Sevi Exam 1

Question 1

Understand what is meant by strategy and strategic management.

Answer 1

i. Strategy: A set of goal-directed actions a firm takes to gain and sustain superior performance relative to competitors.

ii. An integrative management field that combines analysis, formulation, and implementation for competitive advantage.

Question 2

What are the three elements that provide the basis of a good strategy?

Answer 2

i. Analysis of internal and external environment.

ii. Formulation of corporate business and functional strategies.

iii. Strategy implementation and a set of coherent actions to guide policy.

Question 3

What are the elements of Tesla’s strategy? Competitive Challenge? Guiding policy? Coherent actions?

Answer 3

i. Competitive Challenge:
1. Manufacture attractive and affordable vehicles with new technology and build the required tools and facilities to help.

ii. A guiding policy:
1. Building cost-competitive mass-market vehicles and making significant investments in lithium-ion batteries,

iii. Coherent Actions:
1. Ramping up productions to help economies of scale.
2. Outsource production in different countries like Shanghai.
3. Make technology available to the public.

Question 4

What is meant by competitive advantage? Competitive parity? Competitive disadvantage?

Answer 4

i. Competitive Advantage: When a firm’s performance exceeds the other competitors or industry average.

ii. Competitive Parity: When two or more firms perform at the same level.

iii. Competitive disadvantage: When a firm underperforms its rivals or the industry average.

Question 5

• Understand sustainable competitive advantage.

Answer 5

i. Sustainable competitive advantage means a firm can outperform its competitors or the industry average over a long time.

Question 6

• What actions can a firm take to gain competitive advantage?

Answer 6

i. Provide goods or services that consumers value more highly than competitors.

ii. Provide value at a lower price.

iii. Have rewards for that are superior in value creation.
1. Example: Profitability and Market share.

Question 7

• Why is it important for a firm to establish a unique strategic positioning?

Answer 7

i. This allows firms to provide value to customers while effectively managing costs. The better value creation, the greater the economic contribution and likelihood of competitive advantage.

Question 8

• Who are the stakeholders of a firm? What are the interests/claims of different stakeholder groups? What role do stakeholders play in strategic decision-making?

Answer 8

i. Stakeholders are organizations, groups, or individuals who can affect or are affected by a firm’s actions.

Question 9

• Understand the difference between internal and external stakeholders. What are the three characteristics of stakeholders that need to be assessed in developing a stakeholder strategy?

Answer 9

i. Internal Stakeholders: Employees, Stockholders, Board Members.

ii. External Stakeholders: Customers, suppliers, creditors, anyone outside the business.

iii. Power, Legitimacy, Urgency. (Do something it might not want to do, must be legally valid, and must require immediate attention.

Question 10

• Be able to articulate the steps in a stakeholder impact analysis, and how this analysis is used by strategic decision-makers.

Answer 10

The stakeholder analysis analyzes just how important each of our stakeholders are and helps us assess the needs and risks that they each pose.

 5 total steps. (Who are stakeholders, What interest they have, What opportunities, What responsibilities? What should we do?)

Question 11

• Understand the pyramid of social responsibility, and the expectations for firms at each level in the pyramid.

Answer 11

i. 5 LEVELS, From bottom to top, Economic  Legal  Ethical  Philanthropic.

Question 12

• What is meant by vision? Mission? Values? What should each of these statements convey to employees, managers, and other stakeholders of the firm?

Answer 12

i. Vision: Captures an organization’s purpose and aspirations. Conveys a sense of purpose and motivates / inspires managers and employees. Captures the hearts and minds of key stakeholders.

ii. Mission: Describes what the organization does: Communicates how the firm will achieve its objectives, the products it will provide, markets it will compete in, and customers they want to serve.

iii. Values: Principal guidelines of behavior as employees work to achieve a firm’s vision and fulfill the mission. Helps employees understand company culture and provides ethical standards.

Question 13

• What is the role of vision, mission, and values for strategic management? Why are they important?

Answer 13

i. They lay the groundwork and foundation for a firm’s direction and goals. This is important because they determine how a firm will achieve it’s goals and helps create a groundwork to employ a winning strategic process.

Question 14

• What is the difference between a vision statement and a mission statement?

Answer 14

i. Vision = What a firm wants to achieve.

ii. Mission = How the vision will be achieved. The steps that need to be taken.

Question 15

• Be able to distinguish between a customer-oriented vision statement and a product-oriented vision statement.

Answer 15

i. Customer-Orientated focuses on solving problems for customers.

ii. Product-Orientated focuses on the firm, and its products and services given.

Question 16

• Understand the role of core values in impacting employee behavior.

Answer 16

i. They define a guideline of legal, ethical, behavioral actions that encourage preferred behavior.

Question 17

• What is meant by perceptual acuity? Why is this important?

Answer 17

i. Perceptual acuity is the ability to perceive changes and trends in society, but also knowing how to capitalize on these trends to grow and further the business. This is important because businesses must know how to grow and adapt.

Question 18

• What is a SWOT analysis? How is it used?

Answer 18

SWOT is a basis technique to analyze the firm and industry. It helps identify strengths, weaknesses, opportunities, and threats that a firm faces in comparison to other firms, both internally and externally.

Question 19

• Understand what is meant by environmental scanning, monitoring, and competitive intelligence: How are these tools used in assessing the external environment?

Answer 19

i. -Environmental Scanning: Detecting changes already underway. Helps predict changes to come.

ii. Monitoring: Tracking and identifying evolution of trends, activities, events, and facts outside of the organization.

iii. Competitive Intelligence: Understanding the industry and the strengths/weaknesses of competitors.

Question 20

• What is environmental forecasting? How might forecasting impact the development of strategies for the firm?

Answer 20

i. Environmental Forecasting is used to help predict change in terms of direction, speed, scope, and intensity. They help us measure trends and responses to see how effectively we can act upon certain factors.

Question 21

• What is scenario analysis? How is it used in strategy formulation?

Answer 21

i. Scenario Analysis is an assessment of alternative futures. It’s a way for us to determine how trends might affect an issue.

Question 22

• What are the six areas of the general environment that should be analyzed in an external assessment? Be able to identify examples from each of these six areas that might impact the strategy of a firm.

Answer 22

i. Demographic, Sociocultural, Political/Legal, Technological, Economic, and Global.

Question 23

• Be able to articulate how the growth of the digital economy has impacted businesses and industries.

Answer 23

i. -Increased Globalization. Disintermediation of markets. (Getting rid of the middleman).
ii. Reduced Assets. If I wanted to be a retailer, I had to buy or lease stores. Now I just need the internet.
iii. Increased collaboration – Zoom call.
iv. Increased customer expectations.

Question 24

• Understand Porter’s Five Forces and its application. What are the key objectives of a Five Forces analysis? What factors impact the intensity of impact of each of the five forces on industry profitability?

Answer 24

I. Five forces = Competition intensity, threat of new entrants, power of suppliers, power of buyers, threat of substitution.

II. Helps firms analyze the competition, potential, and opportunities of an industry, market, or firm.

Question 25

* Understand the difference between substitutes and complements. Be able to identify complements and substitutes for an industry’s products/services. Be able to distinguish between substitutes and competitors.

Answer 25

i. Substitutes are products that come from outside the industry. They limit the potential returns of an industry. For example, instead of buying a car, I could take the bus or walk. ii. Compliments are products or services that are integral to a product / service’s usage. For example, Apps on an iPhone are integral to an iPhone’s success.

Question 26

* What are strategic groups? How are they useful in understanding competitive dynamics in an industry?

Answer 26

i. Strategic groups are clusters of firms that can share similar strategies. This is useful in analyzing which competitors are utilizing the best practices and helps us identify how we need to differentiate.

Question 27

* Understand the concept of value and how value is created within an organization.

Answer 27

i. Value = Amount buyers are willing to pay for the firm’s products and services.

Question 28

* Be able to distinguish between primary activities in the value chain and support activities.

Answer 28

i. Primary Activities = Logistics, Operations, Marketing and Sales, Services. ii. Support Activities = General Admin. HRM, Technology Development, Procurement.

Question 29

* Be able to identify specific activities and processes that are executed within each of the primary and support activities of the value chain.

Answer 29

i. Primary Services: ii. -Logistics – Managing resources and their transportation methods to ensure sufficient raw materials. iii. Operations – Transforming inputs into final products. iv. Marketing and sales = Your more traditional methods of promoting products and services to the customer itself. v. Service: Providing services to enhance or maintain product value. i. Secondary Services vi. Procurement: How a firm purchases input. vii. Technology Development: Providing tech support to all firm operations. viii. HR: Recruitment, hiring, training and development, etc.

Question 30

* Understand the value chain for service industries – and the differences as compared to the value chain for product-based industries.

Answer 30

i. Product based is standardized and simplified or optimized. Service based value chain is highly evolving and differs from each aspect of business, but also the person who is on the receiving end

Question 31

* How do the interrelationships of activities within the firm create value? How do firms create value through interrelationships of activities with key outside stakeholders (Suppliers, customers)?

Answer 31

i. -Interrelationships are key to forming strong business ties and increasing competitive advantage due to the proper cooperation and alignment. If you can get everyone on the same page, and create that sense of reliability, it can greatly smooth out the day-to-day operations and processes down the line.

Question 32

* What is meant by vertical integration? Be able to identify examples of forward vertical integration and backward vertical integration.

Answer 32

i. Vertical Integration is the process of a firm being able to strategically control different parts of the business without relying on other suppliers or partners. ii. Backwards integration example can be like traveling back to raw materials. If you’re a firm, and you own your own resources, you don’t have to rely on anyone else. iii. If you are a retailer, you can become your own manufacturer and get your own resources.

Question 33

* Understand – and be able to identify examples of tangible resources, intangible resources, and capabilities.

Answer 33

i. Tangible Resources = Resources that can be seen, touched, or quantified. (Equipment, Cash, Locations, Data algorithms, Patents, Copyrights, etc.) ii. Intangible Resources = Assets that are difficult for competitors to account for or imitate. They are often unique. (Examples: Trust, Ideas, Employee Experience, Managerial Skills, etc.)

Question 34

* What are the characteristics of resources that can provide the basis for competitive advantage?

Answer 34

i. -They must be a core competency or follow the VRIN model. Which is talked about down below.

Question 35

* What characteristics make a resource valuable? Rare? Inimitable? Non-substitutable?

Answer 35

i. Valuable: Enables a firm to form or implement strategies to improve efficiency or effectiveness. ii. Rare: Competitors don’t have it. iii. Imitable: It’s unique and unable to be copied. It can be dependent on path, have causal ambiguity, or be something socially complex. iv. Non-Substitutable: No alternatives available that can achieve the same results.

Question 36

* Be able to describe the characteristics that make a resource inimitable: physical uniqueness, path dependency, causal ambiguity, social complexity.

Answer 36

i. Physical Uniqueness: Resources that are physically unique, therefore impossible to duplicate. ii. Path Dependency: Hard to duplicate because of all that has happened. The resource changes so much that it’s impossible to recreate without going through the full process. iii. Causal ambiguity: Impossible for competitors to explain how the resource exists, or how to recreate it. iv. Social Complexity: Competency emerged from cultural, interpersonal relationships built by firm and customers.

Question 37

* Understand financial ratios, and how they can help to understand the performance of the firm. What comparisons are necessary to assess firm performance?

Answer 37

i. 5 Types of ratios: short term, long term, Asset Management, Profitability, and Market Value. This helps measure a firm’s performance. ii. Meaningful ratios must have an analysis of how said ratios change over time. They must compare within the industry norms, and with key competitors.

Question 38

* What is meant by the balanced scorecard? What four perspectives are incorporated into the balanced scorecard?

Answer 38

i. Balanced Scorecard is a evaluation system that uses multiple perspectives in assessing a firm’s performance. Here we want to focus on specific and measurable goals. i. 4 Key Metrics are: 1. Business Processes. 2. Decisions and actions. 3. Key Resources and actions. 4. Employee skills and productivity.