WEEK 2 Flashcards
(54 cards)
Two most used tools for analyzing the external environment
- Porter’s divorce model
- Stakeholder analysis
Oligopolistic industries
are highly consolidated industries with a few large competitors
Stakeholder
An entity that has an interest in the organization
Stakeholder models
Are used to analyze the management issues from stakeholders that are likely to impact the firm’s financial performance
Michael Porter’s model of value chain
focuses on the firm’s strengths and weaknesses.
1.Primary Activities (Directly related to product/service creation and delivery)
*Inbound logistics – Receiving, storing, and managing inputs.
*Operations – Transforming inputs into outputs.
*Outbound logistics – Storing and distributing finished goods.
*Marketing and sales – Promoting and selling products.
*Service – post-sale support to ensure product efficiency.
- Support Activities (Aid primary activities for efficiency)
*Procurement – Acquiring inputs (excluding their physical movement).
*Human resource management – Recruiting, training, and compensating employees.
*Technology development – Managing tools, hardware, software, and processes for productivity.
*Infrastructure – General management functions like finance, legal, planning, and quality assurance.
to have a CA, the sources must be
rare, valuable, durable and inimitable
Some resources are not readily imitable because of
-Tacit resources: resources of an intangible nature that can the readily be codified.
-Path dependent: when end results depend greatly on the events that took place leading up to the outcome.
-Socially complex resources: resources or activities that emerge through the interaction of multiple individuals.
-Causal ambiguity: the relationship between a resource and the outcome it produces is poorly understood.
Core competencies
: unique strengths that differentiate a company strategically
Prahalad & Hamel’s Core Competency Test
1.Does it provide a significant competitive advantage?
2.Does it extend beyond a single business and apply across multiple areas?
3.Is it difficult to replicate by competitors?
risks of core rigidities
- Overcommitment to outdated skills/resources.
- Hinders the development of new core competencies.
- Reduces attractiveness to other disciplines.
- Can demotivate employees.
- Limits the firm’s overall flexibility and innovation.
Dynamic capabilities
In fast-changing markets, firms need the ability to reconfigure their organizational structure and routines to adapt to new opportunities
Balanced Scorecard Perspectives
To measure strategic progress, firms assess:
1.Financial performance
2.Customer satisfaction
3.Internal operations
4.Innovation & learning
Strategic Intent
A company’s long-term, ambitious goal that builds upon and expands its core competencies.
Bridging the Capability Gap
Companies should identify resource and capability gaps between their current and desired future positions.
Capital rationing
allocation of a finite quantity or resource over different possible uses (a company doesn’t have unlimited money to spend, so it has to carefully choose how to allocate its funds among different projects).
Net Present Value (NPV
Calculates the present value of cash inflows minus outflows using a discount rate. A positive NPV indicates that a project generates wealth.
Internal Rate of Return (IRR)
Determines the discount rate at which the NPV becomes zero, helping to assess project profitability
Discounted payback period
the time required to break even on a project using discounted cash flows.
Real options
the application of stock option valuation methods to investments in nonfinancial assets (such as R&D projects).
Stock call options
give an investor the right to buy stock at a fixed price in the future
Drawbacks of Real Options
1.Tech investments don’t always align with financial market assumptions, making real options challenging to apply.
2.Investment success depends on firm-specific factors, such as market position, resources, and strategy.
Disadvantages of Traditional Quantitative Methods
1.Over-reliance on numerical analysis: Many markets do not yet exist, making it hard to quantify potential outcomes.
2.Bias against long-term or risky projects: Many high-potential innovations may be rejected due to uncertain immediate returns.
3.Undervaluing a project’s strategic importance: Traditional models may fail to capture the broader value a project brings to the firm.
Screening Questions
managers use structured questions to discuss project costs and benefits.
The Aggregate Project Planning Framework
Helps firms map their R&D portfolio by considering:
- Risk levels
- Resource commitment
- Cash flow timing
