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OBS 310 v2 > Block 3 > Flashcards

Block 3 Flashcards

1
Q

What are the three best indicators of how well a company’s strategy is working?

A
  1. Whether the company is achieving its stated financial and strategic objectives.
  2. Whether its financial performance is above the industry average.
  3. Whether it is gaining customers and increasing its market share.
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2
Q

How do you evaluate a firm’s internal situation?

A

The following questions should be asked:
1. How well is the firm’s present strategy working?
2. What are the firm’s competitively important resources and capabilities?
3. Is the firm able to take advantage of market opportunities and overcome external threats to its well-being?
4. Are the firm’s prices and costs competitive with those of key rivals, and does it have an appealing customer value
proposition?
5. Is the firm competitively stronger or weaker than key rivals?
6. What strategic issues and problems merit front-burner managerial attention?

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3
Q

What are some specific indicators of strategic success? (5)

A
  • Trends in the firm’s sales and earnings growth.
  • Trends in the firm’s stock price.
  • The firm’s overall financial strength.
  • The firm’s customer retention rate.
  • The rate at which new customers are acquired.
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4
Q

What are Competitive assets?

A

They:

  • Are the firm’s resources and capabilities
  • Are the determinants of its competitiveness and ability to succeed in the marketplace.
  • Are what a firm’s strategy depends on to develop sustainable competitive advantage over its rivals.
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5
Q

Define a resource:

A

A resource is a competitive asset that is owned or controlled by a company.

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6
Q

Define a capability:

A

A capability or competence is the capacity of a firm to perform an internal activity competently. Capabilities are developed and enabled through the deployment of a company’s resources.

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7
Q

Define Resource and capability analysis:

A

Resource and capability analysis is a powerful tool for sizing up a firm’s competitive assets and determining whether they can support a sustainable competitive advantage over market rivals.

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8
Q

What does bad financial performance show?

A

Sluggish financial performance and second-rate market accomplishments almost always signal weak strategy, weak execution, or both.

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9
Q

What are the two types of company resources?

A
  1. Tangible resources
  2. Intangible resources
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10
Q

What type of tangible resources does a company have? (8)

A
  • Physical resources: land and real estate; manufacturing plants, equipment, or
    distribution facilities.
  • Financial resources: cash and cash equivalents; marketable securities.
  • Technological assets: patents, copyrights, production technology.
  • Organizational resources: IT and communication systems (satellites, servers, workstations, etc.); other planning, coordination and control systems.
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11
Q

What type of intangible resources does a company have? (8)

A
  • Human assets and intellectual capital: The education, experience, knowledge, and talent of the workforce, cumulative learning, and tacit knowledge of employees.
  • Brands, company image, and reputational assets: brand names, trademarks, product or company image, buyer loyalty and goodwill.
  • Relationships: alliances, joint ventures, or partnerships that provide access to
    technologies, specialized know-how, or geographic markets
  • Company culture and incentive system: the norms of behavior, business principles, and ingrained beliefs within the company.
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12
Q

What is an organizational capability?

A
  • Is the intangible but observable capacity of a firm to perform a critical activity proficiently using a related combination (cross-functional bundle) of its resources.
  • Is knowledge-based, residing in people and in a firm’s intellectual capital or in its organizational processes and systems, emboding tacit knowledge.
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13
Q

Define a resource bundle:

A

A resource bundle is a linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities.

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14
Q

What does the VRIN test ask about a resource?

A

The VRIN Test for sustainable competitive advantage asks if a resource is Valuable, Rare, Inimitable, and Non-substitutable.

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15
Q

What questions does the VRIN test have about the competitive power of a firm’s resources?

A

● Is the resource (or capability) competitively valuable?
● Is the resource rare—is it something rivals lack?
● Is the resource hard to copy (inimitable)?
● Is the resource invulnerable to the threat of substitution of different types of resources and capabilities (non-substitutable)?

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16
Q

Explain ‘Value’ of the VRINE model:

A

The review of the Value Chain of the organisation, looking for assets that have optimised certain pieces of the chain. In most of the cases, these assets can be considered inside the Value concept of VRINE.

Another interpretation of the Value concepts is for those resources/capabilities that increase the perceived value of the customer.

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17
Q

Explain ‘Rarity’ of the VRINE model:

A

The rarity concept of the VRINE framework requires that the resource/capability labelled meets the short supply and persistence over time condition.

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18
Q

Explain ‘INIMITABILITY and/or
NON-SUBSTITUTABLE’ of the VRINE model:

A

Is the resources/capability difficult to imitate? Or Does this resources/capability generate a cost disadvantage to the competing organisations trying to obtain, develop, or duplicate it?

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19
Q

Explain ‘Exploitable’ of the VRINE model:

A

Is the organisation structured, built and able to exploit the resources/capability?

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20
Q

Explain how the VRINE model creates different levels of advantage for a firm:

A

Valuable + Rare = Temporary Competitive Advantage

Valuable + Rare +Difficult to Imitate = Sustainable Competitive Advantage

Valuable + Rare+ Difficult to Imitate +Organised to Exploit =
Core Competence

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21
Q

What does social complexity and casual ambiguity create for a firm:

A

Social complexity (company culture etc.) and causal ambiguity are two factors that inhibit the ability of rivals to imitate a firm’s most valuable resources and capabilities.

Causal ambiguity makes it very hard to figure out how a complex resource contributes to competitive advantage and therefore exactly what to imitate.

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22
Q

Define dynamic capability:

A

A dynamic capability is the ongoing capacity of a firm to modify its existing resources and capabilities or create new ones by:

  • Improving existing resources and capabilities incrementally.
  • Adding new resources and capabilities to the firm’s competitive asset portfolio.
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23
Q

What are some threats to resources and capabilities?

A

● Rivals providing better substitutes over time
● Capabilities decaying from being neglected
● Disruptive competitive environment change.

24
Q

How can a firm manage capabilities dynamically?

A

● Attending to the ongoing modification of existing competitive assets.
● Taking advantage of any opportunities to develop totally new kinds of capabilities.

25
Q

Explain a SWOT Analysis:

A

● It Is a powerful tool for sizing up a firm’s:
- Internal strengths (the basis for strategy)
- Internal weaknesses (deficient capabilities)
- Market opportunities (strategic objectives)
- External threats (strategic defenses)

26
Q

Define the different types of competencies a firm can have:

A
  • Competence:
    Is an activity that a firm has learned to perform with proficiency—a true capability
  • Core competence:
    Is a proficiently performed internal activity that is central to a firm’s strategy and competitiveness.
  • Distinctive competence:
    Is a competitively valuable activity that a firm performs better than its rivals.
27
Q

What are some Potential Strengths and Competitive Assets:

A
  • Resources and capabilities that are valuable and rare
  • Resources and capabilities that are hard to copy and good substitutes are not available
  • Competencies that are well matched to industry key success factors.
  • Ample financial resources to grow the business.
  • Strong brand-name image or company reputation.
  • Other cost advantages over rivals.
  • Attractive Customer Base
  • Superior technological skills
  • Superior product quality
28
Q

Define ‘weakness’ for the firm and give three types of weaknesses:

A

A weakness (competitive deficiency):

● Is something a firm lacks or does poorly (in comparison to others) or a condition that puts it at a competitive disadvantage in the marketplace.

  • Types of weaknesses
    ● Inferior skills, expertise, or intellectual capital
    ● Deficiencies in physical, organizational, or
    intangible assets
    ● Missing or competitively inferior capabilities in key areas
29
Q

Describe the characteristics of market opportunities:

A
  1. An absolute “must pursue” market:
    Represents much potential but is hidden in “fog of the future”
  2. A marginally interesting market:
    Presents high risk and questionable profit potential
  3. An unsuitable or mismatched market:
    Is best avoided as the firm’s strengths are not matched to market factors
30
Q

What are the two types of threats a company can experience?

A
  • Normal course-of-business threats
  • Sudden-death (survival) threats
31
Q

What should a firm do when considering threats?

A
  • Identify the threats to the firm’s future prospects.
  • Evaluate what strategic actions can be taken to neutralize or lessen their impact.
32
Q

What are some Potential Weaknesses and Competitive Deficiencies:

A
  • No clear strategic vision
  • No well-developed or proven core competencies.
  • No distinctive competencies or competitively superior resources.
  • Lack of attention to customer needs.
  • Inferior product or service features
  • Insufficient financial resources
  • Too much debt
  • Narrow product line
  • Weak brand image or reputation
33
Q

What are some Potential Market Opportunities:

A
  • Meeting sharply rising buy demand for
    the industry’s product.
  • Serving additional customer groups or
    market segments.
  • Expanding into new geographic markets.
  • Expanding the company’s product line to
    meet a broader range of customer needs.
34
Q

What are some Potential External Threats to a Company’s Future Profitability:

A
  • Increasing intensity of competition
    among industry rivals—may squeeze profit margins.
  • Slowdowns in market growth.
  • Likely entry of new competitions.
  • Growing bargaining power of customers or suppliers.
  • A shift in buyer needs and tastes
  • Restrictive foreign trade policies
  • Costly new regulatory requirements
35
Q

What can be gained from the company’s SWOT analysis?

A
  1. Conclusions regarding the company’s overall business situation.
    - How attractive/unattractive are aspects of the company’s situation?
  2. Implications for improving company’s strategy:
    - Use company strengths as foundation for the company’s strategy.
    - Pursue market opportunities best suited for company’s strengths.
    - Correct weaknesses and deficiencies.
36
Q

What are some sign’s of a firm’s competitive strength:

A

● Its prices and costs are in line with rivals
● Its customer-value proposition is competitive and cost effective.
● Its bundled capabilities are yielding a sustainable competitive advantage.

37
Q

Explain the concept of a company’s value chain:

A

Identifies the primary activities and related support activities that create customer value. The value chain analysis facilitates a comparison, activity-by-activity, of how effectively and efficiently a firm delivers value to its customers relative to its competitors.

38
Q

List the primary activities and costs of the value chain:

A
  • Supply chain management
  • Operations
  • Distribution
  • Sales and marketing
  • Service
  • Profit margin
39
Q

List the support activities and costs of the value chain:

A
  • Product R&D, Technology, and system development
  • Human resource management
  • General Administration
40
Q

Define a value chain analysis:

A

Facilitates a comparison, activity-by-activity, of how effectively and efficiently a firm delivers value to its customers, relative to its competitors.

41
Q

Describe the value chain analysis process:

A
  • Segregates the firm’s operations into different types of primary and secondary activities to identify the major components of its internal cost structure.
  • Uses activity-based costing to evaluate the activities.
  • Does the same for significant competitors.
42
Q

Describe the industry value chain:

A

Industry value chain:
● The firm’s internal value chain
● The value chains of industry suppliers
● The value chains of channel intermediaries

43
Q

What are the effects of the industry value chain:

A
  • Costs and margins of suppliers and channel partners can affect prices to end consumers.
  • Activities of channel partners can affect industry sales volumes and customer satisfaction.
44
Q

Define and explain Benchmarking:

A

Benchmarking entails comparing how different companies, both inside and outside the industry, perform various value chain activities and then identifying the best means of performing an activity and using those best practices to improve a company’s own internal activities.

45
Q

What are some sources of benchmarking information?

A

● Reports, trade groups, analysts, and customers.
● Visits to benchmark companies.
● Data from consulting firms.

46
Q

What are areas in the total value chain system for a firm, to look for ways to improve its efficiency and effectiveness:

A

● The firm’s own internal activity segments.
● The suppliers’ part of the value chain system.
● The forward channel portion of the value chain system.

47
Q

How can a firm improve internally performed value chain activities?

A
  • Implement best practices throughout the company.
  • Eliminate cost-producing activities altogether by redesigning products and revamping the internal value chain.
  • Relocate high-cost activities to areas where they can be performed more cheaply.
  • Outsource activities to lower-cost vendors or contractors.
48
Q

How can you improve the effectiveness of the customer value proposition and enhance differentiation?

A
  • Implement best practices for quality, marketing and customer service
  • Reallocate resources to activities that address buyers’ most important purchase criteria
  • Adopt new technologies that spur innvatioon, improve design and enhance creativity
49
Q

Give ways to improve supplier-related value chain activities

A
  • Pressure suppliers for lower prices.
  • Switch to lower-priced substitute inputs.
  • Collaborate closely with suppliers to identify mutual cost-saving opportunities.
  • Work with suppliers to enhance the firm’s differentiation.
50
Q

How can you improve value chain activities of distribution partners? (Cost Based)

A

By Achieving cost-based competitiveness

  • Pressure forward channel allies to reduce their costs and markups.
  • Collaborate with forward channel allies to identify win-win opportunities to reduce costs.
  • Change to a more economical distribution strategy by switching to cheaper distribution channels or integrating forward.
51
Q

Explain how to enhance differentiation through activities at the forward end of the value chain system: (Differentiation based)

A
  • Engage in cooperative advertising and
    promotions with forward channel allies.
  • Use exclusive arrangements with downstream sellers or other mechanisms that increase their incentives to enhance delivered customer value.
  • Create and enforce standards for downstream activities and assist in training channel patners in business practices.
52
Q

What are two options for translating proficient performance of value chain activities into competitive advantage?

A

Option 1: They can contribute to greater efficiency and lower costs relative to competitors.

Option 2: They can provide a basis for differentiation, so customers are willing to pay relatively more for the company’s goods and services.

53
Q

What are the 5 steps in the competitive strength assessment process:

A
  1. Make a list of the industry’s key success factors and measures of competitive strength or weakness.
  2. Assign weights to each competitive strength measure based on its perceived importance.
  3. Score competitors on each competitive strength measure and multiply by each measure by its corresponding weight.
  4. Sum the weighted strength ratings on each factor to get an overall measure of competitive strength for each company.
  5. Use overall strength ratings to draw conclusions about the company’s net competitive advantage or disadvantage and to take specific note of areas of strength and weakness.
54
Q

Explain the strategic implications of competitive strength assessment:

A
  • The higher a firm’s overall weighted strength rating, the stronger its overall competitiveness versus rivals.
  • The rating score indicates the total net competitive advantage for a firm relative to other firms.
  • Firms with high competitive strength scores are targets for benchmarking.
  • The ratings shw how a firm cmpares against rivals, factor by factor.
  • Strength scores can be useful in deciding what strategic moves to make
55
Q

What type of issues need strategic priority and why is it important for a firm to compile them? (10)

A

Two types, namely “how to” and “should we?” issues:

Strategic priority “how to” issues:
● How to meet challenges of new foreign competitors.
● How to combat the price discounting of rivals.
● How to both reduce high costs and prepare for price reductions.

Compiling a list of problems and roadblocks
creates a strategic agenda of problems that merit prompt managerial attention.

Strategic priority “should we” issues
● Expand rapidly or cautiously into foreign markets?
● Reposition the firm to move to a different strategic group?
● Counter increasing buyer interest in substitute products?

A good strategy must contain ways to deal with all the strategic issues and obstacles that stand in the way of the company’s financial and competitive success in the years ahead.

OBS 310 v2 (6 decks)

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