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Business Management > Block 5 > Flashcards

Block 5 Flashcards

1
Q

What are the chooses that complement a competitive approach and maximize the power of strategy

A
  • Offensive and defensive competitive actions
  • Competitive dynamics and the timing of strategic moves
  • Scope of operations along the industry value chain
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2
Q

State strategic offensive principles

A
  • Focusing relentlessly on building competitive advantage and then striving to convert it into sustainable advantage.
  • Applying resources where rivals are least able to defend themselves.
  • Employing the element of surprise as opposed to doing what rivals expect and are prepared for.
  • Displaying a capacity for swift, decisive, and overwhelming actions to overpower rivals.
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3
Q

What should be considered when choosing the basis for competitive attack?

A
  • Avoid directly challenging a targeted competitor where it is strongest.
  • Use the firm’s strongest strategic assets to attack a competitor’s weaknesses.
  • The offensive may not yield immediate results if market rivals are strong competitors.
  • Be prepared for the threatened competitor’s counter-response.
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4
Q

State the principle offensive strategy options

A
  • Offering an equally good/better product at a lower price
  • Leapfrogging competitors by being first to market with next generation products
  • Pursuing continuous product innovation to draw sales and market share away from less innovative rivals
  • Pursuing disruptive product innovations to create new markets
  • adopting and improving on the goods ideas of other companies (rivals or otherwise)
  • Using hit-and-run or guerilla marketing tactics to grab market share
  • Launching a pre-emptive strike to secure an industry’s limited resources/capture a rare opportunity
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5
Q

Choosing which rivals to attack is important.

State the best targets for offensive attacks

A
  • Market leaders that are in vulnerable competitive positions
  • Runner-up firms with weaknesses in areas where the challenger is strong
  • Struggling enterprise on the verge of going under
  • Small local and regional firms with limited capabilities
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6
Q

When does offensive attacks make goods sense?

A

when a firm that leads in terms of market share is not a true leader in terms of serving the market well. Signs of leader vulnerability include unhappy buyers, an inferior product line, aging technology or outdated plants, and financial problems

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7
Q

When is runner-up firms attractive target?

A

When a challenger’s resources and capabilities are well suited to exploiting their weaknesses

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8
Q

Complete the sentence.

Small firms typically have limited expertise and resources, a challenger with broader and deeper capabilities is well-positioned to raid their biggest and best customers….

A

particularly those that are growing rapidly, have increasingly sophisticated requirements, and may already be thinking about switching to a supplier with a more full-service capability.

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9
Q

What is the purpose of defensive strategies?

A
  • Lower the firm’s risk of being attacked
  • Weaken the impact of an attack that does occur
  • Influence challengers to aim their efforts at other rivals
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10
Q

What forms does defensive strategies take?

A
  • Actions to block challengers.
  • Actions to signal the likelihood of strong retaliation.
  • Good defensive strategies can help protect a competitive advantage but rarely are the basis for creating one.
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11
Q

What are the ways to block the avenues open to challengers?

A
  • Introduce new features and models to broaden product lines to close off gaps and vacant niches.
  • Maintain economy pricing (lower prices due to low production costs) to thwart lower price attacks.
  • Discourage buyers from trying competitors’ brands.
  • Make early announcements about new products or price changes to induce buyers to postpone switching.
  • Offer support and special inducements (persuasion) to customers to reduce the attractiveness of switching.
  • Challenge quality and safety of competitor’s products.
  • Grant discounts or better terms to intermediaries who handle the firm’s product line exclusively.
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12
Q

What does signaling an effective defensive strategy encompass?

A
  • Publicly announcing its commitment to maintaining its present market share.
  • Publicly committing to a policy of matching competitors’ terms or prices.
  • Maintaining a war chest of cash and marketable securities.
  • Making a strong counter-response to the moves of weaker rivals to enhance its tough defender image.
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13
Q

Why is timing important?

A
  • Knowing when to make a strategic move is as crucial as knowing what move to make.
  • Moving first is no guarantee of success or competitive advantage.
  • The risk of moving first to stake out a monopoly position versus being a fast follower or even a late mover must be carefully weighed.
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14
Q

What are the conditions that lead to first mover advantage?

A
  • When pioneering helps build a firm’s reputation and creates strong brand loyalty.
  • When a first mover’s customers will thereafter face significant switching costs.
  • When property rights protections thwart rapid imitation of the initial move.
  • When an early lead enables movement down the learning curve ahead of rivals.
  • When a first mover can set the technical standard for the industry.
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15
Q

What are potential first-mover disadvantage?

A
  • When pioneering is more costly than imitating and offers negligible experience or learning-curve benefits
  • When the products of an innovator are somewhat primitive and do not live to buyer expectations
  • When rapid market evolution allows fast followers to leapfrog a first mover’s products with more attractive next version products
  • When market uncertainties make it difficult to ascertain what will eventually succeed
  • When customer loyalty is lowed and first mover’s skills, know-how, and actions are easily copied or surpassed
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16
Q

Define horizontal scope

A

Is the range of product and service segments that a firm serves within its focal market.

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17
Q

Define vertical scope

A

Is the extent to which a firm’s internal activities encompass one, some, many, or all the activities that make up an industry’s entire value chain system, ranging from raw material production to final sales and service activities.

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18
Q

What is strategic alliance?

A

A strategic alliance is a formal agreement between two or more separate companies in which they agree to work cooperatively toward some common objective.

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19
Q

What does strategic alliance involve?

A
  • shared financial responsibility
  • joint contribution of resources and capabilities
  • shared risk
  • shared control
  • mutual dependence.
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20
Q

Complete the sentence

Strategic alliances and cooperative partnerships provide…

A

One way to gain some of the benefits offered by vertical integration, outsourcing, and horizontal mergers and acquisitions while minimizing the associated problems.

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21
Q

Why do companies and partnerships employ strategic alliances?

A

To extend their scope of operations via international expansion and diversification strategies.

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22
Q

True or false

Strategic alliances and cooperative arrangements are now a common means of narrowing a company’s scope of operations as well as serving as a useful way to manage outsourcing.

A

True

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23
Q

Strategic alliance are characterized by?

A
  • cooperative marketing
  • cooperative sales distribution
  • joint production
  • design collaboration
  • projects to jointly develop new technologies or products.
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24
Q

Elaborate on projects to jointly develop new technologies/products

A
  • They can vary in terms of their duration and the extent of the collaboration, some are intended as long-term arrangements, involving an extensive set of cooperative activities, while others are designed to accomplish more limited, short-term objectives.
  • Collaborative arrangements may entail a contractual agreement, but they commonly stop short of formal ownership ties between the partners.
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25
Q

Why and how are strategic alliances advantageous?

A
  • Strategic alliances expedite the development of promising new technologies or products.
  • Strategic alliances help overcome deficits in technical and manufacturing expertise.
  • Strategic alliances bring together the personnel and expertise needed to create new skill sets and capabilities.
  • Strategic alliances improve supply chain efficiency.
  • Strategic alliances help partners allocate venture risk sharing.
  • Strategic alliances allow firms to gain economies of scale.
  • Strategic alliances provide new market access for partners.
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26
Q

When does an alliance become strategic?

A

The following purposes are served:
- It facilitates the achievement of an important business objective.
- It helps build, strengthen, or sustain a core competence or competitive advantage.
- It helps remedy an important resource deficiency or competitive weakness.
- It helps defend against a competitive threat or mitigates a significant risk to a company’s business.
- It increases bargaining power over suppliers or buyers.
- It helps open important new market opportunities.
- It speeds the development of new technologies and/or product innovations.

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27
Q

True or false

Companies that have formed a host of alliances need to manage their alliances like a portfolio.

A

True

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28
Q

True or false
The best alliances are highly selective, focusing on value chain activities and on obtaining a specific competitive benefit. They enable a firm to build on its strengths and to learn.

A

True

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29
Q

Which function factors does companies benefit from entering alliances and partnerships?

A
  • Picking a good partner
  • Being sensitive to cultural differences
  • Recognizing that alliances must benefit both sides
  • Ensuring that both parties live up to their commitments
  • Structuring the decision making process so that actions can be taken swiftly when needed
  • Managing the learning process and then adjusting the alliance agreement over to fit new circumstances
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30
Q

Discuss picking a good partner

A

A good partner must bring complementary strengths to the relationship. A good partner needs to share the company’s vision about the overall purpose of the alliance and to have specific goals that either match or complement those of the company. Strong partnerships also depend on good chemistry among key personnel and compatible views about how the alliance should be structured and managed.

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31
Q

Explain being sensitive to cultural differences

A

Unless there is respect among all the parties for cultural differences, productive working relationships are unlikely to emerge.

32
Q

Explain recognizing that the alliance must benefit both sides

A

Information must be shared and gained, and the relationship must remain forthright and trustful.

33
Q

Explain ensuring that both parties live up to their commitments

A

Both parties must deliver on their commitments for the alliance to produce the intended benefits. The division of the work must be perceived as apportioned, and the caliber of the benefits received on both sides must be perceived as adequate.

34
Q

Explain structuring the decisions making process so that actions can be taken swiftly when needed

A

Parties need to keep up with the fast pace of technological and competitive changes.

35
Q

Explain managing the learning process and then adjusting the alliance agreement over time to fit new circumstances

A

One of the keys to long-lasting success is adapting the nature and structure of the alliance to be responsive to shifting market conditions, emerging technologies, and changing customer requirements.

36
Q

When are alliances more likely to be long-lasting?

A
  1. They involve collaboration with partners that do not compete directly, such as suppliers or distribution allies.
  2. A trusting relationship has been established.
  3. Both parties conclude that continued collaboration is in their mutual interest, perhaps because new opportunities for learning and emerging.
37
Q

State reasons for entering a strategic alliances

A

A. When seeking global market leadership.
- Enter critical country markets quickly.
- Gain inside knowledge about unfamiliar markets and cultures through alliances with local partners.
- Provide access to valuable skills and competencies in concentrated geographic locations.
B. When staking out a strong industry position.
- Establish a stronger beachhead in the target industry.
- Master new technologies and build expertise and

38
Q

State the drawbacks of strategic alliances and partnerships

A
  • Cultural clash and integration problems due to different management styles and business practices.
  • Anticipated gains may fail to materialize due to an overly optimistic view of the synergies or a poor fit in terms of the combination of resources and capabilities.
  • There is a risk of becoming dependent on other companies for essential expertise and capabilities.
  • A partner will gain access to a company’s proprietary knowledge base, technologies, or trade secrets, enabling the partner to match the company’s core strengths and costing the company its hard-won competitive advantage.
39
Q

Disclose the key advantages of using strategic alliances rather than arm’s length transactions to manage to outsource

A
  • The increased ability to exercise control over the partners’ activities.
  • Greater willingness for the partners to make relationship-specific investments.
40
Q

How to make a strategic alliance work?

A
  • They create a system for managing their alliances.
  • They build relationships with their partners and establish trust.
  • They protect themselves from the threat of opportunism by setting up contractual safeguards such as noncompete clauses.
  • They commit to their partners and see that they do the same.
  • They make learning a routine part of the management process.
41
Q

What is short-term partnership?

A

Are successful often become the basis for much more extensive collaborative arrangements. Even when strategic alliances are set up with the hope that they will become long-term engagements, they have a better chance of succeeding if they are phased in so that the partners can learn how they can work together most fruitfully.

42
Q

What does blue-ocean strategy offer?

A

Growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand.

43
Q

What does blue-ocean strategy seek?

A

Gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new market segment that renders existing competitors irrelevant and allows a company to create and capture altogether new demand.

44
Q

What are the two distinct types of market space does the blue ocean strategy view the business universe ?

A
  1. Where industry boundaries are well defined, the competitive rules of the game are understood, and companies try to outperform rivals by capturing a bigger share of existing demand. In these markets, intense competition constrains a company’s prospects for rapid growth and superior profitability since rivals move quickly to either imitate or counter the successes of competitors.
  2. Where the industry does not really exist yet, is untainted by competition, and offers wide-open opportunities for profitable and rapid growth if a company can create new demand with a new type of product offering.
45
Q

What does the blue-ocean strategy provide?

A

Blue-ocean strategies provide a company with a great opportunity in the short run. But they don’t guarantee a company’s long-term success, which depends more on whether a company can protect the market position it opened and sustain its early advantage.

46
Q

Define merger

A

Is the combining of two or more companies into a single corporate entity, with the newly created company often taking on a new name.

47
Q

Define acquisation

A

Is a combination in which one company (the acquirer) purchases and absorbs the operations of another (the acquired).

48
Q

What does a horizontal mergers and acquisitions provide?

A

An effective means for firms to rapidly increase the scale and horizontal scope of their core business.

49
Q

State the 5 objectives of merger and acquisitions strategies

A

To achieve:
1. Creating a more cost-efficient operation out of the combined companies.
2. Expanding a company’s geographic coverage.
3. Extending the company’s business into new product categories.
4. Gaining quick access to new technologies or other resources and capabilities.
5. Leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities.

50
Q

How can horizontal mergers and acquisitions strengthen a firm’s competitiveness/

A
  1. By improving the efficiency of its operations.
  2. By heightening its product differentiation.
  3. By reducing market rivalry.
  4. By increasing the company’s bargaining power over suppliers and buyers.
  5. By enhancing its flexibility and dynamic capabilities.
51
Q

Why do mergers and acquisitions sometimes fail to produce anticipated results/

A
  • Cost savings may prove smaller than expected.
  • Gains in competitive capabilities may take substantially longer to realize or may never materialize at all.
  • Efforts to mesh the corporate cultures can stall due to formidable resistance from organization members.
  • Key employees at the acquired company can quickly become disenchanted and leave.
  • The morale of company personnel who remain can drop to disturbingly low levels because they disagree with newly instituted changes.
  • Differences in management styles and operating procedures can prove hard to resolve.
  • The managers appointed to oversee the integration of a newly acquired company can make mistakes in deciding which activities to leave alone and which activities to meld into their own operations and systems.
52
Q

What is vertical scope?

A

Is the extent to which a firm’s internal activities encompass the range of activities that make up an industry’s entire value chain system, from raw-material production to final sales and service activities.

53
Q

True or false

Expanding a firm’s vertical scope by means of a horizontal integration strategy provides a way to strengthen the company’s position in its core market.

A

False

Expanding a firm’s vertical scope by means of a vertical integration strategy provides a way to strengthen the company’s position in its core market.

54
Q

What is a vertical integrated firm?

A

Is one that performs value chain activities along more than one stage of an industry’s value chain system.

55
Q

What can vertical integration strategy achieve?

A

A vertical integration strategy can expand the firm’s range of activities backward into sources of supply and/or forward toward end users.

56
Q

How can a firm pursue vertical integration?

A

A firm can pursue vertical integration by starting its own operations in other stages of the vertical activity chain or by acquiring a company already performing the activities it wants to bring in-house.

57
Q

State the types of vertical integration strategies?

A
  • Full integration
  • Partial integration
  • Tapered integration
58
Q

Explain full integration

A

Is when a firm participates in all stages of the vertical chain

59
Q

Explain partial integration

A

Is when a firm builds positions only in selected stages of the vertical chain.

60
Q

Explain tapered integration

A

Is is when a firm uses a mix of in-house and outsourced activity in any given stage of the vertical chain.

61
Q

State the benefits of vertical integration strategy

A
  • Adds materially to a firm’s technological capabilities.
  • Strengthens the firm’s competitive position.
  • Boosts the firm’s profitability.
62
Q

What does backward integration involve?

A

Involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

63
Q

How can a backward integration be cost saving and profitable strategy?

A

Must be able to:
- Achieve the same scale economies as outside suppliers. (low-cost based competitive advantage)
- Match or beat suppliers’ production efficiency with no drop-off quality. (differentiation-based competitive advantage)

64
Q

When does the company improve its cost position and competitiveness (backward integration)

A

By performing a broader range of industry value chain activities internally rather than having such activities performed by outside suppliers.

65
Q

True or false

Vertical integration can lower costs by increasing supplier power.

A

False

Vertical integration can lower costs by limiting supplier power.

66
Q

What can backward integration facilitate?

A

They can also lower costs by facilitating the coordination of production flows and avoiding bottlenecks and delays that disrupt production schedules.

67
Q

What can backward integration produce?

A

Backward vertical integration can produce a differentiation-based competitive advantage when performance activities internally contribute to better-quality product or service offering, improve the caliber of customer service, or enhances the performance of the final product.

68
Q

What are the reasons for integrating backwards?

A
  • Reduction of supplier control and power.
  • Reduction in costs of major inputs.
  • Assurance of the supply and flow of critical inputs.
  • Protection of proprietary know-how.
69
Q

What does forward integration involve?

A

Entry into value chain system activities closer to the end user.

70
Q

How can forward integration enhance competitiveness?

A
  • To lower overall costs by increasing channel activity efficiencies relative to competitors.
  • To increase bargaining power through control of channel activities.
  • To gain better access to end users.
  • To strengthen and reinforce brand awareness.
  • To increase products differentiation.
71
Q

State the advantages of a vertical integration strategy

A
  • It can add materially to a company’s technological capabilities.
  • It can strengthen the firm’s competitive position.
  • It can boost its profitability.
  • When there are few suppliers and when the item being supplied is a major component, vertical integration can lower costs by limiting supplier power.
  • It can lower costs by facilitating the coordination of production flows and avoiding bottlenecks and delays that disrupt production schedules.
72
Q

Disclose the disadvantage of a vertical integration strategy

A
  • It raises a firm’s capital investment in the industry, thereby increasing business risk.
  • A company that obtains parts and components from outside suppliers can always shop the market for the newest, best, and cheapest parts, whereas a vertically integrated firm with older parts and technology may choose to continue making suboptimal parts rather than face the high costs of writing off undepreciated assets.
  • It can result in less flexibility in accommodating shifting buyer preferences because integrating forward or backward locks a firm into relying on its own in-house activities and sources of supply.
  • It may not enable a company to realize economies of scale if its production levels are below the minimum efficient scale.
  • It poses all kinds of capacity-matching problems.
  • Integration forward or backward typically calls for developing new types of resources and capabilities.
73
Q

What is outsourcing?

A

Outsourcing involves contracting out certain value chain activities that are normally performed in-house to outside vendors.

74
Q

When does outsourcing certain value chain activities makes strategic sense?

A
  • An activity can be performed better or more cheaply by outside specialists.
  • The activity is not crucial to the firm’s ability to achieve sustainable competitive advantage.
  • Outsourcing improves organizational flexibility and speeds up time to market.
  • It reduces the company’s risk exposure to changing technology and buyer preferences.
  • It reduces the company’s risk exposure to changing technology and buyer preferences.
75
Q

Disclose the risks of outsourcing value chain activities

A
  • A company will farm out the wrong types of activities and thereby hollow out its own capabilities.
  • The lack of direct control because it may be difficult to monitor, control, and coordinate the activities of outside parties via contracts and arm’s-length transactions alone.
  • The lack of incentives for outside parties to make investments specific to the needs of the outsourcing firm’s value chain.

Business Management (6 decks)

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