Final Flashcards
(23 cards)
What are the four basic stages of an industry’s life cycle?
Every industry goes through its introduction, growth, and then maturity.
In terms of an industry’s life cycle, when are differentiation strategies important?
Differentiation strategies are particularly appropriate for industries in the introduction and growth stages. This is because standards have not yet been set in the industry and there are shades of variety that appear to be possible.
In terms of an industry’s life cycle, when are low cost strategies important?
Low cost strategies become more important in maturing and declining industries. Here standardization and commoditization of products and services often appear. Therefore cost efficiency, and cost-cutting to maintain profitability or have greater pricing flexibility, become paramount.
In terms of an industry’s life cycle, when is it important for an industry to reconfigure its value chain?
Industry value chain reconfiguration is most appropriate for a renewal stage. This can involve redefining the industry’s boundaries to focus on new key success factors, disaggregating blocks of value chain activity, redefining value itself, or shifting to complement products and services.
Analyze the strategy implications of competing in fragmented industries
Fragmented industries are usually more perfectly competitive, experiencing a high level of new entry. Companies in these industries can be successful by reconfiguring the industry value chain, disaggregating usually-combined operations or finding ways to aggregate usually-fragmented operations
Analyze the strategy implications of competing in consolidated industries
Consolidated industries often privilege scale and scope which confers cost efficiencies and the low cost strategy. However, large scale companies are slow to move because they are so complex, may be blind to new niche opportunities, must be careful about getting too large for antitrust reasons, and may have constrained financial resources because of their focus on efficient operations. These all present mobility barriers enabling smaller, more agile companies to do well.
Utilize organizational life cycle stages and the kinds of problems and resources issues that businesses experience in each to proactively recommend value creation activities.
Companies in the conception stage face innovation, strategy design, and raising capital as the key challenges. These require the development and use of knowledge, human, social capital, and technology resources.
Commercialization stage companies face the problems of startup production, hiring, and systematizing production of what had been ad hoc experimentation in the R&D phase. This requires strong organizational and human resources.
In the growth stage companies must scale up production, develop sophisticated marketing and sales, and deal with a frenetic pace of activity which can lead to loss of culture. Physical and financial resources assist in operations, and organizational resources can address the people and culture issues.
Mature companies often experience profit pressures and worry about future growth. Developing a process to gain insight on emerging trends can be especially helpful, and technology resources can assist in providing information and internal controls on existing operations.
Explain the risks associated with being a first mover.
Pioneering costs, where it is very expensive to be first in. Others can come along later at a lower cost.
Technological uncertainty, where it is unclear at the beginning what sort of standard will ultimately be most-highly valued by customers.
Demand uncertainty, where it is unclear at the beginning whether a segment will grow sufficiently large.
Inertia, where once in a new segment with a developed product or service, it is usually difficult for a company to make changes even when things aare not going as expected. Here the mindset is to dig in and try harder doing more of the same.
Compare and contrast corporate strategy decisions and business strategy decisions.
Business strategy ideas and frameworks – e.g. value chain, resource based analysis, low cost leadership or differentiation strategy – are appropriate to use when a company operates largely in in only one line of business.
Corporate strategy decisions encompass a wider array of issues: Which industries to enter and exit. Defining a strategic business unit (SBU). Establishing SBU investment priorities. Effecting resource and management transfers among SBUs. Structuring the corporation.
Create a map explaining why companies diversify.
Growth
Market power
Market entry
Spreading risk
Explain the two primary types of diversification: related and unrelated diversification
Related diversification means that there is some dimension of similarity between the
corporation and the company it seeks to acquire.
Variations in the similarities of the industry and value chain determine whether the style of related diversification is horizontal, vertical, or cross-sector.
Unrelated diversification occurs when a corporation enters a new business in a different industry and does not expect to achieve any value chain synergies through the combination.
Draw a BCG Matric
See notes
Draw a GE Business Development Matrix
See notes
Explain how strategy is implemented through a company’s structure.
The structure of a company should follow, reflect, and support its strategy.
Strategies oriented toward cost leadership, consistency and control are more likely to implement structures that call for more direct supervision of employees. Strategies oriented toward differentiation, innovation and flexibility are more likely to implement structures that call for greater mutual adjustment by employees. These represent the ends of a continuum of mechanisms to coordinate work.
Management should define the key organizational components of the core, techno structure, and staff support. Together with mechanisms to coordinate work, identifying these parts will help influence how groups are formed and the resulting structure.
Simple Structure
Provides the advantage of rapid response. Depends on responsive leader at the helm.
Functional Structure
Sound structure for growing or geographically-dispersed organizations, and where a particular function is at the core. Cross-functional coordination becomes an issue.
Multidivisional structure (M-Form)
Often used by conglomerates and diversified corporations, and can result in strategic business units of related operating divisions. Needs to evolve as markets and competition evolve.
Metrix Structure
A solution for functional deployment across a multi-line business, without the decentralization associated with M-form structure. Very complicated to manage, and subject to internal politics.
Adhocracy Structure
Little formal structure, appropriate for projects requiring creativity, short time frames to complete a project, or where the means to complete the project is unknown at the outset.
Analyze and explain the type of mechanisms used to coordinate the activities in an organization
Mutual adjustment. Each individual understand strategy and adjusts their behavior
accordingly.
Standardization of work process. A mechanism to manage large numbers of employees based on the extent to which they follow prescribed process guidelines for doing work.
Standardization of work skills. Relying upon sets of externally developed professional criteria to ensure that appropriate quality work will be performed.
Standardization of work output. Mechanism that focuses exclusively on the output of work, because the work process cannot be standardized nor are there validated external criteria available to assess employees.
Direct supervision. Every employee is directly supervised by another individual.
Translate strategy into functional area goals and activities using the keys to implementation control.
There are five keys to success against which strategy implementation should be evaluated: Fit; Clear and compelling objectives; Single company currency for incentives; Top management involvement; Resource allocations to support direction and commitments.
Implementation begins with mission and vision. The strategic approach which will accomplish the mission leads to specific strategic initiatives. Value chain activities relevant to these initiatives are conducted. Metrics evaluating value-creating activities can monitor progress on the accomplishment of strategy.
Develop effective metrics for the control and growth of the organization.
Are tied to the overall mission/vision of the organization.
Are translated appropriately to all functions and levels of employees.
Are balanced across all functions.
Are composed of both quantitative and qualitative measures.
Are connected to a unifying incentives system.
Describe the differences between the models used for implementing a strategic plan.
The balanced scorecard connects long term competitive and financial performance to short term actions. It relies on a cause-effect logic that requires lead and lag metrics on activities engaged in by a wide variety of stakeholders.
The value-drive-action model builds more directly on strategy formulation efforts. Value creation goals drive actions to enable the company to move from its present position to a desired future position.
The 7-S framework seeks to align seven important dimensions of the organization.
