Test 1 Flashcards
(118 cards)
1
Q
Strategic Management
A
an integrative management field that combines analysis, formulation, and implementation in the quest for competitive advantage
2
Q
Competitive disadvantage
A
underperformance relative to other competitors in the same industry or the industry average
3
Q
Competitive advantage
A
superior performance relative to other competitors in the same industry or the industry average
4
Q
Competitive parity
A
performance of two or more firms at the same level
5
Q
Sustainable competitive advantage
A
outperforming competitors or the industry average over a prolonged period of time.
6
Q
Co-operation
A
cooperation by competitors to achieve a strategic objective
7
Q
Firm effects
A
the results of managers actions to influence firm performance
8
Q
Industry effects
A
the results attributed to the choice of industry in which to compete
9
Q
Strategic business unit
A
a standalone division of a larger conglomerate, with its own profit-and-loss responsibility.
10
Q
Business model
A
organizational plan that details the firms competitive tactics and initiatives; in short, how to the firm intends to make money
11
Q
Bottom of the pyramid
A
the largest but poorest socioeconomic group of the world’s pyramid.
12
Q
Externalities
A
side-effects of production and consumption that are not reflected in the price of a product
13
Q
Crowdsourcing
A
a process in which a group of people voluntarily performs tasks that were traditionally completed by a firm’s employees.
14
Q
Stakeholders
A
individuals or groups who can affect or are affected by the actions of the firm
15
Q
AFI strategy framework
A
a model that links three interdependent strategic management tasks- analyze, formulate, and implement- that, together, help firms conceive of and implement a strategy that can improve performance and result in competitive advantage.
Analysis: Getting started
1. What is the strategy and why is it important?
2. The strategic management process
3. External analysis: industry infrastructure, competitive forces, and strategic groups
4. Internal analysis: resources, capabilities, and activities
5. Competitive advantage and firm performance
Formulation: business strategy
6. Business strategy: differentiation, cost leadership, and integration
7. Business strategy: innovation and strategic entrepreneurship
Formulation: corporate strategy
8. Corporate strategy: vertical integration and diversification
9. Corporate strategy: acquisitions, alliances, and networks
10. Global strategy: competing around the world
Implementation
11. Organizational design: structure, culture, and control
12. Corporate governance: business ethics, and strategic leadership
16
Q
Strategic management process
A
method by which managers conceive of and implement a strategy that can lead to a sustainable competitive advantage
17
Q
Vision
A
a statement about what an organization ultimately wants to accomplish; it captures the company’s aspiration.
18
Q
Strategic intent
A
the staking out of a desired leadership position that far exceeds a company’s current resources and capabilities
19
Q
Mission
A
description of what an organization actually does- what its business is- and why it does it; can be customer-oriented or product-oriented
20
Q
Strategic commitments
A
actions that are costly, long term oriented, and difficult to reverse
21
Q
Organizational values
A
ethical standards and norms that govern the behavior of individuals within a firm or organization
22
Q
Strategic (long range) planning
A
a rational, top down process through which management can program future success; typically concentrates strategic intelligence and decision-making responsibilities in the office of the CEO.
23
Q
Scenario planning
A
strategy planning activity in which managers envision different what if scenarios to anticipate plausible futures
24
Q
Dominant strategic planning
A
the strategic option that managers think most closely matches reality at a given point in time
25
Strategic initiative
any activity a firm pursues to explore and develop new products or processes, new markets, or new ventures.
26
Emergent strategy
any unplanned strategic initiative undertaken by mid-level employees of their own volition.
27
Intended strategy
the outcome of a rational and structured top-down strategic plan
28
Unrealized strategy
part or all of a firm’s strategic plan that falls by the wayside due to unexpected events
29
Realized strategy
combination of intended and emergent strategy
30
Innovation
the commercialization of any new product, process, or idea, or the modification and recombination of existing ones. To drive growth, innovation also needs to be useful and successfully implemented
31
Hypercompetition
a situation in which competitive intensity has increased and periods of competitive advantage have shortened, especially in new, technology based industries, making any competitive advantage a string of short lived advantages.
32
Absorptive capacity
a firm’s ability to understand, evaluate, and integrate external technology developments.
33
Paradigm shift
a situation in which a new technology revolutionizes an existing industry and eventually establishes itself as the new standard.
34
Discontinuities
periods of time in which the underlying technological standard changes.
35
Thin markets
a situation in which transactions are likely not to take place because there are only a few buyers and sellers, who have difficulty finding one another.
36
Long tail
business model in which companies can obtain a large part of their revenues by selling a small number of units from among almost unlimited choices
37
Disruptive innovation
an innovation that leverages new technologies to attack existing markets from the bottom up
38
Industry life cycle
the 4 different stages- introduction, growth, maturity, and decline- that occur in the evolution of an industry over time.
39
Network effects
the positive effect that one user of a product or service has on the value of that product for other users.
40
Standard
an agreed upon solution about a common set of engineering features and design choices; aka dominant design
41
Architectural innovation
a new product in which known components, based on existing technologies, are reconfigured in a novel way to attack new markets.
42
Radical innovation
an innovation that draws on novel methods or materials, is derived from either an entirely different knowledge base or from the recombination of the firm’s existing knowledge base with a new stream of knowledge, or targets new markets by using new tech.
43
Incremental innovation
an innovation that squarely builds on the firm’s establish knowledge base, steadily improves the product or service it offers, and targets existing markets by using existing technology.
44
Strategic entrepreneurship
the pursuit of innovation using the tools and concepts available in strategic management
45
Product innovations
new products, such as the airline, EV’s, ipod
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Process innovations
new ways to produce existing products or delivering services
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Entrepreneurship
the process by which people undertake economic risk to innovate- to create new products, processes, and sometimes new organizations
48
Business level strategy
the actions managers take in their quest for competitive advantage when competing I a single product market.
49
Strategic position
a firm’s strategic profile based on value creation and cost. The goal is to create as large a gap as possible between the value the firm’s product/service creates and the cost required to produce it V-C
50
Productivity frontier
relationship that captures the result of performing best practices at any given time; the function is convex (bowed outward) to capture the trade off between value creation and production cost.
51
Conglomerate
an organization that combines two or more business nits, often active in different industries, under one overarching corporation.
52
Ambidextrous organization
an organization able to balance and harness different activities in trade off situations.
53
Economies of scope
savings that come from producing two or more outputs at less cost than producing each output individualy, despite using the same resources and technology
54
Integration strategy
business level strategy that successfully combines differentiation and cost leadership activities
55
Diseconomies of scale
increase in cost per unit when output increases
56
Minimum efficient scale
output range needed to bring down the cost per unit as much as possible, allowing a firm to stake out the lowest cost position that is achievable through economies of scale.
57
Economies of scale
decrease in cost per unit as output increases
58
Strategic tradeoffs
situations that require choosing between a cost or value position, necessary because higher value tends to require higher cost.
59
Differentiation strategy
generic business strategy that seeks to create higher value for customers than the value that competitors create, by delivering products or services with unique features while keeping the firm’s cost structure at the same or similar levels
60
Mass customization
the manufacture of a a large variety of customized products or services at relatively low unit cost.
61
Focused differentiation strategy
same as the differentiation strategy except with a narrow focus on a niche market
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Focused cost leadership strategy
same as the cost leadership strategy except with a narrow focus on a niche market
63
Scope of competition
the size- narrow or broad- of the market in which a firm chooses to compete
64
Cost-leadership strategy
generic business strategy that seeks to create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers.
65
Value
the dollar amount a consumer would attach to a good or service; the consumer’s maximum willingness to pay; sometimes also called reservation price
66
Economic value created
difference between value IV and cost C, or V-C; sometimes called economic contribution
67
Balanced scorecard
strategy implementation tool that harnesses multiple internal and external performance metrics in order to balance financial and strategic goals
68
Total return to shareholders
return on risk that includes stock price appreciation plus dividends received over a specific period
69
Risk capital
capital provided by shareholders in exchange for an equity share in the company; it cannot be recovered if the firm goes bankrupt
70
Profit
difference between price charged and cost to produce
71
Consumer surplus
difference between the value a consumer attaches to a good or service and what he or she paid for it (V-P)
72
Opportunity cost
the value of the best forgone alternative use of the resources employed
73
Core competencies
unique strengths, embedded deep within a firm, that allow a firm to differentiate its products and services from those of its rivals, creating higher value for the customer or offering products and services of comparable value at a lower cost.
74
Resource based view
a model that sees resources as key to superior firm performance. if a resource exhibits VRIO attributes, the resource enables the firm to gain and sustain a competitive advantage.
75
SWOT analysis
a framework that allows managers to synthesize insights obtained from an internal analysis of the company’s strengths and weaknesses (S and W) with those from an analysis of external opportunities and threats (O and T).
76
Social complexity
a situation in which different social and business systems interact with one another
77
Causal ambiguity
a situation in which the cause and effect of a phenomenon are not readily apparent.
78
Path dependence
a situation in which the options one faces in the current situation are limited by decisions made in the past.
79
Resource flows
the firm’s level of investments to maintain or build a resource
80
Resource stocks
the firm’s current level of intangible resources.
81
Dynamic capabilities perspective
a model that emphasizes a firm’s ability to modify and leverage its resource base in a way that enables it to gain and sustain competitive advantage in a constantly changing environment
82
Strategic activity system
the conceptualization of a firm as a network of interconnected activities.
83
Support activities
firm activities that add value indirectly, but are necessary to sustain primary activities.
84
Primary activities
firm activities that add value directly by transforming inputs into outputs as the firm moves a product or service horizontally along the internal value chain
85
Tangible resources
resources with physical attributes, which thus are visible
86
Intangible resources
resources that do not have physical attributes and thus are invisible
87
Value chain
the internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value. Primary activities directly add value; support activities add value indirectly
88
Resource heterogeneity
assumption in the resource based view that a firm is a bundle of resources and capabilities that differ across firms
89
Resource immobility
assumption in the resource based view that a firm has resources that tend to be “sticky” and that do not move easily from firm to firm
90
Organized to capture value
part of VRIO... the characteristic of having in place an effective organizational structure and coordinating systems to fully exploit the competitive potential of the firm’s resources and capabilities
91
Costly to imitate resource
part of VRIO... a resource is costly to imitate if firms that do not possess the resource are unable to develop or buy the resource at a comparable cost
92
Rare resource
one of the 4 criteria of VRIO... a resource is rare if the number of firms that possess it is less than the number of firms it would require to reach a state of perfect competition
93
Valuable resource
one of the four key criteria in the VRIO framework; a resource is valuable if it allows the firm to take advantage of an external opportunity and/or neutralize an external threat.
94
VRIO framework
a theoretical framework that explains and predicts firm level competitive advantage. A firm can gain a competitive advantage if it has resources that are valuable (V), rare (R), and costly to imitate (I); the firm must also organize (O) to capture the value of the resource.
95
Entry Barriers
obstacles that determine how easily a firm can enter an industry. Entry barriers are often one of the most significant predictors of industry profitability.
- High entry barriers can correspond to high industry profitability
Threat of entry is high when:
- Customer switching costs are low
- Capital requirements are low
- Incumbents do not possess: proprietary technology, established brand equity
- New entrants expect that incumbents will not or cannot retaliate.
96
Structure-conduct-performance SCP model
a framework that explains differences in industry performance.
it identifies 4 different industry types:
1. Perfect competition
2. Monopolistic competition
3. Oligopoly
4. Monopoly
- Fragmented industries tend to be less profitable than consolidated ones.
97
Power of Suppliers
bargaining power of suppliers captures pressures that industry suppliers can exert on an industry, and therefore a company’s, profitability.
- Powerful suppliers can raise the cost of production by demanding higher prices or delivering lower quality goods.
The power of Suppliers is high when:
- Incumbent firms face significant switching costs when changing suppliers
- Suppliers offer products that are differentiated
- There are no readily available substitutes for the products or services that the supplier offer
- Suppliers can credibly threaten to forward integrate into the industry
98
Five Forces Model
a framework proposed by Porter that identifies five forces that determine the profit potential of an industry and shape a firm’s competitive strategy.
Ex. Five forces in airlines v. soft drinks:
- Porter calls airline industry a zero star industry because each of the 5 forces is strong, leading to inferior industry performance.
• No loyalty amongst customers, just want cheapest flight
• Switching costs are low
• Low entry barriers
• Strong supplier power (providers of engines, planes, etc.)
• Easy substitutes (drive instead)
- Soft drinks: opposite... one of the most profitable industries. Porter says 5 star industry because each of the 5 forces is weak...which leads to high industry performance
• High barriers to entry because of the strong brand equity of Coke/Pepsi
• Loyal consumers, Pepsi or Coke fan...dont switch back and forth
• Limited power of suppliers
• Weak power of buyers- price is generally always the same, not cheaper at Walmart or discount stores.
99
Industry
a group of companies offering similar services or products. It makes up the supply side of the market, while customers make up the demand side.
100
PESTEL model
a framework that categorizes and analyzes an important set of external forces (political, economic, sociocultural, tech, ecological, legal)that might impinge upon a firm. These forces are embedded in the global environment and can create both opportunities and threats for firms
- Apply the PESTEL model to organize and asses the impact of external forces on the firm
- Political, Economic. Socio cultural, technology, ecological and legal
101
Political (PESTEL)
Describes the processes and actions of government bodies that can influence the decisions and behavior of firms
102
Economic (PESTEL)
```
mostly macroeconomic... managers need to consider how the following 5 macros can affect firm strategy:
• Growth rates
• Interest rates
• Levels of employment
• Price stability
• Currency exchange rate
```
103
Sociocultural (PESTEL)
Captures society’s cultures, norms, and values. Constantly fluctuating, which means they’re constantly creating new trends, threats, opportunities, etc.
104
Technological factors (PESTEL)
Capture the application of knowledge to create new processes and products. Recent examples of innovations are the EV and the iPad. Tech advancements are constantly changing and at a fast pace and can create serious disadvantages/advantages depending on what side of the innovation you’re on.
105
Legal (PESTEL)
Captures the outcomes of the political processes as manifested in laws, mandates, regulations, and court decisions- these can all have a direct impact on the firms bottom line and ultimately their strategy.
106
Ecological (PESTEL)
Concern broad environmental issues such as the natural environment, global warming, and sustainable growth. Natural and business world can no longer be separated, they’re inexplicably linked and manager must acknowledge that.
107
Power of Buyers
this concerns the pressure buyers can put on the margins of producers in an industry by demanding a lower price or higher quality good.
Threat of Substitute: the idea that products or services available from outside the given industry will come close to meeting the needs of current customers.
The power of buyers is high when:
- There are few large buyers
- Each buy purchases large quantities relative to the size of a single seller
- The industry’s products are standardized or undifferentiated commodities
- Buyers face little or no switching costs
- Buyers can credibly threaten to backward integrate into the industry
108
Mobility barriers
industry specific factors that separate one strategic group from another
109
Rivalry Amongst Competitors
describes the intensity with which companies in an industry jockey for market share and profitability.
The rivalry among existing competitors is high when:
- There are many competitors in the industry
- The competitors are roughly of equal size
- Industry growth is slow, zero, or negative
- Exit barriers are high
- Products and services are direct substitutes
110
Exit barriers
obstacles that determine how easily a firm can leave an industry.
111
Strategic group model
a framework that explains firm differences in performance in the same industry by clustering different firms into groups based on a few key strategic dimensions.
112
Strategic group
the set of companies that pursue similar strategy within a specific industry
113
Industry convergence
a process whereby formerly unrelated industries begin to satisfy the same customer need.
114
6th Force, Strategic Role of Complements
- Complement: a product, service, or competency that adds value to the original product offering when the two are used in tandem.
- Complementor: a company that provides a good or service that leads customers to value your firm’s offering more when the two are combined.
- Ex: iTunes and the iPhone/iPod... sell the hardware, the software compliments the hardware.
115
Perfect competition (SCP)
a. Many small firms
b. Firms are price takes
c. Commodity product
d. Law entry barriers
116
Monopolistic competition (SCP)
a. Many firms
b. Some pricing power
c. Differentiated product
d. Medium entry barriers
117
Oligopoly (SCP)
a. Few large firms
b. Some pricing power
c. Differentiated product
d. High entry barriers
118
Monopoly (SCP)
a. One firm
b. Considerable pricing power
c. Unique product
d. Very high entry barriers
