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Strategic Management Midterm > Strategic Management > Flashcards

Strategic Management Flashcards

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0
Q

Strategy

A

An integrated and coordinated set of commitments Nd actions designed to exploit core competencies and gain a competitive advantage
- decides how well or poor a firm will perform

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1
Q

Strategic competitiveness

A

Achieved when a firm successfully formulates and implements a value creating strategy.
Exploits core competences

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2
Q

Strategic management process

A

1) analyze internal and external environments- to understand capabilities and competencies ( strategic inputs)
2) using the analysis above firms develops vision/mission statements and their competitive strategy
3) achieve above average returns and change strategy inputs to keep up with market evolution

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3
Q

Strategic management process defined

A

A full set of commitments, decision , and actions required to achieve strategic advantage to earn above average returns

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4
Q

Global economy

A

When goods, services, people , skills, and ideas move freely across geographic boarders.

  • relatively un fretted by constraints like tariffs
  • always expanding and becoming more complicated
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5
Q

Globalization

A

Increasing economic interdependencies among countries and their organizations as reflected in the flow of goods,services,capital, and knowledge.

  • product of large firms competing against each other
  • increases range of opportunities and performance standards
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6
Q

Core competencies

A

Resources and capabilities that serve as a source for competitive advantage over rivals.
Visible in a firms organizational function.
(R&d in apple)

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7
Q

Vision

A

A picture of what the firm wants to be and ultimately achieve.
The ideal description of an organizations intended future

The foundation of the mission statement

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8
Q

Mission

A

Specifies the business in which the firm tends to compete and the customers they intend to serve.

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9
Q

Vision vs mission

A
  • Mission statement is more concrete than the vision
  • vision states ethical standards and who it will become
  • mission states how’s it’s going to serve individuals and groups
  • -Mission deals more with product markets and customers
  • Vision statements are more vague than missions which can change at any time
  • Vision is usually short and easily remembered p
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10
Q

Stakeholder vs stockholder

A

Stakeholders- individuals, groups, or organizations that can affect a firms mission/vision and are affected by strategic outcomes

Stockholders- individuals or groups that have invested capital in a firm and expect a positive return

  • stockholders always want to maximize returns on investments while stakeholders want to max. Quality and reliability
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11
Q

Capital market stakeholders

A

Shareholders and suppliers of capital

Want large returns

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12
Q

Product market stakeholders

A 
Primary customers 
Suppliers
Host communities 
Unions 
Reliable products at low prices 
Very important
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13
Q

Organizational stakeholders

A

Employees
Managers
Non managers

Provide rewarding work environment

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14
Q

Strategic leader

A

Are people located in different areas and levels of the firm using strategic management process to select strategic actions to help firm achieve mission and vision
-no matter what position they have are decisive, committed and nurturing to those around them
CEO most important and prominent

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15
Q

Organizational culture

A

Refers to the complex set of ideologies, symbols, and vote values that are shared throughout the firm and that influence how the firm conducts business
–social energy drives or fails a business.
Important for strategic leaders to understand org. Culture

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16
Q

Purpose of external environment analysis

A
  • creates opportunities and threats
  • influences firms as they seek strategic competitiveness and above average returns.
  • foundation for forming vision and mission and implementing strategic action
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17
Q

Components of external environment analysis

A

Scanning- identifying signals of environmental changes and trends
Monitoring- detecting meaning through ongoing observations of environmental changes
Forecasting- developing projections of anticipated outcomes based on monitored changes and trends
Assessing- determining the timing and importance of environmental changes and trends for firms strategies and environments

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18
Q

Scanning

A

Identify potential changes in external environment

  • often reveals ambiguous, incomplete, and unconnected data or information
  • use special software to ID events
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19
Q

Monitoring

A

Observation of external environmental changes and see is an important change is emerging.

  • it is critical to be able to detect the meaning of environmental changes and trends
  • important to ID important stakeholders
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20
Q

Forecasting in external environment

A

Develop feasible projections of what might happen and how quickly
- challenging to be accurate results in economic downturns

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21
Q

Assessing in external environment

A

Determine timing and significance of the environmental changes and trends that have been ID’ed
- specify implications and intent. Without assessing their is an unknown competitive relevance

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22
Q

Industry define

A

A group of firms producing products that are close substitutes.
-In the course of competition these firms influence each other

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23
Q

Purpose of industry environment analysis

A

Industrial environment has more direct effect on the firms strategic competitiveness

  • study other firms to identify their capabilities so they can compete against what they are producing
  • recognize that suppliers and buyers can become competition by them producing adequate substitutes
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24
Economies of scale
The cost of producing additional units decreases on a per unit basis as quantity produced increases - can be developed in most business functions - make entering your market more difficult for competition
25
Strategic groups
A set of firms that emphasize similar dimensions and use a similar strategy - competition in strategic group is greater and more intense - high mobility and entry barriers and low resources limit the formation on strategic groups
26
Competitor analysis
-Future objectives( what drives the competitor) Current strategies(what is the competition doing and can do Assumptions ( what does the competition believe about the industry? Strengths and weaknesses( what are their capabilities ) All of these lead to a response
27
Five forces Michael porter
- Threat of new entrants - bargaining power of suppliers - bargaining power of buyers - Threat of substitutes - Rivalry among competing firms
28
Internal environment analysis components
-What a firm can do Matching what a firm can do with what it might do Turning resources into strategic competitiveness
29
Characteristics of core competencies
Serve as a source of competitive advantage. | Reflect a companies personality
30
What makes a sustainable competitive advantage
Capabilities that are valuable-neutralize external env. Threats/ exploit opportunities Rare- capabilities that are few if any Costly to imitate- capabilities firms cannot easily develop Nonsubstitutable - capabilities that do not have strategic equivalents
31
Value chain
Allows the firm to understand the parts of operation that create value and those that do not Analyzes their cost positions of activities
32
Describe value chain analysis
Support function of finance, hr, and MIS go into value chain activities that create customer value
33
Customer value in the value chain analysis
``` Created by Supply chain management Distribution Marketing Operations Follow up sales ```
34
Tangible resources
Assets that can be observed and quantified
35
Intangible resources
Assets rooted deeply in the firms history, accumulated over time, Relatively difficult for competitors to imitate and analyze
36
Outsourcing
The purchase of a value creating activity or support function activity from an external supplier
37
capabilities into core competencies
-Must allow a firm to perform an activity in a manner that provides value superior to their competitors Or - perform a value creating activity a competitor cannot perform
38
What are capabilities
A firm combines Individual tangible and intangible resources to create them - used to complete organizational tasks - value of human capital in developing and using capabilities
39
Outsourcing contribution to creating value
Firm recognizes they cannot create value in an activity that activity can be outsourced to create more value
40
Conditions affecting Managerial decisions about resources capabilities and core comp.
Is it creating value? Resources and capabilities must be acquired to form a competitive advantage Not quantity that matters but have the right resources Take internal and external environment into consideration
41
Business level strategy
Is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets How a firm intends to compete in a specific product
42
Business level strategy determines
Who will be served What needs those target customers have that the product will satisfy How will those needs be satisfied
43
Market segmentation
Is a process used to cluster people with similar needs into individual and identifiable groups
44
Purpose of business level strategy
To create differences betweens the firms position and those of its competitors Defines the path which provides the direction of actions to be taken by leaders of the firm
45
Types of business level strategies
Cost leadership - lowest cost to broad market - kia's Differentiation - distinctiveness to broad market - Lexus/ Toyota Focus cost leadership - narrow market at low cost -ikea Focused differentiation - narrow market distinctiveness - lunch trucks in the city
46
Cost leadership vs. focus strategy
Cost leadership is the cheapest product to most people Focus strategies focus on a particular market segment People perceive cost leaders to have bad quality
47
Risks pertaining to cost leadership strategy
Powerful customers can force cost leaders to reduce prices Cost of production is major factor Rivals to produce at a lower price Imitation
48
Risks pertaining to differentiation strategy
Customers decide price is too high for uniqueness Differentiation could exceed customers needs Differentiation may cease to provide value to the customer Competitors counterfeiting your differentiation strategy
49
Risks of focus strategy
Same risks as a company using cost leadership or differentiation. Additionally Could focus on too narrow of a market Competitions can differentiate to the same market Needs of customers within a narrow segment may become more similar over time resulting in reduced advantage
50
Corporate level strategy
What business should a firm compete in selecting and managing a group of different businesses competing in different product markets to gain a competitive advantage
51
Vertical integration
Becoming your own supplier or distributor through acquisition. Vertical movement up or down value chain
52
Levels of diversification
--Low level diversification - -Single business- 95% or more of revenue comes from a single business Dominant business- 70-95% of rev. Comes from single business - -Moderate to high level - - Related constrained - less than 70% comes from dominant business and businesses share product/tech/distribution linkages - related linked - less than 70% from dominant business and only some limited linkages - -high level diversification - - unrelated - less than 70% from one business and no linkages
53
Low level diversification
Single business- 95 or more percent of revenues come from single business Dominant business- 70-95 percent come from single business area
54
Moderate to high level diversification
Related constrained diversification - less than 70 percent from dominant business and direct product, tech , or distribution links between firms Related linked diversification - less than 70 percent from dominant business and share a few links mostly transfer of knowledge and core comps
55
High level diversification
Unrelated diversification - less than 70% from dominant business and no relationships between businesses
56
Reasons for diversification
Operational relatedness : sharing activities Corporate relatedness: transferring skills or corporate core competencies Among units
57
Value reducing diversification
Div. managerial employment risk- spread the blame for poor performance Increasing managerial compensation - more duties and responsibilities means more money is required
58
Economies of scope
Related diversification The average total cost of production. Decreases as a result of increasing the number of different goods produced Sharing resources to lower costs
59
Operational relatedness
Sharing activities Share primary support activities in value chain to reduce total average costs Risk and not easy to achieve - synergies not realized and ties create links between outcomes
60
Corporate relatedness
Sharing core competencies on a corporate level Intangible resources can be transferred to an acquired business that will not be easily counterfeited by competitors
61
Financial economy in diversification strategy
- cost savings realized through improved allocations of financial resources based on investments inside or outside firm ( efficient internal capital market allocation) - restructuring of acquired assets firm buys business to make it better and more profitable then to sell off business at a profit
62
Merger
Firms agree to integrate their operations on a relatively equal basis Usually one firm will be more benefitted
63
Acquisition
One firm buys controlling 100 percent interest in another firm with intent of making the acquired firm a subsidiary business in its portfolio
64
Take-over
Special type of acquisition strategy wherein the target firm did not solicit the acquiring firms bid Acquiring firm bought out business that did not want to be bought out
65
Reason for acquisition.
To try and spread risk in uncertain environment Increase market power due to competitive threats Manage industry and regulatory changes
66
Horizontal acquisition
One company in the same industry acquires a company in the same industry Must be careful not to violate antitrust laws Expand your product range and sell more ( economies of scale) Geography advantages
67
Vertical acquisition
Enable you to integrate your supply chain as a basis for improving efficiency and costs. Such as acquiring a supplier Provides indirect method of increasing market share by controlling competitions access to supplies
68
Problems with acquisitions
Clashing corporate cultures -integration difficulties Managers more focused on acquisitions than reasons for obtaining new businesses Inadequate evaluation of target - paid too much for firm , new tax consequences, ineffective due diligence Inability to achieve synergy Too much diversification can lead to decline in performance Large debt - issuing junk bonds
69
Successful acquisition attributes
Select right target Avoid paying too much Integrate operations of the acquiring and target firm effectively Retain the target firms human capital ( intangible resources)
70
Downsizing Restructuring strategy
Reduction in firms employees or operating units Reduce labor costs to increase profitability Want more efficiency
71
Down scoping restructuring
Eliminating businesses unrelated to firms core businesses May accompany downsizing but should avoid key employees Smaller firm can be better managed by top management team
72
Leveraged buyout restructuring or LBO's
One party buys all of a firms assets I'm order to take the firm private Significant debts may by incurred Immediate sale of non-core assets to get rid of debt Can correct managerial mistakes
73
Types of LBO's
Management buyouts MBO Employee buyouts EBO Whole firm buyouts EBO and whole-firm buyouts lead to downs coping and increase in strategic focus plus improved performance

Strategic Management Midterm (1 decks)

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