model of Industry Competition
A tool for examining the industry-level competitive environment, especially the ability of firms in that industry to set prices and minimize costs
Geographic-Area Division Structure
A type of division organizational structure in which operations in geographical regions are grouped internally
Worldwide Matrix Structure
A type of matrix organizational structure that has one line of authority for geographic-area divisions and another line of authority for worldwide product divisions
According to Henry Mintzberg, the realized strategies of a firm: A. are a combination of deliberate and emergent strategies B. are a combination of deliberate and differentiation strategies C. must be based on the strategic plan of the company D. must be kept confidential for competitive reasons
A. are a combination of deliberate and emergent strategies
An organization is responsible to many different entities. In order to meet the demands of these groups, organizations must participate in stakeholder management. Stakeholder management means that: A. interests of the stockholders are not the only interests that matter B. stakeholders are second in importance to the stockholders C. stakeholders and managers inevitably work at cross-purposes D. all stakeholders receive financial rewards
A. interests of the stockholders are not the only interests that matter
We want to be the top-ranked supplier to our customers. (PPG) This is an example of a: A. nonfinancial strategic objective B. financial strategic objective. C. vision statement D. mission statement
A. nonfinancial strategic objective
The vision and mission statements of a company set the overall direction of the organization. Strategic objectives serve what role? A. operationalize the mission statement B. modify the mission statement C. are a shorter version of the mission statement D. are only clarified by the board of directors
A. operationalize the mission statement
Managers should do more than just focus on short-term financial performance. One concept that helps managers do this is stakeholder symbiosis. This means that: A. stakeholders are dependent on each other for their success B. stakeholders look out for their individual interests C. one can only gain at the expense of someone else D. all stakeholders want to maximize shareholder returns
A. stakeholders are dependent on each other for their success
The four key attributes of strategic management include the idea that: A. strategy must be directed toward overall organizational goals and objectives B. strategy must be focused on long-term objectives C. strategy must be focused on one specific area of an organization D. strategy must focus on competitor strengths
A. strategy must be directed toward overall organizational goals and objectives
Firms must be aware of goals other than short-term profit maximization. One area of concern should be social responsibility which is: A. the expectation that business will strive to improve the overall welfare of society B. the idea that organizations are solely responsible to local citizens C. the fact that court costs could impact the financial bottom line D. the idea that businesses are responsible to maintain a healthy social climate for their employees
A. the expectation that business will strive to improve the overall welfare of society
Examples of __________ include: To be the happiest place on earth (Disneyland), and Restoring patients to full life (Medtronic). A. vision statements B. mission statements C. strategic objectives D. operational objectives
A. vision statements
the primary aim of strategic management at the business level is:
Achieving competitive advantage
Shareholder Activism
Actions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization
Strategy Implementation
Actions made by firms that carry out the formulated strategy, including strategic controls, organizational design, and leadership
Human Resources Management
Activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel
Expropriation of Minority Sharholders
Activities that enrich the controlling shareholders at the expense of the minority shareholders
Value Chain Analysis
Allows the firm to understand the parts of its operations that create value and those that do not
External views
Alternate owners and uses of assets and share value
False
An attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms
Vertical Integration
An expansion or extension of the firm by integrating preceding or successive production processes
Market for Corporate Control
An external control mechanism in which shareholders dissatisfied with a firm's management sell their shares
Scenario Analysis
An in-depth approach to environmental forecasting that involves experts' detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment
Business-Level Strategy
An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets
Differentiation Strategy
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
Differentiation Strategy
An integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
Focus Strategies
An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
Cost Leadership Strategy
An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lower cost, relative to that of competitors with features that are acceptable to customers
Cost Leadership Strategy
An integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers
Modular Organization
An organization in which nonvital functions are outsources, which uses the knowledge and expertise of outside suppliers while retaining strategic control
Barrier-Free Organization
An organizational design in which firms bridge real differences to culture, function, and goals to find common ground facilitates information sharing and other forms of cooperative behavior
International Division Structure
An organizational form in which international operations are in a separate, autonomous division. Most domestic operations are kept in other parts of the organization
Strategic Business Unit Structure
An organizational form in which products, projects, or product marker divisions are grouped into homogeneous units
Divisional Organizational Structure
An organizational form in which products, projects, or product markets are grouped internally
Functional Organizational Structure
An organizational form in which the major functions of the firm, such as production, marketing, r&d, and accounting, are grouped internally
Simple Organizational Structure
An organizational form in which the owner-manager makes most of the decisions and controls activities, and the staff serves as an extension of the top executive
Matrix Organizational Structure
An organizational form in which there are multiple lines of authority and some individuals report to at least two managers
Holding Company Structure
An organizational form that is a variation of the divisional organizational structure in which the divisions have a high degree of autonomy both from other divisions and from corporate headquarters
Mission
Answers the questions: What is the purpose of the firm? What value will the firm create? For whom will value be created?
The Political/Legal Segment
Antitrust laws, Taxation laws, Deregulation philosophies, Labor training laws, Educational philosophies and policies
Triple Bottom Line
Assessment of a firm's financial, social, and environmental performance
Outbound Logistics
Associated with collecting, storing, and distributing the product p0r service to buyers
Service
Associated with providing service to enhance or maintain the value of the product
Marketing and Sales
Associated with purchases of products and services by end users and the inducements used to get them to make purchases
Inbound Logistics
Associated with reviving, storing and distributing inputs to the product
Operations
Associated with transforming inputs into the final product form
Peter Senge, of MIT, recognized three types of leaders. __________ champion and guide ideas, create a learning infrastructure, and establish a domain for taking action. A. Local line leaders B. Executive leaders C. Internal networkers D. Shop floor leaders
B. Executive leaders
False
Switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry.
T or F? A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage.
T
T or F? A firm using a differentiation strategy can charge a premium price.
T
T or F? Firms operating in the same market, offering similar products and targeting similar customers are competitors.
T
T or F? Intensified rivalry within an industry results in decreased average profitability for the firms within it
T
T or F? Product quality is a universal theme and is a necessary, but not a sufficient, condition for competitive success.
T
T or F? The probability of a competitive response to a competitive action is based partly on the reputation of the competitor
T
T or F? Two firms that have similar resources, but do not share markets would not be direct and mutually acknowledged competitors.
T
Effectiveness
Tailoring actions to the needs of an organization rather than wasting effort, or 'doing things right'
Introduction Stage
The first stage of the product life cycle, characterized by: 1. New products no known to customers 2. Poorly defined market segments 3. Unspecified product features 4. Low sales growth 5. Rapid technological change 6. Operating Losses 7. Need for financial support
Narrow Scope
The firm selects a segment or a few segments in the industry and tailors its strategy to serving them at the exclusion of others
Narrow Scope
The firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others
Competitor Analysis
The firm studies competitors' future objectives, current strategies, assumptions, and capabilities
Capabilities
The firm's capacity to deploy resources that have been purposely integrated to achieve a desired end state (often developing, carrying, and exchanging info and knowledge through the firms human capital)
False
The five forces model (buyers/suppliers/new entrants/substitutes/rivalry) is a firm-level analytical model.
Organizational Structure
The formalized patterns of interactions that links a firm's tasks, technologies, and people
Decline Stage
The fourth stage in the product life cycle, characterized by: 1. Falling sales and profits 2. Increasing price competition 3. Industry consolidation
Strategic Management Process
The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Pooled Negotiating Power
The improvement in bargaining position relative to suppliers and customers
Acquisitions
The incorporation of one firm into another through purchase
Supplier group is powerful
The industry is not an important customer of this group
Buyer group is powerful
The industry's product is unimportant to the quality of the buyer's products or services
Restructuring
The intervention of the corporate office in a new business that substantially changes the assets, capital structure and/or management, including selling off parts of the business, changing the management, reducing payroll and unnecessary sources of expenses, changing strategies, and infusing the new business with new technologies, processes, and reward systems
Competitive rivalry
The ongoing set of competitive actions and responses occurring between competitors. Influences a firm's ability to gain and sustain competitive advantages
Parenting Advantage
The positive contributions of the corporate office to a new business as a result of expertise and support provided and not as a result of substantial changes in assets, capital structure, or management
Threat of new entrants
The possibility that the profits of established firms in the industry may be eroded by new competitors
Coors' annual report for 1985 states that: "Rarely in Adolph Coors company's 113- year history has there been a year with as many success stories as 1985." Which of the facts would NOT support this?
The price of the stock at the end of 1985 was $21.25
Coors' annual report for 1985 states that: "Rarely in Adolph Coors Company's 113 - year history has there been a year with as many success stories as 1985." Which of the facts would NOT support this?
The price of the stock at the end of 1985 was $21.25.
Market Segmentation
The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups
Diversification
The process of firms expanding their operations by entering new businesses
Strategic Control
The process of monitoring and correcting a firm's strategy and performance
Buyer group is powerful
The products it purchases from the industry are standard or undifferentiated
Outsourcing
The purchase of a value-creating activity from an external supplier
Corporate Governance
The relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders (2) the management (led by the chief executive officer), and (3) the board of directors
Corporate Governance
The relationship among various participants in determining the direction and performance of corporations. The primary participants are the shareholders, the management, and the board of directors
Takeover Constraint
The risk to management of the firm being acquired by a hostile raider
Although vision statements vary from organization to organization, vision statements are intended to motivate and inspire employees to work toward a general goal.
True
An important advantage of first movers or pioneers in a market is that they may establish brand recognition that may later serve as an important switching cost.
True
Buyer power tends to be higher if suppliers provide undifferentiated or standard products.
True
Competition tends to be more intense among firms within a strategic group than between strategic groups.
True
Competitor Intelligence (CI) is a tool that can provide management with "early warnings" about both threats and opportunities.
True
Effective leadership can play a large role in fostering corporate entrepreneurship. Corporate entrepreneurship can have a very positive impact on a firm's bottom line.
True
Environmental monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process
True
Environmental scanning and competitor intelligence provide important inputs for forecasting activities
True
Firms that compete on overall cost leadership are vulnerable if all rivals share a common input or raw material that contributes a significant amount to total costs.
True
Five forces analysis implicitly assumes a zero sum game; a perspective that can be shortsighted.
True
In most industries, new entrants will be a bigger threat because the internet lowers entry barriers.
True
In some industries, high switching costs can act as an important barrier to entry
True
Incumbent firms that thought a niche market was too small to enter in the past may use internet technologies to enter that segment with true focusers
True
Industries characterized by high economies of scale typically attract fewer new entrants.
True
Mass customization enables manufacturers to be more responsive to customer demands for high quality products
True
Most analysts agree that use of the Internet will lower transaction costs.
True
Objectives in organizations should be clear, stated, and known by employees throughout the organization
True
One potential pitfall of a differentiation strategy is that a brand's identification in the marketplace may become diluted through excessive product line extensions.
True
Differentiation Strategy: New Entrants
Can defend against new entrants because New products must surpass proven products, New products must be at least equal to performance of proven products, but offered at lower prices
Bargaining Power of Suppliers
Can exert power by threatening to raise prices or reduce the quality of purchased goods and services
Cost Leadership Strategy: New Entrants
Can frighten off new entrants due to Their need to enter on a large scale in order to be cost competitive andThe time it takes to move down the learning curve
Differentiation Strategy: Buyers
Can mitigate buyers' power because well differentiated products reduce customer sensitivity to price increases
Cost Leadership Strategy: Buyers
Can mitigate buyers' power by Driving prices far below competitors, causing them to exit, thus shifting power with buyers back to the firm
Differentiation Strategy: Suppliers
Can mitigate suppliers' power by Absorbing price increases due to higher margins and Passing along higher supplier prices because buyers are loyal to differentiated brand
Cost Leadership Strategy: Suppliers
Can mitigate suppliers' power by Being able to absorb cost increases due to low cost position and Being able to make very large purchases, reducing chance of supplier using power
Economic Segment of the general environment
Characteristics of the economy, including national income and monetary conditions
Strategic Groups
Cluster of firms that share similar strategies
Similar resources
Common strategies based on ____ give no one firm an advantage
Translation Process
Communication and Market view stem from this
Organizational Capabilities
Competencies or skills that a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end
Uncommon resources
Competitive advantages are gained only from _____, resources that are rare to other competitors
Slow Cycle Market
Competitive advantages are shielded from imitation for long periods of time and imitation is costly. CA can be sustainable.
Fast Cycle Market
Competitive advantages aren't shielded from imitation, Imitation happens quickly and somewhat inexpensively, Competitive advantages aren't sustainable, Non-proprietary technology is diffused rapidly
Porter's 5 forces model applies to which external environment group?
Competitive environment
Principal-Principal Conflicts
Conflicts between two classes of principals - controlling shareholders and minority shareholders - within the context of a corporate governance system
Related Diversification Costs
Coordination costs, Integration costs
Efficient Internal Capital Market Allocation
Corporate office distributes capital to business divisions to create value for overall company
Cost Leadership Strategy: Substitutes
Cost leader is well positioned to Make investments to be first to create substitutes, Buy patents developed by potential substitutes, Lower prices in order to maintain value position
Financial Economies
Cost savings are realized through improved allocations of financial resources
Economies of Scope
Cost savings from leveraging core competencies or sharing related activities among businesses in a corporation
Economies of scope
Cost savings that occur when a firm transfers capabilities and competencies developed in one of its businesses to another of its businesses
What Drives Superior Performance?
Create Value and Capture Value
Operational Relatedness
Created by sharing either a primary activity such as inventory delivery systems, or a support activity such as purchasing
Define vision
Crystallization of what leaders want firm to be
The four key attributes of strategic management include all of the following EXCEPT: A. including multiple stakeholder interests in decision making B. incorporating both short-term and long-term perspectives C. recognizing the trade-offs between effectiveness and efficiency D. emphasis on the attainment of short-term objectives
D. emphasis on the attainment of short-term objectives
Management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because: A. companies that have implemented these techniques have lost money B. there is no proof that these techniques work C. they cost too much money and effort to implement D. every company is trying to implement them and hence it does not make a company different from others
D. every company is trying to implement them and hence it does not make a company different from others
T or F? First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.
F
The strategic management process should be addressed only by top-level executives. mid-level and low-level employees are best equipped to implement the organization's strategies.
False
The three primary participants in corporate governance are (1) the shareholders; (2) management (led by the CEO); and (3) employees.
False
The use of the strategic groups concept is generally not helpful in charting the future directions of firms' strategies.
False
There is generally a weak relationship between equity markets (e.g., New York Stock Exchange) and economic indicators.
False
To generate above average returns, a firm following an overall cost leadership position should not be concerned with attain attaining parity or proximity on the basis of differentation relative to its peers.
False
a disadvantage of firms that successfully integrate overall cost leadership and differentiation strategies is that they are relatively easy for competitors to imitate.
False
a successful differentation strategy increases rivalry since buyers become more price sensitive
False
a successful differentation strategy lowers entry barriers because of customer loyalty and the firm's ability to provide uniqueness in its products and services
False
an important idea behind the profit pool concept is that there is always a strong relationship between the generation of revenues and the capturing of profits
False
businesses that compete in markets that are in decline should simply be harvested or divested since they are no longer profitable
False
concentrating solely on one form of competitive advantage generally leads to the highest possible level of profitability.
False
during the decline stage of the product life cycle,harvesting strat means that a firm keeps a product going without significantly reducing market support, technological development, or other investments, while hoping competitors exit the market
False
during the growth stage of the market life cycle, customers are very likely to establish brand loyalty.
False
focus by itself often constitutes a competitive advantage.
False
given the attractiveness of premium pricing during the growth stage of the market life cycle, managers should emphasize short term results to false increase profits.
False
if a firm has a successful differentiation strategy, it is not necessary to attain parity on cost.
False
the decline stage of the industry life cycle is inevitably followed by death
False
the market life cycle should be used as a short run forecasting device because it provides a conceptual framework for understanding what false changes typically occur.
False
with reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one.
False
Coors' position as the most profitable brewer (per barrel) in 1977, was based primarily on its differentiation and mystique.
False. It really competed based on cost leadership; it charged lower prices but with much cheaper production costs.
External Governance
Methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system
What provides context for all decisions within the organization?
Mission
Attractive Industry
Moderate rivalry among competitors
One way the internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass true customization.
True
Organizational vision statements are the beginning point for the hierarchy of goals throughout the organization. An organizations vision statement should be massively inspiring, overarching, and long-term.
True
Porter's Five Forces model helps to determine both the nature of competition in an industry and the industry's profit potential.
True
Rivalry will be most intense when there is a lack of differentiation or switching costs.
True
How can a resource be inimitable?
Physical Uniqueness Path Dependency Causal Ambiguity Social Complexity
Reward System
Policies that specify who gets rewarded and why
Competitor Environment
Political/Legal, Global, and Technological
The Demographic Segment
Population size, Age structure, Geographic distribution, Ethnic mix, Income distribution
All of the following are examples of Internet business models except
Prescription-based model
Competitive Risks of Cost Leadership Strategy
Processes used to produce and distribute good or service may become obsolete due to competitors' innovations., Focus on cost reductions may occur at expense of customers' perceptions of differentiation., Competitors, using their own core competencies, may successfully imitate the cost leader's strategy
The Technological Segment
Product innovations, Applications of knowledge, Focus of private and government-supported R&D expenditures, New communication technologies (Skype)
Complements
Products or services that have an impact on the value of a firm's products or services
Inimitable resources
Profits generated from ____ are more likely to be sustainable
The threat of new entrants
Profits of established firms in the industry may be eroded by new competitors
Nonwealth-based
Proxies: market share, customer satisfaction, volume Institutional: Employment, continuity, welfare
All of the following are ways that Internet technologies are being used to enhance an overall cost leadership strategy except:
Quick online responses to service requests and rapid feedback to customer surveys and product promotions are enhancing marketing efforts.
HR management
Recruiting, hiring, training, and compensating all types of personnel
Technology Development
Related to a wide range of activities and those embodied in processes and equipment and the product itself
Tangible Resources
Relatively easy to identify, and include physical and financial assets used to create value for customers
Core Competencies
Resources and capabilities that serve as a source of a firm's competitive advantage
Synergy
Revenue enhancement from being within the same corporate parent
Which is considered a force in the "Five Forces model"?
Rivalry among competing firms
Cost Leadership Strategy: Competitors
Rivals hesitate to compete on basis of price, Lack of price competition leads to greater profits
Boundaries and Constraints
Rules that specify behaviors that are acceptable and unacceptable
Components of External Environmental Analysis
Scanning, Monitoring, Forecasting, Assessing
Suppliers
Seek loyal customers willing to pay highest sustainable prices for goods and services
Market power
Sell its products above the existing competitive level and/or Reduce the costs of its primary and support activities below the competitive level
Relationship of economic value to share price (external view):
Share price (alternate owners and uses of assets, share value)
Environmental Scanning
Surveillance of a firm's external environment to predict environmental changes and detect changes already under way
Shell, NEC, and Proctor & Gamble have been measuring their performance according to what has been called a "triple bottom line." This technique involves an assessment of financial, social, and environmental performance.
True
Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community at large.
True
Stockholders, employees, and the community at large are among a firm's stakeholders.
True
Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.
True
Strategic management includes strategy analysis, strategy formulation, and strategy implementation.
True
Strategic management recognizes the trade-offs between effectiveness and efficiency.
True
Strategic objectives are more specific than vision statements.
True
Symbiosis is the ability to recognize interdependencies among the interests of multiple stakeholders within and outside an organization
True
Technological innovations can create entirely new industries and alter the boundaries of industries
True
The Internet provides an electronic "staging area" for several forms of digital communications.
True
The internet heightens the threat of substitutes because it creates new ways to accomplish the same task.
True
The more attractive the price/performance ratio of substitute products, the more tightly it constraints an industry's ability to charge high prices.
True
The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration
True
The same environmental trend can often have very different effects on firms within the same industry.
True
The same environmental trend or event may have a very different impact on different strategic groups within the same industry
True
With a focus strategy, creating niche by differentiating one's product or service often allows small firms to compete successfully with market leaders.
True
an important potential pitfall of an integrated overall cost leadership and differentiation strategy is that firms may fail to implement either one and true become stuck in the middle
True
as markets mature, competition on the basis of differentiation is preferable to price competition.
True
as markets mature, the magnitude of differentiation and cost leadership advantages among competitors decrease.
True
many firms facing a turnaround situation try to reduce their costs by outsourcing the production of many inputs.
True
the example of Lexus automobiles in the text points out that a firm can strengthen its differentation strategy by achieving integration at multiple points along the value chain.
True
Financial Ratio Analysis and Stakeholder perspective
Two approaches for evaluating firm performance
No two firms are totally different and no two firms are exactly the same
Two unassailable assumptions in industry analysis
General Administration
Typically supports the entire value chain and not individual activities
False
Typically, fast industry growth increases an industry's rivalry
Poison Pill
Used by a company to give shareholders certain rights in the event of takeover by another firm
Corporate Relatedness
Using complex sets of resources and capabilities to link different businesses through managerial and technological knowledge, experience, and expertise
The Four Criteria of Sustainable Competitive Advantage
Valuable Capabilities, Rare Capabilities, Inimitable Capabilities, Nonsubstitutable Capabilities
All of the following are ways that Internet technologies are being used to enhance a differentiation strategy except:
Virtual organizing and online "officing" are being used to minimize firm infrastructure requirements and lower costs.
What guides development of strategy and organizations?
Vision
Host Communities
Want companies willing to be long-term employers and provides of tax revenues while minimizing demands on public support services
Union Officials
Want secure jobs and desirable working conditions
Differentiation Strategy: Substitutes
Well positioned relative to substitutes because Brand loyalty to a differentiated product tends to reduce customers' testing of new products or switching brands
Key Issues in Business-Level Strategy
What: Which customers to serve, What: which need to satisfy, How: How resources or capabilities are needed.
Substitute products increase
When buyers face few switching costs
Why outsource?
When it lacks capabilities (or which do not create advantage), the firm can concentrate fully on those areas in which it can create value
Supplier group is powerful
When the group poses a credible threat of forward integration
Industry Rivalry increases
When the industry's growth slows or declines
Industry Rivalry increases
When the strategic stakes are high
Supplier Group is powerful
When this group is dominated by a few companies and is more concentrated than the industry it sells to
Supplier group is powerful
When this group is not obliged to contend with substitute products for sale to the industry
Supplier group is powerful
When this group's products are differentiated or it has built up switching costs for the buyer
Supplier group is powerful
When this groups product is an important input to the buyer's business
Technology Development
Wide range of activities and those embodied in the process and equipment and the product itself.
The Sociocultural Segment
Workforce diversity, Attitudes about quality of worklife , Concerns about environment, Shifts in work and career preferences, Shifts in product and service preferences, Women in the workplace
is it important to be quick with a differentiation strategy?
YES
does coors expend more money on advertising per barrel sold than its competitors in 1985?
Yes, because it needs to sell its beer in new regions where it has little volume and therefore its advertising is more inefficient.
High
____ barriers of entry in an industry reduces threat of new entrants
Do not
_____ outsource activities in which the firm itself can create and capture value
Do not
_____ outsource primary and support activities that are used to neutralize environmental threats or to complete necessary ongoing organizational tasks
backward integration occurs when:
a company produces its own inputs
Which of the following firms would likely pose the least competitive threat?
a competitor to your product where a high switching cost exists
Late Mover
a firm that responds to a competitive action a significant amount of time after the first mover's action and the second mover's response
Second Mover
a firm that responds to the first mover's competitive action, typically through imitation
First Mover
a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position
Resources
a firm's assets, including people and value of brand name
An industry is defined as
a group of firms producing products that are close substitutes
Strategic Action/Response
a market-based move that involves a significant commitment of organizational resources and is difficult to implement and reverse
Tactical Action/Response
a market-based move that is taken to fine-tune a strategy; it involves fewer resources and is relatively easy to implement and reverse
corporate governance
a relationship among stakeholders used to determine and control the direction and performance of a company
Strategic flexibility
a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment
Competitive Action
a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position
Competitive Response
a strategic or tactical action the firm takes to counter the effects of a competitor's competitive action
units coordinate their activities with headquarters and with one another, units adapt to special circumstances only they face, and the entire organization draws upon relevant global resources for enhanced efficiencies. These are all attributes of which type of strategy?
a transnational strategy
in a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. the university is attempting to use it faculty to gain economies of scale.
true
Environmental forecasting involves developing plausible projections about the ______ of environmental change
all of the above
Exit barriers arise from
all of the above
Internet "cookies" can be used to violate consumer privacy because they
all of the above
In the opening case, Agillion, Inc., the start-up failed because
all of the above.
Unique content will not add value to an Internet website under the following conditions:
all of the above.
risk
an investor's uncertainty about the economics gains or losses that will result from a particular investment
If you believed in a pure five forces model of above-average returns, which of the following things is LEAST important?
analysis of resources, capabilities, and core competencies
Research shows that these are all strategies used by firms engaged in successful turnarounds
asset and cost surgery, selective product and market pruning, piecemeal productivity improvements
Intangible resources
assets that are rooted deeply in the firm's history accumulate over time, and are relatively difficult for competitors to analyze and imitate (Human resources, Innovation, Reputational)
Tangible resources
assets that can be observed and quantified (financial, organizational, physical, technological)
which of the following is a risk (or pitfall) of cost leadership?
attempts to stay ahead of the competition may lead to unacceptable quality
The text discusses 3 approaches to combining overall cost leadership and differentiation competitive advantages. These are:
automated and flexible manufacturing systems, exploiting the profit pool concept for competitive advantage, coordinating the extended value chain by way of information and technology
5. Which of the following is NOT an assumption of the resource-based model? a. Each firm is a unique collection of resources and capabilities. b. All firms possess the same strategically relevant resources. c. Resources are not highly mobile across firms. d. Firms acquire different resources and capabilities over time.
b. All firms possess the same strategically relevant resources.
All of the following are assumptions of the industrial organization (I/O) model EXCEPT a. Organizational decision makers are rational and committed to acting in the firm's best interests. b. Resources to implement strategies are firm-specific and attached to firms over the long-term. c. The external environment is assumed to impose pressures and constraints that determine the strategies that result in above-average returns. d. Firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.
b. Resources to implement strategies are firm-specific and attached to firms over the long-term.
2. Tangible resources include: a. assets that are people dependent such as know-how. b. assets that can be seen and quantified. c. organizational culture. d. a firm's reputation.
b. assets that can be seen and quantified.
in order to achieve economies of scale, some manufacturing industries in nations (such as korea) with small domestic markets must globalize.
true
internal competition for corporate governance is effective for companies with an unrelated diversification strategy, but dysfunctional for companies with a related strategy
true
to the extent that firms are able to standardize products across country borders and use the same or similar production facilities, coordinating critical resource functions, they are likely to achieve a more optimal economic scale.
true
Risk
uncertainty about a particular investment
potential pitfalls of a differentiation strategy
uniqueness that is not valuable, too high a price premium, perceptions of differentiation may vary between buyers and sellers
Related versus unrelated mergers/acquisitions
unrelated: no economic value, zero economic profits related: greater value and profits
6. Which of the following is NOT an entry barrier to an industry? a. expected competitor retaliation b. economies of scale c. customer product loyalty d. bargaining power of suppliers
d. bargaining power of suppliers
Which of the following is NOT an entry barrier to an industry? a. expected competitor retaliation b. economies of scale c. customer product loyalty d. bargaining power of suppliers
d. bargaining power of suppliers
When the costs of supplies increase in an industry, the low-cost leader may: a. continue competing with rivals on the basis of product features. b. lose customers as a result of price increases. c. make it difficult for new entrants to the industry to achieve above-average returns. d. be the only firm able to pay the higher prices and continue to earn average or above- average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above- average returns.
Customer needs are related to the: a. characteristics that can be used to subdivide a large market into segments. b. set of values exhibited by a group of customers. c. use of core competencies to implement a strategy. d. benefits and features of a good or service that customers want to purchase.
d. benefits and features of a good or service that customers want to purchase.
Multimarket competition occurs when firms a. sell different products to the same customer. b. have a high level of awareness of their competitors' strategic intent. c. simultaneously enter into an attack strategy. d. compete against each other in several geographic or product markets.
d. compete against each other in several geographic or product markets.
A differentiation strategy can be effective in controlling the power of substitutes in an industry because a. customers have low switching costs. b. substitute products are lower quality. c. a differentiating firm can always lower prices. d. customers develop brand loyalty.
d. customers develop brand loyalty.
8. The I/O model and the resource-based view of the firm suggest conditions that firms should study in order to: a. compete in domestic but not international markets. b. examine strategic outputs achieved mainly in the last 5-year period. c. engage in different sets of competitive dynamics. d. develop the most effective strategy.
d. develop the most effective strategy.
A differentiation strategy provides products that customers perceive as having: a. acceptable features. b. features of little value relative to the value provided by the low-cost leader's product. c. features for which the customer will pay a low price. d. features that are non-standardized for which they are willing to pay a premium.
d. features that are non-standardized for which they are willing to pay a premium.
6. In contrast to the industrial organization model, in a resource-based model, which of the following factors would be considered a key to organizational success? a. unique market niche. b. weak competition. c. economies of scale. d. loyal employees.
d. loyal employees.
Ninety percent of Wm. Wrigley Company's total revenue comes from chewing gum. This is an example of a. market commonality. b. standard-cycle markets. c. economies of scale. d. market dependence.
d. market dependence.
Competitors are more likely to respond to competitive actions that are taken by a. differentiators. b. larger companies. c. first movers. d. market leaders.
d. market leaders.
Incumbent firms may enjoy increased bargaining power because the Internet
diminishes the power of many distribution channel intermediaries.
Removing the organizations or business process layers responsible for intermediary steps in the value chain is known as
disintermediation.
The bargaining power of suppliers is enhanced under the following market condition
dominance by a few suppliers
the bargaining power of suppliers is enhanced under the following market condition:
dominance by a few suppliers
Tangible Resources
easy to identify and include physical and financial assets used to create value for customers
ways the Internet is lowering transaction costs
eliminating supply chain intermediaries, minimizing office expenses, reducing business travel
How would a resource be valuable?
enables a firm to use strategies that improve efficiency or effectiveness
a primary objective of corporate governance is to:
ensure that the interests of top-level managers are aligned with the interests of shareholders
Two of the key inputs to developing forecasts discussed in the text are
environmental scanning and competitor intelligence
potential pitfalls of a focus strategy
erosion of cost advantages within the narrow segment, even product and service offerings that are highly focused are subject to competition from new entrants and from imitation, focusers can become too focused to satisfy buyer needs
Which of the following is not one of the ways the Internet is lowering transaction costs
evaluating employee performance.
Vision statements are used to create a better understanding of the organization's overall purpose and direction. Vision statements:
evoke powerful and compelling mental images
Quality
exists when firm's goods or services meet or exceed customers expectations
Piecemeal productivity improvements during a turnaround typically does not involve
expansion of a firm's product market scope
the finance and R&D functions are emphasized in the differentiation strategy's functional structure.
false. should be marketing and R&D.
A supplier group would be most powerful when there is/are
few substitute products
Examples of tangible resources (in the resource-based view of the firm) include
financial resources, physical resources, and technological resources.
Capabilities
firm's ability to use tangible and intangible resources
Threat of substitute products comes from
firms in other industries that produce products or services that satisfy the same customer need
Which of the following would be an entry barrier?
large economies of scale
Costly and less costly economies of scope
less: employee compensation, tax advantages, risk reduction costly: core competencies, internal capital allocation, multipoint competition, exploiting market power
A differentiation strategy enables a business to address the five competitive forces by:
lessening the competitive rivalry by distinguishing itself
A company using a narrow scope in its business strategy is:
limiting the group of product segments served
Purpose of an external analysis
look outside the organization to identify potential organizational threats and opportunities
If an industry has high exit barriers and high entrance barriers, returns to the industry should be:
low and stable
if an industry has high exit barriers and high entrance barriers, returns to the industry should be
low and stable
The threat of new entrants is high where there are
low economies of scale
Competitive Behavior
set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position
Diversification and shared activity/cost centers
shared activities and cost can generate greater value than independent activities
price match
signaling (attempt to reduce rivalry)
A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon
social complexity.
Increasingly larger numbers of women entering the work force since the early 1970s is an example of
sociocultural changes
Supplier power has increased because of the Internet for all of the following reasons except
some suppliers have created Web-based purchasing systems that encourage switching.
In 2000 and 2001, the Internet sector of the U.S. economy plummeted for all of the following reasons except:
the growth in new Internet users ceased.
All of the following are important elements of the political/legal segment of the general environment except
the increased use of Internet technology
Emerging sociocultural changes in the environment include
the increasing educational attainment of women in the past decade
an analysis of the economic segment of the external environment does NOT include
the move toward a contingent work force
Outsourcing
the purchase of value-creating activity from an external supplier
corporate governance
the relationship among various participants in determining the direction and performance of corporations. -shareholders -management (led by the CEO) -board of directors
Competitive advantage
the unique set of features of a company and its products that are perceived by the target market as significant and superior to the competition
As markets mature,
there is increasing emphasis on efficiency
As markets mature:
there is increasing emphasis on efficiency
Suppliers are powerful when
they offer a credible threat of forward integration
Suppliers are powerful when:
they offer a credible threat of forward integration
The bargaining power of suppliers increases as
threat of forward integration by suppliers increases
A firm successfully implementing a differentiation strategy would expect:
to charge premium prices
The reason Levi Strauss & Co. closed its online store for selling Levi jeans was
to eliminate channel conflict with retail outlets.
The sum total of all expenses associated with conducting business are known as
transaction costs.
operations
transforming inputs into final product (efficient plant operations, appropriate level of automation, quality control, workflow)
GM requires that senior managers from its international partners' headquarters report directly to a top ranking GM regional executive. This illustrates GM's ____ strategy.
transnational
corporate governance involves oversight in areas where owners, managers, and members of boards of directors may have conflicts of interest.
true
Combination strategies may work best for Internet competitors because, in the Internet age,
all of the above
End users are
all of the above
Technologies that use information in the form of electronic signals or "bits" are called
digital technologies.
Two types of financial economies
Efficient internal capital allocations and Purchasing other corporations and restructuring their assets
The power of a buyer group is increased if the buyer group has less concentration than the supplier group
False
*In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?*
> Maturity
The strategic groups in the world-wide automobile industry have been very stable and unchanging in recent years
False
*The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?*
> Maturity
*A firm following a focus strategy:*
> Must focus on a market segment or group of segments
*A firm can achieve differentiation through all of the following means EXCEPT:*
> Offering lower prices to frequent customers
buyer group is powerful
It is concentrated or purchases large volumes relative to seller sales
Operational Effectiveness
Performing similar activities better than rivals
*Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increase from suppliers characterize which type of competitive strategy?*
> Overall cost leadership
Reputation inputs into a firm's production process, such as:
- Capital equipment - Skills of Employee's - Brand names - Financial resources - Talented managers
Outsourcing issues
- Create Value - Evaluating resources and capabilities - Environmental threats and ongoing tasks - Nonstrategic team of resources - Firm's knowledge base
Four Criteria of Sustainable Competitive Advantage
- Valuable - Rate - Costly to imitate - Nonsubstituable
Reasons for engaging in corporate level strategies - value creation
-The diversified firm is worth more than the separate businesses would be by themselves -that equity holders cannot create through portfolio investing
Alliances - costs/benefits of using them
...
Beyond Greening article: Actions by Aracruz Cellulose to promote sustainability
...
Beyond Greening article: Challenges to sustainability
...
Examples of unrelated diversified firms
...
Good Managers article: types of rationalizations
...
Integration versus dis‐integration
...
Mergers/Acquisitions ‐ value creation - by whom and how much?
...
Potential economic outcomes of diversification
...
Rarity of corporate‐level strategic decisions
...
Sam Waksal video: in what industry was his company?
...
Stakeholder, stewardship and agency theory
...
Transaction‐specific investments - description/definition
...
Tucker video: effect of Porter's 5 Forces
...
Types of typical stakeholders
...
Uncertainty and corporate‐level decisions
...
Vertical Integration and diversification
...
Vertical integration, competition and competitive advantage implications
...
Share price is made of two main components
1. Alternative owners and uses of assets 2. Share value
5 Reasons to outsource
1. Improve business focus 2. Provide access to world-class capabilities 3. accelerate business re-engineering benefits 4. Share risks 5. free resources up for other purposes
Competitive Intelligence
A firm's activities of collecting and interpreting data on competitors, defining and understanding the industry, and identifying competitors' strengths and weaknesses
Three stakeholder groups:
1. Capital market stakeholders 2. Product market stakeholders 3. Organizational stakeholders
The translation process between economic value of strategy and share value is?
1. Communication 2. Market view -Generic preference -Credibility
Intrinsic value measures?
1. Discounted cash flows 2. Real option values
6 component of general external environment
1. Economic 2. Sociocultural 3. Global 4. Technological 5. Political 6. Demographic
Relationship of economic value to share price (internal view) 3 things:
1. Economic value (present operations and balance sheet) 2. Changes in financial efficiency 3. Value of additional operating options
What are the three alternative views of "outperform others"
1. Economic value model 2. Objectives other than wealth creation 3. Stakeholder surplus model
Who makes up organizational stakeholders?
1. Employees 2. Managers 3. Nonmanagers
*Which statement regarding competitive advantages is true?*
> If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer
*One of the reasons the Internet is eroding sustainable competitive advantages is:*
> Incumbent firms are entering market segments that they previously considered to be too small
*In the ____ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.*
> Introduction
Strategic Process
1. External/Internal Analysis 2. Develop Strategy 3. Implement strategy at a business/corporate level
Two approaches for evaluating firm performance:
1. Financial ration analysis 2. Stakeholder perspective
How do buyers threaten an industry?
1. Force down prices 2. Bargain for higher quality or more services 3. Play competitors against each other
Support Activities
1. General Administration 2. HR 3. Technology Development 4. Procurement
3 main external environment groups:
1. General environment (focused on future) 2. Industry environment (focused on conditions that influence a firms profitability) 3. Competitor environment (focused on predicting the dynamic of competitor actions, response, and intention)
4 factors that make an attractive industry:
1. High entry barriers 2. Weak suppliers and buyers 3. Few substitute product threats 4. Moderate rivalry
Two issues affect the extent of stakeholders in:
1. How to divide returns 2. How to increase returns
Resource Based Model of Above-Average Returns
1. Identify the firm's resources. Study its strengths and weaknesses compared to competitors 2. Determine the firm's capabilities. 3. Determine the potential of firm's resources and capabilities in terms of competitive advantage. 4. Locate an attractive industry 5. Select a strategy that best allow the firm to utilize its resources and capabilities in terms of a competitive advantage.
Primary Activities
1. Inbound logistics 2. Operations 3. Outbound logistics 4. Marketing and Sales 5. Service
3 traits of general environmental trends and events?
1. Little ability to predict them 2. Even less ability to control them 3. Can vary across industries
4 characteristics of unattractive industry:
1. Low entry barriers 2. Strong suppliers and buyers 3. Strong substitute threat 4. Intense rivalry
Shareholder value measures:
1. Market value of firm 2. Market value of added 3. Return to shareholder
How do we know at minimum that a firm is doing well?
1. Must earn return on capital in excess of cost on capital 2. Must achieve stock value in excess of break-up value
Porters five forces:
1. Potential entrants 2. Power of buyers 3. Power of suppliers 4. Substitutes 5. Rivalry
Who makes up product market to stakeholders?
1. Primary suppliers 2. Suppliers 3. Host communities 4. Unions 5. Customers
Financial indicators measures?
1. Return on capital 2. Growth of revenues and operating profits 3. Economic value added
3 objectives other than wealth maximization
1. Risk adversion (total and specific) 2. Nonwealth based (mkt share, volume, employment, welfare, etc.) 3. Mission based (superior quality at lower costs)
Who makes up capital market to stakeholders?
1. Shareholders 2. Major suppliers of capital
*A differentiation strategy enables a business to address the five competitive forces by:*
> Lessening competitive rivalry by distinguishing itself
Components of industry environment
1. Threat of new entrants 2. Power if supplier 3. Power of buyer 4. Product substitutes 5. Intense rivalry
4 Criteria of sustainable competitive advantage
1. Valuable 2. Rare 3.Costly to imitate 4. Nonsubstitutable
differentiation strategy can mitigate suppliers' power by 2 things:
1. absorb price increase due to higher margins 2. pass along higher supplier prices bc of loyal buyers
cost leadership strategy: can mitigate suppliers' power by 2 things:
1. being able to absorb cost increases due to low cost position 2. being able to make very large purchases, reducing change of supplier using powers
2 targets of competitive scope:
1. broad scope- firm competes in many customer segments 2. narrow scope- firm selects a segment or group of segments in the industry to target
Cost saving actions required by cost leadership strategy
1. build efficient scale facilities 2. tightly control production costs/ OH 3. minimize sales/R&D/services costs 4.build efficient facilities 5. monitor costs provided by outsiders 6. simplify production process
cost leadership cam mitigate buyers' power by one thing:
1. drive prices far below competitors, causing them to exit, and thus shifting power with buyers back to the firm
8 Barriers to entry for the threat of new entrants
1. economies of scale 2. product differentiation 3. capital requirements 4. switching costs 5. access to distribution channels 6. cost disadvantages independent of scale 7. government policy 8. expected retaliation
Factors that drive focused strategies
1. large firms may overlook small niches 2. lack of resources for other strategies 3. can serve a smaller market more effectively 4. focusing allows firms to direct resources to certain value chain activities and build competitive advantage
cost leader is well positioned to do three things in regards to substitutes:
1. make investments to be first to create substitute 2. buy patents developed by potential substitutes 3. lower prices to maintain value position
cost leadership strategy: threat of new entrants can frighten off new entrants due to 2 things:
1. need to enter on a large scale for cost advantage 2. time it takes to move down learning curve
differentiation strategy can defend against new entrants bc of two things:
1. new products must surpass proven products 2. new products must be at least equal to performance, but offered at a lower price
4 governance mechanism
1. ownership concentration 2. board of directors 3. executive compensation 4. market for corporate control
to position itself the firms must decide whether it intends to do 2 things:
1. perform activities differently (cheaper process) 2. perform different valuable activities
competitive risks of differentiation
1. price difference bw product and cost leaders becomes too large 2. differentiation ceases to provide value for which customers are willing to pay 3. experience narrows customers' perceptions of differentiated features 4. counterfeit good replicate features
Competitive risks with cost leadership strategies
1. process becomes obsolete 2. focus on cost reduction comes at expense of consumers' perception of differentiation 3. competitors use their own competencies to imitate the cost leadership strategy
cost leadership strategy causes two advantageous positions in regards to competition
1. rivals hesitate to compete on price 2.lack of price competition leads to greater profits
I/O Model of Above-Average Returns
1. study the external environment(general, industry, competitor), especially the industry environment 2. locate an industry with high potential for above average returns. 3. identify the strategy called for by the attractive industry to earn above average returns. 4. develop or acquire assets and skills needed to implement the strategy. 5.use the firms strengths to implement the strategy.
to be a source of competitive advantage, a resource or capability must allow the firm 2 things:
1. to perform in a way that is superior to competitors 2. to perform an activity that competitors cannot complete
pitfalls of differentiation strategies:
1. uniqueness that is not valuable 2. too much differentiation 3. too high price premium 4. differentiation that is imitable 5. dilution of brand identification through product-line extensions 6. perceptions of differentiation may vary between buyer and seller
A comprehensive value metrics framework:
1. value drivers 2. financial indicators 3. intrinsic value 4. shareholder value
value chain is made of 3 main things:
1.primary activities 2. support activities 3. margin
*Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of:*
> Mass customization
*Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of the Internet technologies?*
> Mass customization
*A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage?*
> Maturity
*The growth stage of the industry life cycle is characterized by:*
> A growing trend to compete on the basis of price
*The primary aim of strategic management at the business level is:*
> Achieving competitive advantage
*Which of the following is most often true about mature markets:*
> Advantages that cannot be duplicated by other competitors are difficult to achieve
*All of the following are potential pitfalls of a differentiation strategy EXCEPT:*
> All rivals share a common input or raw material
*All of the following are potential pitfalls of a focus strategy EXCEPT:*
> All rivals share a common input or raw material
*Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to:*
> Asses niche markets in a highly specialized fashion
*A narrow market focus is to a differentiation-based strategy as a:*
> Broadly-defined target market is to a cost leadership strategy
*Which of the following is a risk (or potential pitfall) of cost leadership?*
> Cost cutting may lead to the loss of desirable features
*In the ___ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are generally management and finance.*
> Decline
*High product differentiation is generally accompanied by:*
> Decreased emphasis on competition based on price
*The text discuss three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following EXCEPT:*
> Deriving benefits from highly focused and high technology markets
*Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy?*
> Differentiation
*Which of the following is NOT one of the ways the Internet is lowering transaction costs?*
> Evaluating employee performance
*Research shows that the following are all strategies used by firms engaged in successful turnarounds EXCEPT:*
> Global expansion
*In the ____ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.*
> Growth
*During the decline stage of the industry life cycle, ____ refers to obtaining as much profit as possible and requires that costs be decreased quickly.*
> Harvesting
*Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform:*
> Higher than firms that achieve either a cost or a differentiation advantage
*The experience curve suggests that cutting prices is a good strategy:*
> If it can induce greater demand and thereby help a firm travel down the experience curve faster
*Primary value chain activities that involve the effective layout of receiving dock operations (inbound) logistics and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?*
> Overall cost leadership
*Which of the following statements about the introduction stage of the market life cycle is TRUE?*
> Products or services offered by pioneers may be perceived as differentiated simply because they are new
*A ______ can be defined as the total profits in an industry at all points along the industry's value chain.*
> Profit pool
*A manufacturing business pursuing cost leadership will likely:*
> Rely on experience effects to raise efficiency
*One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by:*
> Repeating a process until a task becomes easier
*The most likely time to pursue a harvest strategy is in a situation of:*
> Strong competitive advantage
*Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position vis-a-vi Porter's five forces?*
> Supplier power is increased because suppliers will be able to charge higher prices for their inputs
*All of the following are potential pitfalls of an integrated overall cost and differentiation strategy EXCEPT:*
> Targeting too large a market that causes unit costs to increase
*As markets mature:*
> There is increasing emphasis on efficiency
Reverse Positioning
A break in industry tendency to continuously augment products, characteristic of the product life cycle, by offering products with fewer product attributes and lower prices
Breakaway Positioning
A break in industry tendency to incrementally improve products along specific dimensions, characteristic of the product life cycle, b offering products that are still in the industry but perceived to be different by the customer
Global Start-Up
A business organization that, from inception, seeks to derive significant advantage from the use of resources and the sale of outputs in multiple countries
Which of the following firms would likely pose the least competitive threat?
A competitor to your product where a high switching cost exists.
Competitor Analysis provides....
A competitor's capabilities, A competitor's actions (current strategy), A competitor's beliefs about the industry (its assumptions), A competitor's direction (future objectives)
Opportunity
A condition in the general environment that if exploited, helps a company to achieve strategic competitiveness
Threat
A condition in the general environment that may hinder a company's efforts to achieve strategic competitiveness
Virtual Organization
A continually evolving network of independent companies that are linked together to share skills, costs, and access to one another's markets
Strategic Alliance
A cooperative relationship between two or more firms
True
A differentiator's product price is typically higher than that of a cost leader.
VRIO Framework
A firm achieves SCA when its resources and capabilities are Valuable, Rare, not easily Imitated, Organized to exploit full competitive potential
Restructuring
A firm creates value by buying and selling other firms' assets in the external market
Related Diversification
A firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power
Unrelated Diversification
A firm entering a different business that has little horizontal interaction with other businesses of a firm
Related Diversification
A firm is related through its diversification when its businesses share links across products, technologies, distribution channels
Factors That Drive Focused Strategies
A firm may lack the resources needed to compete in the broader market, A firm is able to serve a narrow market segment more effectively than its larger industry-wide competitors can, Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage
Mass Customization
A firm's ability to manufacture unique products in small quantities at low costs
Competitive Parity
A firm's achievement of similarity, or being "on par," with competitors with respect to low cost, differentiation, or other strategic product characteristic
industry defined
A group of firms producing products that are close substitutes. -firms that influence one another -includes a rich mix of competitive strategies that companies use in pursuing strategic competitiveness and above-average returns
Strategic groups consists of
A group of firms within an industry that follow similar strategies
Board of Directors
A group that has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners, or shareholders, of a corporation and that acts as an intermediary between the shareholders and management
Corporation
A mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party
Portfolio Management
A method of assessing the competitive position of a portfolio of businesses within a corporation, suggesting strategic alternatives for each business, and identifying priorities for the allocation of resources across the business
Informational Control
A method of organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization's goals and strategies and the strategic environment
Behavioral Control
A method of organizational control in which a firm influences the actions of employees through culture, rewards, and boundaries
Greenmail
A payment by a firm to a hostile party for the firm's stock at a premium made when the firm's management feels that the hostile party is about to make a tender offer
Transaction Cost Perspective
A perspective that the choice of a transaction's governance structure, such as vertical integration or market transaction, is influenced by transaction costs, including search, negotiating, contracting, monitoring, and enforcement costs, associated with each choice
Golden Parachute
A prearranged contract with managers specifying that, in the event of hostile takeover, the target firm's managers will be paid a significant severance package
Worldwide Product Division Structure
A product division structure in which all divisions have worldwide responsibilities
Hard trend
A projection based on measurable facts, events, or objects. It is something that will happen
True
A risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value to the customer.
Traditional Approach to Strategic Control
A sequential method of organizational control in which: 1. Strategies are formulated and top management sets goals 2. Strategies are implemented 3. Performance is measured against the predetermined goal set
Strategic Groups
A set of firms emphasizing similar strategic dimensions and using similar strategies
Business Groups
A set of firms that, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action
Strategic Objectives
A set of organizational goals that are used to operationalize the mission statement and that are specific and cover a well-defined time frame
Mission
A set of organizational goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage
Mission Statement
A set of organizational goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage
Zero-sum game
A situation in which multiple players interact, and winners win only by taking from other players
Harvesting Strategy
A strategy of wringing as much profit as possible out of a business in the short to medium term by reducing costs
Corporate-Level Strategy
A strategy that focuses on gaining long-term revenue, profits, and market value through managing operations in multiple businesses
Organizational Culture
A system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms
Financial Ratio Analysis
A technique for measuring the performance of a firm according to its balance sheet, income statements, and market valuation
Effective vision statements include: A. all strategic directions of the organization B. a brief statement of the company's direction C. strategic posturing and future objectives D. financial objectives and projected figures
B. a brief statement of the company's direction
According to the text, the strategic management process entails three ongoing processes: A. analyses, actions, and synthesis B. analyses, decisions, and actions C. analyses, evaluation, and critique D. analyses, synthesis, and antithesis
B. analyses, decisions, and actions
Members of boards of directors are: A. appointed by the Securities and Exchange Commission B. elected by the shareholders as their representatives C. elected by the public D. only allowed to serve one term of four years
B. elected by the shareholders as their representatives
In contrast to the vision of an organization, its mission should: A. be shorter in length B. encompass both the purpose of the company as well as the basis of competition C. encompass all the major rules and regulations of the corporate work force D. be less detailed.
B. encompass both the purpose of the company as well as the basis of competition
Fortune Brands states they will cut corporate overhead costs by $30 million a year. This is an example of a: A. nonfinancial strategic objective B. financial strategic objective C. vision statement D. mission statement
B. financial strategic objective
Many organizations have a large number of functional areas with very diverse and sometimes competing interests. Such organizations will be most effective if: A. each functional area focuses on achieving their own goals B. functional areas work together to attain overall goals C. goals are defined at the bottom and implemented at the top D. management and employees have separate goals
B. functional areas work together to attain overall goals
Stakeholders are: A. a new way to describe stockholders B. individuals, groups, and organizations who have a stake in the success of the organization C. creditors who hold a lien on the assets of the organization D. attorneys and their clients who sue the organization
B. individuals, groups, and organizations who have a stake in the success of the organization
While working to prioritize and fulfill their responsibilities, members of the board of directors of an organization should: A. represent their own interests B. represent the interests of the shareholders C. direct all actions of the CEO D. emphasize the importance of short-term goals
B. represent the interests of the shareholders
A CEO made a lot of mistakes in assessing the market and the competitive conditions and improperly redesigning the organization into numerous business units. Such errors led to significant performance declines. According to the text, this example illustrates the __________ perspective of leadership. A. external control B. romantic C. internal mechanism D. operational
B. romantic
Procter and Gamble has perfected a technique for compacting cleaning powder into a liquid concentration. Consumers, retailers, shipping and wholesalers, and environmentalists all have benefited from the resulting change in consumer shopping habits and the revolution in industry supply-chain economics. According to the text, this is an example of __________. A. zero-sum relationship among stakeholders B. stakeholder symbiosis C. rewarding stakeholders D. emphasizing financial returns
B. stakeholder symbiosis
WellPoint Health Network states: WellPoint will redefine our industry: through a new generation of consumer-friendly products that put individuals back in control of their future. This is an example of a: A. strategic objective B. vision statement C. vague statement of direction D. line manager's individual goal
B. vision statement
Forward versus backward vertical integration
Backward: closer to beginning of of value chain towards raw materials forward: closer to end of value chain towards final customer
Factors in the Threat of New Entrants
Barriers to entry, Economies of scale, Product Differentiation, Capital Requirements, Switching Costs, Access to Distribution Channels, Cost Disadvantages Independent of Scale, Government Policy, Expected Retaliation
Generic Strategies
Basic types of business level strategies based on breadth of target market (industry-wide versus narrow market segment) and type of competitive advantage (low cost versus uniqueness)
Why did Coors expand nationally?
Because it had to expand to keep its appropriately big plant operating at high capacity once there was additional offer from other competitors to cover previous excess demand in its core market.
The hierarchy of organizational goals is in this order (least specific to most specific): A. vision statements, strategic objectives, mission statements B. mission statements, strategic objectives, vision statements C. vision statements, mission statements, strategic objectives D. mission statements, vision statements, strategic objectives
C. vision statements, mission statements, strategic objectives
The organizational versus the individual rationality perspective suggests that: A. what is good for a functional area is always good for the organization B. what is good for the organization is always good for a functional area C. what is best for a functional area may not be best for the organization D. the incremental perspective may be best for functional areas while the "rational" perspective may be best for the organization
C. what is best for a functional area may not be best for the organization
Mergers/Acquisitions - tips for buyers and sellers
Buyers -search for rare economies -limit info to other bidders and target -avoid bidding wars -close the deal quickly -seek thinly traded markets Sellers -seek info from bidders -invite other bidders to join in contest -delay, but do not stop acquisition
Peter Senge, of MIT, recognized three types of leaders. __________ are individuals that, although having little positional power and formal authority, generate their power through the conviction and clarity of their ideas. A. Local line leaders B. Executive leaders C. Internal networkers D. Shop floor leaders
C. Internal networkers
__________ may be considered the advance work that must be done in order to effectively formulate and implement strategies. A. Goal setting B. Corporate entrepreneurship C. Strategy analysis D. Organizational design
C. Strategy analysis
__________ involves ensuring proper strategic controls and organizational designs. A. Corporate governance B. Corporate-level strategy C. Strategy implementation D. Business-level strategy
C. Strategy implementation
Strategy formulation and implementation is a challenging ongoing process. To be effective, it should not involve: A. the CEO and the board of directors B. the board of directors, CEO, and CFO C. competitors D. line and staff managers
C. competitors
Effectiveness is often defined as: A. doing things right B. stakeholder satisfaction C. doing the right thing D. productivity enhancement
C. doing the right thing
According to the text, the triple bottom line approach to corporate accounting includes three components: A. financial, environmental, and customer B. financial, organizational, and customer C. financial, environmental, and social D. financial, organizational, and psychological
C. financial, environmental, and social
In large organizations, conflicts can arise between functional areas. In order to resolve these conflicts, strategic objectives: A. put financial objectives above human considerations B. align departments toward departmental goals C. help resolve conflicts through their common purpose D. cause debate and increase conflict
C. help resolve conflicts through their common purpose
According to Henry Mintzberg, decisions following from the strategic analysis of the firm are its: A. emergent strategy B. deliberate strategy C. intended strategy D. realized strategy
C. intended strategy
All of the following are ambidextrous behaviors EXCEPT: A. taking initiative and being alert to opportunities beyond the confines of one's own job B. being cooperative and seeking opportunities to combine one's efforts with others C. intensely focusing on the responsibilities of one individual and maximizing the output of the department in the organization in which that individual works D. being brokers, always looking to build internal linkages
C. intensely focusing on the responsibilities of one individual and maximizing the output of the department in the organization in which that individual works
There are several perspectives of competition. One perspective is zero-sum thinking. Zero-sum thinking means that: A. all parts of the organization gain at no loss B. in order for someone to gain others must experience no gain or benefit C. one can only gain at the expense of someone else D. everyone in the organization shares gains and losses equally
C. one can only gain at the expense of someone else
The three participants in corporate governance are: A. the shareholders, board of directors, and employees B. the shareholders, labor unions, and employees C. the shareholders, board of directors, and management D. the shareholders, banks and lending institutions, and management
C. the shareholders, board of directors, and management
Successful organizations are effective in motivating people. Employees work best when: A. they are asked to do their best B. work requirements are vague and unclear C. they are striving toward specific goals D. they are guided by an abstract mission statement
C. they are striving toward specific goals
Leadership is a necessary (but not sufficient) condition for organizational success. Leaders should emerge at which level(s) of an organization? A. only at the top B. in the middle C. throughout the organization D. only during times of change
C. throughout the organization
The text argues that a strategic perspective in an organization should be emphasized: A. at the top of the organization B. at the middle of the organization C. throughout the organization D. from the bottom up
C. throughout the organization
Vision statements are used to create a better understanding of the overall purpose and direction of the organization. Vision statements: A. are very specific B. provide specific objectives C. set organizational structure D. evoke powerful and compelling mental images
D. evoke powerful and compelling mental images
The text addresses two perspectives of leadership as well as their implications. These two perspectives are: A. romantic and unromantic B. romantic and internal control C. external control and unromantic D. romantic and external control
D. romantic and external control
Strategy Formulation
Decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantage
Economies of Scale
Decreases in cost per unit as absolute output per period increases
Differentiation Strategy: Competitors
Defends against competitors because brand loyalty to differentiated product offsets price competition
What is the Stakeholder surplus model?
Defines beneficiary group and maximizes wealth for total group
Customers
Demand reliable products at low prices
Industry Environment
Demographic, Economic, and sociocultural
False
Demographic, economic, political/legal, sociocultural, technological, and global are the six elements compromising the industry environment.
Suppose that you are an analyst reviewing the Coors business in 1977. Which of the following would you identify as a bigger risk to Coors' performance?
Dependence on insufficient total production capacity by all players In the west region.
Monitioring
Detecting meaning through ongoing observations of environmental changes and trends
Internal analysis helps a firm
Determine if its resources and capabilities are likely sources of competitive advantage, Establish strategies that will exploit any sources of competitive advantage, Determine if the firm lacks any resources/capabilities needed to compete effectively
Assessing
Determined the timing and importance of environmental changes and trends for firms' strategies and their management
Forecasting
Developing projections of anticipated outcomes based on monitored changes and trends
3 generic strategies & their orientation towards unique/low cost/focus
Differentiation (industry-wide/unique) Cost Leadership (industry-wide/low cost) Focus (particular segment/unique (or) low cost)
Intangible Resources
Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have evolved over time
Value creation
Difficulty in imitating resources is key to _____ because it constrains competition
The bargaining power of suppliers is enhanced under the following market condition:
Dominance by a few suppliers
Internet-based venues that draw business buyers and sellers together in one virtual space where participants can reach new customers and reduce transaction costs are known as
E-marketplaces.
Internal Views
Economic Value, Changes in financial efficiency, and value of additional operating options
Barriers to Entry
Economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale, and government policy
Related Diversification Benefits
Economies of scope, Sharing activities, Transferring core competencies, Market power, Vertical integration
Unrelated Diversification Benefits
Efficient internal capital allocation and Business restructuring
Stakeholders perspective
Employees, Customers, Owners
The Physical Segment
Energy consumption, Energy sources , Renewable energy efforts, React to natural or man-made disasters
Internal Development
Entering a new business through investment in new facilities, often called corporate entrepreneurship and new venture development
________ tracks the evolution of environmental trends, sequences of events, or streams of activities
Environmental monitoring
Overcoming the dark side of resources
Experimentation and renewal, Incentive and reward systems, Organization structure, Cross-functional teams, Recruiting and training policies, Organization process
Strategic Dimensions
Extent of technological leadership, Product quality, Pricing policies, Distribution channels, Customer service
Dependence on the Market
Extent to which a firm's revenues or profits are derived from a particular market. Firms are likely to respond strongly to attacks threatening market position if high.
Risks of Differentiation
Extra costs may exceed value to customers, Not enough customers in segment, Customers don't value services or characteristics, Brand image can't be created or is easily duplicated
T or F? Competitive dynamics indicates that firms and their strategic actions are independent
F
T or F? Extensive market commonality guarantees intense competition in an industry
F
T or F? Wal-Mart has recently moved to Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Wal-Mart's competitive actions is a viable long-term option, because although the companies have high market commonality they have little resource similarity. These small retailers are correct in their decision
F
General Environment
Factors external to an industry, and usually beyond a firm's control that affect a firm's strategy
General Environment
Factors external to an industry, and usually beyond a firm's control, that affect a firm's strategy
A firm striving for cost leadership will typically spend relatively more on product related R&D than on process related R&D.
False
According to the text, a mission statement is an overarching statement that is massively inspiring, long-term, and only discusses the purpose of the company.
False
Although changes in the general environment may often adversely or favorably impact a firm, they seldom alter an entire industry.
False
An end user's switching costs are potentially much higher because of the Internet.
False
Because of the internet and digital technologies, it is very difficult for suppliers to create purchasing techniques that lower switching costs.
False
Business-level strategy focuses on two issues, (1) what business to compete in, and (2) how businesses can be managed to achieve synergy.
False
Competitive intelligence generally does not benefit very much from gathering information on competitors from sources in the public domain
False
Complementary products are products that typically have a negative impact on the value of a firm's own products or services
False
Corporate-level strategy addresses how firms compete and outperform their rivals as well as achieve and sustain competitive advantages.
False
Decisions by Boards or Directors are always consistent with shareholder interests.
False
Even with all of the advances in recent years, forecasting is typically considered more of an art than a science and it is of little use in generating accurate predictions.
False
Former Chrysler vice chairman Robert Lutz stated: "We are here to serve the shareholder and create shareholder value. I insist that the only person who owns the company is the person who paid good money for it." This is an example of a symbiotic approach to stakeholder management.
False
Management innovations such as total quality, benchmarking, and business process reengineering often lead to sustainable competitive advantage.
False
Michael Porter's 3 generic strategies can be depicted on 2 dimensions: competitive advantage and product life cycle
False
Michael Porter's Five Forces Analysis is a dynamic tool for analyzing industry attractiveness
False
Much research has supported the notion that individuals work much harder when they are asked to "do their best" rather than when they are striving toward a specific goal.
False
Nortel, like other firms, suffered from a drop in overall industry demand for telecommunications equipment during 2000 and 2001. According to the text, this would be an example of the "romantic" perspective of leadership.
False
One of the benefits of crowdsourcing is that stakeholders are restricted to one narrow role.
False
Porter's Five Forces model is designed to help us understand how social attitudes and cultural values impact U.S. businesses.
False
Reintermediation is responsible for an overall reduction in business opportunities.
False
Rivalry is most intense when there are high exit barriers and high industry growth.
False
Scenario planning is usually concerned with short-term forecasts
False
Some excellent examples of mission statements are: "To be the happiest place on earth" (Disney) and "restoring patients to full life" (Medtronic).
False
Stockholders in a company are the only individuals with an interest in the financial performance in the company.
False
Strategic management should only include short-term objectives. Long-term objectives are covered in the organization's vision statement.
False
Strategic objectives should be measurable, specific, appropriate, and realistic, but not constrained by time deadlines.
False
Supplier power trends to be highest in industries where products are vital to buyers, where switching from one supplier to another is very costly, and where there are many suppliers.
False
The best firms always realize their intended strategy.
False
The experience curve concept suggests that production costs tend tend to decrease as production increases regardless of where an industry is at in its life cycle.
False
The five forces model (buyers/suppliers/new entrants/substitutes/rivalry) is a firm-level analytical model which explains differences in performance between the firms that compete in one industry?
False
The internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions
False
The internet has provided a small subset of companies with greater tools for managing costs
False
The internet offers few advantages for focusers because niche players and small companies cannot implement capabilities as effectively as their large competitors.
False
Coors' position as the most profitable brewer (per barrel) in 1977, was based primarily on its differentiation and mystique. T/F?
False. It really competed based on cost leadership; it charged lower prices but with much cheaper production costs.
Attractive Industry
Few threats from substitute products
Tangible Resource Examples
Financial: *Cash Accounts *Capacity to raise equity * borrowing capacity Physical Resources: *Modern plant and facilities * Favorable Locations *State-of-the-art machinery Technological Resources: *Trade Secrets *Innovative processes *Patents, trademarks Organizational Resources: *Effective Strategic Planning Process *Excellent Evaluation and control systems
Multimarket competition
Firms competing against each other in several product or geographic markets
True
Firms implementing cost leadership strategies often sell no-frills standardized goods or services to the industry's most typical customers.
Competitors
Firms operating in the same market, offering similar products and targeting similar customers
Market Power
Firms' abilities to profit through restricting or controlling supply to a market or coordinating with other firms to reduce investment
Combination Strategies
Firms' integration of various strategies to provide multiple types of value to customers
Industry Environment
Focuses on factors and conditions influencing a firm's profitability within an industry
Competitor Environment
Focuses on predicting the dynamics of competitors' actions, responses and intentions
Buyers Threaten an industry
Forces down prices, bargain for higher quality or more services, and play competitors against each other
Procurement
Function of purchasing inputs used in the firm's value chain
Given its 1977 strategy (beginning of the case), it would make sense for Coors beer business to have been organized as a:
Functional organizational structure
Vision
Future oriented picture of what the firm wants to be and achiee
Market View
Generic performance and credibility stem from this
Demographic segment of the general environment
Genetic and observable characteristics of a population, including the levels and growth of age, density, sex, race, ethnicity, education, geographic region, and income
Sharing Activities
Having activities of two or more businesses' value chains done by one of the businesses
Which of the following would be considered part of a firm's general environment
Higher unemployment rates
Political/legal segment of the general environment
How a society creates and exercises power, including rules, laws, and taxation policies
Vertical integration and organizational flexibility
How costly it is to alter strategic decisions -low flex- means cost is high -high flex- means cost is low
Define Strategy
How to beat present and potential competitors
Strategy
How to beat present and potential competitors
All of the following are ways that Internet technologies are being used to enhance a focus strategy except:
Human resources departments are using online testing and evaluation techniques in the hiring process and online training after they hire.
Intangible Resource Examples
Human: *Experience and capabilities *Trust * Managerial Skills *Firm-Specific practices and procedures Innovation: *Technical and Scientific Skills *Innovation Capacities Reputation:
The Global Segment
IPR rights, Unspoken rules, Government policy, Legal system
Competing with resources & capabilities
Identify - What are the firm's R & C?, Appraise - How valuable are the R & C?, Apply - Plan & act, Develop - Create new R & C
Scanning
Identifying early signal of environmental changes and trends
What are the two sources of a financial ratio analysis?
Income statement and Balance sheet
Stakeholders
Individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm's performance. - claims are enforced by the stakeholder's ability to withhold essential participation
Stakeholders
Individuals, groups, and organizations who have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, and the community at large
Stakeholders
Individuals, groups, and organizations who have a stake in the success of the organization, including owners, employees, customers, suppliers, and the community at large
Industry A is characterized by high fixed costs while Industry B has low fixed costs. Which industry would tend to have a lower threat of new entrants? Higher degree of rivalry?
Industry A; Industry A
The dark side of resources
Inertia & inflexibility and prior strategic commitments.
The Economic Segment
Inflation rates, Interest rates, Trade deficits or surpluses, Budget deficits or surpluses, Personal savings rate, Business savings rates, Gross domestic product
Digital Technologies
Information that is in numerical form, which facilitates its storage, transmission, analysis and manipulation
Technological segment of the general environment
Innovation and state of knowledge in industrial arts, engineering, applied sciences, and pure science; and their interaction with society
Business-Level Strategies
Intended to create differences between the firm's position relative to those of its rivals
Unattractive Industry
Intense rivalry among competitors
Greater
Internal competition between strategic group firms is ____ than between firms outside that strategic group
Effect of a strategic group
Internal competition is greater, more heterogeneity in the performance
Internet start-up Buy.com tried to build brand with an overall low cost leadership strategy. Why is this a risky strategy?
Investing heavily to build brand recognition is considered ineffective for low cost leaders because customers who seek low prices are typically not brand loyal.
The value of a company's stock in the market is a result of:
Its ROE & VOP & its value for other corporations.
Improve business focus
Lets a company focus on broader business issues by having outside experts handle various operational details
Ways to Develop resources
Linking strategy to Human Resource Management--developing individual competencies, Acquisition or alliance (Daimler-Chrysler and Mitsubishi), Greenfield development in separate organizational unit (GM & Saturn), Product sequencing (Intel , Sony, Hyundai)
General Environmental trends and events
Little ability to predict them Even less ability to control them Can vary across industries
Porter's five forces
Longterm profitability of an industry is determined by: (industry attractiveness) 1. Threat of new entrants in the industry 2. Threat of substitutes 3. Bargaining power of buyers 4. Bargaining power of suppliers 5. Rivalry among existing competitors
Unattractive Industry
Low entry barriers
Unrelated Diversification Costs
Management costs
Managerial Motives
Managers acting in their own self-interest rather than to maximize long term shareholder value
Anti-takeover Tactics
Managers' actions to avoid losing wealth or power as a result of a hostile takeover
Growth for Growth's Sake
Managers' actions to grow the size of their firms not to increase long-term profitability but to serve managerial self-interest
Egotism
Managers' actions to shape their firms' strategies to serve their selfish interests rather than to maximize long-term shareholder value
Alignment
Managers' clear sense of how value is being created in the short term and how activities are integrated and properly coordinated
Adaptibility
Managers' exploration of new opportunities and adjustment to volatile markets in order to avoid complacency
What is Coors obvious focus during the period of the case?'
Manufacturing
False
McDonald's brand recognition is a fundamental source of differentiation, while the rigorous standardization of processes allows it to lower costs. Thus, McDonalds is a classic example of the focused differentiation strategy.
Intrinsic Value
Measures: Discounted Cash, and Real option values
Shareholder Value
Measures: Market value of the firm, Market value added, and Return to shareholders
Financial Indicators
Measures: Return on Capital, Growth of revenues and operating profits, and economic profit
Joint Ventures
New entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entitiy
Was Coors successful from 1977 to 1985? Why?
No its per barrel net income had deteriorated dramatically against that of other industry players.
Does Coors expend more money on advertising per barrel sold than its competitors in 1985?
No, it does not need to because there is not enough offer in the region to cover demand at a competitive price.
Was Coors successful from 1977 to 1985? Why?
No, its per barrel net income had deteriorated dramatically against that of other industry players.
1. A firm has achieved ____ when it successfully formulates and implements a value-creating strategy. a. strategic competitiveness b. a temporary competitive advantage c. substantial returns d. legal and ethical core values
Not sure atm
Factors in Intensity of Rivalry Among Competitors
Numerous or equally balanced competitors, Slow Industry Growth, High Fixed Costs or High Storage Costs, Lack of Diff. or Low Switching Costs, High Strategic Stakes, High Exit Barriers
Risk aversion/tolerance Non wealth-based Mission-based
Objectives Other than wealth maximization
Risks of the Integrated Cost Leadership/ Differentiation Strategy
Often Involves Comprises and Becoming Stuck in the Middle
switching cost
One-time costs that a buyer/supplier faces when switching from on supplier/buyer to another
Economies of scope - types and examples
Operational: sharing activities Financial: allocate capital accross divisions Anticompetitive: firms agree not to compete agressively Managerialism: managers or large firms receive more $
Southwest air is an example of which generic strategy:
Operations, because more floor space was needed and Outbound logistics, because the beer needed refrigeration during shipping
Intangible resources
Organizational assets that are difficult to identify and account for and are typically embedded in unique routines and practices, including human resources, innovation resources, and reputation
Tangible Resources
Organizational assets that are relatively easy to identify, including physical assets, financial resources, organizational resources, and technological resources
Ambidextrous Organizational Designs
Organizational designs that attempt to simultaneously pursue modest, incremental innovations as well as more dramatic, breakthrough innovations
Horizontal Organizational Structures
Organizational forms that group similar or related business unites under common management control and facilitate sharing resources and infrastructures to exploit synergies among operating units and help to create a sense of common purpose
Vision
Organizational goal(s) that evoke(s) powerful and compelling mental images
Hierarchy of goals
Organizational goals ranging from, at the top, those that are less specific yet able to evoke powerful and compelling mental images, to, at the bottom, those that are more specific and measurable
Competitive Advantage
Organizational resources also possessed by competitors are not sources of _____
Valuable
Organizational resources can be a source of competitive advantage only when they are _____
Boundaryless Organizational Designs
Organizations in which the boundaries, including vertical, horizontal, external, and geographic boundaries, are permeable
Create Value
Outsource only to firms possessing a core competence in terms of the outsourced activity
primary value chain activities that involve the effective layout of receiving dock operations and support value chain activities that include expertise in process engineering characterize what generic strategy?
Overall cost leadership
Efficiency
Performing actions at a low cost relative to a benchmark, or "doing things right"
Value Chain
Shows how a product moves from raw-material stage to the final customer
External Control view of leadership
Situations in which external forces - where the leader has limited influence - determine the organization's success
Supplier power has increased because of the Internet for all of the following reasons except
Some suppliers have created Web-based purchasing systems that encourage switching
Soft Trend
Something that might happen and for which the probability that it might happen can be estimated
Value Drivers
Sources: Market share, scale economies, innovation, and brands
Cost Leadership traits
Standardized products features acceptable to many customers lowest competitive price
Define Mission
Statement explaining why a company exists
Which of the following statements about strategic groups is false?
Strategic groupings are of little help to a firm in assessing mobility barriers that protect a group from attacks by other groups
What lists a set of actions to provide products or services that create more value than their cost?
Strategy
Strategic Management Process
Strategy analysis, strategy formulation, implementation
Realized Strategy
Strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences
Intended Strategy
Strategy in which organizational decisions are determined only by analysis
stages of industry life cycle- maturity
Strategy: Cost Leadership Mkt Growth: low to moderate # Segments: many Intensity of Competition: very Emphasis on Product Design: low to moderate Emphasis on Process Design: high Major Area of Concern: production Overall Obj: defend market share and extend product life cycles
stages of industry life cycle- introduction
Strategy: Differentiation Mkt Growth:low # Segments: low Intensity of Competition: low Emphasis on Product Design: very high Emphasis on Process Design: low Major Area of Concern: research and development Overall Obj: increase mkt share and awareness
stages of industry life cycle- decline
Strategy: cost leadership (focus) Mkt Growth: negative # Segments: few Intensity of Competition: hanging Emphasis on Product Design: low Emphasis on Process Design: low Major Area of Concern: general management and finance Overall Obj: consolidate, maintain, harvest, or exit
stages of industry life cycle- growth
Strategy: differentiation Mkt Growth: very large # Segments: some Intensity of Competition: increasing Emphasis on Product Design: very high Emphasis on Process Design: low to moderate Major Area of Concern: sales and marketing Overall Obj: create customer demand
Unattractive Industry
Strong threats from substitute products
Strategy Analysis
Study of firms' external and internal environments, and their fit with organizational vision and goals
Mission-based
Superior quality at lower cost
Unattractive Industry
Suppliers and buyers have strong positions
True
Suppliers are powerful when no satisfactory substitutes are available, selling the industry is relatively more concentrated, and switching costs are high.
False
Support activities in the value chain are generic across business strategies.
Demographic Changes
The aging of the population, changes in ethnic composition, and effects of the baby boom are:
General Enviroment
The broad enviroment, encompassing factors that influence most businesses in a society
Buyer group is powerful
The buyer faces new switching costs and it earns low profits
Buyer group is powerful
The buyer pose a credible threat of backward integration
Ambidexterity
The challenge managers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities
Mergers
The combining of two or more firms into one new legal entity
Experience Curve
The decline in unit costs of production as cumulative output increases
Product differentiation
The degree that a product has strong brand loyalty or customer loyalty
Environmental Forecasting
The development of plausible projections about the directions, scope, speed, and intensity of environmental change
Industry Enviroment
The enviroment that includes factors that directly impact a given firm and its competitors
Competitor Intelligence
The ethical gathering of needed information and data that provides insight into A competitor's direction (future objectives), A competitor's capabilities and intentions (current strategy), A competitor's beliefs about the industry (its assumptions), A competitor's capabilities
Divestment
The exit of a business from a firm's portfolio
Social Responsibly
The expectation that businesses or individuals will strive to improve the overall welfare of society
Broad Scope
The firm competes in all or most customer segments
Broad Scope
The firm competes in many customer segments
Growth Stage
The second stage of the product life cycle, characterized by: 1. Strong increase in sales 2. Growing competition 3. Developing brand recognition 4. Need fro financing complementary value-chain activities such as marketing, sales, customer service, and research and development
Provide access to world-class capabilities
The specialized resources of outsourcing providers makes world-class capabilities available to firms in a wide range of applications
Industry Life Cycle
The stages of introduction growth, maturity, and decline that typically occur over the life of an industry
What is strategic management?
The study of why some firms outperform others
Maturity Stage
The third stage of the product life cycle, characterized by: 1. Slowing demand growth 2. Saturated markets 3. Direct competition 4. Price competition 5. Strategic emphasis on efficient operations
Threat of substitute products and services
The threat of limiting the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge without losing too many customers to substitute products
Bargaining power of buyers
The threat that buyers may force down prices, bargain for higher quality or more services, and play competitors against each other
Intensity of rivalry among competitors in an industry
The threat that customers will switch their business to competitors within the industry
Bargaining power of suppliers
The threat that suppliers may raise prices or reduce the quality of purchased goods and services
Profit Pool
The total profits in an industry at all points along the industry's value chain
Competitive dynamics
The total set of actions and responses taken by all firms competing within a market
Sociocultural segment of the general environment
The values, beliefs, and lifestyles of a society
Which of the following descriptions of a product in the maturity stage is true?
There are few forms of differentiation, emphasis is placed on efficiency, and there is a growing trend to compete on the basis of price.
Heterogeneity
There is more ____ in the performance of firms within strategic groups
How do suppliers exert power?
Threaten to raise prices or reduce quality
How to tell if a company is performing well
To replace assets a firm must earn return on capital in excess of cost of capital and to survive acquisition, firm must achieve stock market value in excess of break-up value
Risk Aversion/tolerance
Total risk avoidance and specific risk-avoidance
A major sociocultural trend in the United states is the increased educational attainment by women
True
A mission statement encompasses both the purpose of the company as well as the basis of competition and competitive advantage.
True
A potential pitfall of a focus strategy is that focusers can become too focused to satisfy buyer needs.
True
According to the text, formulating strategy includes taking into consideration strategy at the business, international, and corporate levels. In addition managers must formulate effective entrepreneurial initiatives.
True
All of the following factors are likely to be impediments to growth in Internet use except
advances in wireless technology.
5. Which of the following is a true statement about capabilities? a. Capabilities emerge over time through complex interactions of tangible and intangible resources. b. Valuable capabilities are based almost entirely on tangible resources. c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated. d. The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.
a. Capabilities emerge over time through complex interactions of tangible and intangible resources
Which of the following is a true statement about capabilities? a. Capabilities emerge over time through complex interactions of tangible and intangible resources. b. Valuable capabilities are based almost entirely on tangible resources. c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible capabilities because of the tendency for employee knowledge to become outdated. d. The link between firm financial performance and capabilities is dependent on whether the capabilities are based on tangible or intangible resources.
a. Capabilities emerge over time through complex interactions of tangible and intangible resources.
____ is/are the source of a firm's ____, which is/are the source of the firm's ____. a. Resources, capabilities, core competencies b. Capabilities, resources, core competencies c. Capabilities, resources, above average returns d. Core competencies, resources, competitive advantage
a. Resources, capabilities, core competencies
When a product's unique attributes provide value to customers, the firm is implementing a. a differentiation strategy. b. a cost leadership strategy. c. an integrated cost leadership/differentiation strategy. d. a single-product strategy.
a. a differentiation strategy.
A cost leadership strategy provides goods or services with features that are: a. acceptable to customers. b. unique to the customer. c. highly valued by the customer. d. able to meet unique needs of the customer
a. acceptable to customers
To be a core competency, a capability must satisfy all of the following criteria EXCEPT: a. be technologically innovative. b. be hard for competing firms to duplicate. c. be without good substitutes. d. be valuable to customers.
a. be technologically innovative.
An integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage in a specific product market is a definition of: a. business strategy. b. core competencies. c. sustained competitive advantage. d. strategic mission.
a. business strategy.
Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other strategies. a. business-level b. corporate-level c. acquisition d. international
a. business-level
Internal analysis enables a firm to determine what the firm a. can do. b. should do. c. will do. d. might do.
a. can do.
Capabilities that other firms cannot develop easily are classified as a. costly to imitate. b. rare. c. valuable. d. nonsubstitutable.
a. costly to imitate.
Business-level strategies are concerned specifically with: a. creating differences between the firm's position and its rivals. b. the industries in which the firm will compete. c. how functional areas will be organized within the firm. d. how a business with multiple physical locations will operate one of those locations.
a. creating differences between the firm's position and its rivals.
Business-level strategies are concerned specifically with: a. creating differences between the firm's position and its rivals. b. selecting the industries in which the firm will compete. c. how functional areas will be organized within the firm. d. how a business with multiple physical locations will operate one of those locations.
a. creating differences between the firm's position and its rivals.
The three dimensions of a firm's relationships with customers include all the following EXCEPT a. exclusiveness. b. affiliation. c. richness. d. reach.
a. exclusiveness.
1. The __________ environment is composed of elements in the broader society that can influence an industry and the firms within it. a. general b. competitor c. sociocultural d. industry
a. general
The chief disadvantage of being a first mover is the a. high degree of risk. b. high level of competition in the new marketplace. c. inability to earn above-average returns unless the production process is very efficient. d. difficulty of obtaining new customers.
a. high degree of risk.
A firm's mission a. is a statement of a firm's business in which it intends to compete and the customers which it intends to serve. b. is an internally-focused affirmation of the organization's financial, social, and ethical goals. c. is mainly intended to emotionally inspire employees and other stakeholders. d. is developed by a firm before the firm develops its vision.
a. is a statement of a firm's business in which it intends to compete and the customers which it intends to serve.
9. Strategic mission: a. is a statement of a firm's unique purpose and scope of operations. b. is an internally-focused affirmation of the organization's societal and ethical goals. c. does not limit the firm by specifying the industry in which the firm intends to compete. d. is developed by a firm before the firm develops its strategic intent.
a. is a statement of a firm's unique purpose and scope of operations.
Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT a. lack of scientific transference. b. social complexity. c. unique historical conditions. d. causal ambiguity.
a. lack of scientific transference.
According to the five factors model, an attractive industry would have all of the following characteristics EXCEPT: a. low barriers to entry. b. suppliers with low bargaining power. c. a moderate degree of rivalry among competitors. d. few good product substitutes.
a. low barriers to entry.
A cost leadership strategy targets the industry's ____ customers. a. most typical b. poorest c. least educated d. most frugal
a. most typical
10. The interests of an organization's stakeholders often conflict, and the organization must prioritize its stakeholders because it cannot satisfy them all. The ________ is the most critical criterion in prioritizing stakeholders. a. power of each stakeholder b. urgency of satisfying each stakeholder c. importance of each stakeholder to the firm d. influence of each stakeholder
a. power of each stakeholder
9. Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT: a. scientific transference. b. social complexity c. historical conditions d. causal ambiguity
a. scientific transference.
3. Intangible assets include: a. the firm's reputation. b. a firm's borrowing capacity. c. depreciated capital assets. d. manufacturing facilities.
a. the firm's reputation.
4. The economic environment refers to: a. the nature and direction of the economy in which a firm competes or may compete. b. the economic outlook of the world provided by the World Bank. c. an analysis of how the environmental movement and world economy interact. d. an analysis of how new environmental regulations will affect our economy.
a. the nature and direction of the economy in which a firm competes or may compete.
2. Investors in a company judge the adequacy of the returns on their investment in relation to: a. the returns on other investments of similar risk.. b. the stock market's overall performance. c. the initial size of the investment. d. the prime interest rate.
a. the returns on other investments of similar risk..
The goal of the organization's ____ is to capture the hearts and minds of employees, challenge them, and evoke their emotions and dreams. a. vision b. mission c. culture d. strategy
a. vision
Corporate level strategy
about how to achieve above normal returns (competitive advantage) by operating in more than one business/industry
Because of the internet, firms that use a focus strategy have new opportunities to:
access niche markets in a highly specialized fashion
Which of the following phrases best completes the sentence: Because of the Internet, firms that use a focus strategy have new opportunities to
access niche markets in a highly specialized fashion.
Strategic Competiveness
achieved when a firm successfully formulates and implements a value creating strategy
Horizontal Integration
acquisition of competitors; horizontal movement at the same point in the value chain
All competitive advantages do not accrue to large sized firms. A major advantage of smaller firms is that they a. are more likely to have organizational slack. b. can launch competitive actions more quickly. c. have more loyal and diverse workforces. d. can wait for larger firms to make mistakes in introducing innovative products.
b. can launch competitive actions more quickly.
Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor, for years. Gamma has gathered and analyzed large amounts of competitive intelligence about Ardent. It has observed as much of the firm's internal functioning and technology as it can legally, yet Gamma cannot understand why ABC has a competitive advantage over it. The source of ABC's success is a. impregnable. b. causally ambiguous. c. rationally obscure. d. elusive.
b. causally ambiguous.
Firms that achieve competitive parity can expect to: a. earn below-average returns. b. earn average returns. c. earn above-average returns. d. initially earn above-average returns, declining to average returns.
b. earn average returns.
The risks of a cost leadership strategy include: a. becoming "stuck in the middle." b. production and distribution processes becoming obsolete c. the ability of competing firms to provide similar features in a product. d. customers deciding the product isn't worth what the firm must charge for it.
b. production and distribution processes becoming obsolete
Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in a. the selection of industries in which the firm will compete. b. specific product markets. c. primary value chain activities. d. particular geographic locations.
b. specific product markets.
On the whole there are more competitive responses to a. strategic actions than to tactical actions. b. tactical actions than to strategic actions. c. buyer pressures than to supplier pressures. d. the demands of the top management team than to industry structural pressures.
b. tactical actions than to strategic actions.
10. Upper limits on the prices a firm can charge are impacted by: a. expected retaliation from competitors. b. the cost of substitute products. c. variable costs of production. d. customers' high switching costs
b. the cost of substitute products.
The highest amount a firm can charge for its products is most directly affected by a. expected retaliation from competitors. b. the cost of substitute products. c. variable costs of production. d. customers' high switching costs.
b. the cost of substitute products.
The effectiveness of any of the generic business-level strategies is contingent upon a. customer needs and competitors' strategies. b. the match between the opportunities and threats in its external market and the strengths and weaknesses of its internal environment. c. the trends in the general consumer base and the robustness of the global and industry economy. d. the firm's competitive scope and its competitive advantage.
b. the match between the opportunities and threats in its external market and the strengths and weaknesses of its internal environment.
A firm successfully implementing a differentiation strategy would expect: a. customers to be sensitive to price increases. b. to charge premium prices. c. customers to perceive the product as standard. d. to automatically have high levels of power over suppliers.
b. to charge premium prices.
A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of
backward integration
Which of the following is NOT an entry barrier to industry?
bargaining power of suppliers
Why did Coors expand nationally?
because it had to expand to keep it's appropriately big plant operating at high capacity once there was additional offer from other competitors to cover previous excess demand in its core market.
Vertical Integration
becoming your own supplier or distributor through acquisition; vertical movement up or down the value chain
Product differentiation refers to the:
belief by customers that a product is unique
differentiated strategy defends against competitors bc of one thing
brand loyalty
differentiation strategy is well positioned relative to substitutes bc:
brand loyalty to a differentiated product tends to reduce customers testing new products or switching brands
a narrow market focus is to differentiation based strategy as a
broadly defined market is to a cost leadership strategy
Successful Strategies are...
built by Combining Complementary Capabilities
How do infomediaries and consumer information websites increase the intensity of competitive rivalry?
by consolidating the marketing message that consumers use to make a purchase decision to a few key pieces of information that the selling company has little control over
How do infomediaries and consumer information websites increase the intensity of competitive rivalry:
by consolidating the marketing message that consumers use to make a purchase decision to a few key pieces of information that the selling company has little control over.
6. What is the job of a Chief Learning Officer? a. implementing employee training and development programs b. educating customers about the firm's products c. developing an environment in which knowledge is widespread among employees d. establishing programs to promote education in the community
c .developing an environment in which knowledge is widespread among employees
All of the following are assumptions of the resource-based model EXCEPT a. Each firm is a unique collection of resources and capabilities. b. The industry's structural characteristics have little impact on a firm's performance over time. c. Capabilities are highly mobile across firms. d. Differences in resources and capabilities are the basis of competitive advantage.
c. Capabilities are highly mobile across firms.
Incumbent firms may enjoy increased bargaining power because the Internet
diminishes the power of many distribution channel intermediaries
3. Which of the following is an opportunity for an entrepreneur who wishes to open a business doing therapeutic massage in his small community? a. the average age of the population in his community is high b. the level of unemployment in his community is high c. a chiropractor and two independent physical therapists located in his community d. the average income level of the population in his community is low
c. a chiropractor and two independent physical therapists located in his community
4. Compared to tangible resources, intangible resources are: a. of less strategic value to the firm. b. not the focus of strategic analysis. c. a more potent source of competitive advantage. d. more likely to be reflected on the firm's balance sheet.
c. a more potent source of competitive advantage.
Compared to tangible resources, intangible resources are a. of less strategic value to the firm. b. not the focus of strategic analysis. c. a more potent source of competitive advantage. d. more likely to be reflected on the firm's balance sheet.
c. a more potent source of competitive advantage.
Product differentiation refers to the: a. ability of the buyers of a product to negotiate a lower price. b. response of incumbent firms to new entrants. c. belief by customers that a product is unique. d. fact that as more of a product is produced the cheaper it becomes per unit.
c. belief by customers that a product is unique.
The differentiation strategy can be effective in controlling the power of rivalry with existing competitors in an industry because: a. customers will seek out the lowest cost product. b. customers of non-differentiated products are sensitive to price increases. c. customers are loyal to brands that are differentiated in meaningful ways. d. the differentiation strategy benefits from rivalry.
c. customers are loyal to brands that are differentiated in meaningful ways.
Firms with few competitive resources are more likely a. to not respond to competitive actions. b. respond quickly to competitive actions. c. delay responding to competitive actions. d. respond to strategic actions, but not to tactical actions.
c. delay responding to competitive actions.
Which of the following would be an example of a strategic action? a. a "two movies for the price of one" campaign by Blockbuster Video b. use of product coupons by a local grocer c. entry into the European market by Home Depot d. fare increases by Southwest Airlines
c. entry into the European market by Home Depot
All of the following are forces that create high rivalry within an industry EXCEPT a. numerous or equally balanced competitors. b. high fixed costs. c. fast industry growth. d. high storage costs.
c. fast industry growth.
A company pursuing a differentiation or focused differentiation strategy would a. have highly efficient systems linking suppliers' products with the firm's production processes. b. use economies of scale. c. have strong capabilities in basic research. d. make investments in easy-to-use manufacturing technologies.
c. have strong capabilities in basic research.
7. A major department store chain has a strict policy of banning photographs of its sales floor or back room operations. It also does not allow academics to include it in research studies for publication in research journals. In fact, some of its own top managers refer to the store policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are: a. causally ambiguous. b. unobservable. c. imitable. d. valuable.
c. imitable.
A company using a narrow scope in its business strategy is: a. following a cost leadership business strategy. b. focusing on a broad array of geographic markets. c. limiting the group of product segments served. d. likely to earn only average returns.
c. limiting the group of product segments served.
1. A sustained or sustainable competitive advantage requires that: a. the value creating strategy be in a formulation stage. b. competitors be simultaneously implementing the strategy. c. other companies not be able to duplicate the strategy. d. average returns be earned by the company.
c. other companies not be able to duplicate the strategy.
New entrants to an industry are more likely when (i.e., entry barriers are low when...) a. it is difficult to gain access to distribution channels. b. economies of scale in the industry are high. c. product differentiation in the industry is low. d. capital requirements in the industry are high.
c. product differentiation in the industry is low.
2. The environmental segments that comprise the general environment typically will NOT include: a. demographic factors. b. sociocultural factors. c. substitute products or services. d. technological factors.
c. substitute products or services.
The environmental segments that comprise the general environment typically will NOT include a. demographic factors. b. sociocultural factors. c. substitute products or services. d. technological factors.
c. substitute products or services.
9. Buyers are powerful when: a. there is not a threat of backward integration. b. they are not a significant purchaser of the supplier's output. c. there are no switching costs. d. the buyers' industry is fragmented.
c. there are no switching costs.
8. Suppliers are powerful when: a. satisfactory substitutes are available. b. they sell a commodity product. c. they offer a credible threat of forward integration. d. they are in a highly fragmented industry.
c. they offer a credible threat of forward integration.
Suppliers are powerful when: a. satisfactory substitutes are available. b. they sell a commodity product. c. they offer a credible threat of forward integration. d. they are in a highly fragmented industry.
c. they offer a credible threat of forward integration.
Competitive dynamics refers to the a. circumstances where competitors are aware of the degree of their mutual interdependence resulting from market commonality and resource similarity. b. set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position. c. total set of actions and responses taken by all firms competing within a market. d. ongoing set of competitive actions and competitive responses between competitors as they maneuver for advantageous market position.
c. total set of actions and responses taken by all firms competing within a market.
All of the following are resources of an organization EXCEPT a. an hourly production employee's ability to catch subtle quality defects in products. b. oil drilling rights in a promising region. c. weak competitors in the industry. d. a charity's endowment of $400 million.
c. weak competitors in the industry.
Stakeholders
can affect the firm's vision and mission, are effected by strategic outcomes achieved, and have enforceable claims on the firm's performace
Core Competencies
capabilities that are a competitive advantage over competitors
strategic groups
cluster of firms that share similar strategies (compete in a similar way) -technology leadership -price leaders -distribution channels EX: world automobile industry
outbound logistics
collecting, storing, and distributing the product or service
Organizational Capabilities
competencies that a firm employs to transform inputs into outputs (ex: fantastic customer service, innovativeness, motivation, product developments, etc)
Actor's Reputation
competitors are more likely to respond to competitive moves by market leaders
____ is used to resolve principle/agent conflict
corporate governance
potential pitfall of cost leadership cost
cutting may lead to the loss of desirable features
4. Which of the following is NOT an assumption of the Industrial Organization, or I/O, model? a. Organizational decision makers are rational and committed to acting in the firm's best interests. b. Resources to implement strategies are not highly mobile across firms. c. The external environment is assumed to impose pressures and constraints that determine the strategies that result in superior performance. d. Firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.
d. Firms in given industries, or given industry segments, are assumed to control similar strategically relevant resources.
In evaluating its customers, which of the following is NOT a relevant question? a. How will core competencies meet the customer's needs? b. Who is the customer? c. What are the customers' needs? d. How will our top management team interact with the customer?
d. How will our top management team interact with the customer?
The typical risks of a differentiation strategy do NOT include which of the following? a. Customers may find the price differential between the low-cost product and the differentiated product too large. b. Customers' experience with other products may narrow customers' perception of the value of a product's differentiated features. c. Counterfeit goods are widely available and acceptable to customers. d. Suppliers of raw materials erode the firm's profit margin with price increases.
d. Suppliers of raw materials erode the firm's profit margin with price increases.
3. The strategic management process is: a. a set of activities that is guaranteed to prevent organizational failure. b. a process concerned with a firm's resources, capabilities, and competencies, but not the conditions in its external environment. c. a set of activities that to date have not been used successfully in the not-for-profit sector. d. a dynamic process involving the full set of commitments, decisions, and actions related to the firm.
d. a dynamic process involving the full set of commitments, decisions, and actions related to the firm.
5. An industry is defined as: a. a group of firms producing the same item. b. firms producing items that sell through the same distribution channels. c. firms that have the same seven digit standard industrial code. d. a group of firms producing products that are close substitutes.
d. a group of firms producing products that are close substitutes.
8. When a resource or capability is valuable, rare, costly to imitate, and nonsubstitutable firms may obtain: a. a temporary competitive advantage. b. a complex competitive advantage. c. competitive parity. d. a sustainable competitive advantage.
d. a sustainable competitive advantage.
1. As defined in the text, resources: a. are concrete sources of value. b. are easily identified. c. have two categories: generic and unique. d. are the source of the firm's capabilities.
d. are the source of the firm's capabilities.
When the costs of supplies increase in an industry, the low-cost leader a. may continue competing with rivals on the basis of product features. b. will lose customers as a result of price increases. c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit margins. d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.
d. may be the only firm able to pay the higher prices and continue to earn average or above- average returns.
An external analysis enables a firm to determine what the firm a. can do. b. should do. c. will do. d. might do.
d. might do.
7. Switching costs refer to the: a. cost to a producer to exchange equipment in a facility when new technologies emerge. b. cost of changing the firm's strategic group. c. one-time costs suppliers incur when selling to a different customer. d. one-time costs customers incur when buying from a different supplier
d. one-time costs customers incur when buying from a different supplier
Switching costs refer to the: a. cost to a producer to exchange equipment in a facility when new technologies emerge. b. cost of changing the firm's strategic group. c. one-time costs suppliers incur when selling to a different customer. d. one-time costs customers incur when buying from a different supplier.
d. one-time costs customers incur when buying from a different supplier.
1. Above-average returns are: a. higher profits than the firm earned last year. b. higher profits than the industry average over the last 10 years. c. profits in excess of what an investor expects to earn from a historical pattern of performance of the firm. d. profits in excess of what an investor expects to earn from other investments with a similar level of risk.
d. profits in excess of what an investor expects to earn from other investments with a similar level of risk.
The resource-based model of the firm argues that a. all resources have the potential to be the basis of sustained competitive advantage. b. all capabilities can be a source of sustainable competitive advantage. c. the key to competitive success is the structure of the industry in which the firm competes. d. resources and capabilities that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.
d. resources and capabilities that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.
7. The resource-based model of the firm argues that: a. all resources have the potential to be the basis of sustained competitive advantage. b. resources are not a source of potential competitive advantage. c. the key to competitive success is the structure of the industry in which the firm competes. d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.
d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis of a firm's core competencies.
In the resource-based model, which of the following factors would be considered a key to organizational success? a. unique market niche b. weak competition c. economies of scale d. skilled employees
d. skilled employees
3. The strategic management process is a. a set of activities that will assure a temporary advantage and average returns for the firm. b. a decision-making activity concerned with a firm's internal resources, capabilities, and competencies, independent of the conditions in its external environment. c. a process directed by top-management with input from other stakeholders that seeks to achieve above-average returns for investors through effective use of the organization's resources. d. the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.
d. the full set of commitments, decisions, and actions required for the firm to achieve above-average returns and strategic competitiveness.
An analysis of the economic segment of the external environment would include all of the following EXCEPT a. interest rates. b. international trade. c. the strength of the U.S. dollar. d. the move toward a contingent workforce.
d. the move toward a contingent workforce.
When implementing a focus strategy, the firm seeks: a. to be the lowest cost producer in an industry. b. to offer products with unique features for which customers will pay a premium. c. to avoid being stuck in the middle. d. to serve the specialized needs of a market segment.
d. to serve the specialized needs of a market segment.
In the airline industry, frequent-flyer programs, ticket kiosks, and e-ticketing are all examples of capabilities that are a. rare. b. causally ambiguous. c. socially complex. d. valuable.
d. valuable.
In this stage of the industry life cycle, there are few segments, the emphasis on product design is low, and the major functional areas of concern are general management and finance.
decline
The most likely time to pursue a harvest strategy is in a situation of:
decline in the market life cycle
high product differentiation is generally accompanied by
decreased emphasis on competition based on price
high product differentiation is generally accompanied by:
decreased emphasis on competition based on price
The aging of the population, changes in ethnic composition, and effects of the baby boom are
demographic changes
Suppose that you are an analyst reviewing the Coors business in 1977. Which of the following would you identify as a bigger risk to Coors' performance?
dependence on insufficient total production capacity by all players in the west region
Product Development
developing new products and/or significantly improving on existing products
Support value chain activities that involve excellent applications engineering support and facilities that promote a positive firm image characterize what generic strategy?
differentiation
Intangible Resources
difficult for competitors and the firm to account for or imitate, typically evolved over time.
Advantages that cannot be duplicated by other competitors are
difficult to achieve
potential pitfalls of an integrated overall low cost and differentiation in the middle, underestimating the challenges and expenses associated strategy
firms that fail to attain both may end up with neither and become stuck with coordinating value creating activities, miscalculating the sources of revenue and profit pools in the firm
In the value-net analysis, complementors are
firms that produce products or services that have a positive impact on the value of a firm's products or services
a firm following a focus strategy must
focus on a market segment or group of segments
An independent group of suppliers, such as farmers, gather to form a cooperative to sell their products to buyers directly, replacing their former distributors. This is an example of
forward integration
Given its 1977 strategy (beginning of the case), it would make sense for Coors beer business to have been organized as a:
functional organizational structure
Internet search activities include
gathering information.
The industry life cycle has important implications for a firm's
generic strategies, functional areas, value creating activities, and overall objectives
Industry
group of firms producing products that are close substitutes
During the decline stage of the industry life cycle, this refers to obtaining as much profit as possible and requires that costs be decreased quickly
harvesting
Firms would be most likely to face intense rivalry with competitors when they
have high fixed costs, in a slow growth industry with high exit barriers
Attractive Industry
high entry barriers
research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform
higher than firms that achieve either a cost of differentiation advantage
Because the internet lowers barriers to entry in most industries, it
increases the threat of new entrants
Because the Internet lowers barriers to entry in most industries, it
increases the threat of new entrants.
According to the text, the types of industries that are likely to be most radically transformed by the Internet are:
information-intensive such as financial services
Intention of business-level strategy
intended to create difference between the firm's position relative to those of it's rivals
An organization is responsible for many different entities. in order to meet the demands of these groups, organizations must participate in stakeholder management. stakeholder management means that:
interests of the stockholders are not the only interests that matter
strategic groups (competition)
internal competition between strategic group firms is GREATER than between firms outside that strategic group. -there is more heterogeneity in the performance of firms within strategic groups.
In general, the threat of substitutes is heightened because the internet
introduces new ways to accomplish the same task
In general, the threat of substitutes is heightened because the Internet:
introduces new ways to accomplish the same tasks
In the ______ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.
introduction
in this stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low
introduction
Integrated Cost Leadership/ Differentiation Strategy
involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation
The value net is a game-theoretic approach that
is a way to analyze all the players in a game and analyze how their interactions affect a firm's ability to generate and appropriate value
Gathering "competitive intelligence"
is good business practice.
The value-adding activity known as problem-solving
is typically used in the context of providing unique services.
Buyer power will be greater when
it is concentrated or purchases large volumes relative to seller sales
Juno.com became the third largest Internet service provider by offering free email service, but eventually had to stop this practice because of what potential pitfall:
it offered the free service to build market share but then could not sustain the low-cost strategy.
Pets.com spent an enormous sum promoting its brand but eventually closed during the dot-com downturn. Which of the following was not one of the reason Pets.com failed:
it overextended its focus on a market niche and tried to appeal to an overly broad audience.
What is the value chain?
it shows how a product moves from raw-material to the final customer
the value of a company in the market is a result of
its ROE & its VOP & its value for other corporations
To illustrate interrelationships among different segments of the general environment: The persistence of large U.S. trade deficits (_____) has led to greater demand for protectionist measures, such as trade barriers and quotas (______). These measures lead to higher prices for U.S. consumers and fuel inflation (_____).
macroeconomic, political/legal, macroeconomic
A danger of forecasting discussed in the text is that
managers may view uncertainty as "black and white" while ignoring important "gray areas."
What is coors obvious focus during the period of the case?
manufacturing
Standard Cycle Markets
markets in which the firm's competitive advantages are moderately shielded from imitation and where imitation is moderately costly
Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them.This capability is an example of:
mass customization
Method of implementing a differentiation strategy that has been greatly enhanced because of internet technologies
mass customization
Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?
mass customization
Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of
mass customization.
A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage?
maturity
In the _______ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.
maturity
In this stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high
maturity
The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?
maturity
n a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?
maturity
Mergers and acquisitions description/definition
mergers: two firms combined, co equal basis acquisitions: one firm buys another
Market Development
moving into different geographic markets
A firm can achieve differentiation through all of the following means
mproving brand image, better customer service, adding additional product features
One of the reasons the internet is eroding sustainable competitive advantages is:
nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage
One of the reasons the Internet is eroding sustainable competitive advantages is
nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.
Interest rate increases have a ______ impact on the residential home construction industry and a _____ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items
negative; neglible
Product differentiation by incumbents act as an entry barrier because
new entrants will have to spend heavily to overcome existing customer loyalties
Product differentiation by incumbents act as an entry barrier because
new entrants will have to spend heavily to overcome existing customer loyalties.
Does coors expend more money on advertising per barrel sold than its competitors in 1977?
no, it does not need to because there is not enough offer in the region to cover demand at a competitive price.
Equity, non‐equity, joint venture description/definition
non-equity: contracts, supply & distribution agreements equity-alliance: partners own stakes in eachother joint venture: independent firm is created and profit shared
The only technology ever adopted by consumers more rapidly than the Internet was
none of the above
Complete the following sentence: "It is the actual use of the Internet for profitable transactions, ______________________________________________"
not the technology itself, that matters to a company's bottom line.
The most intensive rivalry results from
numerous equally balanced competitors, slow industry growth, high fixed or storage costs
Examples of value-adding content often found on websites include all of the following except
online shopping.
Opportunism, adverse selection, holdup and moral hazard
opportunism: firm is unfairly expolited in an exchange adv. sel.:misrepresenting value of inputs moral hzd: providing inputs of lesser value holdup: exploiting transaction specific investment of partners
Internet business models
outline methods that online businesses use to create value
firm size and execution compensation are _______ related
positively
the growth stage of the industry life cycle is characterized by
premium pricing
sustainable differentiation is achieved when:
price premiums exceed extra costs of being unique
Advertising is a ______activity. Supply of replacement parts is a _________activity.
primary; primary
differentiation strategy
produce goods at an acceptable cost that customers perceive as being different in ways that are important to them (add value) (ex: prestige, tech, innovation, customer service, etc)
The threat of new entrants is increased if:
product differentiation in the industry is low
focus strategy
production of goods or service that serve the needs of a particular competitive segment (ex: youths, professional craftsmen, east coast)
Substitute products and services
products and services outside the industry that serve the same customers needs as the industry's products and services
defined as the total profits in an industry at all points along the industry's value chain
profit pppl
Threat of new entrants
profits of established firms in the industry may be eroded or limited by new competitors -high barriers to entry in an industry reduces this threat
Internal analysis
provides a comparative look at a firm's capabilities/competencies
A cost leadership strategy can be summarized as:
providing products with features acceptable to customers at the lowest competitive price.
service
providing service to enhance or maintain the value of the product
Marketing and sales
purchase of products and services by end users and the inducements used to get them to make the purchase
Procurement
purchasing inputs used in the firm's value chain
In Porter's Five Forces model, conditions under which a supplier group can be powerful include all of the following except
readily available substitute products
Inbound logistics
receiving, storing and distributing inputs into the product
rivalry
reduce price/increase cost (both bad for company)
EncrypTix is an electronic delivery company that uses bar-code printing technology to let customers print-out their own tickets to concerts and sporting events. This new Internet company is an example of:
reintermediation.
average returns
returns equal to those an investor expects to earn from other investments with a similar amount of risk
above-average returns
returns in excess of what an investor expects to earn from other investments with a similar amount of risk
Above average returns
returns in excess of what is expected in comparison to another with similar risk
Four Internet-based activities that are enhancing firms' capabilities to use the Internet to add value include:
search, evaluation, problem-solving, and transaction.
does corporate governance and performance have a strong or weak correlation?
strong
Conferenza is an example of an Internet company that offers busy people an alternative way to participate in conferences. This is an example of Internet-based
substitution.
Attractive Industry
suppliers and buyers have weak positions
General Administration
supports the entire value chain (effective planning systems, ability to top mgmt to anticipate key environmental trends)
3 types of resources
tangible intangible organizational capabilities
The three key types of resources that are central to the resource-based view of the firm are
tangible resources, intangible resources, and organizational capabilities.
Which of the following is not one of the reasons the Internet increases the intensity of competitive rivalry:
the Internet has made it more difficult to imitate the advantages achieved by competitors.
One of the greatest threats to supplier power that has emerged because of the Internet is
the Internet inhibits the ability of suppliers to offer highly differentiated products or services.
Which of the following is not one of the reasons why the bargaining power of buyers is increasing because of the Internet:
the Internet isolates customers which makes differential pricing possible.
Scale economies may be less important for new entrants that launch Web-based businesses because
the Web makes it possible for new entrants to enter a market with relatively lower capital costs.
Scanning the general environment would identify information on
the aging population and ethnic shifts
The bargaining power of the buyer is greater than that of the supplier when
the buyer's profit margin is low
Upper limits on the prices a firm can charge are impacted by:
the cost of substitute products
A certain marble quarry provides a unique type of marble that is richly colored and strikingly veined. It has been used for churches and public buildings throughout the world. The architect of a new headquarters for a prestigious Fortune 500 firm has specified the use of this marble, and this marble only, for this project. Which of the following statements is most likely to be true?
the cost of the marble will be expensive because of the bargaining power of the supplier
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
strategic management process
the full set of commitments, decisions, and actions required for a firm to achieve above-average returns
Smithfield Food produces hams and other meat products. It owns hog raising operations. This is an example of _____ business.
vertically integrated
differentiation strategy can mitigate buyers' power bc of one thing involving price:
well differentiated product reduce customer sensitivity to price increases
By studying internal environment firms determine
what they can do
By studying external environment, firms identify...
what they might choose to do
strategic competitiveness
when a firm successfully formulates and implements a value-creating strategy
sustainable competitive advantage
when competitors are unable to duplicate a company's value-creating strategy
Substitute products decrease
when differentiated industry products that are valued by customers reduce
Industry Rivalry increases
when the high exit barriers prevent competitors from leaving the industry
Substitute products increase
when the products quality and performance are equal to or greater than the existing product
Substitute products increase
when the substitute product's price is lower
Industry Rivalry increases
when there are high fixed costs or high storage costs
Industry Rivalry increases
when there are numerous or equal balanced competitors
Industry Rivalry increases
when there is a lack of differentiation opportunities or low switching costs
Threat of substitute products increases when:
• Buyers face a few switching costs • Substitute products price is lower • Substitute products quality is = or >
Bargaining power of suppliers is high when:
• Fewer companies than market is sells to • No substitute • Industry is not an important customer of supplier group • Products are differentiated • Threat of forward integration
Industry rivalry increases when:
• Numerous equally balanced competitors • Industry growth slows or declines • High fixed or storage costs • When strategic stakes are high • Similar product, low switching costs • High exit barriers
Bargaining power of buyers is high when:
• Purchases large volumes relative to seller sales • Product is standard • Buyer faces few switching costs • Earns low profits • Buyer pose a threat of backward integration • Product is unimportant to quality of buyers product
