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MADM 760 > Chapter 1, 2 & 3 > Flashcards

Chapter 1, 2 & 3 Flashcards

1
Q

What is the organizations mission

A

The mission is :
statement of purpose that identifies the scope of an organization’s operations and its offerings to the various stakeholders.

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2
Q

In strategic management what does strategy refer to?

A

Strategy refers to top management’s plans to develop and sustain competitive advantage so that the organization’s mission is fulfilled.

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3
Q

What is competitive advantage

A

Competitive advantage is a state where a firm’s successful strategies can’t be easily duplicated by its competitors.

Maintaining this over time can be challenging.

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4
Q

what is strategic management?

A

Strategic Management broader than strategy a process that includes top management’s analysis of the environment in which the organization operates prior to formulating a strategy, as well as the plan for implementation and control of the strategy.

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5
Q

What does a business model explain?

A

A business model explains how the organization will earn a profit in selling its goods.

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6
Q

what kind of business model do progressive firms have?

A

Progressive firms have innovative business models that extract revenue/ profits from sources not identified by competitors.

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7
Q

what are the 5 characteristics of a successful strategy

A

Five Characteristics of a Successful Strategy

  1. Understand competitive environment
  2. Understand how resources translate to strengths and weaknesses
  3. Strategy consistent with mission and goals of org
  4. Action plan for strategy designed before implemented
  5. Possible future changes for strategic control are evaluated before strategy adopted
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8
Q

what is intended strategy?

A

Intended Strategy is what management originally plans

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9
Q

what is realized strategy

A

Realized Strategy what management actually implements.

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10
Q

How does realized and intended strategies differ.

A

Intended & realized strategies typically differ because of:

a. ) unforeseen events,
b. ) better information available now than wen strategy was formulated,
c. ) an improvement in top management’s ability to assess its environment.

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11
Q

What is key to Strategy as an Art ?

A

Strategy as an art has a lack of environmental predictability and the fast pace of change render elaborate strategy planning as suspect at best.

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12
Q

What is characteristic of managers who implement strategy as art?

A

managers emphasize creativity and innovation and Strategies developed like a potter molds clay.

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13
Q

What is key to Strategy as an Science?

A

most widely recognized view of strategy, systematically assess environment and evaluate pros an cons of alternatives (scientific method)

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14
Q

What is characteristic of managers who implement strategy as science?

A

systematically assess firm’s external environment and evaluate the pros and cons of alternatives before formulating strategy.

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15
Q

What is industrial organization

A

Industrial organization (IO), a branch of microeconomics, emphasizes the influence of the industry environment on the firm.

primary influence on firm performance is the structure of the industry

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16
Q

what is the view of resource based theory?

A

Resource-based theory views performance primarily as a function of a firm’s ability to utilize its resources and emphasize the development of a distinctive competence

primary influence on firm performance is firm’s unique combo of strategic resources

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17
Q

what is the view of contingency theory?

A

Contingency theory, middle ground perspective that views organizational performance as the joint outcome of environmental forces and the firm’s strategic actions.

primary influence on firm performance is the fit between the firm and its external environment

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18
Q

Who makes the Strategic decisions ?

A

Strategic decisions are typically made by the owners in small privately-held firms.

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19
Q

What is Corporate governance ?

A

Corporate governance refers to :
a.) board of directors,
b.) institutional investors (e.g., pension and retirement funds, mutual funds, banks, insurance companies, among other money managers),
c.) large shareholders (aka blockholders)
monitor firm strategies to ensure effective management.

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20
Q

What is the Board of directors do?

A

Boards consist of officials elected by shareholders who are responsible for monitoring activities in the organization.

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21
Q

Who are the BOD responsibilities ?

A

Boards are responsible for:

  1. Evaluating top management’s strategic proposals.
  2. Establishing broad direction for the firm
  3. Selecting and determining the compensation for the chief executive
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22
Q

What are some criticism of boards?

A

Some criticisms include:
- CEO Duality
- “rubber stamping”
but many boards are becoming more responsive and assertive int heir role

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23
Q

What is CEO Duality

A

CEO Duality is when the CEO also serves as the chairman of the board—represents a potential conflict of interest

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24
Q

what is “rubber stamping”

A

Rubber stamping is when boards simply approve top management’s proposals

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25
Q

what is the Sarbanes -Oaxley Act (2002)

A

Sarbanes -Oaxley Act (2002 )Covers public firms in the United States
and requires that both the CEO and the CFO to certify every report that contains company financial statements. It restricts membership of the firm’s audit committee to outsiders and prohibits firms from extending personal loans to board members or executives

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26
Q

What are 4 Characteristics of Strategic Decisions

A

4 Characteristics of Strategic Decisions:

  1. Based on a systematic, comprehensive analysis of internal and external factors.
  2. Long-term and future-oriented—usually several years to a decade or longer.
  3. Seek to capitalize on favorable situations outside the organization.
  4. Involve choices and trade-offs.
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27
Q

who makes the strategic decisions?

A

Strategic decisions are typically made by a top management team, although the CEO alone is usually held responsible.

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28
Q

What is the global imperative for firms?

A

The basis for global involvement is comparative advantage, the idea that certain products may be produced more cheaply or at a higher quality in particular countries due to cost or technology advantages.

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29
Q

What are the steps in a case analysis?

A

When and how did the organization form?
Is the company public or private?
What is the firm’s mission?
What is the firm’s basic business model?

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30
Q

What is an industry

A

An industry is a group of companies that produce competing products or services.

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31
Q

What are critical success factors?

A

critical success factors (CSFs) are elements of the strategy that are promote but do not guarantee success within a given industry. Rivals often have these in common

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32
Q

What is a primary industry

A

A primary industry consists of a firm’s most direct competitors.

33
Q

what is a secondary industry

A

A secondary industry includes less direct rivals.

34
Q

How are industries defined?

A

use of SIC (standard industrial classification) system and now , the NAICS (North American Industry Classifcation System), used as a starting point to determine competitors within an industry. Outside sources can help define an industry, but top managers must make their own determination.

35
Q

what is market share?

A

Market share represents the proportion of industry sales attributed to a particular rival.

36
Q

How does a firm determine its market share?

A

the market share—a competitor’s share
of the total industry sale. calculations are usually based on total sales revenues of the firms in an industry . This information is often available from
public sources

37
Q

What is an alternative to marketshare ?

A

if data not available relative market share—the firm’s percentage of sales in an “industry” restricted to select competitors—is a useful measure.

38
Q

How do you Identify Industry & Competitors?

A

Use other sources and classifications (SIC & NAICS) to guide thinking, but make your own assessment.
Consider the question “Where would the firm’s customers go if the firm did not exist?” when determining competitors.
Draw a picture to illustrate firms inside and outside of the industry.
Provide market shares if possible. Compute relative market shares

39
Q

What are the life cycle states of an industry ?

A

Industry Life Cycle Stages are”

  1. Introduction
  2. Growth
  3. Shakeout
  4. Maturity
  5. Decline
40
Q

What is the Stage 1 of the industry life

A

Stage 1 introduction :

  • young industry beginning to form
  • demand output low, product/svcs awareness developing, purchasers are first time buyers
  • quick stage
41
Q

What is the Stage 2 of the industry life

A

State 2 Growth
- fewer first tiem bbuyers, purchases are upgrades or replacements, strong compositors are profitable ,weaker competitors go out of business

42
Q

What is the Stage 3 of the industry life

A

Stage 3 Shakeout

  • no industry growth
  • firm growth contingent upon resources and competitive positioning
  • small number of industry leaders
43
Q

What is the Stage 4 of the industry life

A

Stage 4 Maturity

  • maket saturated
  • all purchases are upgrades and replacments
  • growth low, negative or nonexistent
  • industry standards established
  • customer expectation consistent
44
Q

What is the Stage 5 of the industry life

A

Stage 5 Decline

  • demand for industry product/svc declines
  • costumers turn to more convenient , safer or higher quality offerings
  • firms divest business unis
  • reinvention occurs during this stage
45
Q

What’s Porter’s Five Forces Model?

A

Poter’s 5 Forces Model include:

  1. Intensity of Rivalry
  2. Threat of new Competition
  3. Threat of substitute prodcuts/svs
  4. Bargining power of buyers
  5. Bargaining power of suppliers
46
Q

What are eight factors that influence rivalry intensity

A

competition intensity factors include:

  1. concentration of competitors
  2. high fixed or storage costs
  3. slow industry growth
  4. lack of differentiation or low switching costs
  5. capacity augmented in large increments
  6. diversity of competitors
  7. high strategic steaks
  8. high exit barriers
47
Q

What’s Intensity of Rivalry Factor #1

A

Concentration of competitors
Industries with few firms tend to be less competitive, but those with many firms that are roughly equivalent in size and power tend to be more competitive, as each firm fights for dominance.

48
Q

what’s Intensity of Rivalry Factor #2

A

High fixed or storage costs
Firms with high fixed costs are most likely to cut prices when excess capacity exists because they must operate near capacity to be able to spread their overhead over more units of production.

49
Q

what’s Intensity of Rivalry Factor #3

A

Slow industry growth
Firms in industries that grow slowly are more likely to be highly competitive than those in fast-growing industries because one firm’s increase in market share must come primarily at the expense of rivals.

50
Q

what’s Intensity of Rivalry Factor #4

A

Lack of differentiation or low switching costs
The more similar the offerings among competitors, the more likely customers are to shift from one to another.
Switching costs are incurred by buyers if they switch from one competitor to another. When they are low, firms are under more pressure to satisfy customers.
When products or services are less differentiated, purchase decisions are often based on price, thereby increasing rivalry

51
Q

what’s Intensity of Rivalry Factor #5

A

Capacity augmented in large increments
If economies of scale or other factors dictate that production be augmented in large blocks, then capacity additions may lead to temporary overcapacity in the industry, and firms may cut prices to clear inventories.

52
Q

what’s Intensity of Rivalry Factor #6

A

Diversity of competitors
Companies that are diverse in their origins, cultures, and strategies often have different goals and means of competition. Such firms may have a difficult time agreeing on a set of “rules of combat” and increase rivalry.

53
Q

what’s Intensity of Rivalry Factor #7

A

High strategic stakes

Competitive rivalry is likely to be high if firms also have high stakes in achieving success in a particular industry.

54
Q

what’s Intensity of Rivalry Factor #8

A

High exit barriers
Exit barriers represent costs a firm must incur if it leaves an industry. High exit barriers increase rivalry because they keep firms in the industry.

55
Q

What’s force #2 of Porter’s Five Forces Model?

A

Threat of Entry
New entrants threaten the hold existing firms have on an industry and thereby tend to lower profits. The likelihood that prospective competitors will join an industry depends on barriers to entry.
Firms often erect entry barriers to keep potential competitors out of the industry.
Seven factors that affect the threat of entry are presented in the following slides

56
Q

What’s force #1 of Porter’s Five Forces Model?

A

Intense competition can result in price wars, advertising battles, new product introductions or modifications, and even increased customer service or warranties.
Eight factors that influence rivalry intensity are presented in the following slides

57
Q

what’s industry threat of entry factors

A

The eight factors that cause threat of entry to an industry are:

  1. Economies of scale
  2. Brand identity and product differentiation
  3. Capital requirements
  4. Switching costs
  5. Access to distribution channels
  6. Cost disadvantages independent of size
  7. Government policy
58
Q

what’s industry threat of entry factor #1

A

Economies of scale
Substantial economies of scale deter new entrants by forcing them either to enter an industry at a large scale or suffer substantial cost disadvantages associated with a small-scale operation.

59
Q

what’s industry threat of entry factor #2

A

Brand identity and product differentiation
Established firms may enjoy strong brand identification and customer loyalties that are based on actual or perceived product or service differences. Typically, new entrants must incur substantial marketing and other costs to overcome this barrier.

60
Q

what’s industry threat of entry factor #3

A

Capital requirements
Higher entry costs tend to restrict new competitors and ultimately increase industry profitability for existing competitors.

61
Q

what’s industry threat of entry factor #4

A

Switching costs
When switching costs are high, buyers often need an incentive to try a new competitor; this raises costs for the new company and acts as a barrier. When switching costs are low—typically the case when consumers try a new grocery store—change may not be difficult.

62
Q

what’s industry threat of entry factor #5

A

Access to distribution channels
Existing competitors might have distribution channel ties based on long-standing or even exclusive relationships, requiring the new entrant to create its own channels of distribution.

63
Q

what’s industry threat of entry factor #6

A

Cost disadvantages independent of size
Existing competitors may have developed cost advantages not related to firm size that cannot be easily duplicated by newcomers. These advantages discourage other firms from entering the industry.
Cost advantages that are dependent on size are economies of scale, an entry barrier discussed earlier.

64
Q

what’s industry threat of entry factor #7

A

Government policy
Governments often control entry to certain industries with licensing requirements or other regulations. Alcohol sales are regulated in many locales in the U.S. Health care providers, insurance companies, and banks must meet certain requirements in order to operate.

65
Q

What’s force #3 of Porter’s Five Forces Model?

A

Pressure from Substitute Products
Substitute products come from outside of the industry, not from competitors.
Substitutes present acceptable alternatives in some cases, but not others.

66
Q

What’s force #4 of Porter’s Five Forces Model?

A

Buyers Have Bargaining
1. Buyers are concentrated or each one purchases a significant percentage of total industry sales.
2. products that the buyers purchase represent a significant percentage of the buyers’ costs.
3. products are standard or undifferentiated.
Buyers face few switching costs.
4. Buyers earn low profits, creating pressure for them to reduce their purchasing costs.
5. Buyers have the ability to become their own suppliers (backward integration).
6. industry’s product is relatively unimportant to the quality of the buyers’ products or services.
7. Buyers have complete information

67
Q

What’s force #5 of Porter’s Five Forces Model?

A

Suppliers Have Bargaining Power

  1. The supplying industry is dominated by one or a few companies.
  2. There are few or no substitute products.
  3. The buying industry is not a major customer of the suppliers.
  4. Suppliers are capable of becoming their own customers (forward integration)
  5. Suppliers’ products are differentiated or have built-in switching costs, reducing the ability of buyers to play one supplier against another.
68
Q

What are the Limitations of Porter’s Five Forces Model

A

limitations to Porters 5 forces model include:
a ) Assumes a clear, recognizable industry and does not consider partner firms.
b. ) Assumes that large firms cannot influence the industry structure.
c. ) Assumes industry factors, not firm resources, are primary profit drivers.
d.) Difficult to apply to firms operating in multiple countries where industry environments vary considerably.

69
Q

what is Case Analysis Step 3 of Potential Profitability of the Industry

A

Apply Porter’s five forces model in detail.
Analyze the industry, not the firm. Firm-specific issues will be considered later in the SWOT analysis.
Make a judgment (positive, negative, or neutral) about the effect of each force on the potential for profits.
Provide a summary of overall industry profitability.

70
Q

what is Case Analysis Step 4 Industry Successes & Failures

A

What firms in the industry have succeeded and failed in the past? The same company may have succeeded and failed at different times in the past.
Why did these firms succeed or fail?
Based on these examples, identify any critical success factors (CSFs) for the industry.

71
Q

What are macroenvironmental forces ?

A

Macroenvironmental forces affect industries and individual firms within industries. The focus at this stage of analysis is on the industry, not the firm. they incldue (PEST):

  • Political-Legal forces
  • Economic & Ecological forces
  • Social forces
  • Technological forces
72
Q

What are macroenvironmental force: Political-Legal ?

A

Maroeviromental forces of political-legal include:

  • Outcomes of elections
  • Legislation
  • Judicial court decisions
  • Governmental agency activity
73
Q

Recent examples of macroenvironmental force: Political-Legal ?

A
  • Pension Security Act (2002)—Gives workers more freedom to diversify their investments and greater access to quality investment advice concerning their 401(k) plans.
  • CAN SPAM Act (2003)—Prescribes rules and penalties for e-mail “spammers,” although enforcement is difficult.
  • Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)—Increases regulations of U.S. financial markets and credit rating agencies.
74
Q

Recent examples of Political- lega macroenvironmental force: effects of government regulation

A

Regulation can be costly to firms, but are not always opposed. Sometimes large firms even lobby for regulations that create entry barriers.
Example: President Obama increased average gas mileage (CAFÉ) standards to 55 miles per gallon by 2025. Some analysts estimate that production costs will rise by as much as $3000 per vehicle to meet the requirement.

75
Q

What are some global regulation trends

A

Globally, regulation and protectionism rose after World War II, gradually shifting toward free trade in the late 1980s through the 2000s.
In the U.S., the trend shifted back toward greater regulation in the late 2000s, sparked by the financial crisis and the election of President Obama.

76
Q

What are macroenvironmental force: Ecological Influences ?

A

Ecological influences are part of the economic environment because they can alter cost structures in entire industries.
Ecological forces are often intertwined with political-legal forces because governments frequently attempt to manage economic development or address ecological concerns with regulations.

77
Q

What are some Key Economic Considerations

A

When the dollar declines in value, U.S. exports become less expensive but U.S. imports become more expensive, at least in the short run.
A good economy is not good for all industries. Pawn shops and discount stores often thrive during recessions.

78
Q

what is Case Analysis Steps 5-6Political/Legal & Economic Forces

A

Identify the specific political-legal (step 5) and economic/ecological (step 6) forces that affect the industry.
Specify precisely how the factors identified affect the industry.
Focus on the industry, not the firm. Specific applications to the firm come later.

MADM 760 (4 decks)

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