Flashcards in Strategy Deck (21)
What is Strategy?
A long-term direction.
Defines the scope of organizational activities.
Defines how to address changes.
What is Vision?
The desired long-term future state.
What is Mission?
Is the overriding purpose aligned to the values and expectations of stakeholders.
What is a business model?
Defines how the organization creates added value.
Specifies the flow of products, services and/or information between parties and its cost structure.
Competitive Strategy according to Michael Porter:
A different set of activities that deliver a unique mix of value in order to achieve a superior industry position by differentiating the products/services from the customers perspective.
Describe the 3 levels of Strategy:
Corporate level strategy (defines overall purpose, scope, main business units).
Business level strategy (competitive strategy, defines the position in the market, resources)
Operational level strategy (delivers results to upper-level strategies in terms of resources, processes and people).
Competitive Strategy (definition) according to Johnson, Scholes, Whittington:
The mixed view. It is a direction and scope over the long term.
Aims to achieve advantage in a changing environment by configuring resources and competences to fulfill stakeholders expectations.
Competitive Strategy according to Hamel, Prahalad:
A unique selling proposition coming from unique resources and capabilities.
Generally speaking: doing what you are best at.
Describe the Market Based View (MBV):
Strategy has to fit with the outside.
Considers mature, static markets.
Product-centric cost, cash-flow balance, differentiation.
Strategic Advantage as business specific and observable.
The company is made from business units.
Short and mid-term.
Defensive in nature, adaptation of strategy to competitive forces.
Describe the Resource Based View (RBV):
Company made from core competencies: capabilities and resources.
Suits emerging, dynamic markets.
Growth through core competences.
Strategic advantage is long-lasting and hard to attack (tacit knowledge).
Long-term is emphasized.
More offensive, enhancement of old business and entry into new business.
Describe Porter's 5 forces, what you achieve with them and why it corresponds to the MBV:
New entrants (Threat of)
Suppliers (Power of)
Rivalry (Industry competitors)
Buyers (Power of)
Achievement: understand an evaluate an industry -> Get Superior market position
MBV: Because it makes the organization react, match or adapt to the market
Describe the Hamel/Prahalad model and mention why it belongs to the RBV:
A unique selling proposition is made by Core Competencies.
Core Competencies are composed from:
Resources (tangible or intangible)
Capabilities (structures, processes and systems)
RBV: belongs to it because it relies on the exploitation of companies competences and its more offensive in its approach (active).
Describe Porter's strategic reactions to the 5 market forces:
Defense against the forces based on capabilities.
The industry is given -> match it with strengths and weaknesses
* Influence the balance of forces:
improve with innovation and vertical integration
* Anticipate shifts:
Have a strategy for the new balance before others see it.
Describe Porter's Value Chain and its use:
Used to analyze companies activities.
Support activities: Infrastructure, HR, Technology, Procurement.
Primary activities: Inbound logistics, Operations, Outbound logistics, Marketing and sales, Sales service
Describe Porter's Generic Strategies:
They are based on 2 axis:
* Competitive Advantage Source (Low cost or Differentiation)
* Market Scope (Broad Target or Narrow Target)
Describe the Strategic Clock:
Axis X: Price
Axis Y: Perceived benefit
1 No frills
2 Low price
5 Focused differentiation
3 ways of maintaining a Sustainable Competitive Advantage:
1) Price-based strategies (lower margin, high volume, cheap resources)
2) Differentiation strategies (unique value, ecosystem, hard to imitate), strong brand, patents, unique resources)
3) Lock-in (willingness to switch, exit-barriers, contracts, pricing, compatibility, process design)
What is the role of IT in competition:
Lowers internal and external costs
Expand from niche to global market
What does the reading "Does IT matter" refers to?:
The vanishing advantage of IT (not scarce anymore).
The commoditization of IT (cheap, standardized, replicable).
From offense to defense (essential to compete, inconsequential in strategy by itself).
More risks by depending on IT.
* Spend less
* Follow, don't lead
* Focus on vulnerabilities
* Manage costs and risks meticulously
Conter-arguments of the reading "IT doesn't matter":
* IT by itself doesn't give strategic differentiation
* IT doesn't cure it all (no panacea)
* It is about how employees uses IT's potential
* Feasibility of new products not present before
* Importance of management (to leverage the value of IT)
* Tech is only 1 component of IT investment: Business process redesign + Training + Organizational changes