Ch. 1 - 5 Flashcards
What is the difference between a companies strategy and its business model?
Business model: management’s story for how the strategy will be a money maker. Without ability to deliver good profitability, strategy is not viable and survival of company is in doubt. 2 key elements: its customer value proposition, and its profit formula.
Strategy: is management’s action plan. Answers how are we going to get there, and is integrated array of considered choices.
What overall is a company strategy?
Consists of the competitive moves and business approaches that managers are employing to compete successfully, improve performance, and grow the business.
How do planned and emergent issues affects a companies strategy?
Proactive/deliberate/planned strategy are elements that are planned and continued from prior periods (previously planned).
Reactive/emergent strategy consists of new strategy elements that emerge as changing conditions warrant. New strategy elements that emerge as managers react adaptively to changing circumstances. Reactions to unanticipated developments and fresh market conditions. As needed, unplanned reactions to unanticipated conditions - unexpected strategic reactions or adjustments (developed on the fly)
- What is the difference between a companies mission statement and its strategic vision?
Strategic vision portrays a company’s aspirations for its future (“where we are going”), whereas a company’s mission describes its purpose and it’s present business (“who we are, what we do, and why we are here”)
- What makes a well stated objective (5&6)
a. Strategic
b. Financial?
Objectives (concrete and measurable) organization’s performance targets - convert the vision and mission into specific performance targets. Well-stated objectives are specific, quantifiable or measurable, and contain a deadline for achievement. Cannot manage what you cannot measure. What gets measured gets done.
2 different performance target types.
financial objectives: management’s targets for financial performance
E.g. X percent increase in annual revenues
strategic objectives: outcomes related to company’s marketing standing and competitive vitality, and future business prospects.
E.g. Wining an x percent market share
7/11. What is the difference between strategy making hierarchy of single business and diversified company – need to understand corporate strategy?
In single business corporate and business strategy merge into one level business strategy managed by CEO and top execs because strategy of whole business involves one distinct line of business.
Diversified company how to gain advantage from managing group of businesses - cross business synergies, what businesses to hold or divest, which new markets to enter, what mode of entry (e.g. Acq, strategic alliance, franchising)
7,8,9,10 – Differentiate between different levels of strategy hierarchy
- corporate, business, functional, operational
Corporate - orchestrated by CEO and other senior execs (multi business strategy - how to gain advantage from managing a group of businesses), scope of firm, acq/diversification strategies.
Business - strategy of each line of business managed by general manager - how to strength market position and competitive advantage
Functional - led by heads of major functional activities (R&D, production, sales and marketing, finance) within each business (provide game plan for managing details of particular activities that support business strategy)
Operational - operatinng strategies within each business, managing specific lower-echelon activities (e.g. quality control, materials purchasing), led by brand managers, operating managers of plants, distribution/purchasing centres
- What are the obligations of a board of directors in the strategy making and executing process?
Senior managers have lead responsibility for crafting and executing strategy.
Cf.
Board responsible for effective corporate governanc - overseeing the strategic management process, exercise strong oversight: 4 important obligations in best interests of shareholders and other stakeholders.
1) Critically appraise company’s strategic direction, strategy and business approaches. Asking probing questions, drawing on business acumen, and independent judgment.
2) Evaluate caliber of senior execs strategic leadership skills, determining whether current CEO is doing a good job of strategic leadership.
3) exec compensation - institute compensation plan for top execs - agent of the shareholders.
4) overseeing company’s financial accounting and financial reporting practices - ensuring fair and accurate reporting.
- What does a strategic group map tell you about an industry and its rivals?
Reveals which companies are close competitors and which are distant competitors. Displays different market or competitive positions that rival firms occupy in the industry.
Which are stronger or weakly positioned, size of circles proportionate to size of firms.
- VRIO framework – Basically four tests, which two of them have to do with the power of a companies competitive advantage and which two have to do with sustainability of companies competitive advantage?
VRIO: 4 tests of a resource’s competitive power.
2 to support competitive advantage (1st two):
Valuable - i.e. better customer value proposition and/or profit formula.
Rare - something rivals lack? Held by only a small number of firms.
2 to determine whether can be sustained in face of active competition:
Imitation - hard to copy (difficult and costly for competitor to imitate)
Organization: “Is the firm organized, ready, and able to exploit the resource/capability?”
- Which two factors inhibit rivals’ ability to imitate a firms capabilities?
Social complexity and casual ambiguity are two factors that inhibit copying.
Social complexity: company culture, interpersonal relationships among managers/R&D teams, trust based relationships with customers or suppliers
Causal ambiguity: hard to figure out how contributes to competitive advantage and exactly what to copy (e.g. Web of intricate processes enabling new drug discovery)
Also, unique resources and built over time (brand)
What is distinctive competence?
A competitively important activity that a company performs better than its rivals - it thus represents a competitively superior internal strength.
- What’s the payoff for doing a thorough SWOT analysis?
Drawing conclusions from the SWOT analysis about the company’s overall situation and translating these conclusions into strategic actions for improvement.
E.g. Match strategy to internal strengths and market opportunities & to correct weaknesses, and to defend/lessen impact against external threats.
- Which of the following is the best example of an opportunity (if everyone gets this right, we all get 2 extra bonus points)?
Look at drivers to think about market opportunities.
Openings to win market share from rivals.
Sharply rising buyer demand for industry’s products.
Serving additional customer groups or market segments.
Expanding into new geographic markets.
Expanding product line to meet broader range of customer needs.
Utilising existing skills or know-how to enter new product lines/businesses.
Online sales via Internet.
Integrating forward or backward.
Falling trade barriers in attractive foreign markets.
Acquiring rival firms or companies with attractive expertise or capabilities.
Entering into alliances or joint ventures to expand market coverage or boost competitive capability.
Openings to exploit emerging new technologies.
- What are the three main areas in the value chain where significant differences in costs can occur between competing firms?
TBC
Supply Chain Management
Operations
Distribution
Other areas in value chain: Sales and Maeketing Service Product R&D, Technology & Systems Dev HR Management General Administration
