Exam 1 Flashcards
(26 cards)
Strategic Management Process
Mission,Objectives,(External Analysis and Internal Analysis), Strategic Choice, Strategy Implementation, Competitive Advantage
Mission
- Long-Term Purpose
- Defines both what a firm aspires to be in the long run and what it wants to avoid in the meantime.
Objectives
- Specific, Measurable targets;
- the things a firm needs to ‘do’ to achieve its mission
- Should influence other elements in the strategic management process
Strategy Implementation
- Occurs when a firm adopts organizational policies and practices that are consistent with its strategy.
- How strategies are carried out; who will do what
- Organizational structure and control
- Who reports to whom
- How does the firm hire, promote, pay, etc.
Competitive Advantage
-Competitive advantage is the result of doing something different and/or better than competitors
-A firm has a competitive advantage when…
It is able to create more economic value than rival firms
Competitive Advantage Temporary
Competitive Advantage is temporary because profit attracts competition.
Competitive parity
- The firm’s offerings are ‘average’
- People do not have a preference for the firm’s offering
- The firm does not have a cost advantage over others
Competitive Disadvantage
- People may have an aversion to the firm’s offering
- The firm may have a cost disadvantage
- A firm may have outdated technology/equipment
- A firm may have a negative reputation
Emergent
-Emergent strategies are theories of how to gain competitive advantage in an industry that emerge over time or that have been radically reshaped once they are initially implemented.
External Analysis
A way to tell what the company should or might choose to do.
-Helps analyze opportunities and threats.
- Technology
- Politics/Law
- Demographics
- Culture
- Economics
Structure-Conduct-Performance Model
A way to tell if an industry is going to develop or not.
Porter’s Five Forces
- Threat of supplier leverage
- Threat from superior or lower-cost substitute products
- Threat of competition among existing companies.
- Threat of new competition
- Threat of buyer’s influence
Threat of existing competitors
Attributes:
- Large number of competitors
- Slow or declining growth
- high fixed costs and/or high storage costs
- low product differentiation
Threat of new entrants/competition
Barriers to Entry:
-Economies of scale: finding the profitable and optimal amount for production
-Product differentiation:
entrants are forced to overcome customer loyalties to existing products
-cost advantages independent of scale:
proprietary technology; managerial know-how; favorable access to raw materials; learning curve cost advantages.
-Government policies: governments may impose trade restrictions and/or grant monopolies
Threat of substitute products
Direct Competitors: provide products or services in the same ways
Substitutes: provide products or services in a different way.
Threat of supplier leverage/bargaining power
- Small number of firms in the suppliers industry
- Highly differentiated product
- Lack of close substitutes for suppliers’ products
- Focal firm is an insignificant customer of supplier
- Supplier could integrate forward.
Threat of buyers’ influence/bargaining power
- Number of buyers is small
- Products sold to buyer are undifferentiated and standard.
- Products sold to buyers are a significant percentage of a buyer’s final costs.
- Buyers are not earning significant economic profits.
- Buyers threaten backward vertical integration.
Internal Analysis
Helps a firm identify what they can do
- Uncovers a firm’s strengths and weaknesses
- determines if internal resources and capabilities can lead to competitive advantage.
- identifies and implements strategies that best leverage internal resources and capabilities for a competitive advantage.
Resource-Based View
Resources: Tangible (factories and products) and Intangible (reputation) assets of a firm
Capabilities: Subset of resources that enable a firm to take full advantage of it’s resources
Examples: Marketing Skill, Cooperative relationships.
Resource Heterogeneity
- Different firms may have different resources
- Resources can be bundled
- Unequal distribution of resources(some may have more of others)
Resource Immobility
- It can be cost to acquire and/or develop resources
- Some resources may not transfer between firms easily
Question of Value
Does a firm and capabilities add value by enabling it to exploit opportunities and/or neutralize threats.
Question of Rareness
How many competing firms already posses these valuable resources and capabilities?
Question of Imitability
Do firms without a resource of capability face a cost disadvantage compared to firms that already possess it.
