CH 1-5 Flashcards
(112 cards)
1
Q
List the goals of strategy
A
- Strategic competitiveness
- Sustainable competitive advantage
- Above average returns
2
Q
Define strategic competitiveness
A
companies ability to formulate and implement a value-creating strategy
3
Q
Define sustainable competitive advantage
A
company that develops and implements a strategy that competitors cannot duplicate or is too costly to imitate
4
Q
Define above average returns
A
returns above what investors expect in comparison to other investments with similar risk
5
Q
Examples of strategy
A
Boeing and Airbus: From 2001-2005 Airbus’s strategy won the competitive advantage when it created an aircrafted that seated 550+ passengers but only served 35 large aiports. Boeing responded with a strategy focused on smaller planes that served more airports and gained supremacy again.
McDonalds: used to have profitability/growth driven by market saturation. Now they focus on growth using their existing stores. Changed strategy.
6
Q
Define strategy
A
integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage
7
Q
List the requirements of a strategy
A
Pursue a long term mission and vision
Impacts long term profitability
Involves multiple functional areas
8
Q
Old competitive landscape vs. New Competitive landscape
A
old = characterized by market stability
new = characterized by:
- economies of scale
- advertising budgets aren’t as effective
- new organizational forms/relationship (joint venture, alliance, M&A)
- rapid change
- focus on innovation/flexibility vs traditional
9
Q
Change in competitive landscape has led to ______
A
Hypercompetition
10
Q
Define hypercompetition
A
extremely intense rivalry among firms
- increasingly competitive moves
- inherent market instability/change
11
Q
List the drivers of the competitive landscape
A
- Technology
2. Global economy (globalization)
12
Q
SWOT is ___
A
DEAD
13
Q
What do the S&W now stand for
A
Resources Capabilities Core competencies Competitive advantage VRIO
14
Q
What do the O&T now stand for
A
General environment
Industry environment
Competitive environment
15
Q
Define the Industrial Organization (I/O) Model
A
the EXTERNAL environment determinant of a firm’s strategic action
16
Q
Define the Resource Based Model
A
a firm’s UNIQUE RESOURCES and CAPABILITIES are the critical determinants of strategic competitiveness
17
Q
I/O Model states that
A
the industry a firm chooses has a stronger influence on performance than do the choices that managers make
18
Q
List the I/O Model strategies
A
Cost leadership
Differentiation
19
Q
Resource-based Model states that
A
a firm should choose to enter a certain industry based on its resources/capabilities
20
Q
according to the resource based model, a resource/capability must be
A
valuable, rare, costly to imitate, not substitutable
21
Q
Define vision
A
- picture of what the firm ultimately wants to achieve
- the foundation for the mission
- the responsibility of the leader
22
Q
Define mission
A
- specific business in which the firm intends to compete and customers it intends to serve
- more concrete than vision
- deals more with product markets and customers
23
Q
List the types of stakeholders
A
- Capital market
- Product market
- Organizational
24
Q
Capital market stakeholders
A
shareholders, banks, etc.
- expect returns to commiserate with the risk accepted by investment
- higher dependency relationship relates to how significant the response
25
Product market stakeholder
customers, suppliers, communities, unions
| -all benefit due to competitive battles
26
Organizational stakeholders
employees
27
Steps of the Strategic Management Process
1. Collect info/knowledge to help determine what type of strategy would be effective and how it could be best implemented (external environment/internal organization)
2. After studying external and internal environments, the firm has the information it needs to form a vision and mission
- -articulate the goal the firm is trying to accomplish
- -inform stakeholders what that goal is
28
Segments of General Environment
```
Global
Technological
Political/Legal
Demographic
Economic
Sustainable Physical
Sociocultural
"Gabby Talks Politics During Every Single Supper"
```
29
External environment consists of the ____ and ____ environments
Competitor
Industry (Threat of new entrants, Power of suppliers, Power of buyers, Product substitutes, Intensity of rivalry)
30
Define General Environment
dimensions in the broader society that influence an industry and the firms within it
31
Demographic segment
age, population size, geographic distribution, ethnic mix income distribution
32
Economic segment
inflation, interest rates, trade, budget, savings rate, GDP
33
Political/Legal segment
laws, deregulation, policies, lobbying, regulation, antitrust laws
34
sociocultural segment
women in workplace, workplace diversity, attitudes about quality of work, shift in work/career preferences, shifts in product/service preferences, diverse & aging workplace,
35
technological segment
product innovation, applications of knowledge, R&D expenditures, new communication technologies, growth of internet
36
global segment
important political events, critical global niche markets, newly industrialized nations, different cultural/institutional attributes, growth of informal economy
37
Sustainable physical (environment) segment
energy consumption, energy sources, renewable energy, environment footprint, water availability, environmentally friendly products, reacting to natural or man made disaster
38
Define the industry environment
set of factors directly influencing a firm and its competitive actions and competitive responses
39
List the different elements that influence a firm (industry)
- -threat of new entrants
- -power of suppliers
- -power of buyers
- -threat of product substitutes
- -intensity of rivalry among competitors
"Sally really buys supplies everywhere"
40
General vs Industry vs Competitor Environment
General - focused on future
Industry - factors that influence a firm's profitability within its industry
Competitive - focusing on predicting the dynamics of competitors' actions, responses, and intentions
41
Define Industry
a group of firms producing products that are close substitutes
ex: Tobacco industry (cigarettes, juul, etc) and nicotine patches, Nicorette could be combined to become the oral fixation industry
42
List Porter's Five Forces
- threat of new entrants
- bargaining power of suppliers
- bargaining power of buyers
- threat of substitutes
- intensity of rivalry among competitors
43
Threat of new entrants requires ____
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
44
Define economies of scale
marginal improvements in efficiency that a firm experiences as it incrementally increases in size
45
Define product differentiation
unique products
customer loyalty
products at competitive prices
---essentially, the products you buy regardless of price but you prefer over another brand
46
Define capital requirements
in some industries you require a lot of products to build your business (facilities, inventory, marketing, availability of resources)
47
Define switching costs
one time costs customers incur buying from a different supplier
- new equipment, retraining employees
ex: you have to get out of a cell phone contract
48
Define distribution channel access
stocking or shelf space, price breaks
| ex: Yoplait and Chobani have to pay for shelf space
49
Define cost disadvantages independent of scale
- proprietary technology
- favorable access to raw materials
- desirable locations
50
Define expected retaliation
responses by existing competitors may depend on a firm's present stake in the industry
51
Define government policy
licensing and permit regulations, deregulation of industry
| ex: Dodd Frank Act Deregulation, Environmental protection by EPA
52
Supplier power increases when...
- suppliers are large and few in number
- substitutes not available
- customer diversification
- supplier goods are critical to buyer's marketplace success
- supplier's products have high switching costs
- supplier poses a threat to integrate further into buyer's industry
53
buyer power increases when...
- buyer are large and few in number
- buyer purchases a large portion of the industry's total output
- buyer's purchases = significant portion of supplier revenue
- buyer switching costs are low
- buyers can pose a threat to integrate backwards in supplier's industry
54
context of internal analysis
Resources + Resource = Capabilities + Core Competencies (3-4) → Competitive Advantage
55
Context of Internal Analysis
- Maintain a "Global Mindset"
- Analyze firm's resources and capabilities (and how to leverage these to create value)
- A firm's core competencies creates and sustains its competitive advantage
56
How does a firm create value
by exploiting core competencies or competitve advantages, firms create value
-value is created by bundling and and leveraging firm resources and capabilities
57
Define Competitive Advantage
When one firm creates more value than another firm
58
Foundation of a competitive advantage
Resources, capabilities, and core competencies
59
How do firm's effectively bundle and leverage resources
firms must understand what the customer values
60
What are the two types of resources?
Tangible and Intangible
61
Define and list tangible resources
assets that can be seen and quantified
- financial
- physical
- technological
- organizational
62
Define and list intangible resources
assets rooted in the firm's history and that have accumulated over time
- human
- innovation/creativity
- reputation
63
Financial resources
cash
capacity to raise equity
borrowing capacity
64
Physical resources
plant and facilities
favorable manufacturing locations
access to raw materials
65
Technological resources
```
stock of technology like trade secrets
innovative product processes
patents
copyright
trademark
```
66
organizational resources
firm's formal reporting structure
| formal planning, controlling, and coordinating systems
67
Human resources
knowledge
trust
employee experience/skills
organizational routines
68
innovation/creativity resources
ideas
scientific skills
innovation capacities
69
reputation resources
brand name
quality and reliability repuation
supplier relations
70
Define Capability
exist when resources are purposely integrated to achieve a specific task or set of tasks
71
Examples of capabilities
Ex: Walmart developed a great MIS system early on so they could tell exactly what they sold and what more they needed. They also strategically located themselves close to distribution centers so they could easily stock up at a low cost.
Ex: Southwest's HR routines + physical resources of planes and gates
72
Define core competency
are capabilities that serve as a source of competitive advantage for a firm over its rivals
73
Ideal number of core competencies
no more than 3-4
74
Tools used to identify core competency
1. Barney's Four Criteria of Sustainable competive advantage (VRIO)
2. Porter's value chain
75
Barney's Four Criteria of Sustainable Competitive Advantage
Four criteria (VRIO)
1. Valuable - does capability help take advantage of an opportunity/create value for customers?
2. Rarity - capability currently possessed by limited number of suppliers?
3. Inimitability - do firms without capability face cost disadvantage to develop?
4. Nonsubstituable - does capability lack a strategic equivalent?
***A yes to all four questions = "Sustained Competitive Advantage" (goes down to Temporary Advantage, Parity, and Disadvantage)
76
Porter's Value Chain Analysis
allows a firm to understand the parts of its operations that creates value and those that don't
used to understand a firm's cost position and identify how to implement a business-level strategy
Broken down into primary and support activites
Key: create additional value without incurring significant costs and capture value that has been created
77
Define primary activities
deal with physical creation, sale, distribution, and servicing of a product/service
- inbound/outbound logistics
- operations/production
- marketing and sales
- service
78
Define support activities
provide assistance for the primary activities to take place
- human resource management
- technology development
- resource procurement
- administration
79
Define value chain
proposes that each activity either adds or subtracts value for the firm.
- activities that support core competencies = value adding = do(in house)
- activities that require capabilties that are not core competencies = value subtracting = don't do (outsource)
80
Define Business-Level Strategyq
integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in SPECIFIC PRODUCT MARKETS
81
In determining a business level strategy, firm must determine
who (the customer group is)
what (needs the customer has that the firm seeks to satisfy)
how (the firm can satisfy needs - can firm use its core competencies)
82
List the different business level strategies
```
cost leadership
differentiation
focused cost leadership
focused differentiation
Integrated cost leadership/differentiation
```
83
Basic business level strategy matrix
Competitive Advantage
Cost Uniqueness
Broad Target CL D
Competitive Scope ICL/D
Narrow Target FCL FD
84
Define cost leadership strategy
An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers
- Produces no-frills, standardized products for typical customers
- Focuses on efficiency so costs are lower than competitors’ costs
- Generally offers lower cost products with competitive levels of differentiation
85
Examples of cost leadership
Greyhound Bus
Big Lots: buys "lots" of goods that don't sell at other stores for a big discount and resell at a decent margin
Walmart
86
Competitive risks of cost leadership
- too much focus on one or a few value-chain activities
- all rivals share a common input or raw material
- imitated too easily
87
Define Differentiation Strategy
integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
- Provide products with different, valued features sold at a premium price
- ------Hinges on customers valuing differentiated features more than they value low price
- Firms should differentiate offerings on as many dimensions as possible
- The less similarity to competitors’ products, the more buffered a firm is from competition
88
Examples of differentation strategy
Tiffany Jewelry
Apple
Lexus
89
Risks of Differentiation Strategy
- Customers decide that differences between differentiated and cost leader’s product not worth a higher price
- Competitors offer similar products at a lower cost
- Too high a price premium
- Counterfeiters offer a cheap “knockoff” of a differentiated good or service (e.g., easily imitated)
- Too much differentiation
90
Define focus strategies
The focus strategy is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
- a particular buyer group (ie youths/senior citizens)
- a different segment of a product line (ie professional painters or do-it-yourselfers)
- a different geographic market (east or west)
91
Example of focus strategies
Cost leadership - IKEA
| Differentiation - Airstream (trailers), Babies R Us
92
Risks of focus strategies
- A competitor is able to focus on an even more narrowly defined market segment
- Industry-wide competitors decide to focus on specific customer segments
- The differences are reduced between the needs of a specific market segment and those of the rest of the industry
93
Define Integrated CL/D Strategy
firms
- Provide relatively low cost products with valued differentiated features
- Use primary and support activities to produce differentiated products at relatively low costs
94
Risk of Integrated CL/D Strategy
A firm produces products that lack sufficient low cost or differentiation
95
Example of Integrated CL/D Strategy
Southwest Airlines
- low cost: use a single aircraft model, secondary airports, short route flights, no meals, no reserved seats
- differentiation: focus on customer satisfaction, high level of employee dedication, focus on making flying experience fun
96
Challenge with integrated CL/D Strategy
its risky!
potential pitfalls: "Stuck in the Middle" --> When a firm’s products are too expensive to compete with low cost producer and too undifferentiated to provide the value offered by the differentiated producer
97
Competitor
firms operating in the same market, offering similar products, and targeting similar customers
98
Competitive rivalry
firm-to-firm competitive actions
-ongoing set of actions and responses occurring between competitors as they contend with each other for an advantageous position
99
Competitive dynamics
sum of all firm competitive actions
| -Total set of actions and responses of all firms competing within a market
100
Strategic action
significant commitment of a specific and distinctive resource that is irreversible
ex: Boeing's midsized jet liner; Guess position to be more upscale
101
Tactical action
Commitment of less specific resources, taken to fine-tune a strategy, that is reversible
ex: pricing, advertising
102
Outline the essence of competitive action and response
industry environment --> Company A initiates a competitive action (Starbucks/Verizon) --> Industry environment is changed --> Company B (McDonalds/Sprint) initiates competitive response --> industry environment is changed again... and so on
103
Strategic Groups
group competitors together based on how they're similar and how they're different
104
Examples of strategic groups
Ferrari, Porsche, Lamborghini
Mercedes, BMW
Hyundai, Kia
Toyota, For GM, Chrysler, Honda, Nissan
105
Strategic groups = ___
low, traditional, high, size, performance aspects of Capsim
106
Competitive rivalry consists of what elements
High Market Commonality + High Resource Similarity = Extent of Competitive Rivals
107
Define market commonality
increases when firms compete in similar markets
- the more overlapping markets the higher the MC
- eg geographic, product, customer, etc.
108
Example of market commonality
McDonalds and Burger King --> McDonalds has a great location strategy so BK decided just to locate all of its stores close to a MCD
109
Resource Similarity
how comparable are competitor's tangible and intangible resources in type and amount
110
Example of resource similarity
- FedEx & UPS
| - both have international airhubs, distribution centers, etc.
111
____ MC & RS ____ likelihood of attack
HIgh; Reduces
- firms are more aware of each other's competitive moves
- when attacked, similar firms more likely aggressively retaliate which can lock firms into mutually destructive competitive situations
ex: Blockbuster and Netflix; fast food industry participants; if UPS raises prices Fedex likely will too
112
Drivers of competitive behavior
awareness: by managers
motivation: incentive to take action?
ability: necessary resources to attack?
