Chapters 5-8 Flashcards
Overall Cost Leadership
two parts: Aggressive construction of efficient scale facilities, and vigorous pursuit of cost reductions from experience
experience curve
how a business learns to lower costs as output increases
competitive parity
differentiation relative to competitors, its not always about having the lowest price
differentiation strategy
creating something that is unique industrywide, and valued by customers
Focus strategy
narrow competitive scope within an industry, segments or niches
combination strategies
firms integrations of various strategies to provide multiple types of value to customers
mass customization
a firms ability to manufacture unique products in small quantities at low cost
profit pool
the total profits in an industry at all points along the industry’s value chain, this includes other segments, primary/support activities.
industry life cycle
the stages of introduction, growth, maturity, and decline that occur over the life of an industry, product, or service
introduction stage
first stage of industry life cycle, New Products that are unknown to consumers Poorly defined market segments unspecified product features low sales growth rapid technological changes operating losses need for financial growth
Growth Stage
Stage 2 of PLC, Strong increase on sales growing competition developing brand recognition a need for financing value chain activities
maturity stage
Third stage of PLC, Slowing demand growth saturated markets direct competition price competition strategic emphasis on efficient operations
Decline Stage
Stage 4 of PLC,
Falling sales and profits
Increasing price competition
Industry consolidation (make stronger)
reverse positioning
return to products to base-line, then add a few features, instead of being overdosed with features, can sell at lower price with less features, returns to growth stage
breakaway positioning
leaves it category and joins a new one, redefining competition, moves into a completely different market/product line. returns to growth stage
Four basic strategies for Decline Phase
Maintaining
Harvesting
Exiting the Market
Consolidation
harvesting strategy
obtaining as much profit as possible and requires that costs be reduced quickly
consolidation strategy
a firms acquiring with other firms to enhance market power and gain valuable assets
turnaround strategy
reverses a firms decline in performance and returns it to growth and profits
corporate level strategy
strategy that focuses on gaining long term revenue, profits, and market value through managing operations in multiple businesses
diversification
the process of firms expanding their operations by entering new businesses
related diversification
a firm entering different businesses to benefit by leveraging core competencies, sharing activities, or builidng market power
economies of scope
cost savings from leveraging core competencies or sharing related activities among businesses in a corporation
core competencies
a firms strategic resources that reflect the collective learning in the organization
Three criteria for core competencies to create value
must enhance competitive advantage by creating superior customer value
different businesses in the corp. must be similar in at least one important way related to the core competence
core competencies must be difficult to imitate or find substitutes
sharing activities
having activities of tow or more businesses value chains done by one of the businesses, creates cost savings, and revenue enhancements
market power
firms ability to profit through restricting or controlling supply to a market, or coordinating with other firms to reduce investment
two parts: pooled negotiating power and vertical integration
pooled negotiating strategy
improvement of bargaining positioning relative to suppliers and customers
vertical integration
occurs when a firm becomes its own supplier or distributor
unrelated diversification
a firm entering a different business that has little horizontal interaction with other businesses of a firm
parenting advantage
positive contributions of corp office to a new business through expertise
restructuring
the intervention of the corp office in a new business that drastically changes assets, rewards, tech systems, capital structure, and or management
BCG Stars
competing in high growth industries with relatively high market shares, have long term growth potential and should continue to receive funding
BCG Question Marks
competing in high growth industries but having relatively weak market shares, resources should be invested in them to enhance competitive positions
BCG Cash cows
high market shares in low growth industries, source of cash for funding other SBU
BCG Dogs
weak market shares in low growth industries, recommend that they be divested
acquisitions
the incorporation of one firm into another through purchase
mergers
the combining of two or more firms into one new legal entity
divestment
the exit of a business from a firms portfolio
strategic alliance
the cooperative relationship between two or more firms
joint ventures
special case of alliance, where two or more firms contribute to form a new legal entity
internal development
entering a new business through investment in new facilities, aka corp entrepreneurship or new venture development
managerial motives
managers acting in their own self interest rather than to maximize long term shareholder value
growth for growths sake
mangers actions to grow the size of their firms not to increase long term profitability but to serve their self interest
egotism
managers actions to shape their firms strategies to serve self interests, ego is too high and gets in the way
greenmail
a payment by a firm to a hostile party for the firms stock at a premium, when a offer might be made otherwise
golden parachute
a prearranged contract with mgmt specifying that in the event of a hostile takeover the target firms mangers will be paid a significant severance package
poison pill
aka shareholder rights plans, gives shareholders certain rights in the event of takeover by another firm
globalization
increase of international trade of goods, money, info, and ideas
growing similarity of laws rules, norms, values, and ideas across countries
factor endowments
the nations position in factors of production
demand condition
the nature of home market demand for the industrys goods
related and supporting industries
presence or absence of support activity industries in the industry value chain
firm strategy, structure, and rivalry
conditions of nation governing of industries, as well as domestic rivalry
multinational firms
firms that manage operations in more than one country
arbitrage opportunities
an opportunity to profit by buying and selling the same good in different markets
reverse innovation
new products developed from emerging markets that have adequate functionality at a low costs
political risk
potential threat to a firms operations due to ineffectiveness of the domestic political system
rule of law
a characteristic of legal systems where by behavior is governed by rules that are uniformly enforced
counterfeiting
selling of trademarked goods without consent of the trademark holder
currency risk
potential threat due to fluctuations in currency exchanges
management risk
potential threat due to mgmt decision making in foreign markets
outsourcing
using other firms to perform value creating activities that were previously performed in house
offshoring
shifting a value creating activity from a domestic location to a foreign location
exporting
producing goods in one country to sell to residents in another country
licensing
when a company receives royalties in exchange for the right to use valuable property ie trademark patents
franchising
like licensing, but involves a longer time period and other factors like monitoring operations training and advertising
wholly owned subsidiary
a business in which a multinational company owns 100 percent of the stock
opportunity recognition
identifying, selecting, and developing potential opportunities
angel investors
private individuals who provide equity investments for seed capital during early stages of a new venture
venture capitalists
companies that invest funds in lucrative business opportunities
crowdfunding
funding a venture by pooling small investments from a large number of investors, usually online
pioneering new entry
firms entry into an industry with a radical new product or highly innovative service that changes the way business is conducted
imitative new entry
entry into an industry with products or services that capitalize on proven market successes and that usually have a strong marketing orientation
adaptive new entry
entry into an industry by offering a product or service that is somewhat new and different to create value for customers by capitalizing on current market trends
new competitive action
an act that might provoke competition to react such as new market entry, price cut, imitating products, or expanding production
market commonality
extent to which competition are vying for same customers
resource similarity
the extent to which rivals draw from the same types of strategic resources
threat analysis
firms awareness of its closest competitors and the competitive actions they might be planning
strategic actions
major commitments of distinction and specific resources to strategic initiatives
tactical actions
extensions of strategies usually involving minor resource commitments
market dependence
degree of concentration of a firms business in a particular industry
forbearance
a firms choice of not reacting to a rivals new competitive action
co opetition
a firms strategy of both cooperating and competing with rival firms
