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Strategic Management > Prelim 1 > Flashcards

Prelim 1 Flashcards

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1
Q

Operational Effectiveness

A

Performing similar activities better than competitors, encompassing efficiency and management techniques like Total Quality Management (TQM), benchmarking, and reengineering

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2
Q

characteristics of operational effectiveness

A

-Improves inputs’ utilization by reducing defects, speeding up production, or improving customer service.
-Driven by continuous improvement initiatives, flexibility, and adoption of new technologies.

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3
Q

strategy

A

Creating a unique and sustainable position by performing different activities or performing the same activities differently

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4
Q

productivity frontier

A

Represents the maximum value a company can deliver at a given cost with the best current technologies and management practices.

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5
Q

what are the three sources of strategic positioning

A

variety-based, needs-based, and access-based

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6
Q

variety-based positioning

A

Specializing in producing a subset of an industry’s products or services

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7
Q

needs-based positioning

A

Meeting the distinct needs of a specific group of customers

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8
Q

access-based positioning

A

Serving customers who are accessible in specific ways due to geography, scale, or other factors.

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9
Q

trade-offs

A

foundation of a sustainable strategic position, as they prevent rivals from imitating activities without compromising their own strategy

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10
Q

three causes of trade offs

A

incompatibility of image or reputation, conflicting activities, and limits on coordination

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11
Q

fit

A

emphasizes how activities interconnect and reinforce one another, creating a cohesive and sustainable system

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12
Q

first-order fit

A

Consistency between each activity and the overall strategy

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13
Q

second-order fit

A

Activities that reinforce each other

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14
Q

third-order fit

A

Optimization of effort to eliminate redundancies and maximize synergies.

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15
Q

4 challenges to sustaining strategy

A

growth imperative, best practices mentality, organizational realities, and failure to make trade offs

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16
Q

why do some firms outperform others

A

understanding the decisions that drive differences in performance

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17
Q

what is performance

A

financial (ROIC - return on investment capital) and survival (how long the firm survives)

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18
Q

efficiency

A

how well a firm uses its resources

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19
Q

why is operational effectiveness necessary but not sufficient

A

people can easily replicate

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20
Q

strategic positioning

A

deliberately choosing different activities or preforming similar activities differently than competitors

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21
Q

in order to improve operational effectiveness, what should happen on the productivity frontier

A

to improve OE, must move closer to the line

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22
Q

how does Fit prevent imitation

A

when activities fit, there is little benefit from imitating just one activity, but there is complexity in replicating the entire system

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23
Q

porter’s 5 forces

A
  1. threat of new entrants
  2. bargaining power of suppliers
  3. bargaining power of buyers
  4. threat of substitute products or services
  5. rivalry amongst existing competitors
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24
Q

what do porter’s five forces enable strategists to do

A

identify root causes of profitability, anticipate shifts in competition, and craft strategies to defend against and influence competitive forces

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25
threat of new entrants
new competitors increase market competition, reduce prices, and intensify the need for investment to remain competitive
26
economies of scale
Incumbents achieve lower costs through higher production volumes. New entrants face significant cost disadvantages unless they scale quickly.
27
demand-side benefits of scale (network effects)
A larger customer base enhances the perceived value of a product.
28
effects of high threat of new entrants
Existing firms may lower prices or increase investment in differentiation and innovation to deter new entrants
29
bargaining power of suppliers
suppliers can capture more value by raising prices, reducing quality, or limiting availability
30
concentration of suppliers
If suppliers are more consolidated than buyers, they wield greater power.
31
dependency on industry
Suppliers less reliant on a specific industry (e.g., diversified suppliers) can demand higher prices
32
switching costs
Firms with significant investment in supplier-specific systems or technologies face higher costs to switch
33
supplier differentiation
Unique or patented products give suppliers greater leverage.
34
bargaining power of buyers
buyers can demand lower prices, higher quality, or additional services, shifting value away from the firm
35
threat of substitutes
substitute products or services cap industry profitability by providing alternative solutions for customers
36
effects of high substitution threat
Industry profits suffer as substitutes place a ceiling on prices and limit growth potential.
37
rivalry amongst existing competitors
rivalry occurs through price wars, product innovations, marketing battles, or improved services
38
what are the two types of rivalry
price based and non-price based (branding, services, etc)
39
what happens when the five forces are weak
When the five forces are weak, industries tend to be more profitable (attractive)
40
what happens when the five forces are strong
When five forces are strong, industries tend to be less profitable (unattractive)
41
steps to analyze industry profitability
1. define the industry 2. identify the relevant participants 3. assess the 5 forces
42
step 1 - define the industry
where does the competition take place? 3 scopes to define the industry (horizontal, vertical, geographic scope)
43
horizontal scope (product)
the products or services included in the competition
44
vertical scope
the stage of the industry value chain where the competition occurs Industry value chain - a sequence of activities to create a product or service
45
geographic scope
the location of the competition (local, national, global)
46
step 2 - identify the relevant participants (there is always 5 participant groups)
1. Potential entrants 2. Industry competitors 3. Substitutes 4. Buyer 5. Supplier
47
if higher threat of new entrants
then lower industry profitability
48
if lower threat of new entrants
then higher industry profitability
49
if there is a high industry rivalry
then less profitable industry
50
if a low industry rivalry
then more profitable industry
51
when is industry rivalry high
when the industry is closer to perfect competition
52
industry rivalry is high when
Many competitors with equal power Stagnant or shrinking market Price-based competition High exit costs
53
industry rivalry is low when
Few competitors with unequal power Growing market Non-price-based competition Low exit costs
54
substitutes
products or services outside the industry that serve similar functions
55
if there is a high threat of substitutes
then there is a less profitable industry
56
if there is a low threat of substitutes
then there is a more profitable industry
57
threat of substitutes is high when
Readily available Affordably priced High quality Low switching costs
58
threat of substitutes is low when substitutes are
Not readily available Not affordably priced Low quality High switching costs
59
if there is more powerful buyers
then there is less profitable industry
60
if there is less powerful buyers
then there is more profitability in the industry
61
buyers have more power when
There are many, unconcentrated buyers Products are unique They face switching costs when changing suppliers Buyers are not price-sensitive
62
buyers have less power when
There are many, unconcentrated buyers Products are unique They face switching costs when changing suppliers Buyers are not price-sensitive
63
if there is more powerful suppliers
then there is a less profitable industry
64
if there is a less powerful supplier
then the industry is more profitable
65
suppliers have power when
There are a few, concentrated suppliers Suppliers depend heavily on the buyers for revenue Buyers have no substitutes for the supplier’s product Buyers face huge switching costs in changing suppliers
66
what are the two types of positionings
differentiation and cost-leadership
67
primary activities that help with cost-leadership strategy
directly related to the creation of a product or service (ex. manufacturing)
68
secondary activities that help with cost-leadership strategy
support primary activities to become more efficient (ex. human resources)
69
competitive advantage
firm's ability to sustain superior profitability compared to competitors (done through positioning)
70
how does a cost-leadership strategy create a competitive advantage
value stick - heuristic
71
consumer surplus
= WTP - Price
72
value captured (profit)
= price - cost
73
total value created
= WTP - Cost
74
stuck in the middle
a firm fails to develop a clear competitive advantage (not on the productivity frontier because you are not leading in cost or efficiency)
75
productivity frontier
represents the state of best practice where a firm operates at optimal efficiency
76
PEST analysis
political, economic, social, technological
77
political
regulations and laws, government policies, ex. minimum wage policy
78
economic
inflation, interest rates, exchange rates
79
social
cultural trends and demographic shifts, Ex. health concerns
80
technological
technological change (e.g. automation), Ex. third-party delivery platforms
81
creativity
the ability to form novel and useful concepts using existing knowledge
82
innovation
realization of creative ideas in the form of products and services
83
cognitive fixation
our creativity is often structured by past experience
84
what prevents us from being creative
conformity in groups (asch experiment) -- conforming pressures

Strategic Management (1 decks)

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