Strategic Management

Path dependence

Just because you can see the end result doesn't mean you can duplicate the actions it takes to get to the result: each step of the process is "dependent" on the previous steps. If you haven't' taken the previous steps, you can't duplicate what another company is doing at the present time.

Establishing Goals Process

MISSION VISION Internal external audits Establish GOAL

For Structure of the Class see

P Strategy Introduction 2018 Slides 14-22

New markets created by iPods, PDAs, and Wi-Fi are a result of

disruptive technologies.

Product market stakeholders include

suppliers

Which of the following is NOT a value-creating activity associated with the differentiation strategy?

Developing policies to ensure efficient hiring and retention to keep costs low and implement training to ensure high employee efficiency.

Resource Heterogeneity

Different companies have different resource sets. Heterogeneous resource often the result of bundling resources in a unique way.

Alternative Perspectives on Strategy Development

Environmental determinism Structure content performance model Research Enactment Combination

The U.S. Hispanic market is the third-largest "Latin American" economy behind Brazil and Mexico. This impacts the ______ aspect of demographic segment analysis

Ethnic mix

Integrated Low Cost-Differentiation Strategy

Evidence suggests organizations can pursue an integrated approach that involves achieving low costs and high levels of differentiation McDonald's, Southwest Airlines, Google, Toyota are examples of companies that have successfully integrated low cost and differentiation

After Amazon lowered the price on Kindle e-readers, Sony eventually lowered the price on its Reader. Sony needed to do this because

It is in the same strategic group

Capabilities

are a combination of knowledge, skills, and physical resources needed to perform the key functions of a business.

Functional Strategy formulation

contains the details of how the functional areas such as marketing, operations, finance, research should work together to achieve the business level strategy.

When RESOURCES and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n)

core competence.

When resources and capabilities serve as a source of competitive advantage for a firm, the firm has created a(n)

core competence.

Nine Dimensions of Culture (Power Distance)

degree to which members of a group expect and agree that power should be shared unequally. For example, India's caste system where everyone has his/her "rightful place" still influences their modern society.

Nine Dimensions of Culture (Performance Orientation)

extent to which an organization or society encourages and rewards group members for improved performance and excellence The United States reliance on Standardized testing in US schools is an example of performance orientation

Distributional justice

fair distribution of value to shareholders

Interactional justice

fairness in the way stakeholders are treated during transactions (Treat with respect)

One capability that can be learned from failure is when to

quit

An analysis of society's attitudes and values would be conducted when studying the ______ segment of the general environment

sociocultural

Compared to tangible resources, intangible resources are

a superior source of capabilities

Porter

At one time they dug raw materials out of the ground. They also realized there was more money in putting those materials together to create products. They got out of the mining industry and became a chemical company. That's a classic example of a Industrial Organization move. Go where the money is...

As customers come to believe that a firm's product is unique, this allows the firm to

Obtain loyal customers

______ innovation is a term used to describe how rapidly and consistently new, information-intensive technologies replace older ones.

Perpetual

Industry Structure Analysis:

Porter's 5 forces PESTEL model

Internal analysis enables a firm to determine what the firm

can do

A company pursuing the differentiation or focused differentiation strategy would tend to

develop flexible systems that allow rapid response to customers' changing needs.

Entry barriers

economies of scale high level of product differentiation high switching costs limited access to distribution channels gvt polocies and regulations that make it hard to compete Existing firms have resources like patents that are hard to duplicate past history of aggressive retaliation to new entrants

The U.S. Hispanic market is the third-largest "Latin American" economy behind Brazil and Mexico. This impacts the ______ aspect of demographic segment analysis.

ethnic mix

The three dimensions of a firm's relationships with customers include all the following EXCEPT

exclusiveness.

The observation that China, despite a 37 percent surge in car sales in 2010, is expected to reach production overcapacity by 2015 and have a glut of extra cars, is an aspect of the ______ segment of the general environment

global

The observation that China, despite a 37 percent surge in car sales in 2010, is expected to reach production overcapacity by 2015 and have a glut of extra cars, is an aspect of the ______ segment of the general environment.

global

Global interconnectedness

increases competition.

innovations

replicated reliably on a meaningful scale )new products or processes)

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies in

specific product markets.

Why consider society

stakeholders are members of society-assess values and beliefs good ethical reputation avoid restrictive legislation change=opportunities (oil)

Stakeholder analysis

Identifying and prioritizing key stakeholders assessing their needs collecting ideas from then integrating this knowledge into the strategic management processes

Why Industries Display Increasing Returns

Industries display increasing returns when: They have high up-front costs and low marginal costs Producer learning is high Network externalities [the network effect], when the purchase of a product by a new customer creates additional value for existing customers

Substitute Products

If there are no or few alternative industry providers for your industry's product, then this threat isn't very high. However, if there are a few good alternative industry providers or even several not-so-good alternative industry providers for your product, then this isn't favorable for your industry's profitability.

Barriers to Exit

In contrast, you want low barriers to exit, so you can leave the industry if need be. You want low sunk costs, and assets that are generic an easily sold. Few other opportunities Non-transferable skills Sunk investments No one want an outdated manufacturing plant. These are barriers to exit.

Organization is a bundle of resources

financial, physical human, knowledge, and learning and general organizational ( structure, systems, culture, reputation, relationships with stakeholders.)

Defender Strategy

used by organizations to protect current market share by emphasizing existing products. Defenders have well-established businesses that they're seeking to safeguard. They'll do whatever it takes to aggressively prevent competitors from coming into their turf. Major US Airlines have used this strategy when new competitors move into their territories. The Auto industry used this strategy against Tesla. have a well-established business protect current market share emphasize existing products produce a limited product line aggressively prevent competitors from taking market share from them

Five Forces Review

1.) Buyer Power: measures the degree of power that customers have over companies in the industry 2.) Supplier Power: measures the degree of power that suppliers have over companies in the industry 3.) Threat of New Entrants: measures ease of entry into the industry 4.) Threat of Substitutes: measures the likelihood that new products or services will substitute for those supplied by the industry 5.) Degree of Rivalry: measures the degree of competition between firms in the industry

Economic (PESTEL)

1.) Capital intensity is a measure of the importance of capital relative to labor. Some industries like aerospace requires large investments in capital and small investments in labor. In contrast, healthcare and education are labor intensive. The larger the required capital investment the greater advantage established companies tend to have if they hold slack fund or have access to large amounts of cash. 2.) Advertising Intensity Advertising intensity: a measure of the amount of money spent on advertising as a percentage of revenue (sales). Established companies again have an advantage over small in advertising-intensive industries because advertising is subject to economies of scale... it typically takes a lot of cash to do well at a national or international level and takes time for advertising to have an effect. So, you have large outlays of cash and a long wait to see what the return on that investment will be. 3.) Growth tend to be more munificent and contracting industries force companies out of business. Economic: The economic sector includes macroeconomic data, current statistics, forecasted trends and changes that reflect what's happening with the overall economy. Major economic data that might be important to scan and evaluate includes interest rates; exchange rates and the value of the dollar; budget deficits or surpluses; trade deficit or surplus; inflation rates; gross national product (GNP) or gross domestic product (GDP), consumer income, spending, and debt levels; employment-unemployment levels; consumer confidence levels; and workforce productivity rates.

Four Categories of Resources / Assets

1.) Financial resources are cash on hand or cash that's available to the company. 2.) Physical resources are PP&E, but also includes the company's physical location. 3.) Now we add Human resources are the skills and abilities of the employees to what we've already talked about. 4.) Organizational resources include organizational structure and relationships the company builds both inside and outside the organization; organizational culture.

Bargaining Power of Buyers

If buyers have a lot of bargaining power, they can force prices down, bargain for higher quality or more services, or even play competitors against each other trying to see who will give them the best deal. We have lots of choices in snack food, or fast food. It's real easy to switch products or go without, so consumers tend to keep prices low. On the other hand, there are only a few suppliers of gas. Most people need it to get to work, so when supply becomes scares prices go up, consumer's can't do much about it. We shift spending from other things to gas. Buyers affect profitability if they can force prices down, bargain for higher quality or more services, or are able to play competitors against one another

Industrial Organizational Economics

based off determinism, study environment and then adapt from for winning strategy.

The analysis of the activity map of a successful company such as Southwest Airlines emphasizes how

it is hard for rivals to match a configuration of integrated activities than to imitate a single activity.

New entrants to an industry are more likely when

product differentiation in the industry is low

Subscriptions to the New York Times have been decreasing as more customers receive their news through other media. At the same time, advertisers have shifted portions of their spending to other media. The NYT's managers are making decisions under

uncertainty

The three conditions that characterize difficult managerial decisions concerning resources, capabilities, and core competencies are

uncertainty, complexity, and intraorganizational conflicts.

Potential Entrants

The threat of new entrants depends on the barriers to entry and the reaction by existing competitors to these entrants. When barriers are high or existing competitors can be expected to take significant actions to keep newcomers out, then the threat of entry is low. A low threat of potential entrants is positive for an industry because profitability won't be divided up among more competitors.

To Gain Competitive Advantage Companies Need To Determine

What products and/or services does the firm intend to sell? How and where will it make those products or services? How and where will it sell them? How and where will it acquire the necessary resources? How does it expect to outperform its competitors?

Nine Dimensions of Culture (Assertiveness)

degree to which people in a culture are determined, confrontational, and aggressive in their social relationships For example German managers tend to use straightforward and direct language: conflict and confrontational discussion are acceptable workplace behaviors

The global economy, globalization, rapid technological change, and the increasing importance of knowledge are creating the need to

delegate strategic responsibilities to employees "closer to the action."

Historically, women have paid more for dry cleaning than men. Signature Cleaners advertises "equal price" for all customers. Signature Cleaners appeals to women, which is market segmentation by ______ factors.

demographic

Recently, the only type of car available for Anthony to rent on a business trip was a compact, fuel-efficient Japanese import. Anthony was surprised at the comfort and performance of the car. He is in the market for a new car and had previously considered only buying another luxury SUV. Now, he is thinking about the significant cost savings he would have if he bought the compact vehicle rather than a new SUV. This is an example of the competitive risk that

experience can narrow a customer's perceptions of the value of a product's differentiated features.

Nine Dimensions of Culture (Uncertainty Avoidance)

extent to which a society, organizations, or groups rely on established social norms, rituals, and procedures to avoid uncertainty. For example, the United States promotes entrepreneurship.. low uncertainty avoidance; Middle Eastern countries, high uncertainty avoidance cultures value careful business negotiations built on long-term trusted relationship.

Types of Resources

Tangible assets or resources are things like cash, property-plants-&-equipment, or coal, oil etcetera. Intangible resources are things like knowledge, skills or reputation.

Organizational Stakeholders

There are internal stakeholders in addition to external stakeholders. Strategic leaders have differing responsibilities to each group of internal stakeholders. For example The company is responsible for training their employees, providing a safe productive environment, At the same time, the company is responsible for turning a profit to keep owners happy. Expectations of what is acceptable change over time. What was acceptable in the 1970s is different than what is acceptable now. CarbonTet or asbestos example

Vision Statement

What the company wants to be in the future Could be socially responsible and continually improve statements

Strategic Direction

setting long term goals and objectives (such as mission and vision) defines the purposes for which an organization exits and operates (Ethics and Values) STRATEGIC DIRECTION MAY BE CONTAINED , IN PART, IN A FIRMS MISSION AND VISION STATMENTS

Capabilities and Competencies

Capabilities and Competencies are for all practice purposes synonyms. The two terms come out of different streams of research.

An entrepreneur is investigating starting a company that provides tax advice to small companies. In order to position his company differently from the existing competitors, the entrepreneur must

provide tax advice either in a different manner or provide a different kind of tax service than competitors.

Capital Market Stakeholders

put money into the company expecting a return. stakeholders expect higher returns as the risks increase: lower returns are OK if the firm has lower associated risks, but they always want their investment protected.

Distinctive competencies, or distinctive capabilities

unique combination of knowledge, skills and physical resources that give a firm a competitive advantage. Ford, Chevy and Chrysler all have the capabilities to perform these functions.

Nine Dimensions of Culture (Future Orientation)

extent to which people engage in future-oriented behaviors such as planning, investing in the future, and delaying gratification. Again, many Middle Eastern countries are concerned with traditional values and ways of doing things.. low future orientation In contrast, North Americans believe they can plan and control the future and idealize change for the sake of changing.

Traditional/ contemporary perspective

firms should adapt forces in the external environment when it is unreasonable to try to change the, while being proactive in other areas. Strategy making is a combo of planning and learning. Fares from organizational economics and industry analysis

A major department store chain has a strict policy of banning photographs or videos of its sales floor or back-room operations. It also does not allow academics to conduct studies of it for publication in research journals. In fact, some of its own top managers refer to the management's policies on secrecy as "verging on paranoid." These policies indicate that the top management of the firm believes the organization's core competencies are

imitable

Strategic control

refers to the processes that lead ti adjustments in strategic directions, strategies, or the implementation plan when necessary.

Strategic fit among many activities (in an activity map) is fundamental to

sustainability of a firm's competitive advantage.

The corporate research division of Siemens files, on average, 25 patents a day. The patents are a(n) ______ resource.

technological

The primary drivers of hypercompetition are

the emergence of a global economy and rapid technological change.

All of the following are characteristic of the global economy EXCEPT

the increased use of tariffs to protect industries.

Environmental determinism

the most competitive strategy is determined by the environment. It involves adapting to environmental technical and human forces.

When do customers have power

small number of customers similar products exist customers make high volume purchases customers can get accurate info on the selling industry products buys are undifferentiated (no quality difference only brand difference) They can easily vertically integrate backwards (companies ability to do it themselves) Can easily switch from one seller to another

Supplier power

small number of suppliers few substitutes suppliers are nondependent of the buyer supplier can get accurate info on buying industry suppliers have differentiated their precepts suppliers can easily integrate forward suppliers have made it costly to switch

An analysis of society's attitudes and values would be conducted when studying the ______ segment of the general environment.

sociocultural

A ______ is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.

strategy

critical thinking

Identify the problem: the desired state we just talked about Develop multiple potential solutions, evaluate the probably solutions and choose one: this is brainstorming. Develop criteria so you can tell if the solution works. Implement the solution Move on to new problem if your successful or repeat if necessary by returning to step two.

basic innovation

impacts much more than one product category or industry

Consumers in the United States are known for their

impatience.

Effective development or acquisition of organizational resources

may be the other most important reason that some organizations are more successful than others.

Dynamic Capability

ability to constantly reconfigure company capabilities to keep up with changes in the environment. Apple is an example of a company that demonstrates dynamic capabilities. They have evolved rapidly to take advantage of new market opportunities... They are no longer a "computer company..

Valuable capabilities

allow the firm to exploit opportunities or neutralize threats in its external environment.

A decision that results in failure

allows for learning.

Causes of Rivalry

Barriers to entry Barriers to exit

Strategic Thinking used to describe the creative aspects of strategic management:

Focus on strategic intent Long term orientation Consideration of past and present Systems perspective (Stakeholder organization) Ability to seize unanticipated opportunities Scientific approach (Hypotheis testing, take chances)

What makes a resource competitive?

Helps firms difference product Helps firm produce product at a lower cost value does not equal competitive advantage

Firms use both the ______ and ______ models. In fact, these models complement each other in that one focuses outside the firm while the other focuses inside the firm.

I/O; resource-based

Understanding how new knowledge can develop new products, processes, or materials is a result of analyzing the ______ segment of the general environment.

Technological

Strategic Planning

often rigid and unimaginative, with detailed instructions pertaining to every aspect of the process

Research

suggests industry is important to performance, but not primary determinant.

Key success factors

they are those things every company needs if it is to do well in a given industry. These two constructs are similar... Key Success factors are industry specific while core competencies are firm specific. Core competencies/capabilities could be applied to multiple industries.

A firm successfully implementing a differentiation strategy would expect

to charge premium prices.

Core competency:

Core competency has two acceptable definitions definition one: the unique characteristic(s) that a company needs to compete in a given industry. The definition for key success factors. DON'T use this one definition two: activities that allow a company performs at a high level. I prefer the later... Core competencies (capabilities) are a subset of a firms capabilities. Core competencies (capabilities) generate value across a wide range of firm activates. All capabilities are not core competencies.

Three Levels of Strategy

Corporate level strategies answer the question: What industries or industry segments do we want to compete in? Competitive or Business level strategies answer how we're going to compete. Functional level strategies answer how are we going to implement this?

DWK Foods has developed a line of cookies and candies sweetened exclusively with organic honey. Although DWK is selling some of the products over the Internet, in order to gain economies of scale the products must be sold in retail outlets. The main barrier to entry DWK is likely to encounter here is

Access to distribution channels

Combination

organizations typically involved in adaptation and enactment.

Buyers are powerful when

switching costs are low

3 Levels of Strategy

corporate, competitive, functional

The I/O model is grounded in

economics

Procedural Justice

Fair decision making process (feeling employee is being heard)

Enactment

firms can, in part, create their environments. (influence- advertising)

Media content has moved from paper, tape, and film to a digital world based on Internet technology. From the perspective of the five forces model, which force is most relevant here?

Substitutes

Miles and Snow's Adaptive Strategies

They identified four strategic postures: prospector, defender, analyzer, and reactor.

Political and Legal forces

among most significant determinants of organizational success GVT provide and enforce rules in which organizations operate Level of inference from get varies from country to country and industry to industry worldwide trend is words more regulation alliances and treaties among gvt provide another level of complexity in planning

competitive parity

everyone has competitive advantage so its no longer competitive

inventions

new ideas that are discovered

Cost leadership strategy

or low-cost strategy is one in which an organization strives to have the lowest costs in its industry. Produces products and services are for a broad customer base. Companies often compete on economies of scale. Being efficiency in all areas is critical for the firm to be successful. Cost leadership companies are in a good position to win price wars... Efficiency in all areas is critical -resources, -distinctive capabilities, and -functional strategies are directed on efficiency

Government agencies are known for having so many layers and rules that decisions are made slowly and inefficiently. In this case the ______ resource is a detriment to taxpayers using and paying for the bureaucracy.

organizational

Stakeholder perspectives

part of external analysis and alliance formation

Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the ______ segment of the general environment that McDonald's has sought to address (Chapter 2 Strategic Focus).

physical

All of the following are forces that create high rivalry within an industry EXCEPT

Fast industry growth

Valuable resources

create a competitive advantage. The competitive advantage last only until the resource can be copied by a competitor.

If Southwest Airlines is considering the consequences of videoconferencing on business travel, it is in the profit pool analysis step known as

defining the pool's boundaries.

Nine Dimensions of Culture (Humane Orientation)

degree to which a culture encourages and rewards people for being fair, generous, caring, and kind to others. Switzerland's helpfulness to others during and after WW I and WW II is an example of high humane orientation. The country espouses tolerance and responsibility as central educational goals.

Nine Dimensions of Culture (Institutional Collectivism)

degree to which an organization or society encourages institutional or societal collective action

Nine Dimensions of Culture (Gender Egalitarianism)

degree to which an organization or society minimizes gender differences and promotes gender equality. In Sweden, men and women share power equally. Extensive welfare system allows both sexes to balance work and family life.

Four Fundamental Questions in Strategy

One: What industries to we want to compete in? Two: What attractive market opportunities exist that the company can take advantage of? Three: How can we compete within our chosen industries and markets? Four: how do we execute the plan?

Goals & Objectives (Performance)

Profitability Efficiency Growth Customer Service Customer Loyalty Customer Satisfaction

Stuck in the middle / Straddling

This happens when an organization has not developed the ability to provide a low cost or differentiation advantage

How to implement Strategic thinking?

Train managers in strategic thinking Encourage and reward employees for strategic thinking Implement a strategic planning process that incorporates strategic thinking Take risks

Common Product Features

Some common product features that costumers can use to determine what product to buy are: Delivery speed, reliability, product support, newness (novelty) Newness or novelty is wanting the newest version of a product: wanting the latest iPhone. The cost of the product can be low price, simply the cheapest product available, and it can also be a cost quality trade off.

Industry Analysis (Porter)

Some industries are more attractive than others Companies in more attractive industries consistently make more profit than those in other industries Being in a high profit industry is often very important to innovative companies

Nine Dimensions of Culture (In-Group Collectivism)

degree to which people express pride, loyalty, and cohesiveness in their organizations or families. For example some Middle Eastern cultures regard family and religious affiliation above all else. They still do honor killings of family members who have disgraced or defied the paternal leader of the family.

VRIO Model

Value Rarity Imitability Organized to Exploit When firms have resources that are valuable, rare, costly to imitate, and the company is organized to exploit those resources; the company can expect a sustained competitive advantage.

When a firm is able to produce nonstandardized (that is, distinctive) products for customers who value differentiated features more than they value low cost, the firm is successfully implementing

a differentiation strategy.

All of the following were traditional sources of competitive advantage EXCEPT

a highly educated labor market.

Industry Structure

a set of enduring factors that explain successful operations of companies in a given industry or industry segment.

Casual ambiguity

adds to the cost of imitation. Just because you can see the end result doesn't mean you will be able to deconstruct the processes that lead to that result. Southwest Airlines has been analyzed to death, but the other major airlines still cannot match their success.

Distinctive capabilities

allow firms to expand successfully into new product markets and allow firms to expand successfully into new markets. One of Wal-Mart's distinctive competencies is logistics. Wal-Mart does an exceptional job of getting merchandise from point A to point B at minimal costs. To do this, Wal-Mart combines several capabilities like: cross docking the use RFID chips and barcodes and other inventory control systems. Competitive Advantage

Which of the following is NOT a component of internal analysis leading to competitive advantage?

analysis of supplier power

Market Segmentation

division of the total market into smaller groups that are similar on key characteristics related to buying behavior For Example: Geographic factors (cultural, regional, and national differences) Demographic factors (age, income, sex, etc.) Psychological factors (lifestyle, personality traits) Socioeconomic factors (social class, stage in the family life cycle) Consumption patterns (heavy, moderate, and light users, price points) Perceptual factors (product benefit segmentation, perceptual mapping)

Corporate Strategy formulation refers to

domaine definition or the choice of business areas. usually decided by the CEO and the board of directors

increasing interdependencies

due to the flow if goods and services, knowledge and financial capital across borders. Makes business environment complicated

Key forces ( global economy) that affect all organizations

economic growth intrest rates availability of credit inflation rates foreign exchange rates foreign trade balances

It is important to emphasize that, primarily because they are related to how a firm interacts with its stakeholders, almost all strategic management process decisions have

ethical dimensions.

The focused differentiation strategy differs from the differentiation strategy in that

focused differentiators target a narrower customer market.

Exit barriers to a firm include all of the following EXCEPT

generic assets

Worlds markets have been becoming increasingly...

globalized

Organization is a network of relationships with stakeholders

internal ad external constituencies that have a strong interest in the activities and outcomes of the firm and upon who the organization replies on to achieve its objectives.

Resource based perspective

internal analysis leading to identification of sources of sustainable competitive advantage.

hyper competition

intese competition among firms, often associated with tech innovation.

Critical elements of Leadership

need to bring individuals together, set boundaries and goals, support people, and manage change.

Does fairness= equality?

no

Broad environment

sociocultural forces economic forces technological forces political/ legal forces

A river barge company can offer cheaper, although slower, per pound transportation of products to companies when compared with transportation by air, truck, or rail. The river barge company should first target customers whose companies use

the cost leadership strategy.

3 M's Stand for

Minnesota, Mining, and Manufacturing.

Corporate Level Strategy

Who will be served? What needs will be satisfied? How will those needs be satisfied?

Positioning

4 P's product, place, promotion, and price.

Capabilities that other firms cannot develop easily are classified as

costly to imitate

Core Capabilities

capabilities a company needed to compete in a given industry

Strategic leaders, ______, often work long hours, and their work is filled with ambiguous decision situations.

regardless of their location in the organization

Costs of Imitation

Patents Copyrights Trade Secrets

PESTEL Model

Political Economic Socio-cultural Technological The natural Environment Legal

Global perspectives

integrated throughout all aspects of strategic management

Strategic Management is a process through which organizations

Analyze/ learn from internal and external environments establish strategic direction (purpose) establish strategies that are intended to help and achieve establish goals execute those strategies

______ is the ability to analyze, understand, and manage an internal organization in ways that are not dependent on the assumptions of a single country, culture, or context.

A global mind-set

All competitive advantages have

limited life

increasing interdependencies , economic volatility, Global interconnectedness all make

innovation important

Technological (PESTEL)

we look for scientific or technological innovations that create opportunities and threats. The two organizational areas most affected by technology are research and development and work processes improvements. For instance, computers drastically change how things get done. Just look at my presentations and consider what a lecture would be like with only a chalkboard. [My genetics class example] The question companies need to ask: How will changing technology affect your organization's products, services, production or delivery? What do you think the most recent technological improvements have been... iPhone, tablet, PCs are getting smaller.... not much productivity gains. Where do you think productivity gains might come from in the future.... You are going to live through robotics and AI. GM's self driving car is planned 2019. This is one aspect of artificial intelligence. Robots will do more jobs. AI will replace decision making in some cases. My understanding is that computers can often easily do thinks people find hard, but struggle with some things we easily do.

Porter's Factors of Intense Rivalry (8)

1.) Numerous equal-sized competitors tend to increase competition. Fragmented market Constant action Turmoil Competitors jockey for Position 2.) Slow industry growth once industries reach a mature stage, the only way to get new costumers is to take them from another company. 3.) High Fixed Cost, can cause price wars. Economies of scale tend to be the method of competition. The automotive industry is examples of high fixed cost, low margin industry. It's also a mature industry. 4.) Lack of differentiation or switching costs leads to price competition. Switching costs are an expense associated with a change. Those costs can be procedural, financial, or relational for companies. For example, if you move from one state to another. You have to get a new drivers license, register your car, change your address with the post office. These are all switching costs. The phone market, once you get past the newest and the nicest phone, is an example of low switching costs. Carriers use the contract to try and maximize switching, but it's not that effective. 5.) Addition of / Overcapacity Price Competition 6.) Diverse competitors High uncertainty It's hard to determine what a competitor might do. When the competition is diverse it also tend to be unpredictable. 7.) High strategic stakes competition Competitors take extreme actions High Risk Strategies... winner take all 8.) High exit barriers. If you can't get out of an industry, you can be forced into winner-take-all competitions.

Change in the Competitive Environments

1.) Slow cycle -has fewer radical changes and therefore, the environment is more forgiving compared environments with faster cycle times. 2.) Standard (Moderate) cycle -characterized by methodical predictable change. The automotive industry is mostly in this category. Top of the line cars are always brining new technology to consumers, but the development time for cars is still several years. 3.) Fast cycle -are faces with constant changes and new technologies. The computer industry is usually the best example of a fast cycle industry. Just as computer technology was becoming fairly predictable, tablets and smart phones revitalized that industry Slow Cycle: Crayola crayons Decades or longer Standard / Moderate Change: Automobiles, Fast Food, Years to a decade Fast cycle: high-tech electronics (computers, phone) Less than a year

Vision and Mission

Archores Goals and Objectives The vision and mission articulate where the company is and where the company wants to be. The target audience is employees, customers, vendors, and investors. From the vision and mission the company can create goals and objectives to close the gap between what the company is and what the company wants to be in the future

Mission Statement

Defines what an organization is, why it exists, and its reason for being Can Specify: Who your primary customers are identify the products and services you produce describe the geographical location in which you operate

Population Ecology

Average Size of Firms -New start up companies do better when the average size of the companies in the industry is also small. When the average size of the companies in an industry is large, new companies are more likely to suffer from a lack of resources or benefits from economies of scale that their competitor can leverage against them. Concentration Ratios -We describe industries as monopolies, one firm; duopoly two dominant firms, and fragmented, lots of equally positioned competitors. Concentration Ratios are a percentage of market share held by the largest companies, usually the top four. Established firms tend to do better in concentrated industries because concentrated industries provide firms with market power. Start ups and small firms have a better chance in less concentrated industries Virtual Monopoly -A virtual monopoly is when one company controls so much of the market that they can behave as a monopoly. Facebook for social media... Google's search engine are both probably virtual monopolies. Amazon for online purchases. Increasing Returns Businesses -Industries based learning and/or network externalities: profits increase as the volume increases. However, some industries suffer from decreasing returns. Decreasing returns happen when a company can take advantage of easy profits early, but it will become increasingly difficult to extract profits as time goes on. An example here would be oil production. They really did have gushers early on when searching for oil. The oil was under so much pressure it shot out of the ground. Then, we had to pump it out, and now, we're fracking to get to it.

Best firms use

Both Strategic Planning, Strategic thinking

Resources and Capabilities

Capabilities are a combination of resources needed to perform a core function of the business. Capabilities often include both tangible and intangible resources. Examples of capabilities are: exceptional marketing skills; being exceptionally good at managing long-term contracts, alliances or acquisitions; being highly innovative—good at R&D.

Key Premise of IO / Porter's Model

Companies need to find industries / industry segments that have high profits, move into those industries and then, keep other companies out of those industries.

Core Rigidities

Core capabilities have a down side. Core capabilities dictate how people can work together, solve problems, and what activities they believe are acceptable and unacceptable. As companies specialize and focus on what they do well, companies run the risk of becoming incapable of performing activities outside of their areas of expertise. Core rigidities inhibit a companies ability to react to changes in the environment and do new things. Example: Kodak's inability to adapt to digital photograph because they were really good at film.

The Hourglass Phenomenon

Demographic Information shapes society and helps identify opportunities and threats The US population was stacked by age in a pyramid for several decades with more young people compared to old people. It was shaped more like an hourglass with baby boomers occupying more of the top, a small number of people in the middle and the largest generation of young people - Millennials Generation Z and the silent generation at the bottom. The narrow section, the baby bust years, is moving slowly upward now as older people die off. How might decision makers use this information? Men and women over 50 are the largest purchasers of cars now. Do you notice all of the retro cars: Mustangs, Camaros, Challengers.... Does anyone here own one of those cars? They actually target mostly men over 50. it's the car they had or wanted to have when they were young. but, the still appeal to they young. The point is... demographics make a difference.

Demographics

Demographics includes the kinds of information that the U.S. Census Bureau gathers such as gender, age, income levels, ethnic makeup, education, family composition, geographic location, birth rates, employment status, and so forth. For instance, an aging population is good for the health care industry... but not so good for other industries like construction. At a certain point, people are not physically able to do these jobs. The US population is increasing It is aging, there are more people over 30 than under It is becoming more educated It is becoming more disabled The largest minority is group is now Hispanics For instance, Do Hispanics have different buying habits in different regions of the country? When I lived in San Antonio, I noticed they still have barber shops: 1950's style barber shops. I haven't seen them anywhere else....

Trust is associated with three types of organizational justice

Distributional justice Procedural Justice Interactional justice

Goals & Objectives (Other)

Employee -Retention -Moral/wellbeing Community Related Environmental

Corporate Industrial Markets Focus

End-use segments (identified by NAICS, SIC code) Product segments (based on technological differences or production economics) Geographic segments (defined by boundaries between countries or by regional differences within them) Common buying factor segments (cut across product market and geographic segments) Size of the customer segments

Political & Legal (PESTEL)

In this sector, various laws, regulations, judicial decisions, and political forces at the federal, state, and local levels of government are analyzed Changes in bankruptcy laws that made it tougher for individuals to wipe out debt; this helped credit card companies reduce write-offs. Trade agreements between countries change product availability, product pricing, and access to customers (NAFTA). Local laws restrict what can be done with the property. Is a property zoned commercial or residential.

Resource Immobility

It can be hard or costly to duplicate another companies resource set. It may be costly for firms without certain resources to acquire or develop them. Some resources may not spread from firm to firm easily.

How did McDonald's make a remarkable recovery in the early 2000s?

It reinvented itself and returned to the basics of focusing on the customer experience

Three Legs of Strategy of a Successful Strategy

Market Opportunity Resources or Capability Successful Implementation

Market Share

Market share is a ratio of your sales divided by total sales. So, you add your sales and all of your competitors sales and the, divide your sales by that total.

Alternative perspectives on Strategy Development. (Resource based view)

Organization is a bundle of resources Sustainable Competitive Advantage Effective development or acquisition of organizational resources

Which of the following is TRUE about outsourcing?

Outsourcing allows firms to concentrate on those areas in which they can create value.

Green restaurant design, sustainable packaging, waste management, and energy efficiency are aspects of the ______ segment of the general environment that McDonald's has sought to address (Chapter 2 Strategic Focus)

Physical

Sociocultural (PESTEL)

Refers to a country's culture and includes: Traditions Lifestyles Values Attitudes Beliefs Tastes Patterns of beliefs and behavior groups have Think about Traditions and beliefs.... Is your company going to recognize Christmas, Hanukkah, or Ramadan. How would the US economy be different without the Christmas shopping season. The term "Black Friday" means that companies cover their expenses by Thanksgiving and sales after Thanksgiving produce the profits for the year. average vacation days by country.

Strategy is

Strategy is a organizational plan of action intended to accomplish goals systematic decision making process intended to improve the performance of a company. It is a set of actions a firms take to reach goals. It's very similar to a gap analysis or a problem solving sequence. I am here. I want to be there. My company is performing at this level, but I want it to be performing differently in the future. What do I have to do to get from here to their successfully..

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

Clarissa is a sales representative for a large pharmaceutical firm. While calling on one of her major clients, the purchasing director of a hospital, the client told her confidential information that a sales representative from a competing firm had passed on to him. The information completely contradicts Clarissa's firm's understanding of the competitor's business strategy, and would allow Clarissa's employer to gain many of the competitor's clients. What ethical implications may result from this situation?

The ethical dilemma here is the right of competitors not to reveal certain information

Process to Building Capabilities

The general process for developing capabilities is to: Evaluate the external environment, Evaluate the internal environment,

Natural Environment (PESTEL)

The natural conditions impact the company. Doing business in the cold of Alaska is very different from the challenges of arid southwest: Nevada, Arizona, western Texas or the mid Atlantic states. The climate is simply different. Things freeze in Alaska and melt in much of the southwest. The North east and eastern seaboard are loaded with major highways. They have a lot of deep water ports, If your business needs to ship merchandise overseas in any volume, chances are it is going by ship, and you need access to deep water ports either directly or by highway access. Easy access to transportation is an advantage. Specific laws or Social mores that determine how a company can treat the natural environment. Environmental groups like the Sierra Club Hunting and Fishing groups Greenpeace

The industry Life cycle

The state of the infrastructure will influence new technologies. A current example is fuel-cell versus electric cars. Only one of those technologies will likely become the dominant technology that replaces gasoline powered cars. Both technologies need convenient refueling stations if either is to become the new dominant technology. The dominant technology will, in part, be determined by the availability of refueling stations. In the technology sector, RFID's are becoming standard because Wal-Mart is using them to track inventory.

The Question of Imitability

The temporary competitive advantage of valuable and rare resources can be sustained only if competitors face a cost disadvantage in imitating the resource. Intangible resources are usually more costly to imitate than tangible resources.

Barriers to Entry

Things like high start-up costs, proprietary technology or even brand reputation to discourage other from moving into the industry Strong brands Proprietary technology Start-up costs If you want to start a bank, you need a lot of capital and you need to meet a lot regulations. It's hard to start a bank. Biotech firms rely on highly skilled workers. You have to have the skilled workers to get into this industry and typically a lot of cash.

Alternative perspectives on Strategy Development. (Stakeholder Perspective)

Value of co- creation *** How to treat people= right strategy= share valuable info, allow for other to create value for you Organization is a network of relationships with stakeholders Stakeholder analysis Stakeholder management

Bargaining Power of Suppliers

When industry suppliers have bargaining power, they can raise prices, reduce the number of services provided or the quality of products offered for purchase Suppliers can include any providers of raw materials, equipment, labor or financial resources Supplier Power: If your industry's resource providers have bargaining power, they can raise prices, reduce services provided, or reduce the quality of products your industry purchases. An industry's resource providers include raw materials sources, equipment manufacturers, financial institutions, and even labor sources. Auto example: during the 1990's productivity went way up... the cost of cars stayed about the same as quality and features improved. scarce resources.

STRATEGIC POSITIONING

Where managers of a company situate that company relative to it's rivals along important competitive dimensions To reduce the effects of rivalry and thereby improve profitability

In the animal food products business, food-product needs of owners of companion animals pets (e.g., dogs and cats) differ from the needs for food and health-related products of those owning production animals (e.g., livestock). Which of the following aspects of managing customer relationships does this choice refer to?

Who: Determining the Customers to Serve

The Resource-Based View

Why do some firms operating in the same industry out perform other firms operating in that same industry. Why is Amazon doing quite well while Barnes & Noble struggles, and Borders is out of business. They all started out selling books.

Prospector strategy

an organization continually innovates by finding and exploiting new product and market opportunities. A prospector's competitive strength is its ability to survey a wide range of rapidly changing environmental conditions, trends, situations , and to create new products and services to fit this dynamic environment. continually innovation find and exploiting new products and /or new market opportunities Continually innovate creates uncertainties for competitors Competitive advantage comes from developing high margin products

Firms use the five forces model to identify the ______ of the industry as measured by its

attractiveness; profitability.

Reactor Strategy

characterized by the lack of a coherent strategic plan or an apparent means of competing. Reactors simply react to environmental changes and make adjustments only when finally forced to do so by environmental pressures. Oftentimes, reactors are unable to respond quickly to perceived environmental changes. They lack the needed resources or capabilities to compete or they're not able to exploit their current resources and capabilities to compete.

Sustainable Competitive Advantage

come from a resource that is valuable in the market, processed by only a small number of firms (rare), and costly or difficult to imitate in the short term.

Stakeholder management

communicating with stakeholders negotiating and contracting with stakeholders managing relationships with them motivating them to behave in way that are beneficial to the organization and its other stakeholders

Product Market Stakeholders

include the companies suppliers, customers, host communities and unions. Suppliers want good customers that are a steady revenue stream. and, suppliers can influence the company by changing pricing or quality up and down. Suppliers can withhold supplies in extreme circumstances . Customers want good products at acceptable prices, and control the "buy, don't buy decision." The host communities want good companies that are good neighbors, provide jobs, and support the community. The host communities influence companies through legislation or public opinion. To me unions fall under communities, but here unions are a separate category. Unions need employers. Without employers they have no members. Unions negotiate for more benefits or make concession. They can, if legal, go on strike. Unions tend to be stronger in Europe compared to the US, so they are still a consideration...

Stakeholder

influence Strategic decisions. part of the external and internal environment. are any person that has a vested interest in the actions of the company. any person or group affected by a firm's actions or have and enforceable claims on it. The enforceable claim usually means they can take some sort of legal action against the company. can, and do, influence a company's decision at both a strategic and tactical level. in general influence or change the vision and mission, the firm's strategic outcomes. can be classified broadly as capital market, product market, or organizational stakeholders.

Three technological forces

inventions innovations basic innovation

Strategic Restructuring

involves a renewed emphasis on what an organization does well, combined with a variety of tactics to revitalize the organization and strengthen its competitive position.

Strategy Implementation

involves creating the functional strategies, symptoms, structures, and processes needed by the organization in achieving strategic ends.

Business Strategy formulation

involves domain direction and navigation or how to compete in a given area. Usually decided by division heads and business unit managers.

A firm's mission

is a statement of a firm's business in which it intends to compete and the customers it intends to serve.

Differentiation Strategy

isolate and understand market segments, develop product features that are valued by customers and apply capabilities, and functional strategies effectively.

Strategic thinking

leads to creative solutions and new ideas

Analysis of the industry's profit pool enables strategic managers to

locate the most promising areas of an industry's value chain.

According to the five forces model, an attractive industry would have all of the following characteristics EXCEPT

low barriers to entry

economic volatility

makes planning more difficult. Interconnections more poroblematic during crisis.

Vision, Mission, and Strategy

provide the foundation to build a strategic plan. Develop goals that will accomplish the vision, And finally, come up with strategies to implement the goals. Goals are reasonable, obtainable, time constrained and measurable. Strategies are broad statements that capture what the company want to accomplish.

Analyzer Strategy

strategy of analysis and imitation. Analyzers watch for and copy the successful ideas of prospectors. They are early second movers. They compete by following the direction that prospectors pioneer. Organizations using this strategy also thoroughly analyze new business ideas before jumping in. They'll systematically assess and evaluate whether this move is appropriate for them. Analyzers often improve products or correct mistakes first movers make. Analysis and imitation Copy successful ideas They systemically assess and evaluate whether their move is appropriate for them

Indirect competitors/ substitues

sub not the same as competing products and series, Are: products and services from one industry that can substiute for the products and services of the industry being studied (ie. contact lens vs surgery) close sub- place ceiling on the price that can be charged, set indirect performance comparisons

The economic environment refers to

the nature and direction of the economy in which a firm competes or may compete

Structure content performance model

the performance of an industry is dependent on the conduct of the firm companies which id depended on industry structure.