Exam

Question 1

Industry definition

Answer 1

same sources of supply, goods/services satisfy same need, same geographic market

Question 2

Market entry barriers

Answer 2

capital requirements, specialised resource requirements, competitive barriers, administrative barriers

Question 3

Reasons for fragmented industries

Answer 3

low entry barriers, diverse market needs, diverse product lines, local content requirements, local policies prohibiting concentration

Question 4

Competing in fragmented industry

Answer 4

enhance product differentiation, specialisation (product, customers, geography), reduce costs where possible, make acquisitions to grow MS

Question 5

Reasons for concentrated industries

Answer 5

high entry barriers, economies of scale, experience curve effects, size –> bargaining strength

Question 6

Strategic vision vs. mission

Answer 6

Vision: long-term course / future state of company, challenging, inspirational
Mission: current business activities and value creation for customers

Question 7

Strategic thinking process

Answer 7

i) recognising opportunities/threats early, ii) analyse –> plan –> implement strategic plan, iii) respond to changing goals, vision, environment etc.

Question 8

Strategic management tasks

Answer 8

i) develop strategic vision / mission, ii) set objectives,

iii) craft strategy, iv) implement/execute strategy, v) evaluate and make corrections

Question 9

Triggers for strategy changes

Answer 9

changing market conditions, competitor moved, technological development, changing customer needs/preferences, legal changes etc.

Question 10

Strategy implementation

Answer 10

resources, capabilities, best practises, process improvement, communication, motivation/rewards

Question 11

Competitive environment vs. macro-environment

Answer 11

Comp: economic entities that have direct relationship with company
Macro: framework conditions that company has to operate within

Question 12

Experience curve vs. economies of scale

Answer 12

Experience curve: cost benefits through experience, cumulative output increases (all yrs)
Economies of scale: cost benefits gained through increased level of production for period

Question 13

Analysing industry attractiveness

Answer 13

dominant economic traits (profitability, market size, growth, risk/uncertainty), competitive rivalry, product characteristics, customer needs

Question 14

Strategic group

Answer 14

rival firms with similar competitive approach + industry positions

Question 15

Strong substitutes

Answer 15

readily available, attractively priced, perceived comparable / better by buyer, high propensity to switch

Question 16

Promoting substitution

Answer 16

target early switchers, reduce switching costs, building brand/product awareness, use multiple distribution channels, improve offer in areas most important to customers

Question 17

Protective strategies (substitution)

Answer 17

cost reduction, performance improvement, improve product image, raise switching costs/barriers, aggressive sales strategy to deter switching

Question 18

Failing against substitution

Answer 18

not considering threat, not recognising substitute, wrong understanding of why customers switch, not reacting to value-price decrease, fighting substitute instead of joining

Question 19

Purpose of analysing industry value chain

Answer 19

Assessing cost competitiveness all along industry value chain

Question 20

Primary vs. supporting activities

Answer 20

Primary activities: most value creation

Support activities: facilitating primary activities

Question 21

Internal cost structure

Answer 21

Combined costs of all activities in value chain, compare activity by activity against competitors, pinpoint cost advantages/disadvantages

Question 22

Differences btw. own and competitor value chain

Answer 22

Different strategies, operating practises, technology use, degree of vertical integration

Question 23

Qualitative vs. quantitative assessment of strategy

Answer 23

Qualitative: is the strategy well-conceived (complete, consistent, appropriate)?
Quantitative: what are the results (financial/strategic objectives, above industry avg.)?

Question 24

Core competence vs. distinctive competence

Answer 24

Core: well-performed activity central to competitiveness and profitability
Distinctive: competitively valuable activity; superior, rare, hard to copy and surpass

Question 25

3 main generic strategies

Answer 25

Low-cost, broad differentiation, best-cost

Question 26

2 generic market niche strategies

Answer 26

Focused low-cost, focused differentiation

Question 27

When to apply low-cost strategy

Answer 27

vigorous price competition, standardised products, few differentiation opportunities, low switching costs, strong bargaining power of buyers

Question 28

When to apply differentiation strategy

Answer 28

diverse buyer needs and uses, few rivals with similar differentiation approach, fast technological change + product innovation

Question 29

When to apply best-cost strategy

Answer 29

buyer diversity --> product differentiation the norm, many buyers sensitive to price/value

Question 30

Pitfalls of low-cost strategy

Answer 30

easily imitated, profit deterioration, ignoring changing customer preferences/needs

Question 31

Pitfalls of differentiation strategy

Answer 31

over-differentiating --> exceed buyers’ needs, price premium > perceived value

Question 32

Risks of best-cost strategy

Answer 32

getting squeezed between low-cost/differentiation competition – low-cost leaders stealing customers / customers willing to pay more for high-end differentiators’ products