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CH 1-5 Flashcards

1
Q

List the goals of strategy

A
  1. Strategic competitiveness
  2. Sustainable competitive advantage
  3. Above average returns
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2
Q

Define strategic competitiveness

A

companies ability to formulate and implement a value-creating strategy

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3
Q

Define sustainable competitive advantage

A

company that develops and implements a strategy that competitors cannot duplicate or is too costly to imitate

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4
Q

Define above average returns

A

returns above what investors expect in comparison to other investments with similar risk

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5
Q

Examples of strategy

A

Boeing and Airbus: From 2001-2005 Airbus’s strategy won the competitive advantage when it created an aircrafted that seated 550+ passengers but only served 35 large aiports. Boeing responded with a strategy focused on smaller planes that served more airports and gained supremacy again.

McDonalds: used to have profitability/growth driven by market saturation. Now they focus on growth using their existing stores. Changed strategy.

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6
Q

Define strategy

A

integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

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7
Q

List the requirements of a strategy

A

Pursue a long term mission and vision
Impacts long term profitability
Involves multiple functional areas

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8
Q

Old competitive landscape vs. New Competitive landscape

A

old = characterized by market stability

new = characterized by:

  • economies of scale
  • advertising budgets aren’t as effective
  • new organizational forms/relationship (joint venture, alliance, M&A)
  • rapid change
  • focus on innovation/flexibility vs traditional
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9
Q

Change in competitive landscape has led to ______

A

Hypercompetition

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10
Q

Define hypercompetition

A

extremely intense rivalry among firms

  • increasingly competitive moves
  • inherent market instability/change
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11
Q

List the drivers of the competitive landscape

A
  1. Technology

2. Global economy (globalization)

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12
Q

SWOT is ___

A

DEAD

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13
Q

What do the S&W now stand for

A 
Resources
Capabilities
Core competencies
Competitive advantage
VRIO
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14
Q

What do the O&T now stand for

A

General environment
Industry environment
Competitive environment

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15
Q

Define the Industrial Organization (I/O) Model

A

the EXTERNAL environment determinant of a firm’s strategic action

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16
Q

Define the Resource Based Model

A

a firm’s UNIQUE RESOURCES and CAPABILITIES are the critical determinants of strategic competitiveness

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17
Q

I/O Model states that

A

the industry a firm chooses has a stronger influence on performance than do the choices that managers make

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18
Q

List the I/O Model strategies

A

Cost leadership

Differentiation

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19
Q

Resource-based Model states that

A

a firm should choose to enter a certain industry based on its resources/capabilities

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20
Q

according to the resource based model, a resource/capability must be

A

valuable, rare, costly to imitate, not substitutable

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21
Q

Define vision

A
  • picture of what the firm ultimately wants to achieve
  • the foundation for the mission
  • the responsibility of the leader
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22
Q

Define mission

A
  • specific business in which the firm intends to compete and customers it intends to serve
  • more concrete than vision
  • deals more with product markets and customers
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23
Q

List the types of stakeholders

A
  1. Capital market
  2. Product market
  3. Organizational
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24
Q

Capital market stakeholders

A

shareholders, banks, etc.

  • expect returns to commiserate with the risk accepted by investment
  • higher dependency relationship relates to how significant the response
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25
Q

Product market stakeholder

A

customers, suppliers, communities, unions

-all benefit due to competitive battles

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26
Q

Organizational stakeholders

A

employees

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27
Q

Steps of the Strategic Management Process

A
  1. Collect info/knowledge to help determine what type of strategy would be effective and how it could be best implemented (external environment/internal organization)
  2. After studying external and internal environments, the firm has the information it needs to form a vision and mission
    - -articulate the goal the firm is trying to accomplish
    - -inform stakeholders what that goal is
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28
Q

Segments of General Environment

A 
Global
Technological
Political/Legal
Demographic
Economic
Sustainable Physical
Sociocultural
"Gabby Talks Politics During Every Single Supper"
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29
Q

External environment consists of the ____ and ____ environments

A

Competitor

Industry (Threat of new entrants, Power of suppliers, Power of buyers, Product substitutes, Intensity of rivalry)

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30
Q

Define General Environment

A

dimensions in the broader society that influence an industry and the firms within it

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31
Q

Demographic segment

A

age, population size, geographic distribution, ethnic mix income distribution

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32
Q

Economic segment

A

inflation, interest rates, trade, budget, savings rate, GDP

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33
Q

Political/Legal segment

A

laws, deregulation, policies, lobbying, regulation, antitrust laws

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34
Q

sociocultural segment

A

women in workplace, workplace diversity, attitudes about quality of work, shift in work/career preferences, shifts in product/service preferences, diverse & aging workplace,

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35
Q

technological segment

A

product innovation, applications of knowledge, R&D expenditures, new communication technologies, growth of internet

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36
Q

global segment

A

important political events, critical global niche markets, newly industrialized nations, different cultural/institutional attributes, growth of informal economy

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37
Q

Sustainable physical (environment) segment

A

energy consumption, energy sources, renewable energy, environment footprint, water availability, environmentally friendly products, reacting to natural or man made disaster

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38
Q

Define the industry environment

A

set of factors directly influencing a firm and its competitive actions and competitive responses

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39
Q

List the different elements that influence a firm (industry)

A
  • -threat of new entrants
  • -power of suppliers
  • -power of buyers
  • -threat of product substitutes
  • -intensity of rivalry among competitors

“Sally really buys supplies everywhere”

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40
Q

General vs Industry vs Competitor Environment

A

General - focused on future
Industry - factors that influence a firm’s profitability within its industry
Competitive - focusing on predicting the dynamics of competitors’ actions, responses, and intentions

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41
Q

Define Industry

A

a group of firms producing products that are close substitutes
ex: Tobacco industry (cigarettes, juul, etc) and nicotine patches, Nicorette could be combined to become the oral fixation industry

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42
Q

List Porter’s Five Forces

A
  • threat of new entrants
  • bargaining power of suppliers
  • bargaining power of buyers
  • threat of substitutes
  • intensity of rivalry among competitors
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43
Q

Threat of new entrants requires ____

A

barriers to entry

  • economies of scale
  • product differentiation
  • capital requirements
  • switching costs
  • access to distribution channels
  • cost disadvantages independent of scale
  • government policy
  • expected retaliation
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44
Q

Define economies of scale

A

marginal improvements in efficiency that a firm experiences as it incrementally increases in size

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45
Q

Define product differentiation

A

unique products
customer loyalty
products at competitive prices
—essentially, the products you buy regardless of price but you prefer over another brand

46
Q

Define capital requirements

A

in some industries you require a lot of products to build your business (facilities, inventory, marketing, availability of resources)

47
Q

Define switching costs

A

one time costs customers incur buying from a different supplier

  • new equipment, retraining employees
    ex: you have to get out of a cell phone contract
48
Q

Define distribution channel access

A

stocking or shelf space, price breaks

ex: Yoplait and Chobani have to pay for shelf space

49
Q

Define cost disadvantages independent of scale

A
  • proprietary technology
  • favorable access to raw materials
  • desirable locations
50
Q

Define expected retaliation

A

responses by existing competitors may depend on a firm’s present stake in the industry

51
Q

Define government policy

A

licensing and permit regulations, deregulation of industry

ex: Dodd Frank Act Deregulation, Environmental protection by EPA

52
Q

Supplier power increases when…

A
  • suppliers are large and few in number
  • substitutes not available
  • customer diversification
  • supplier goods are critical to buyer’s marketplace success
  • supplier’s products have high switching costs
  • supplier poses a threat to integrate further into buyer’s industry
53
Q

buyer power increases when…

A
  • buyer are large and few in number
  • buyer purchases a large portion of the industry’s total output
  • buyer’s purchases = significant portion of supplier revenue
  • buyer switching costs are low
  • buyers can pose a threat to integrate backwards in supplier’s industry
54
Q

context of internal analysis

A

Resources + Resource = Capabilities + Core Competencies (3-4) → Competitive Advantage

55
Q

Context of Internal Analysis

A
  • Maintain a “Global Mindset”
  • Analyze firm’s resources and capabilities (and how to leverage these to create value)
  • A firm’s core competencies creates and sustains its competitive advantage
56
Q

How does a firm create value

A

by exploiting core competencies or competitve advantages, firms create value
-value is created by bundling and and leveraging firm resources and capabilities

57
Q

Define Competitive Advantage

A

When one firm creates more value than another firm

58
Q

Foundation of a competitive advantage

A

Resources, capabilities, and core competencies

59
Q

How do firm’s effectively bundle and leverage resources

A

firms must understand what the customer values

60
Q

What are the two types of resources?

A

Tangible and Intangible

61
Q

Define and list tangible resources

A

assets that can be seen and quantified

  • financial
  • physical
  • technological
  • organizational
62
Q

Define and list intangible resources

A

assets rooted in the firm’s history and that have accumulated over time

  • human
  • innovation/creativity
  • reputation
63
Q

Financial resources

A

cash
capacity to raise equity
borrowing capacity

64
Q

Physical resources

A

plant and facilities
favorable manufacturing locations
access to raw materials

65
Q

Technological resources

A 
stock of technology like trade secrets
innovative product processes
patents
copyright
trademark
66
Q

organizational resources

A

firm’s formal reporting structure

formal planning, controlling, and coordinating systems

67
Q

Human resources

A

knowledge
trust
employee experience/skills
organizational routines

68
Q

innovation/creativity resources

A

ideas
scientific skills
innovation capacities

69
Q

reputation resources

A

brand name
quality and reliability repuation
supplier relations

70
Q

Define Capability

A

exist when resources are purposely integrated to achieve a specific task or set of tasks

71
Q

Examples of capabilities

A

Ex: Walmart developed a great MIS system early on so they could tell exactly what they sold and what more they needed. They also strategically located themselves close to distribution centers so they could easily stock up at a low cost.

Ex: Southwest’s HR routines + physical resources of planes and gates

72
Q

Define core competency

A

are capabilities that serve as a source of competitive advantage for a firm over its rivals

73
Q

Ideal number of core competencies

A

no more than 3-4

74
Q

Tools used to identify core competency

A
  1. Barney’s Four Criteria of Sustainable competive advantage (VRIO)
  2. Porter’s value chain
75
Q

Barney’s Four Criteria of Sustainable Competitive Advantage

A

Four criteria (VRIO)

  1. Valuable - does capability help take advantage of an opportunity/create value for customers?
  2. Rarity - capability currently possessed by limited number of suppliers?
  3. Inimitability - do firms without capability face cost disadvantage to develop?
  4. Nonsubstituable - does capability lack a strategic equivalent?

***A yes to all four questions = “Sustained Competitive Advantage” (goes down to Temporary Advantage, Parity, and Disadvantage)

76
Q

Porter’s Value Chain Analysis

A

allows a firm to understand the parts of its operations that creates value and those that don’t

used to understand a firm’s cost position and identify how to implement a business-level strategy

Broken down into primary and support activites

Key: create additional value without incurring significant costs and capture value that has been created

77
Q

Define primary activities

A

deal with physical creation, sale, distribution, and servicing of a product/service

  • inbound/outbound logistics
  • operations/production
  • marketing and sales
  • service
78
Q

Define support activities

A

provide assistance for the primary activities to take place

  • human resource management
  • technology development
  • resource procurement
  • administration
79
Q

Define value chain

A

proposes that each activity either adds or subtracts value for the firm.

  • activities that support core competencies = value adding = do(in house)
  • activities that require capabilties that are not core competencies = value subtracting = don’t do (outsource)
80
Q

Define Business-Level Strategyq

A

integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in SPECIFIC PRODUCT MARKETS

81
Q

In determining a business level strategy, firm must determine

A

who (the customer group is)
what (needs the customer has that the firm seeks to satisfy)
how (the firm can satisfy needs - can firm use its core competencies)

82
Q

List the different business level strategies

A 
cost leadership
differentiation
focused cost leadership
focused differentiation
Integrated cost leadership/differentiation
83
Q

Basic business level strategy matrix

A

Competitive Advantage
Cost Uniqueness

Broad Target           CL                                  D

Competitive Scope ICL/D

 Narrow Target         FCL                              FD
84
Q

Define cost leadership strategy

A

An integrated set of actions designed to produce or deliver goods or services at the lowest cost, relative to competitors with features that are acceptable to customers

  • Produces no-frills, standardized products for typical customers
  • Focuses on efficiency so costs are lower than competitors’ costs
  • Generally offers lower cost products with competitive levels of differentiation
85
Q

Examples of cost leadership

A

Greyhound Bus
Big Lots: buys “lots” of goods that don’t sell at other stores for a big discount and resell at a decent margin
Walmart

86
Q

Competitive risks of cost leadership

A
  • too much focus on one or a few value-chain activities
  • all rivals share a common input or raw material
  • imitated too easily
87
Q

Define Differentiation Strategy

A

integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them

  • Provide products with different, valued features sold at a premium price
  • ——Hinges on customers valuing differentiated features more than they value low price
  • Firms should differentiate offerings on as many dimensions as possible
  • The less similarity to competitors’ products, the more buffered a firm is from competition
88
Q

Examples of differentation strategy

A

Tiffany Jewelry
Apple
Lexus

89
Q

Risks of Differentiation Strategy

A
  • Customers decide that differences between differentiated and cost leader’s product not worth a higher price
  • Competitors offer similar products at a lower cost
  • Too high a price premium
  • Counterfeiters offer a cheap “knockoff” of a differentiated good or service (e.g., easily imitated)
  • Too much differentiation
90
Q

Define focus strategies

A

The focus strategy is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment

  • a particular buyer group (ie youths/senior citizens)
  • a different segment of a product line (ie professional painters or do-it-yourselfers)
  • a different geographic market (east or west)
91
Q

Example of focus strategies

A

Cost leadership - IKEA

Differentiation - Airstream (trailers), Babies R Us

92
Q

Risks of focus strategies

A
  • A competitor is able to focus on an even more narrowly defined market segment
  • Industry-wide competitors decide to focus on specific customer segments
  • The differences are reduced between the needs of a specific market segment and those of the rest of the industry
93
Q

Define Integrated CL/D Strategy

A

firms

  • Provide relatively low cost products with valued differentiated features
  • Use primary and support activities to produce differentiated products at relatively low costs
94
Q

Risk of Integrated CL/D Strategy

A

A firm produces products that lack sufficient low cost or differentiation

95
Q

Example of Integrated CL/D Strategy

A

Southwest Airlines

  • low cost: use a single aircraft model, secondary airports, short route flights, no meals, no reserved seats
  • differentiation: focus on customer satisfaction, high level of employee dedication, focus on making flying experience fun
96
Q

Challenge with integrated CL/D Strategy

A

its risky!

potential pitfalls: “Stuck in the Middle” –> When a firm’s products are too expensive to compete with low cost producer and too undifferentiated to provide the value offered by the differentiated producer

97
Q

Competitor

A

firms operating in the same market, offering similar products, and targeting similar customers

98
Q

Competitive rivalry

A

firm-to-firm competitive actions
-ongoing set of actions and responses occurring between competitors as they contend with each other for an advantageous position

99
Q

Competitive dynamics

A

sum of all firm competitive actions

-Total set of actions and responses of all firms competing within a market

100
Q

Strategic action

A

significant commitment of a specific and distinctive resource that is irreversible
ex: Boeing’s midsized jet liner; Guess position to be more upscale

101
Q

Tactical action

A

Commitment of less specific resources, taken to fine-tune a strategy, that is reversible

ex: pricing, advertising

102
Q

Outline the essence of competitive action and response

A

industry environment –> Company A initiates a competitive action (Starbucks/Verizon) –> Industry environment is changed –> Company B (McDonalds/Sprint) initiates competitive response –> industry environment is changed again… and so on

103
Q

Strategic Groups

A

group competitors together based on how they’re similar and how they’re different

104
Q

Examples of strategic groups

A

Ferrari, Porsche, Lamborghini

Mercedes, BMW

Hyundai, Kia

Toyota, For GM, Chrysler, Honda, Nissan

105
Q

Strategic groups = ___

A

low, traditional, high, size, performance aspects of Capsim

106
Q

Competitive rivalry consists of what elements

A

High Market Commonality + High Resource Similarity = Extent of Competitive Rivals

107
Q

Define market commonality

A

increases when firms compete in similar markets

  • the more overlapping markets the higher the MC
  • eg geographic, product, customer, etc.
108
Q

Example of market commonality

A

McDonalds and Burger King –> McDonalds has a great location strategy so BK decided just to locate all of its stores close to a MCD

109
Q

Resource Similarity

A

how comparable are competitor’s tangible and intangible resources in type and amount

110
Q

Example of resource similarity

A
  • FedEx & UPS

- both have international airhubs, distribution centers, etc.

111
Q

____ MC & RS ____ likelihood of attack

A

HIgh; Reduces

  • firms are more aware of each other’s competitive moves
  • when attacked, similar firms more likely aggressively retaliate which can lock firms into mutually destructive competitive situations

ex: Blockbuster and Netflix; fast food industry participants; if UPS raises prices Fedex likely will too

112
Q

Drivers of competitive behavior

A

awareness: by managers
motivation: incentive to take action?
ability: necessary resources to attack?

MGT (4 decks)

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