Lecture 2

Question 1

management

Answer 1

practice of formulating and implementing strategies across multiple levels in the organization

includes control and business administration in terms of formulation AND implementation

extracting effort in different ways can be better than others

Question 2

competitive positioning comes down to advantages relating to…

Answer 2

resources and business (two externally facing factors)

Collis and montgomery

Question 3

parent companies have an advantage: resources

Answer 3

when they can leverage key tangible resources and intangible resources for multiple businesses

it is worthwhile to expand new businesses if you utilize resources you have, and the whole is greater than sum of parts (value added!)

Question 4

obtaining resources

Answer 4

build
borrow
buy

Question 5

most successful way to obtain resrouces

Answer 5

use multiple modes: more likely to survive than when using only one strategy

capron and mitchell

Question 6

4 step model

Answer 6

1. build?
2. borrow via contract?
3. borrow via alliance?
4. buy?

Question 7

building

Answer 7

bias towards this
most co’s preferred internal dev, but 1/2 were disappointed
(had probs integrating and diffusing resources)

Question 8

borrowing

Answer 8

most would choose alliance > contract, but most alliances don’t meet goals

look to contracting first!! control of resources is often overemphasized

Question 9

when are alliances useful?

Answer 9

when limited # of people are needed for coordination

Question 10

buying

Answer 10

mode of last resort

paranoia is a common motivator

Question 11

corporate strategy: businesses

Answer 11

firm must decide where to compete - assess industry attractiveness

industry attractiveness = biggest predictor of profitability

Question 12

porter’s 5 forces

Answer 12

relevant for understanding profitability of any industry

1. threat of new entrants
2. threat of substitute products & services
3. bargaining power of buyers
4. bargaining power of suppliers
5. rivalry among existing firms

Question 13

threat of new entrants

Answer 13

profits of est. firms in industry may be eroded by new competitors

lower threat when barriers to entry are higher: economies of scale, brand power, access to distribution, switching costs

Question 14

bargaining power of suppliers

Answer 14

suppliers can threaten to raise prices or reduce quality of goods

have power when supplier’s product is an irreplaceable input to buyer’s business, or when suppliers can cluster into concentrated groups

Question 15

bargaining power of buyers

Answer 15

buyers can force down prices or bargain for higher quality or more services by playing competitors against each other

have power when they have negotiating leverage, or when they are price sensitive

Question 16

threat of substitutes

Answer 16

substitutes limit potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitably charge

greater threat if substitute is cheaper and has higher performance

Question 17

most important driver of profitability

Answer 17

industry!!