Strategy Mid-term Exam

Effective vision

- Is expressed as a statement - Should be forward-looking and inspiring - Should provide meaning for employees in pursuit of the organization's ultimate goals

resource immobility

-A firm has resources that tend to be "sticky" and that do not move easily from firm to firm -resources are difficult to replicate -resources can last for a long time

resource heterogeneity

-A firm is a unique bundle of resources, capabilities, and competencies -these bundles differ across firms

Dynamic Capabilities

-Adapt resources over time -Create, deploy, modify, reconfigure, upgrade, leverage

Strategic process (AFI)

-Analysis -Formulation -Implementation

Resources

-Any assets that a firm can draw on -ex. cash, buildings, machinery, or intellectual property

Strategy diamond (5 key components of strategy)

-Arenas -Vehicles -Differentiators -Staging -Economic Logic

Values

-Captures an organization's aspiration. -Spells out what the organization wants to accomplish. -identifies the long-term objective -Should be forward looking and inspiring

Entry barriers

-Econimies of scale -Network effects -Customer switching costs -Capital requirements -Advantages independent of size -Government policy -Credible threat of retaliation

What are the three standards of measuring performance?

-Economic value -Accounting profitability -Shareholder value

How to determine level of five forces

-Economies of scale -Backward/Forward integration -Concentration -Switching costs -Product differentiation -Entry/Exit barrier -Industry growth

Values (Organizational core values)

-Ethical standards and norms -Govern the behavior of individuals -provide stability to the strategy -serve as guardrails to keep the company on track

Triple-Bottom line

-Financial -Social -ecological

Support activities

-Human resources -Accounting and Finance -Research and development -Firm infrastructure -Information systems

Power of Buyers

-Lowers industry profit potential if: buyers obtain price discounts, which reduces revenue; buyers demand higher quality/service, which raises production costs

Task environment

-Managers can influence - Includes the composition of strategic groups - Includes the structure of the industry

General Environment

-Managers have littel control -Macroeconomic factors are included -Ex. interest, exchange rates, etc.

Company vision

-Massively inspiring, overarching, and long-term (what we want to be) -Statement of organization's value and aspiration, ambition

Threat of substitutes

-Meet the same basic customer need: -in a different way -Available from outside the given industry -Ex. software vs. professional services -Ex. Energy drinks vs. coffee

The dynamic capabilities perspective model emphasizes a firm's ability to

-Modify and leverage its resource base -Gain and sustain competitive advantage -Respond to a constantly changing environment

Strategic objectives

-Operationalize the mission statement (what we need to do; how to accomplish our goals?) -Provide guidance on how the organization can fulfill goals -more specific, measureable, time frame

Capabilities

-Organizational and managerial skills -Ex. structure, routines, culture

What are the key sources of competitive advantage?

-Provide goods or services that: -Consumers value more highly than those of its competitors, or -Are similar to the competitors' at a lower price

What are the three approaches to organizational strategy?

-Strategic planning -Scenario planning -Strategy as planned emergence

meaning of competitive advantage

-Superior performance relative to other competitors in the same industry or the industry average. -competitive advantage is relative, not absolute -compare the firm to competitors in the same industry -compare the firm to the industry average

Primary activities

-Supply chain management -Operations -Distribution -Marketing and sales -After sales service

Porter's Five Forces Model

-Threat of entry -Power of suppliers -Power of buyers -Theat of substitutes -Rivalry among existing competitors

Values helps employees

-Understand the company culture -Deal with complexity -Resolve conflict

Econimic value

-Value, Price, and Cost -Consumer surplus, product surplus, economic value created -Limitations of economic value

What are the three fundamental and practical questions in Strategic management?

-Where are we going? -How will we get there? -How will we know when we have arrived?

Bottom-Up Emergent Strategy

-autonomous actions -serendipity -resource allocation process

Power of suppliers

-pressures that industry suppliers can exert on an industry's profit potential -Lowers industry potential if: supplliers demand higher prices for their inputs; suppliers capture part of the economic value created

Threat of entry

-the risk that potential competitors will enter an industry -Lowers industry profit potential -Increases spending among incumbent firms

Resource based view

-this model aids in identifying core competencies -Resources are key to superior firm performance

Mission

-what an organization actually does -the products and services it will provide -the markets in which it will compete -defines how the vision is accomplished

Analysis

1. What is strategy? 2. Strategic leadership: managing process 3. External analysis: industry structure, competitive forces, and strategic groups 4. Internal analysis: resources, capabilities, and core competencies 5. Competitive advantage, firm performance, and business models

Key questions in strategic management

1. Why do some firms outperform others? 2. What is the source of a competitive advantage? (How can a firm gain/create a competitive advantage over competititors?) 3. Is is sustainable/

What is Strategy not?

1.) grandiose statements "we will be number 1" 2.) a failure to face a competitive challenge 3.)operational effectiveness, competitive benchmarking, or other tactical tools -these are good policies for initiatives, but not a strategy

Implementation

11. Organizational design: Structure, and Control 12. Corporate governance and Business Ethics

Formulation: Business Strategy

6. Business Strategy: Differentiation, Cost leadership, and Blue Oceans 7. Business Strategy: innovation, entrepreneurship, and platforms

Formulation: Corporate Strategy

8. CS: Vertical integration and diversification 9. CS: Strategic Alliances, Mergers and acquisitions 10. Global strategy: competing around the world

Top-down strategic planning

A rational, data-driven strategy process through which top management attempts to program future success. (AFI)

Mission statements

A statement of a firm's unique purpose and the scope of its operations (why we exist, who we are, what we actually do)

How are cumulative learning and experience effects of a company most likely to affect Michael Porter's five forces? A. Threat of new entrants will be low B. Bargaining power of suppliers will be high C. Availability of complements will be low D. Threat of substitute products and services will be high

A. Threat of new entrants will be low

Which of the following is true about accounting data?

Accounting data are historical and thus backward-looking

Which of the following statements correctly compares Apple and Microsoft in 2016?

Apple had a higher return on invested capital than microsoft

Which of the following best describes a Level 5 manager in the Level-5 leadership pyramid?

Asoka is the ceo of Green machines Inc; he has helped his company in gaining and sustaining a competitive advantage through ethical decision making.

Level of Strategy

Business and Corporate

Which of the following summarizes the difference between corporate strategy and business strategy?

Corporate strategy deals with where to compete; business strategy deals with how to compete

Activities

Distinct and finegrained business-processes (Order taking, invoicing, etc.)

________ is best described as the difference between a buyer's willingness to pay for a product or service and a firm's total cost to produce it.

Economic value created

Mission

How do we accomplish our goals?

Which of the following is a disadvantage of the balanced-scorecard approach?

It provides limited guidance about which metrics to choose

General (macro) environment (PESTEL)

Political Economical Socialogical Technological Ecological Legal

What is the strategic management process?

Strategic leaders design a method to formulate and implement strategy.

Scenario planning

Strategy-planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses.

In which of the following situations is the power of suppliers high in an industry?

Suppliers' industry is more concentrated that the industry it sells to.

Which of the following statements accurately brings out the difference between tangible and intangible resources?

Tangible assets can be bought on the open market by anyone with the necessary cash, whereas intangible assets cannot be easily purchased.

Rivalry among competitors

The intensity with which companies in the same industry jockey for market share and profitability

The criteria for assessing resources

VRIO

What does the VRIO framework stand for?

Valuable Rare Imitate Organized to create value for the resource

Vision

What do we want to accomplish ultimately?

Which of the following features about a buyer indicates that the buyer has high bargaining power?

When the buyer operates in an industry where products are undifferentiated.

industry

a group of incumbent companies that face more or less the same set of suppliers and buyers

A music distributor that decides to launch a proprietary music streaming service to respond to changes in music consumption trends exhibits dynamic capabilities. a. True b. False

a. True

Buyer power tends to be higher if suppliers provide undifferentiated or standard products. a. True b. False

a. True

Rivalry will be most intense when there is a lack of differentiation or switching costs. a. True b. False

a. True

The core competencies of a firm are determined by the interplay of its tangible resources and intangible capabilities. a.True b. False

a. True

The power of suppliers will be enhanced if they are able to maintain a credible threat of forward integration. a. True b. False

a. True

A large fabricator of building components purchased a steel company to provide raw materials for its production process. This is an example of a. Backward integration b. Economies of scale c. Forward integration d. Product differentiation

a.Backward integration

Under the strategy as a planned emergence model, even entry-level employees can help generate strategic initiatives. a.True b.False

a.True

In assessing its primary activities, an airline would examine a. Employee training programs b. Baggage handling c. Criteria for lease versus purchase decisions d. The effectiveness of its lobbying activities

b. Baggage handling

When a firm possesses resources and capabilities that are valuable but not rare, it has a: a. Competitive disadvantage. b. Competitive parity. c. Temporary competitive advantage. d. Resource immobility.

b. competitive parity

High demand for online video streaming options is one of Netflix's core competencies. a. true b. false

b. false

One of Rolex's tangible resources is its well-known brand name and reputation for quality timepieces. a. true b. false

b. false

Inbound logistics include a. Machining and packaging b. Warehousing and inventory control c. Repair and parts supply d. Promotion and packaging

b. warehousing and inventory control

Which of the following firms would likely pose the least competitive threat? a. A firm in the same industry and in the same strategic group b. A firm that produces substitute goods to your product line C. A competitor to your product where a high switching cost exists d. A firm in the same industry and in the nearest strategic group looking to join your group

c. A competitor to your product where a high switching cost exits

Which is considered a force in the "Five Forces model"? a. Increased deregulation in an industry b. The threat of government intervention c. Rivalry among competing firms d. Recent technological innovation

c. Rivalry among competing firms

In an industry, the threat of entry is high when...

capital requirements are low

intangible

culture knowledge brand equity reputation intellectual property

Missions are __________ and ___________ oriented

customer, product

The bargaining power of suppliers increases as a. More suppliers enter the market b. Importance of buyers to supplier group increases c. Switching costs for buyers decrease d. Threat of forward integration by suppliers increases

d. Threat of forward integration by suppliers increases

Strategic leadership pertains to the use of power and influence by ___________ to direct the activities of others when pursuing an organization's goals a. production workers b. lower-level managers c. external stakeholders d. corporate executives

d. corporate executives

According to an evaluation using the VRIO framework, Crocs Shoes was unable to sustain its competitive advantage primarily because its products were

easy to imitate

The production head at the Omnitone Paint company would frequently stay back after office hours and experiment with new color combinations even though this was part of the new product development team's job. As a result of these experiments, he came up with two more new interior paint colors, foggy morning and mint julep. The new colors proved popular among test groups, and quickly became Omnitone's best-selling products. Which of the following strategies does this scenario best illustrate?

emergent strategy

Planned emergence (Mintzberg)

emergent, intended and realized strategy

As manager of a relatively new company, you are tasked with analyzing company resources to identify core competencies capable of supporting a competitive advantage. Which of the following resources is most likely to generate a competitive advantage?

enthusiastice company culture

Balanced Scorecard

external and internal metrics; stakeholders view; 4 perspectives

Firm Effects

firm performance attributed to the actions strategic leaders take

Industry Effects

firm performance attributed to the structure of the industry in which the firm competes

Internal view (firm effects)

firm's unique bundle of resources and capabilities

The weaker the Five Forces, the ___________ the industry's profit potential

greater

The "Natural Nourishment" granola bars manufactured by Global foods have been the top-selling granola bars on the market. Though the market for granola bars is flooded with competitors, Global Good has been able to maintain its market position for a long time. This is mainly attributed to the pleasant texture of its granola, which comes form a proprietary processing technique used by the company. This competency of Global Good Foods will be considered as an ___________ resource in the VRIO framework.

imitable

External view (industry effects)

industry structure, positioning

value chain

internal activities a firm engages in when transforming inputs into outputs through primary and support activities

What is strategy?

is a set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors

Business Strategy

is focused on HOW the business should compete: cost leadership, differentiation, or value innovation?

Corporate Strategy

is focused on Where the firm should compete: industry, markets, and geography?

Which of the following is a primary feature of the five forces model?

it views competition within an industry broadly to include forces such as buyers, suppliers, and threat of subtitutes.

tangible

labor capital land buildings plant equipment supplies

Economies of scale are cost advantages that accrue for firms with...

larger output

The competitive advantage that one firm has will be short-lived in an industry in which...

perfect competition exists

Two assumptions of RBV

resource heterogeneity and resource immobility

Brain Boost Inc. is a leading educational toy company. Competitors across the globe have failed to imitate Brain Boost's production models, supply chain systems, knowledge systems, and culture. These attributes have remained unique to Brain Boost Inc. for a long time. Which of the following assumptions of the resource-based model of competitive advantage does this scenario best illustrate?

resource immobility

A firm's _________ relates to its ability to create value for customers (V) while containing the cost to do so (C).

strategic position

What is the SWOT analysis?

strengths, weaknesses, opportunities, threats

National Safety Inc., an indurance firm, replaced its existing project management software with new software from another supplier. Since the new software has different features and abilities, National Safety has had to spend $10,000 on training its employees to use it. In this scenario, $10,000 represents National Safety's...

switching cost

what are the two types of resources

tangible and intangible

Which of the following external forces is part of a firm's task environment?

the composition of the strategic group to which the firm belongs.

A firm's strategic position is likely to be strong when...

the gap between the value of the firm's product generates and the cost to produce it is large.

Intended strategy uses what kind of strategic plan?

top-down (AFI)

The stronger the Five Forces, the __________________ the industry's profit potential

weaker