Lecture 2 Flashcards
(24 cards)
What is the goal of a competitive strategy?
Achieving competitive advantage
What are the two perspectives of competitive advantage?
Industrial Organisation and Strategic Management
What does the Industrial Organisation perspective focus on?
External industry forces shaping competition and profitability
What does the Strategic Management perspective emphasize?
Firm-specific resources and strategic positioning
What are the key factors in the Industrial Organisation perspective?
Willingness to Pay (WTP), Willingness to Sell (WTS), Price, Firm Costs
What is Willingness to Pay (WTP)?
The maximum amount a buyer is willing to pay for a good
What is Willingness to Sell (WTS)?
The minimum price at which suppliers provide necessary inputs
What defines the economic space for profitability?
The gap between WTP and WTS
What does the gap between WTP and Price represent?
Consumer Surplus
What does the gap between Price and Firm’s Cost represent?
Firm’s Profit
What is the preferred definition of competitive advantage?
A firm creates more economic value than rivals and captures part as profit
What are external sources of competitive advantage?
Changing customer demand, prices, technological change
What are internal sources of competitive advantage?
Resource heterogeneity, creative and innovative capability
What are common profitability metrics?
ROA, ROI, ROCE, Operating Margin, EBITDA Margin, Return on Sales
What are threats to strategic sustainability?
Imitation, Substitution, Holdup, Slack
What is corporate advantage?
The collective value of a corporation exceeds the sum of its individual businesses
What are the two mechanisms of corporate advantage?
Portfolio Selection and Business Combination
What are the two main approaches to corporate strategy?
Synergy Approach and Financial Approach
What defines the synergy approach?
Managing shared resources and operational synergies
What defines the financial approach?
Managing financial synergies with high autonomy for businesses
What are the six portfolio strategy models?
Single Industry Domestic, Single Industry Multinational, Multi-Industry Technology-Driven, Multi-Industry Marketing-Driven, Conglomerate with Main Business, Classic Conglomerate
What are the four parenting strategy models?
Transferring Competencies, Sharing Assets, Dynamic Portfolio Management, Restructuring
What are the four logics to evaluate corporate strategy?
Business Logic, Added Value Logic, Capital Markets Logic, Governance and Compliance Logic
What are the principles of strategy evaluation?
Consistency, Consonance, Advantage, Feasibility
