Chapter 1 / Week 1 (NAICS + Teamwork) Flashcards
NAICS
North American Industry Classification System
Purpose of NAICS
An industry classification system developed by the statistical agencies of Canada, Mexico and the United States.
Created against the background of the North American Free Trade Agreement (NAFTA), it is designed to provide common definitions of the industrial structure of the three countries and a common statistical framework to facilitate the analysis of the three economies.
- Defined based on operations or production processes
- supply base, not demand use
When companies fit more than one NAIC code: Given code where most revenue is, or have multiple codes
The economic transactors for which NAICS is designed
Are businesses and other organizations engaged in the production of goods and services.
Who do NAICS include?
They include farms, incorporated and unincorporated businesses and government business enterprises.
Also include government institutions and agencies engaged in the production of marketed and non-marketed services, as well as organizations such as professional associations and unions and charitable or non-profit organizations and the employees of households.
Also companies and enterprises (which a catch)
And also own-account production, such as unpaid work of households
The criteria used to group establishments into industries in NAICS
Are of similarity of input structures, labour skills and production processes.
RULES FOR WHEN using NAICS for classifying companies and enterprises
NAICS has not been specially designed to take account of the wide range of vertically- or horizontally-integrated activities of large and complex, multi-establishment companies and enterprises.
Hence, there will be a few large and complex companies and enterprises whose activities may be spread over the different sectors of NAICS, in such a way that classifying them to one sector will misrepresent the range of their activities.
Are Higher levels or lower levels better for the classification of companies and enterprises
HIGHER!
A larger proportion of the activities of each complex company and enterprise is more likely to fall within the sector, subsector and industry group levels of the classification than within the industry levels.
Hence, the higher levels of the classification are more suitable for the classification of companies and enterprises than are the lower levels
NAICS vs other industry classification systems
NAICS provides enhanced industry comparability among the three North American Free Trade Agreement (NAFTA) trading partners, while also increasing compatibility with the two-digit level of the International Standard Industrial Classification (ISIC Rev.4) of the United Nations
NAICS divides the economy into _______sectors
twenty (20)
How are the 20 sectors broken up?
4 sectors are largely goods-producing
16 are entirely services-producing industries
The 2012 NAICS revision was undertaken to achieve one main goal:
to modify or create industries to reflect new, emerging, or changing activities and technologies.
The Development of NAICS
NAICS was developed by Statistics Canada, Mexico’s Instituto Nacional de Estadística y Geografía (INEGI) and the Economic Classification Policy Committee (ECPC) of the United States Office of Management and Budget.
NAICS is based on
a production-oriented, or supply-based conceptual framework in that establishments are grouped into industries according to similarity in the production processes used to produce goods and services.
The production process
refers to the combination of inputs (capital, labour, energy, materials and services – KLEMS) used in producing a certain quantity of outputs
(NAPCS)
North American Product Classification System
The North American Product Classification System (NAPCS)
classification that organizes goods and services throughout the economy in a systematic fashion. It is a departmental standard classification for goods and services.
NAICS Numbering system
The first two digits designate the sector, the third digit designates the subsector, the fourth digit designates the industry group and the fifth digit designates the industry.
The sixth digit is used to designate national industries. A zero as the sixth digit indicates that there is no further national detail.
Comparability among the three countries
indicated by superscripts at the end of class titles
The abbreviation “CAN”
indicates a Canadian-only class
The abbreviation “MEX”
indicates that the Canadian and Mexican classes are comparable
The abbreviation “US”
indicates that the Canadian and United States classes are comparable
When no superscript appears
the Canadian, Mexican and United States classes are comparable.
Textbook and beyon
Textbook and beyond
Strategy
company strategy, company’s strategy
The coordinated set of actions that its managers take in order to outperform the company’s competitors and achieve superior profitability.
A strategy stands a better chance of succeeding when it is predicated on actions, business approaches, and competitive moves aimed at
(1) appealing to buyers in ways that set a company apart from its rivals and
(2) staking out a market position that is not crowded with strong competitors.
competitive advantage
whenever it has some type of edge over rivals in attracting buyers and cop-ing with competitive forces.
A competitive advantage is essential for realizing greater marketplace success and higher profitability over the long term.
Two basic mechanics of a competitive advantage
Either they provide the customer with a product or service that the customer values more highly than others (higher perceived value)
or they produce their product or service more efficiently (lower costs)
What makes a competitive advantage sustainable (or durable)
as opposed to temporary, are elements of the strategy that give buyers lasting reasons to prefer a company’s products or services over those of competitors—reasons that com-petitors are unable to nullify, duplicate, or overcome despite their best efforts.
Five of the most frequently used and dependable strategic approaches to setting a
company apart from rivals, building strong customer loyalty, and gaining a competitive advantage are
1) A low-cost provider strategy
2) A broad differentiation strategy
3) A focused low-cost strategy
4) A focused differentiation strategy
5) A best-cost provider strategy
1) A low-cost provider strategy
achieving a cost-based advantage over rivals.
Examples: Walmart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have achieved over their rivals
2) A broad differentiation strategy
seeking to differentiate the company’s product or service from that of rivals in ways that will appeal to a broad spectrum of buyers.
Examples: Apple (innovative prod-ucts), Johnson & Johnson in baby products (product reliability), Rolex (luxury and prestige), and BMW (engineering design and performance).
3) A focused low-cost strategy
concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs and thus being able to serve niche members at a lower price.
Example: IKEA’s emphasis on modular furniture, ready for assembly, makes it a focused low-cost player in the furniture market.
4) A focused differentiation strategy
concentrating on a narrow buyer segment (or mar-ket niche) and outcompeting rivals by offering buyers customized attributes that meet their specialized needs and tastes better than rivals’ products.
Example: Lululemon, specializes in high-quality yoga clothing and the like, attracting a devoted set of buyers in the process. Tesla Inc, with its electric cars,
5) A best-cost provider strategy
giving customers more value for the money by satisfy-ing their expectations on key quality features, performance, and/or service attributes while beating their price expectations.
This approach is a hybrid strategy that blends elements of low-cost provider and differentiation strategies
Example: Target is an example of a company that is known for its hip product design (a reputation it built by featuring limited edition lines by designers such as Rodarte, Victoria Beckham, and Jason Wu)
Why a Company’s Strategy Evolves over Time
Sustainable doesn’t mean forever
Even a substantial competitive advantage over rivals may crumble in the face of drastic shifts in market conditions or disruptive innovations.
managers of every company must be willing and ready to modify the strategy in response to changing market conditions, advancing technology, unexpected moves by competitors, shifting buyer needs, emerging market opportunities, and new ideas for improving the strategy
Evolving strategy
Constantly changing the sustainable competitive advantage
Adapting to new conditions and constantly evaluating what is working well enough to continue and what needs to be improved
The typical company strategy is a blend of
(1) proactive, planned initiatives to improve the company’s financial performance and secure a competitive edge and
(2) reactive responses to unanticipated developments and fresh market conditions.
deliberate strategy
consisting of proactive strategy elements that are both planned and realized as planned (while other planned strategy elements may not work out and are abandoned in consequence)
emergent strategy
consists of reactive strategy elements that emerge as changing conditions warrant.
realized strategy
tends to be a combination of proactive and reactive elements, with certain strategy elements being abandoned because they have become obsolete or ineffective
A strategy is ethical
only if it does not entail actions that cross the moral line from “can do” to “should not do.”
For example, a company’s strategy definitely crosses into the “should not do” zone and cannot pass moral scrutiny if it
entails actions and behaviors that are deceitful, unfair or harmful to others, disreputable, or unreasonably damaging to the environment
A company’s strategic actions cross over into the “should not do” zone and are likely to be deemed unethical when
(1) they reflect badly on the company
(2) they adversely impact the legitimate interests and well-being of shareholders, customers, employees, suppliers, the communities where it operates, and society at large
(3) they provoke public outcries about inappropriate or “irresponsible” actions, behavior, or outcomes.
business model
management’s blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit.
The two elements of a company’s business model are
(1) its customer value proposition
(2) its profit formula
1) The customer value proposition
lays out the com-pany’s approach to satisfying buyer wants and needs at a price customers will consider a good value.
2) The profit formula
describes the company’s approach to determining a cost structure that will allow for acceptable profits, given the pricing tied to its customer value proposition
value-price-cost framework
The customer value proposition can be expressed as V − P, which is essentially the customers’ perception of how much value they are getting for the money
The profit formula
P − C, on a per-unit basis
from a customer perspective
the greater the value delivered (V) and the lower the price (P), the more attractive is the company’s value proposition
from a business perspective
the lower the costs (C), given the customer value proposition (V − P), the greater the ability of the busi-ness model to be a moneymaker.
Three tests can be applied to determine whether a strategy is a winning strategy:
- The Fit Test:
- The Competitive Advantage Test:
- The Performance Test:
- The Fit Test:
How well does the strategy fit the company’s situation?
a strategy has to be well matched to industry and competitive conditions, a company’s best market opportunities, and other pertinent aspects of the business environment in which the company operates.
Has to have good fit both internally and externally with the aspects on the company’s overall situation.
THey must also be a dynamic git in the sense that they evolve over time
- The Competitive Advantage Test:
Is the strategy helping the company achieve a competitive advantage? Is the competitive advantage likely to be sustainable?
Strategies that fail to achieve a competitive advantage over rivals are unlikely to produce superior performance
- The Performance Test:
Is the strategy producing superior company performance?
Two kinds of performance indicators tell the most about the caliber of a company’s strategy:
(1) competitive strength and market standing
(2) profitability and financial strength.
Crafting and executing strategy are top-priority managerial tasks for two big reasons.
First, a clear and reasoned strategy is management’s prescription for doing business, its road map to competitive advantage, its game plan for pleasing customers, and its formula for improving performance
Second, even the best-conceived strategies will result in performance shortfalls if
they are not executed proficiently.
Good Strategy + Good Strategy Execution = Good Management
good strategy and good strategy execution are the most telling and trustworthy signs of good management.
Reading and Beyon
Powering Up Teams
What it is about
1) describe what it means to be an empowered work team and what outcomes result
from empowered teams.
2) describe the distinction between empowered teams
and self-managing teams.
3)discuss the components of each of the support systems that must be in place to maximize the
effectiveness of empowered work teams.
work team
group of individuals working
interdependently toward common goals and
whose members are mutually accountable for
task achievement.
empowered
teams share four experiences:
1) potency
2) meaningfulness
3) autonomy,
4) impact.
A Sense of Potency
Team members who share a sense of potency
believe in themselves. They exhibit a confident, can-do attitude.
A Sense of Meaningfulness
Teams with a sense of meaningfulness have a
strong collective commitment to mission.
They work with a sense of purpose and they
have an intrinsic caring about their tasks
A Sense of Autonomy
Autonomy refers to the freedom, discretion,
and control that teams experience.
Team members that have the responsibility to establish their own work processes experience
autonomy.
These teams have the freedom to
allocate resources, seize opportunities, and
make rapid decisions without approval from
on high.
A Sense of Impact
Impact is experienced when teams see the
effect of their labors on other stakeholders.
A design team experiences impact when it
attends a focus group discussion and hears the
reaction of potential customers to its newest
creation.
Feedback from internal and external
customers contributes to a sense of impact.
EMPOWERMENT VERSUS
SELF-MANAGEMENT:
WHAT’S THE DIFFERENCE?
self-managing teams have strong
effects on employee satisfaction and commitment, but only modest effects (or none at all) have
been found for productivity.
Self-management is synonymous with
only autonomy
WHAT DOES IT TAKE TO BECOME AN
EMPOWERED TEAM?
Typically, the rollout of organizational efforts to install empowered work teams begins with visionary statements by top management, the formation of work
teams, team-building exercises, and a variety
of efforts to establish team identity, including
the creation of team names
Bridge teams
composed of members from different teams that must integrate their efforts and are charged with facilitating communication and coordination among their teams
Industry Research Video
Process where you gather information about economic drivers, rends, and social factors, that impact a specific industry. Ultimately, this research will help you gain insight into your consumers, your competitors, and the overall market
Typical industry Sources:
1) Industry Overviews
2) Market research
3) Statistics
4) Company information (Public companies only)
5) Articles
Secondary Sources: Not written for your desired sources, will need to extrapolate information accordingly
Finding Sources:
1) Industry / Market research (sub topic databases)
2) Subject Database
3) Summon
4) Internet
6) Industry associations
7) Government agencies
RADAR (Rationale, authority, date, accuracy, relevance)
Corporate ecosystem
Company (inner most) Operating Environment (micro environment) Industry (Macro Environment)> Remote environment (outer most - Macro Environment)
KLEMS
Capital, Labour, energy, materials, and services
Setting industry boundaries
Most relevant way: geography, country of origin
Others: TImeframe Reason/ purpose for study Substitutability Product/ markets served
Teams purpose
Self directed, academic team formed to learn together in MGMT 290 and to prepare 1 industry report and 1 presentation presenting your findings/ analysis for assigned industry
