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Capstone > Chapters 1 & 5 > Flashcards

Chapters 1 & 5 Flashcards

0
Q

What is/are strategic management?
Strategies?
Competitive advantages?
Operational effectiveness?

A

Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages.

Strategies are ideas, decisions, and actions that enable a firm to succeed.

Competitive advantages is in a firm’s resources and capabilities that enable it to overcome the competitive forces in the industry.

Operational effectiveness means performing similar activities better than rivals

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1
Q

How does the romantic view of leadership contrast with the external control view of leadership?

A

Romantic view of leadership is in which the LEADER is the KEY FORCE of determining the organization’s success or lackof.

External control view of leadership is that the FOCUS is on EXTERNAL FACTORS that may positively or negatively affect a firm’s success rather than a leader.

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2
Q

Which three ongoing processes does strategic

management entail?

A

Analysis: visions, objectives
Decisions: how should we compete? (Formulation)
Actions: implementation

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3
Q

Why can’t sustainable competitive advantage be

achieved through operational effectiveness alone?

A

Operational effectiveness: total quality, just-in-time, benchmarking, business process reengineering, outsourcing.

“Performing similar activities better than rivals”. NONE LEAD TO SUSTAINABLE COMPETITIVE ADVANTAGE because everyone is doing them. Strategy is all about being DIFFERENT.

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4
Q

What are the four key attributes of strategic management?

A
  1. Directs the organization toward overall goals and objectives.
  2. Includes multiple stakeholders in decision making.
  3. Needs to incorporate short-term and long-term perspectives.
  4. Recognizes trade-offs between efficiency and effectiveness.
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5
Q

What is the “organizational versus individual rationality” perspective?

A

Effort must be directed at what is best for the total organization, not just a single functional area. What might look “rational” or ideal for one functional area may not be in best interest of overall firm.

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6
Q

What are stakeholders?

A

Individuals, groups, and organizations who have a “stake” in the success of the organization. Owners, employees, customers, suppliers, and community.

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7
Q

How does effectiveness differ from efficiency? What are the necessary trade-offs?

A

Effectiveness is tailoring actions to the needs of an organization rather than wasting effort “Doing The Right Thing”.

Efficiency is performing actions at a low cost relative to a benchmark or “Doing Things Right”.

Managers must focus on the short term and efficiency; at other times the emphasis is on the long term and expanding a firm’s product-market scope in order to anticipate opportunities in the competitive environment.

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8
Q

What is ambidexterity?

A

A manager’s challenge to both align resources to take advantage of existing product markets as well as proactively explore new opportunities.

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9
Q

Considering Mintzberg’s model, what is meant by intended, deliberate, unrealized, emergent, and realized strategies?

A

Intended Strategy – strategy in which organizational decisions are determined only by analysis; rarely survive in its original form.

Realized Strategy – decisions determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and changes in managerial preferences.

Emergent and deliberate strategies are a combination of realized strategy.

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10
Q

What is strategy analysis?

A

Starting point of the strategic management process.

Study of firm’s external/internal environments, and their fit with organizational vision and goals.

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11
Q

What is strategic formulation?

A

Based on strategy analyses, developed at several levels, involves decisions that can create and sustain competitive advantage.

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12
Q

What are the 4 types of strategic formulation?

A

Investment decisions
Commitment of resources
Operational synergies
Recognizing viable opportunities

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13
Q

What is strategy implementation?

A

Implements the formulated strategy. Includes strategic controls, organizational design, and leadership.

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14
Q

What is corporate governance?

A

The relationship among various participants in determining the direction and performance of corporations.

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15
Q

Who are the three primary participants in corporate governance?

A

Shareholders, Management (led by CEO), Board of Director

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16
Q

What is the role of the board of directors?

A

Ensure interests & motives of management are aligned with those of owners.

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17
Q

What is stakeholder management?

A

A firm’s strategy for recognizing and responding to the interests of all its salient stakeholders.

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18
Q

What is meant by zero sum and symbiosis, as related to stakeholder management?

A

Zero sum – stakeholders compete for attention & resources; Gain of one is a loss to the other.

Symbiosis – Stakeholders are dependent upon each other for success & well being; receive mutual benefits.

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19
Q

What is social responsibility?

A

The expectation that businesses or individuals will strive to improve the overall welfare of society.

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20
Q

What is shared value?

A

Policies and operating practices that enchance the competitiveness of a company while simultaneously advancing the economic and social conditions it operates.

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21
Q

What is meant by the “triple bottom line”?

A

Assessment of a firm’s financial, social, and environmental performance.

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22
Q

What are the three types of leaders that should be involved in the strategic management process?

A 
Local Line Leaders (profit/loss responsibility)
Executive Leaders (champion, guide ideas)
Internal Networkers (little power, conviction/clarity)
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23
Q

Relating to the hierarchy of goals, how do the characteristics of the organization’s vision, mission statement, and strategic objectives differ?

A

Vision – evokes powerful & compelling mental images of a shared future.

Mission Statement – encompasses the organization’s current purpose, basis of competition, & competitive advantage.

Strategic Objectives – operationalize the mission statement with specific yardsticks. They help provide guidance on how organization can move toward higher goals.

24
Q

How do financial and non-financial strategic objectives differ?

A

Financial strategic objectives are directed toward generating greater profits and returns for owners of the business.

Non-Financial strategic objectives are directed customers or society at large.

25
Q

What is the benefit of providing proper objectives?

A
  1. They help to channel all employees’ efforts toward common goals.
  2. Challenging objectives can help motivate and inspire employees to higher levels of commitment/effort.
  3. Potential for different parts of organization to pursue their own goals rather than overall company goals.
  4. Provide a yardstick for rewards and incentives.
26
Q

What is a business level strategy?

A

A strategy designed for a firm that competes within a single business.

27
Q

What are Porter’s three generic strategies?

A

Overall cost leadership - (create low-cost position relative to firm’s peers, managing relationships throughout the entire value chain to lower costs)

Differentiation – products/services that are unique & valued, emphasis on nonprice attributes for which customers will gladly pay a premium.

Focus – Narrow product lines, buyer segments, or targeted geographic markets; Advantages obtained either through differentiation or cost leadership.

28
Q

What is the primary aim of strategic management at the business level?

A

A strategy designed for a firm or a division of a firm that competes within a single business. Sustain a competitive advantage is the primary aim of strategic management at the business level.

29
Q

What does it mean to be “stuck in the middle”

A

Firms that tries to attain both cost and differentiation advantages. Firms are stuck in the middle if they fail to attain both strategies. The low performers that do not identify with any type of advantage

30
Q

What tactics are associated with the overall cost leadership strategy?

A

Aggressive construction of efficient-scale facilities.
Vigorous pursuit of cost reductions from experience.
Tight cost & overhead control.
Avoidance of marginal customer accounts.
Cost minimization in all activities in firm’s value chain, such as R&D, service, sales force, advertising.

31
Q

How can primary and support activities support the overall cost leadership strategy?

A

Firm Infrastructure – Superior MIS, Facilities that promote firm image, Widely respected CEO

Human Resource Management – programs to attract talented engineers & scientists, provide training and incentive

Technology Development - effective use of technology

Procurement – buy high quality items to enchance product image

Inbound Logistics – superior material handling operations to minimize damage.

Operations – effective use of quality control to minimize rework.

Outbound Logistics – Effective utilization of deliver fleet.

Marketing & Sales – Purchase of media in large blocks.

Service – through service guidelines to minimize repeat maintenance calls.

32
Q

What are experience effects?

A

How business “learns” to lower cost as it gains experience with production process.

33
Q

How does an organization benefit from the experience curve?

A

Workers getting better at what they do.
Product designs being simplified as product matures.
Production processes being automated and streamlined.

34
Q

What is competitive parity?

A

A firm’s achievement of similarity with competitors of low cost, differentiation, or other strategic product characteristics.

35
Q

How can an overall cost leadership strategy enable a business to improve its competitive position in terms of the five competitive forces?

A

Protects firm against rivalry from competitors
Protects firm from powerful buyers
Provides more flexibility to cope with demands from powerful suppliers who want to increase costs
Provides substantial entry barriers due to economies of scale and cost advantages
Puts the firm in a favorable position with substitute products

36
Q

What are the potential pitfalls of pursuing an overall cost leadership strategy?

A

Too much focus on one or few value chain activities
Increase in cost of inputs on which advantage is based
Strategy is imitated too easily
Lack of parity on differentiation
Reduced flexibility
Obsolecence of the basis of a cost advantage.

37
Q

What forms can differentiation take?

A

Prestige or brand image, technology, Innovation, Features, Customer Service, Dealer Network

38
Q

How can primary and support activities support the differentiation strategy (Exhibit 5.4)?

A

Firm Infrastructure – Superior MIS, Facilities that promote firm image, Widely respected CEO
Human Resource Management – programs to attract talented engineers & scientists, provide training and incentives
Technology Development
Procurement – buy high quality items to enchance product image
Inbound Logistics – superior material handling operations to minimize damage.

39
Q

How can a differentiation strategy enable a business to improve its competitive position in terms of the five competitive forces?

A

Creates higher entry to barrier due to customer loyalty
Provides higher margin that enable the firm to deal with supplier power
Reduces buyer power because buyers lack suitable alternatives
Establishes customer loyalty and hence less threat from substitutes

40
Q

What are the potential pitfalls of pursuing a differentiation strategy?

A

Uniqueness that is not valuable
Too much differentiation
Too high price premium
Differentiation that is easily imitated
Dilution of brand identification through product line extensions
Perceptions of differentiation may vary between buyers and sellers

41
Q

What is a focus strategy?

A

Based on choice of a narrow competitive scope within an industry.

42
Q

How can a focus strategy enable a business to improve its competitive position in terms of the five competitive forces?

A

Creates higher entry to barriers due to cost leadership or differentiation or both
Can provide higher margins that enable the firm to deal with supplier power
Reduces buyer power because the firm provides specialized products or services
Focused niches are less vulnerable to substitutes

43
Q

What are the potential pitfalls of pursuing a focus strategy?

A

Erosion of cost advantages within narrow segment
Highly focused products and services are still subject to competition from new entrants & from imitation.
Focusers can become too focused to satisfy buyers.

44
Q

What is an integrated overall low cost leadership and differentiation strategy?

A

Strategy that makes it difficult for competitors to duplicate or imitate strategy; Walmart.

45
Q

What are the three approaches discussed in the text?

A
  1. Automated and flexible manufacutring systems
  2. Exploiting the profit poll concept for competitive advantage
  3. Coordinating the “extended” value chain by way of information technology
46
Q

What is mass customization?

A

Firm’s ability to manufacture unique products in small quantities at low cost.

47
Q

What is Profit pool?

A

Total profits in an industry at all points along the industry’s value chain.

48
Q

How can an integrated overall low-cost and differentiation strategy enable a business to improve its competitive position in terms of the five competitive forces?

A

Creates higher entry barriers due to both cost leadership & differentiation
Can provide higher margins that enable the firm to deal with supplier power
Reduces buyer power because of fewer competitors
Overall value proposition reduces threat from substitutes

49
Q

What are the potential pitfalls of pursuing an integrated overall low-cost and differentiation strategy?

A

May end up with neither and become “stuck in the middle”
Firms can also underestimate the challenges & expenses associated with coordinating value-creating activities in the extended value chain
Firm can miscalculate sources of revenue and profit pools in the firm’s industry

50
Q

What are the two major impacts that the Internet is having on business?

A

Created new ways of differentiating by enabling mass customization
Lowered transaction costs allow firms to achieve parity on cost while providing unique experience

51
Q

How has the Internet eroded sustainable competitive advantages?

A

With lower costs for all, the net effect is fewer rather than more opportunities for sustainable advantage
The ease of comparison shopping

52
Q

What is the industry life cycle?

A

The stages of introduction, growth, maturity, and decline that typically occur over the life of an industry.

53
Q

What are the characteristics of each stage of the life cycle (introduction, growth, maturity, and decline).

A

Introduction – products are unfamiliar to consumers, market segments are not well-defined, product features are not clearly specified,competition tends to be limited

Growth – strong increase in sales, attractive to potential competitors, when firms can build brand recognition

Maturity- aggregate industry demand slows, market becomes saturated, direct competition becomes predominant, marginal competitors begin to exit

Decline- industry sales/profits begin to fall, price competition increases, industry consolidation occurs

54
Q

In the maturity phase, what is reverse positioning?

A

A break in industry tendency to continuously make augment products, by offering products with fewer product attributes and lower prices.

55
Q

Breakaway positioning?

A

A break in industry tendency to incrementally improve products along specific dimensions, by offering products that are still in the industry but that are perceived by customers as being different.

56
Q

What are the four basic strategies available in the decline phase?

A

Maintaining – keeping product going without reducing market support

Harvesting – obtaining as much profit as possible and requires costs be reduced quickly.

Exiting The Market – dropping product from firm’s portfolio.

Consolidation – one firm acquiring at a reasonable price the best of the surviving firms in an industry.

57
Q

What are the different effective strategies used by firms in turnaround efforts?

A

Asset & Cost Surgery – assts that do not produce any returns

Selective Product And Market Pruning – Discontinue declining product and focus on profitable areas.

Peicemeal Productivity Improvements – Eliminate cost and improve productivity.

58
Q

What are the reasons for the successful turnaround Ford experienced under CEO Alan Mulally?

A

Downsizing, creating greater efficiency, improving quality, selling off the European luxury brand, mortgaging assets to raise money.

Capstone (3 decks)

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