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LOMA 335 I*STAR > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

what is a corporate mission

A

the organization’s reason for being and is expressed in a mission statement.

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2
Q

What is the corporate vision?

A

related to corporate mission, it refers to a company’s view of its mission as it evolves into the future.

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3
Q

What is “corporate goals and objectives”

A

they are broad targets the company is attempting to achieve in support of the coporate mission and vision

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4
Q

Define a strategy

A

a comprehensive plan for future action directed toward acheiving various goals, including making the corporate vision a reality.

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5
Q

What is a tactic?

A

an action designed to support a strategy.

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6
Q

to understand strategy a company needs to review the present and future. Goals and objectives represent the corporate view of the intended future outcomes from present activites, responsibilities and resources. What are some present and future perspectives.

A
  1. present: perspective, a company’s mission is its reason for existence.
  2. present perspectives. A company assigns responsibilities and account abilities, allocate resources, establishes, controls and undertakes activities.
  3. future perspective: a company’s vision is the company’s view of its mission and it evolves into the future.
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7
Q

planning and control can be viewed as the structure a company uses for what?

A

achieving alignment between operations and corporate objectives.

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8
Q

How does a company approach the cycle of control activities?

A

a set of control tools, often labeled as steering controls, concurrent controls and feedback controls.

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9
Q

what is the purpose of steering controls

A

to communicate expectations, they are in place before a reporting period begins.
ex: plans, budgets, goals, policies, codes of conduct. etc.

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10
Q

What is the control between reporting periods called?

A

concurrent controls.
They are used to monitor operations and indicate whether ongoing processes are within tolerances.
- this way they can monitor exception reports and other automatic feedbacks.

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11
Q

What is the purpose of feedback controls?

A

used to compare actual performance or output with established standards.
important at end of measurement periods.
ex: exception reports, automated routing of telephone calls

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12
Q

What is gained by the understandings provided through analyzing feedback ?

A

they enable an operational unit to make appropriate corrections to its operations and controls.
ex: actual-to-expected comparisons, audits

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13
Q

What is strategic alignment?

A

refers to the establishment of congruent positioning between operational efforts with the corporate structure and corporate strategy.
- important for cost containment and accumulation of knowledge.

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14
Q

what is corporate governance?

A

A company boards responsibility and authority to direct the organization to properly fulfill its mission on behalf of the company’s legitimate stakeholders in a legal and fiscally responsible manner.
ie: authority, accounta ility, stewardship, direction, control

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15
Q

What is a common challenge of governance?

A

ensure that top executives and other employees, act in the best interests of a company’s owners and policyholders.
AKA: agency problem

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16
Q

What is agency problem.

A

this exists when one person is paid to act on behalf of another, but the two have different interests, have acess to different information about the agents acitvities, and have different incentives.

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17
Q

what is a conflict of interest?

A

this exists when the interests or actions of one entity such as an employee, are incompatible with the interests or actions of a related entity such as an employer.

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18
Q

What is the Hierarchy of strategy and their management roles

A
  1. corporate executives > corporate strategy
  2. Business Executives > business strategy
  3. Functional Managers > functional strategy
  4. Operational managers > operational strategy.
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19
Q

What is corporate stratedy?

A

refers to a company;s broad plan for achieving competitive advantage in all its undertakings across all lines of its business.
= adresses how each lline of business supports the competitive strategy of the whole organization.
-

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20
Q

What is business strategy

A

refers to the action plans of a line of business, also called a product line, business unit, or strategic business unit (SBU)

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21
Q

What is a competitive strategy?

A

is slightly different from a corporate or business strategy, encompassing only corporate or business srategies, and tactics devoted to achieving or maintaining the company;s advantageous position relative to competitors?

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22
Q

Which forms of strategies are carefully aligned to support the overriding business and corporate strategies.

A
  1. functional and operational strategies.
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23
Q

What is functional strategy?

A

drive operational plans for a specific functional area of department

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24
Q

operational managers are responsible for developing and implementing a level of strategy known as operational strategy. What is this?

A

its an action plan for a narrow area dealing with day-to-day activities and operating within a budget dictated by the company;s functional plan and functional management.

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25
Q

Define the term Market

A

its a real or hypothetical forum where sellers, also called suppliers, and buyers exchange resources, including services.

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26
Q

define Market structure

A

Refers to the number and relative size of sellers in a martket.

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27
Q

Define Industry structure.

A

Refers to the nature of the competitive relationships among the various companies in an industry.

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28
Q

What are 5 indicators of market structure?

A

1) market share
2) market leadership
3) customer share
4) industry ranking
5) industry concentration.

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29
Q

A company;s competitive success if often measured in terms of its market share. define this.

A

the company;s percentage representation in a given meaure of the size of the entire market

30
Q

company’s sucess can also be measured by customer share. what is this?

A

the percentage of total customers for a given product or service who are also customers of the particular company

31
Q

True or False, Market shares measyres the overall share of a given industry that a company may have, where are customer share is specific to a product or service and varies within the company?

A

True

32
Q

A company can measure its competitive position within an industry in terms of an industry ranking. define thi

A

which is a listing of companies within an industry in order of a given measure of their size.

33
Q

What is market leadership

A

refers to company’s prominent competitive position relative to its competitors in terms of market share percentage.

34
Q

Who is the industry leader?

A

the company with the highest ranking or the greatest market share

35
Q

What is industry concentration?

A

its for insurance companies to measure the number of companies within a specific set of comapnies and the distribution among them of their total reserves.

36
Q

What is “concentration ratio”

A

its usually calcualted by taking the sum of the percentage market shares of the top few companies in the industry.

37
Q

What is the 5-company concentration ratio?

A

the sum of the percentage shares of reserves of the top n companies is called the n-company concentration ratio. The 5-company conentration ratio is the industry concentration for the top 5 compannies.

38
Q

Define Market dimensions

A

the measurements characteristics of a market or an industry, including the numbers of sellers, numbers of buyers, availability of substitute prodcuts, role of pricing, role of advertising, role of regulation, and economies of sale.

39
Q

How does the number of sellers affect the level of competition in a market?

A

the more sellers, the more diercely those sellers must compete for the same number of buyers.

40
Q

How can the number of buyers affect the level of competition?

A

a minimum market size might be required to support doing businesss in a given market. A market with few buyes is a small market.

41
Q

What are substitute products?

A

two or more products that purchasers can use to satisfy the same wants or needs in the financial services industry, a pair of substitute products is the deferred annuity and the certificate of deposit.

42
Q

What is an affinity group?

A

people in a given age group, or poeple in a given profession.

43
Q

What are barriers to entry in terms of regulating start ups?

A

these are obstacles to a new seller’s entry into a market. For insurance and financial services companies, important barriers for new entrants are legal barriers and econonmies of sacale.

44
Q

what is a legal barrier?

A

this exists when laws or regulations act a disincentive to new competitors entering a market.
- ie. licensing requirements.

45
Q

define the term “Economies of scale”

A

these are savings that accerue to a seller having large scale in financial or operational terms.

46
Q

Define financial economies of scale

A

saving due to having large-scale financial assets

47
Q

Define operational economies of scale

A

savings due to large scale physical operations

48
Q

Economists recognize four classic market models of seller behavior. Name them

A
  1. competition
  2. monopolistic competition
  3. oligopoly
  4. monopoly
    > these models give insight into dynamics of industry competition.
49
Q

Experts generally view which market conditions for insurance companies?

A

monopolistic competition

oligopoly

50
Q

define monopolistic competition

A

moderl of a market having many sellers, with similar products and services, customer perception of nonprice differences between products and services, insignificant barriers to the entry of new sellers, use of brand names, and reliance on advertising.
» Similar products so companies must focus on advertisements to promote diffrences

51
Q

define oligopoly markets

A

model of market having few sellers, undifferent products or services, vigorous advertising, significant barriers to entry of new sellers.
» companies competet using other approaches to differentiation, such as image or reputation.
* incentives

52
Q

What are 4 characteristics of an oligopoly insurance market?

A
  1. companies appeal to CS, quality and claim service
  2. advertisement is important and will focus on reputation, quality rating, and importance of decision making
  3. Large funding requirements and heavy regulation present impotant barriers.
  4. financial service companies cooperate in many areas: research, and regular monitoring.
53
Q

What is the difference between short run and long run in terms of competition?

A

short run: period of time during which all factors of production are fixed, so competitors do not have time to adjust operations.
Long run: period over which at least some factors of production are variable and competitors do have have time to adjust their operations.

54
Q

define core competencies

A

a company’s distinctive strengths that form the basis for the company’s ability to add value in its transformative process, as well as forming the basis for its successful competitive strategies and competitive advantages.
» 1. makes sig contribution to customers perception of products and services
» 2. difficult for companies to imitate

55
Q

define competitive advantage

A

position or circumstance that allows a company to ear greater return or experience faster market growth than its competitiors, whether in the short or long run.
> eventually competitors can imitate or duplicate the success

56
Q

In the long run a competitive advantage may be sustainable or temporary. Define this

A

its a competitive position in which the unique factors central to a company’s success - its competitive advantages- have not been duplicated or imitated by competitors in the long run.

57
Q

Define temporary competitive advantage

A

a dominant competitive position that competitiors can quickly emulate and adopt.

58
Q

What characterizes a mature industry?

A

releatively stable group of companies, stable growth, established company reputations, emphasis on cost cutting and cost control, and incremental refinement to products.

59
Q

define growth strategy

A

an overall plan to promote company growth

60
Q

To achieve growth in a mature market, you need three generic growth strategies. what are they?

A
  1. differentiation strategy
  2. low-cost strategy
  3. niche strategy
    > these combine a company’s primary core compentency with characteristic of the company’s chosen target markets.
61
Q

Define Differentiation strategy

A

this supports growth in broad markets by creating a clear delineation between a company and its competitors.
> acheived based on products, image reputation, sertive levels or intellectual propeorty.

62
Q

define low-cost strategy

A

supports growth in broad markets by offering customers the same benefits as other companies, but at a lower cost of production and presumably at a lower price.
» requires a broad market share to support economies of scale.
> may establish barrier to entry

63
Q

Define Niche strategy

(known equally as focus strategy or segmentation strategy_

A

approach to growth through focus on management practices or subset of the total market.
> select a definite management practice or market subset and use basis to achieve growth.

64
Q

what are some important growth strategies popular with insurance companies?

A

innovation, knowledge and customer focus strategy.
> can form basis of a sustainable competitive advantage based on cost differntiation, product differentiation, or service differentiation.

65
Q

Define innovative strategy

- may be classified as a type of differentiation strategy.

A

strategy of successfully replacing the industry;s present model for valye creation with a groundbreaking new model for value creation.

66
Q

Define knowledge strategy

- can be seen as a type of differentiation strategy

A

approach to growth that focuses on developing and exploiting knowledge that no other firm in the industry possess.

67
Q

Define how the the following growth strategies

  1. inovation strategy
  2. knowledge strategy
  3. customer focus emphasize differentiation in a broad, Total market
A
  1. groundbreaking new model for value creation
  2. unique intellectual property used to attract customers who hope to grain the benefits of the company’s unique knowledge
  3. providing superior customer service
68
Q

Define customer-focus strategy

- can be viewed as a type of differentiation strategy.

A

an approach to successful competition by cultivating either a one-on-one relationship between an individual customer and a customer service representitive assigned to the customer or by ensuring that the quality of services provided regardless of contact point surpoasses all standards.

69
Q

How can operational excellence support company growth strategies?

A
  1. operational excellence can serve as a barrier agaisnt entry of new competitors
  2. operational excellence can support a differentiation strategy based on customers perception of value in the companys product and service.
70
Q

According to Robert E Nolan, what are the 7 attributes of successful company?

A
  1. leadership
  2. organizational alignment
  3. Entrepreneurial take on Niche opportunities
  4. Superior understanding of customers and markets
  5. Nimble and ready to act
  6. Effective Deployment of technology
  7. customer service excellence

LOMA 335 I*STAR (14 decks)

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