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BEC I and II > 9. Business Strategy and Market Analysis > Flashcards

9. Business Strategy and Market Analysis Flashcards

1
Q

What are 2 elements that make up the larger economic environment?

A

Economic systems

Economic market structures

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2
Q

What must an entity do to be successful?

A
  • Understand that environment

* Develop and execute a strategic plan to succeed in that environment

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3
Q

What is the definition of strategic planning?

A

Sequence of interrelated procedures for determining an entity’s long-term goals and identifying the best approaches for achieving those goals.

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4
Q

What are general steps in strategic planning process?

A
  • Establish mission, values, and goals
  • Assess the environment
  • Establish objectives
  • Formulate strategies
  • Implement strategies
  • Evaluate and control activities
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5
Q

What is mission statement?

A

An expression of the purpose and range of activities of the entity

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6
Q

What does value establish?

A

The underlying benefits that govern operations and how relationships with other parties are conducted.

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7
Q

What is goals?

A

General purpose toward which entity endeavors are directed (mid-to-long-term)

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8
Q

What must an entity analyze for the external and internal environment?

A
  • Macro-environment (external)
  • Industry (external)
  • Internal: SWOT and relationship between environment and entity
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9
Q

What is objective? What are they typically related to?

A

State the desired measurable results to be achieved.

Profitability, growth, market share, innovation.

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10
Q

What are the 3 generic strategies by Porter?

A
  • Cost leadership
  • Differentiation
  • Focus
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11
Q

What is PEST analysis and what is it concerned about?

A
  • a means of analyzing the external macro-environment (political, economic, social, and technological) in which an entity operates or may operate.
  • a framework for this environmental analysis.
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12
Q

What is Five Forces used for?

A

determining the nature, operating attractiveness, and probable long-run profitability of a competitive industry.

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13
Q

Macro environment: What does PEST stand for?

A

Political, Economic, Social, Technology factors.

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14
Q

Macro environment: PEST: what are examples of P?

A
  • Political stability
  • Ways and extent government intervenes in economy
  • Labor laws
  • Environmental laws
  • Tax policy
  • Trade restrictions (tariffs, quotas..)
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15
Q

Macro environment: PEST: what are examples of E?

A
  • Economic growth rate and related demographics
  • Interest rates
  • Inflation rates
  • Currency exchange rates
  • Others
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16
Q

Macro environment: PEST: what is Social element concerned with? Examples?

A

With culture, values, and demographics.

  • Population growth rate
  • Age distribution
  • Educational attainment and career attitude
  • Emphasis on health and safety
  • Others
17
Q

Macro environment: PEST: what are examples of T?

A
  • Level of research and development
  • State of technology infrastructure
  • State of automation capability
  • Level of technology “savvy”
  • Rate of technology change
  • Other
18
Q

Macro environment: What does PESTEL stand for?

A

Political, economic, social, technology, environment, legal

19
Q

Industry Analysis: What is industry?

A

Group of entities that produce goods or provide services which are close substitutes and which compete for the same customers

20
Q

Industry Analysis: what can be used to analyze industry?

A

Five Forces factor analysis by Porter.

21
Q

Industry Analysis: What are five forces?

A
  • Threat of new entrants into the market: new entrants increase competition and reduce market attractiveness
  • Threat of substitute goods/services: presence or possibility of substitutes reduces ability to set prices and reduce market attractiveness
  • Bargaining power of buyers: greater the bargaining their power, the less ability providers has to determine characteristics and price; reduce market attractiveness
  • Bargaining power of suppliers: greater their bargaining power, the less ability of buyer to influence availability and cost of inputs; reduce market attractiveness
  • Intensity of rivalry: greater the rivalry, the less attractive the market
22
Q

Entity/environment relationship: What can be used to analyze?

A

SWOT analysis: develops profile of internal strengths and weaknesses and external opportunities and threats

23
Q

Entity/environment relationship: What are SW?

A
  • Strengths: resources and capabilities that provide relative competitive advantage in the market (patten, desirable locations…)
  • Weaknesses: short-comings that place entity at relative competitive disadvantage in the market (poor location, unfavorable reputation…)
24
Q

Entity/environment relationship: What are OT?

A
  • Opportunities: Chances to benefit from new or unmet demand in the market
  • Threats: Chances of adverse consequences as results of external forces
25
Q

Entity/environment relationship: what are SWOT matrix strategy approaches?

A
  • Strengths and opportunities: Utilize strengths to take advantage of opportunities in market
  • Weaknesses and opportunities: Pursue opportunities to overcome weaknesses
  • Strengths and threats: Utilize strengths to reduce susceptibility to external threats
  • Weakness and threats: Pursue ways to prevent from weaknesses from being overcome by threats
26
Q

Generic strategy: What is basic strategy purpose?

A

Leverage strengths to achieve objectives and goals.

27
Q

Generic strategy: what are 3 elements of Porter’s generic strategies?

A
  • Identified at higher level
  • Independent of entity
  • Independent of industry
28
Q

Generic strategy: What are Porter’s 3 strategies?

A
  • Cost leadership
  • Differentiation
  • Focus - cost leadership or differentiation applied to narrow market
29
Q

Generic strategy: what is cost leadership and objective?

A

Become low cost provider in an industry.
Ob:
*sell goods/service at average market price and earn profits higher than competitors
*Sell goods/services below average market price and gain market share

30
Q

Generic strategy: what will an entity that pursue cost leadership do?

A
  • Seek to minimize costs
  • Invest significantly in production and distribution assets
  • Have high level of expertise in product design, manufacturing and distribution
31
Q

Generic strategy: Cost leadership risks?

A
  • Other entities can achieve cost leadership
  • Improved technology enables others to produce equally low cost or lower cost
  • Multiple entities will focus on segments of industry and separately achieve lower cost in those segments
32
Q

Generic strategy: what is differentiation strategy?

A

Develop product or service that offers quality or uniqueness valued by customers.
Ob:
*Value added by uniqueness or quality permits a premium price that more than covers extra cost of goods or services

33
Q

Generic strategy: What will entities that pursue differentiation do?

A
  • Have highly skilled and creative product/services development personnel
  • Have leading edge research capabilities
  • Have strong/dedicated marketing and sales personnel
  • Have reputation for innovation, quality and service
34
Q

Generic strategy: Risk for differentiation?

A
  • Customers change preferences
  • Customer economic status changes
  • Imitation by competitors/”knock-offs”
  • Multiple firms will focus on segments of market and separately achieve greater differentiation in those segments
35
Q

Generic strategy: What is focus strategy? Objective?

A

Achieve either cost leadership or differentiation within a narrow segment of industry (niche market).
Ob: Identify a distinct subgroup within market and focus on providing goods services that meet needs of that subgroup

36
Q

Generic strategy: What will entities that pursue focus strategy do?

A
  • Have outstanding market research and understanding of target group
  • Have ability to tailor strengths in product/service development to target group
  • Have a high degree of customer satisfaction and loaylty
37
Q

Generic strategy: Risks of Focus strategy?

A
  • Smaller in size with lower in volume = little bargaining power with suppliers
  • Imitation by competitors (“knock-offs”)
  • Changes in targeted customers’ preferences or economic status
  • Industry cost leader will adapt products/services to compete in focus market
  • Other entities will carve out subgroups of target focus group
38
Q

What is an alternative strategy?

A

Resources-based model (RBM):

  • Assesses resources and capabilities of an entity
  • Bases strategy on collection of resources and capabilities to take advantage of opportunities in market
39
Q

What is PEST analysis primarily concerned with?

A

Location

BEC I and II (12 decks)

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