Final Exam Flashcards
(48 cards)
1
Q
What are the factors of Strategic Value Position?
A
Price, Product, Manufacturing, Distribution, Marketing, HR, Mission
2
Q
What are the Porters’ 5 Forces?
A
- Threat of New Entrants
- Rivalry among Existing Competitors
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
- Threat of Substitutes
3
Q
What are some important factors for Porters’ 5 Forces?
A
- Concentration
- Differentiation
- Cost of switching to another related competitor
- Economies of scale
- Likelihood of being integrated
4
Q
When is bargaining power of suppliers high?
A
- It is more concentrated than the industry it sells to
- Suppliers offer products that are differentiated
- Industry participants face switching costs in changing suppliers
- There is no substitute for what the supplier group provides
- The supplier group does not depend heavily on the industry for its revenues
- The supplier group can credibly threaten to integrate forward into the industry
5
Q
When is bargaining power of buyers high?
A
- Large volume buyers (somewhat concentrated)
- The industry’s products are standardized or undifferentiated
- Buyers face few switching costs
- Buyers can credibly threaten to integrate backward
6
Q
When is threat of new entrants low?
A
1. Barriers to entry is high • Supply-side economies of scale • Demand-side benefits of scale • Customer switching costs • Capital requirements • Incumbency advantages independent of size • Unequalaccesstodistributionchannels • Restrictive government policy • Network effect 2. Expected retaliation is high • Incumbents have previously responded vigorously to new entrants • Incumbents possess substantial resources to fight back • Incumbents seem likely to cut prices • Industry growth is slow
7
Q
When is intensity of rivalry high?
A
– Competitors are numerous
– Competitors are roughly equal in size and power
– Rivals are highly committed to the business and have aspirations for leadership
– Degree of differentiation of product is low
– Industry growth is low
– Exit barrier is high
8
Q
What is a differentiation strategy?
A
- An integrated set of action taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
- Product innovation is critical to the successful use of differentiation strategy. But also many ways to be differentiated, brand, technology, service, network, etc.; profit from product features, brand loyalty, etc.; buyers lack comparable alternatives, substitutes
- Low price does not mean not differentiated; high price can only signal differentiation, does not guarantee differentiated well
- There are multiple forms (directions) of differentiation, depending on the targeted market and customers
9
Q
What are some value drivers of the differentiation strategy?
A
- Product features
- Customer service
- Brand
- Network effect
- Complements
10
Q
What is a low-cost leadership strategy?
A
- An integrated set of actions taken to produce goods or services with features that are acceptable at the lowest cost
- Sell standard goods or services (but with competitive levels of differentiation) to the industry’s most typical customers
- Requires heavy upfront investment in manufacturing and scale
- Concentrate on finding ways to lower their costs relative to competitors while maintaining competitive levels of differentiation
- Process innovation can allow the firm to operate more efficiently, is also critical to the successful use of cost leadership strategy; the less efficient ones will lose out
- Low price ≠ Low cost
- There is only one form of low cost i.e. low cost
11
Q
What are some cost drivers of the low-cost leadership strategy?
A
- Cost of input factors
- Economies of scale
- Learning-curve effects
- Experience-curve effects
12
Q
What are some of Porters’ Generic Strategies?
A
- Cost-leadership strategy (broad and low-cost)
- Differentiation strategy (broad and product unique)
- Focus strategy (low-cost) (narrow and low-cost)
- Focus strategy (differentiation) (narrow and product unique)
13
Q
What is a focus strategy?
A
• An integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment
• Firms use a focus strategy when they utilize their core competencies to serve the needs of a particular industry segment or niche
• Specific market segment:
(1) A particular buyer group
(2) A different segment of a product line (3) A different geographic market
14
Q
What are the risks of a cost-leadership strategy?
A
- A fine line between misfit and attempt to differentiate on top of low cost
- Imitation by a resource backed entrant
- Geographical migration to the lowest cost point, a race
- Technology changes nullify learning and past investment in scale
- Low-cost image, hard to reverse
15
Q
What are the risks of a differentiation strategy?
A
- Differentiation becomes commoditized and a standard of quality across rivals
- Overshoot differentiated appeal that does not increase willingness to pay: quality, feature, brand, etc.
- Buyers become sophisticated and their need for differentiators falls
- Loses out on network or platform competition
16
Q
What is external consistency?
A
Does the strategy tap the opportunities and neutralize the threats posed by the outside world in a unique manner?
17
Q
What is internal consistency?
A
Do the parts of the strategy fit together to form a whole that is greater than the sum of the parts?
18
Q
What is dynamic consistency?
A
Is the strategy robust to the continuously changing external and competitive environment?
19
Q
What is included in a value chain analysis?
A
- Firm infrastructure
- Human resource management
- Technology development
- Procurement
- Design
- Sourcing & manufacturing
- Distribution
- Marketing & Sales
- Operations
20
Q
What is a core competency?
A
- Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals; the activities the company performs especially well compared to competitors
- Core competencies distinguish a company competitively and reflect its personality through which the firm adds unique value to the goods or services it sells to customers
- Core competencies emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities.
21
Q
What does the VRIO framework consist of?
A
- Valuable capabilities
- Rare capabilities
- Costly-to-imitate capabilities
- Organized to capture value of resources
* If all is achieved, the company has sustained competitive advantage
22
Q
What are the stages in an industry life cycle?
A
- Introduction
- Growth
- Shakeout
- Mature
- Decline
23
Q
How do you know if a company is in the introduction phase of the life cycle?
A
- Market grows slow
- Product innovation
- Non-price competition, so price is high
- Compete on product features
- Differentiation drives profitability
- Few competitors
- May have first mover disadvantage cos risky
24
Q
How do you know if a company is in the growth phase of the life cycle?
A
- Market grow is high
- Price starts to fall
- Product innovation decreasing; Process innovation increasing
- Compete on Quality
- Differentiation still drives profitability
- Many competitors, try to become the leader of the market
25
How do you know if a company is in the shakeout phase of the life cycle?
* Market growth is slowing down
* Price is moderate
* Cut-throat competition on price
* Increasing process innovation rapidly, Improve manufacturing efficiency to lower cost
* Differentiation or integration strategy drives profitability
* Fewer competitions because weak players exit
26
How do you know if a company is in the mature phase of the life cycle?
* No real market growth
* Price is low
* Compete on price
* Process innovation at maximum
* Cost leadership drives profitability
* Only a few players with the largest scale remains
* Fiercely intense competition cos compete on price
27
How do you know if a company is in the decline phase of the life cycle?
* Negative market growth
* No real innovation
* Price (Low or high)
* Few competitors, if any
* Exit, Harvest, Consolidate, or Maintain
28
What are the types of innovation?
1. Architectural Innovation (new market & existing tech)
2. Radical Innovation (new market & new tech)
3. Incremental Innovation (existing market & existing tech)
4. Disruptive Innovation (existing market & new tech)
29
What are the types of disruptive technology?
1. Low-end disruption
| 2. New-market disruption
30
What is low-end disruption?
* Low-end disruptions attack the least-profitable and most over-served customers along attributes that the market currently values
* Emerging low-end segments in an industry that has already been over-serving consumers on the market
* A dominant design is established, a stable environment to do engage in modular replacement (to an inferior but still good enough for some consumer segment)
* Availability of technological components on the market after a cumulative time and collective effort of innovation by all players in the industry
31
What is new-market disruption?
* New-market disruptions create a new demand
* Targets non-consumption: customers who historically lacked the money or skill to buy and use the traditional attributes of the product
* A dominant design is established, need to create a new type of demand in order to compete, or event better, not compete with the dominant design holder
* Availability of technological components on the market after a cumulative time and collective effort of innovation by all players in the industry
32
What are some strategies for internal exploitation?
1. First Mover Strategy
2. Follower/Imitator Strategy
3. Side Entrance Strategy (find the niche market and innovate for that niche)
4. Derivative Strategy (add new improvements to old products)
33
What are some strategies for external exploitation?
1. Licensing (let someone else use the technology in return for royalty fee)
2. Spin-off (e.g. IPO, MBO)
34
What is a red ocean strategy?
- Compete in existing market space
- Beat the competition
- Exploiting existing demand
- Make the value-cost-trade-off
- Align the whole system of a firm's activities with its strategic choice of differentiation or low-cost
35
What is a blue ocean strategy?
- Create uncontested market space
- Make the competition irrelevant
- Create and capture new demand
- Break the value-cost-trade-off
- Align the whole system of a firm's activities in pursuit of differentiation and low cost
36
What is ERRC?
1. Eliminate
2. Raise
3. Reduce
4. Create
37
What are the types of horizontal diversification?
1. Single business firm (e.g. Coca-Cola, Google, Facebook)
2. Dominant-business firm (Harley-Davidson, Nestle, UPS)
3. Related business firm - related-constrained (ExxonMobile, J&J, Nike)
4. Related business firm - related-linked (Amazon, Disney, GE)
4. Unrelated business firm (Berkshire Hathaway, Yamaha, Tata)
38
What's the BCG Growth-Share Matrix?
1. Question Mark (high growth, low market share)
2. Star (high growth, high market share)
3. Dog (low growth, low market share)
4. Cash Cow (low growth, high market share)
39
How do you analyze a firm's diversification strategy?
Assess multiple business units under one corporate:
• Analyze what resources/capabilities are being shared across different business units
• Identify if the shared resources and capabilities are the core competencies of each business unit
• Better-off test: Analyze how well do each business unit
achieve economy of scale (if any) and economy of scope (if any); are capabilities/core competencies well shared across all business units; is the sharing increase WTP or reduce costs in all business units?
• Ownership-test: Analyze whether ownership of each business unit is needed, or other alternatives are better forms for the corporate to engage in the business unit.
• and (organization-test)
40
What's CAGE Framework?
1. Cultural differences
2. Administrative differences
3. Geographic differences
4. Economic differences
41
What's the Integration-Responsiveness Framework?
1. Global standardization strategy (high integration, low responsiveness)
2. International strategy (low integration, low responsiveness)
3. Transnational strategy (high integration, high responsiveness)
4. Multi-domestic (low integration, high responsiveness)
42
What are the benefits and risks of an international strategy?
```
Benefits:
- Leveraging core competencies
- Economies of scale
- Low-cost implementation through:
• Exporting or licensing
• Franchising
• Licensing
```
Risks:
- No or limited local responsiveness
- Highly affected by exchange-rate fluctuations
- IP embedded in product or service could be expropriated
43
What are the benefits and risks of a multidomestic strategy?
Benefits:
- Highest possible local responsiveness
- Increased differentiation
- Reduced exchange-rate exposure
Risks:
- Duplication of key business functions in multiple countries leads to high cost of implementation
- Little or no economies of scale
- Little or no learning across different countries
- Higher risk of IP expropriation
44
What are the benefits and risks of a global standardization strategy?
Benefits:
- Location economies: global division of labor based on wherever best-of-class capabilities reside at lowest cost
- Economies of scale and standardization
Risks:
- No local responsiveness
- Little or no product differentiation
- Some exchange-rate exposure
- Race to the bottom as wages increase
- Some risk of IP expropriation
45
What are the benefits and risks of a transnational strategy?
Benefits:
- Attempts to combine benefits of localization and standardization strategies simultaneously by creating a global matrix structure
- Economies of scale, location experience, and learning
Risks:
- Global matrix structure is costly and difficult to implement, leading to high failure rate
- Some exchange-rate exposure
- Higher risk of IP expropriation
46
What consists of the PESTEL Framework?
1. Political
2. Economical
3. Sociocultural
4. Technological
5. Ecological
6. Legal
47
What is sustaining innovation?
Performance improvement in attributes most valued by the industry's most demanding customers
48
What are the different sources of synergies?
1. Linkage influence
2. Stand-alone influence
3. Corporate development
