Competitive Strategy Flashcards
Industry lifecycle stages - Growth
- Low price elasticity of demand
- High price
- High Adv (product)
- Profit low, then increasing
- Variety: Innovation
- Quality: bugs
- Capacity shortages
- Easy entry
- Few firms
- Patch distribution
Industry lifecycle stages - Maturity
- Increasing price elasticity of demand
- Falling price
- High Adv (brand)
- Profit in decline
- Variety: standardization
- Quality: stable
- Capacity OK
- Entry is difficult and less attractive
- Many firms
- Well-established distribution
Industry lifecycle stages - Decline
- High price elasticity
- Falling price
- No money for Adv
- Profit low or negative
- Variety: standardization
- Quality: well-established design
- Overcapacity
- Entry is unattractive
- Fewer firms
- Distribution is important
Strategies for decline stage (Porter)
- Dominance and leadership
- Niche exploitation
- Harvest
- Exit
- Internalize the threat
The 5 forces framework
- Threat of new entrants
- Rivalry
- Bargaining power of buyers
- Bargaining power of suppliers
- Pressure from substitute products
Dominant strategy
a strategy that, no matter what other parties do, makes the player better off
Strategic Moves
something that is intended to alter the beliefs or expectations of other in a direction favorable to you
Specialization
is one variant of a range of strategies which communicate a credible commitment to a specified course of action by deliberately restricting the options to the firm
Value Chain
it breaks the firm down to component activities to identify actual and potential sources of competitive advantage
Strategy Business Unit (SBU)
part of the firm that can be seen to have a strong technological or market thread that allows it to be managed as a distinct business in its own right
Strategies - generic approaches
- Cost leadership
- Differentiation
- Focus
Cost leadership - Cost drivers
- Economies of scale
- Learning and experience curve gains
- Capacity utilization
- Vertical links with the value chain
- Economies of scope
- Timing
- Location
- Regulations, taxation, and subsidies
- Discretionary policies
- External economies
Differentiation - Differentiation drivers
- Policy choices
- Linkages
- Timing
- Location
- Inter-relationships with other value chains
- Learning
7 Vertical integration and control - Scale
R&D - Success of design
- Economies of scale
- Learning curve
- Network of users
- Network of suppliers
R&D - Failure of design
- Rising costs
- Few learning gains
- Few users
- Low supplier interest
Characteristics of innovative process - phases
- Basic research
- Applied research
- Development
- Introduction
Characteristics of innovative process - Research end
- Specificity: LOW
- Uncertainty: HIGH
- Time: LONG
- Cost of stage: LOW
- Cumulative cost: HIGH
Characteristics of innovative process - Introduction end
- Specificity: HIGH
- Uncertainty: LOW
- Time: SHORT
- Cost of stage: HIGH
- Cumulative cost: LOW
9 innovating problems
- Appropriability
- Neglect of potential internal spin-offs
- Duplicated research efforts
- Uncertainty
- Cost
- Long time horizons
- Asymmetric information
- Macchiavelli’s problem
- Compartmentalization and need for integration
Innovating problems: solutions
- Conduct R&D in-house
- Internal funding of R&D
- Corporate-level R&D
- Top-down budgeting
- Split the R&D function
- Split budget for operation and innovation
- Target for new product generation
- Parallel R&D approaches
- Second-in strategies
- Licensing and joint venture
- Research clubs
- Corporate diversification
- R&D diversification
- Matrix organization
- Organic structures
- Quasi-autonomy
- Product champions
- Fixed-price VS cost-plus R&D contracting
- Public fund of basic research
Vertical relations - Range
- Spot contract
- Long-term contract
- Vertical integration
- Franchising
- Tapered integration
- Vertical quasi-integration
- Value-adding partnership
Hold-up problem: solutions
- Repeated contracting
- Exhaustive contracting
- Standardized assets
- Hostages
- Multiple sourcing
- Vertical integration
- Tapered integration
Market relations problems (w/ transactions)
- Bounded rationality
- Opportunism
- Asset specificity
Forms of asset specificity
- Site specificity
- Physical asset specificity
- Human asset specificity
- Dedicated asset
Cost of vertical integration
- Different competencies
- Dangers of specialization
- Lack of flexibility
- Sacrifice of economy of scale
- Dampered performance incentive
- Large size
- Vertical relations with rivals
Attacks
- Innovation
- Change in consumer tastes
- Resource depletion
- CHange in government restrictions
Diamond Framework (Porter)
- Factor conditions
- Demand conditions
- Linked and related industries
- Firm strategy, structure, and rivalry
- Chance and government
Competing abroad: the principles (Porter)
- Seek sophisticated oversea buyers
- Source basic factors globally
- Keep strategy assets close to home
- Selective tapping of foreign technology
- Attack rivals directly to learn from them and neutralize them
- Locate regional HQs and best diamonds
- International acquisition and alliances for access and learning
- Globalization versus localization
Mergers: difficulties in determining if value was added
- Measurement difficulties
- Other motives
- Wrong criteria
- Opportunity costs
Mergers: how advantages are achieved
- Similar outlets
2. Similar activities
Mergers gains: Supply-side vs Demand-side
- Supply: sharing resources and reducing costs
2. Demand: shifting demand curve and/or increased market power
Mergers: why do they perform so bad?
- Compatibility problems
- Optimistic bias
- Strategy matching, interdependent strategies
- Insulation from environmental surprises
- Agency problems
- Prisoners’ dilemma
Mergers: why do acquirers do even worse than those being acquired?
- Grossman-Hart problem (1980) - dispersion of ownership
- The ‘winner’s curse’
- Hubris
Cooperative activities
- Licensing
- Franchise
- Informal co-operation
- Sub-contracting
- Joint venture
- Alliance
- Network participation
