Chapter 6 - Strategic direction

Question 1

Defining a strategic direction

Answer 1

• assess a firm current position (strenghts, weaknesses, core competencies)
  
  • external and internal firm environment
  • Porter’s Five Force Model/ stakeholder analysis
• assess capabilities
• define a strategic intent that should be ambitious
  
  • sustainable competitive advantage

Question 2

Porter’s Five Forces Model

Answer 2

• Degree of existing rivalry
  
  • number of firms and size
  • differences between firms
  • product demand
  • exit barriers
• Threat of potential entrants
  
  • high if market attractive and low entry barriers
• Bargaining power of suppliers
  
  • number of suppliers
  • product differentiation
  • amount purchased
  • switching costs
  • ability to vertically integrate
• Bargaining power of buyers
  
  • number of buyers
  • product differentiation
  • switching costs
• Threat of substitutes
  
  • number of potential substitutes
  • functionality closeness
  • price

Question 3

Porter’s sixt force

Answer 3

• Complements
  
  • recntly acknowledged
• Importance of complements in industry
• differentiation of complements with rivals
• value offered by complements for who?

Question 4

What is stakeholder analysis? What types there are?

Answer 4

• identification of all parties impacted by the firm
  
  • interests and resorces offered
  • stockholders, employees, customers, government, rivals
• analysis focusing stakeholders’ impact on firm performance
  
  • strategic stakeholder analysis
• analysis focusing on firm ethical or moral issues
  
  • normative stakeholder analysis

Question 5

Stakeholder Analysis steps

Answer 5

• who are the stakeholders?
• what does each stakeholder want?
• what resources do they contribute to the organization?
• what claims are they likely to make on the organization?

Question 6

Internal analysis

Answer 6

• evaluate firm strenghts and weaknesses
  
  • on whole value chain
• value chain activities
  
  • primary: logistics, marketing, sales and servicies
  • secondary: hr, infrastructure, technology development
• identify strenghts that could be susteinable cmpetitive advantage
  
  • rare, valuable,durable, inimitable
  • path dependent, complex resources or casually ambigous [talent] are valuable and difficult to imitate

Question 7

What are competencies and capabilities?

Answer 7

• used interchangeably
• core competencies
  
  • integration of more basic capabilities

Question 8

What are core competencies?

Answer 8

• capabilities that distinguish a company strategically from competitors
  
  • combination of different kinds of abilities
• difficult to imitate
  
  • also thanks to integrated and harmonized combination
• several core competencies may form a business unit
  
  • same core competency may be in several different business unit
  • cover a range of businesses
• firm structure and incentives should encourage cooperation and exchange of resources across strategic business units
  
  • Prahalad and Hamel

Question 9

What is a core rigidity?

Answer 9

• a risk
• when firms excel at an activity they can become committed to it and rigid
  
  • can limit opportunities

Question 10

What are dynamic capabilities?

Answer 10

• enable a firm to quickly reconfigure its structure and routines
  
  • response to new opportunities
  • not related to specific products or technologies

Question 11

What is a firm’s strategic intent?

Answer 11

• ambitious long-term term goal
  
  • 10 to 20 years in the future
  • establishes clear milestones
  • requires all levels of the organization to increase existing core competencies
• focus on future markets and customer requirements
• focus development efforts and investments necessary to develop strategic technologies
  
  • resources and capabilities needed to close gap

Question 12

What is the balanced scorecard? What it is used for?

Answer 12

• tool for performance measurement
  
  • translates strategy into action (objectives and measures)
• incorporates different perspectives
  
  • financial
  • customer
  • internal
  • innovation and learning

Question 13

Ocean strategy

Answer 13

• Mauborgne and Chan Kim
• two types of firm strategy
  
  • red ocean strategy -> harsh competition in the market
    
    • existing markets
    • exploit existing demands [differentiation]
    • value-cost tradeoff
    • beat competition
  • blue ocean strategy -> conquest of unexplored markets
    
    • new market
    • create/capture new demand
    • break value-cost tradeoff
    • make competition irrelevant