Ch 1 Flashcards
4 factors that contribute to the success of top corporate performers
- entrepreneurial
- market oriented
- used valuable competencies
- offered innovative products and services
Strategic management process
- analyze external environment and organization to determine: resources, capabilities, core competencies. internal and external analysis => mission & vision => strategy
- strategy: effective actions and simultaneous integration of strategic formulation/implementation => positive performance
- performance
4 characteristics of current comp. landscape
- pace of change = relentless & ever-changing (boundaries = challenge)
- conventional sources not as effective
- new mind-set: flexibility, speed, innovation, integration, evolution
- perilous business world
hypercompetition
reality
inherent instability & change (from maneuvering combatants)
hypercompetition based on:
- price-quality positioning
- competition creates new know how & est. 1st mover advantage
- competition to protect/invade est. mkts.
2 primary drivers of the competitive landscape
- global economy
2. technology
Global economy
associated w/ opportunities & challenges
- EU & emerging economies
- challenges firms to evaluate mkt
globalization (led to):
- Incr. range of opportunities & Incr. performance standards
- culturally sensitive decisions & Incr. complexity
- “multi-polar” world
- liability of foreigness
- major factor: growth in influence of emerging mkts (BRIC, VISTA, Mexico, Thailand)
Technology & Technological changes
- Technology diffusion & disruptive technologies
- Info age
- Increased knowledge intensity
Technology diffusion & disruptive technologies
- diffusion % Incr. a lot over 15-20 years
- perpetual innovation => shorter product life cycles
- main adv.: speed to mkt w/ innovative products
- decr. adv. of patents (1-1.5 years to get info about competitors)
- disruptive technologies => new industry or harm incumbents
Info age
- flexibility to small firms
- decr. costs & Incr. accessibility
Increased knowledge intensity
- knowledge = info + intelligence + expertise
=> basis of technology & its application - intangible resource - must use quickly & productively
=> gain via experience, observation, inference - use w/ strategic flexibility & continuously learn
- develop + acquire + integrate => capabilities => apply to get comp. adv.
- knowledge stock = necessary for innovation
I/O model
focuses outside the firm
must imitate each other
I/O model: performance determined by range of industry properties
- economies of scale
- barriers to entry
- diversification
- product differentiation
- degree of concentration
- market frictions
I/O model: 4 underlying assumptions
- external environ. imposes pressures & constraints that determine above average % strategies
- competitors control similar resources & pursue similar strategies
- resources = highly mobile => any difference = short lived
- decision makers = rational & committed + profit-max behaviors
I/O model: porter’s 5 forces
profit = function(interaction of forces)
ID attractiveness & most advantageous position
cost leadership strategy
differentiation strategy
“zero-sum” =
unattractive industry
I/O model: 6 components
- study external environment => primary determinant of %
- locate attractive industry - potential for > avg %s
- ID strategy formulation
- develop/acquire assets & skills to implement strategy
- strengths => strategy implementation
- superior returns
resource based model
focuses inside the firm
core competencies seen in org. functions
differences in performance due to unique resources & capabilities => not industry characteristics
resource based model: 3 categories of resources
- physical
- human
- capital
resource based model: 3 assumptions
- acquire different resources and develop unique capabilities based on combo and use
- resources and capabilities are not highly mobile across firms
- differences in resources and capabilities = basis of competitive advantage
resource based model: 4 elements: resources => adv.
- valuable
- rare
- costly to imitate
- nonsubstitutable
resource based model: 6 components
- resources
- capabilities
- adv.
- attractive industry
- strategy form. & implement.
- superior returns
vision & mission key purpose
inform stakeholders 1) what firm is, 2) what seeks to accomplish, 3) who it seeks to serve
vision
enduring, short & concise
tied to environments
foundation for mission
mission
concrete, est. individuality, inspiring/relevant
deals more directly w/ product mkts, customers, lower mgrs.
stakeholder influence
level of influence incr. with dependence
stakeholders: can manage to be competitive adv.
- ID & understand all important stakeholders
2. prioritize - power = most crucial criterion
3 classifications of stakeholders
- capital market stakeholders
- product market stakeholders
- organizational stakeholders
capital market stakeholders
- shareholders prefer minimal debt
- major suppliers of capital (lenders)
expect firm to preserve & enhance wealth
product market stakeholders
- customers - most valuable
- suppliers
- host communities
- unions
organizational stakeholders
- e’ees - original stakeholders
- managers
- non-managers
building knowledge => strategic leaders
strategic leaders
decisive, committed to nurturing, and helping create value
visionary leadership motivates e’ees to expend extra effort => Incr. performance
not just CEOs; delegation
impacted by org. culture - the social energy that drives (or fails to drive) the org.
effective strategic leaders:
- innovative
- leverage partnerships
- global mind-set
- long hrs. & ambiguous decisions
- provide vision
profit pools
predict outcomes of strategic decisions
4 steps to ID profit pools
- define boundaries
- estimate overall size
- estimate size of value-chain activity
- reconcile calculations
____ indicates what the firm will/won’t do and shows how firm differs from competitors
strategy
no competitive advantage is permanent
life determined by competitor’s speed to copy
exploiting competitive advantage is important for earning above average returns - w/o, earn at best avg. returns
the march of globalization
product of firms competing against one another in an increasing number of global economies
liability of foreignness
the risks of participating outside of a firm’s domestic markets in the global economy
amount of time required to learn how to compete in new markets
overdiversification
rate of technology diffusion
speed at which new technologies become available and are used
specifies that industry/segment in which company chooses to compete has a stronger influence on performance than do the choices managers make inside their organizations
I/O model
earn above average returns by producing standardized goods or services at costs below competitors
cost leadership strategy
earn above average returns by producing differentiated goods or services for which customers are willing to pay a price premium
differentiation strategy
determining boundaries = challenge example
entertainment industry
nature of global economy reflects realities of a hypercompetitive environment and challenges individual firms to evaluate markets. Example?
Starbucks & GE
Example of disruptive technology
Uber
Challenges firms to find most attractive industry to compete
I/O model
example of zero sum
Mcdonalds
_________ exemplifies I/O model imitation and poor performance
airline industry
few airlines have not imitated
southwest developed unique and valuable resources and capabilities
assumes that a firm’s strategy is a set of commitments and actions flowing from the characteristics of the industry
I/O model
assumes that each organization is a collection of unique resources and capabilities
Resource based model
resources have a greater likelihood of turning into an advantage when…
formed into a capability
many resources are ______ and _______ over time
imitable; substitutable
developed by CEO
vision
points firm in direction of where it would like to be in the years to come
vision
stretches and challenges people
vision
reflect firm’s values and aspirations and are intended to capture the heart/mind of each employee and stakeholders
vision
Mission: stronger ethical standards => _______
incr. profitability
critical aspects of the analysis required to engage in strategic actions that help to achieve strategic competitiveness and earn above average returns
mission & vision
the challenge of potential conflicts with stakeholders lessens with…
above average returns
capital market stakeholders: shareholders rights grounded in laws governing…
private property and enterprise
product market stakeholders: customers prefer investors receive…
a minimum return when the quality and reliability of firm’s products are improved, but without high prices
product market stakeholders: suppliers seek….
loyal customers willing to pay highest sustainable prices
product market stakeholders: host communities
represented by government entities with which the firm must deal, influence via laws/regulation
product market stakeholders: union officials
secure jobs, under highly desirable working conditions
organizational stakeholders: employees
expect dynamic, stimulating, and rewarding work environment
when do profit pools predict outcomes of strategic decisions?
before implementing decisions
how do profit pools help?
can anticipate and focus on profit growth through mapping industry’s profit pool
help recognize actions to take
analysis of profit pools
ID and understand primary sources of profits in industry
rational approach firms use to achieve strategic competitiveness and earn above average returns
strategic management process
Strategic management process: almost all have _________
ethical dimensions = ethics are revealed by culture
I/O model: 2 business level strategies
cost leadership
differentiation
