elect 1- 2nd exam Flashcards
Dynamic capabilities enable firms to quickly adapt to emerging markets or major technological discontinuities. This is also the set of abilities that make a firm more agile and responsive to change.
STRATEGIC INTENT
The two most commonly used tools for analyzing the external environment of the firm include Porter’s five-force model and stakeholder analysis.
In this model, the attractiveness of an industry and a firm’s opportunities and threats are identified by analyzing five forces
EXTERNAL ANALYSIS
Highly consolidated industries with a few large competitors
OLIGOPOLISTIC INDUSTRIES
An industry’s degree of rivalry is influenced by a number of factors. First, the number and relative size of competitors will shape the nature of rivalry. In general, the more firms competing that are of comparable size, the more competitive the industry will be.
The degree of existing rivalry.
influenced by the degree to which competitors are differentiated from each other. For example, if competitors are highly differentiated, they will experience less direct rivalry because their products are likely to appeal to different market segments.
The degree of existing rivalry.
is influenced by both the degree to which the industry is likely to attract new entrants and the height of entry barriers. This also refers to the threat that new competitors pose to current players within an industry.
Threat of potential entrants
Customers in the industry show a strong preference for the products and/or services of existing companies.
BRAND LOYALTY
Existing companies own exclusive rights to suppliers and distribution channels.
Access to suppliers and distribution channels
The degree to which the firm relies on one or a few suppliers will influence its ability to negotiate good terms. If there are few suppliers or suppliers are highly differentiated, the firm may have little choice in its buying decision, and thus have little leverage over the supplier to negotiate prices, delivery schedules, or other terms.
BARGAINING POWER OF SUPPLIERS
Finally, if the firm can _______ integrate (i.e., produce its own supplies), this will lessen supplier bargaining power
backward vertically integrate
this will lessen supplier bargaining power, and if the supplier can threaten to ______ integrate into the firm’s business, this will increase the supplier’s bargaining power.
forward vertically integrate
The degree to which the firm is reliant on a few customers will increase the customer’s bargaining power, and vice versa.
Bargaining power of buyers.
Substitutes are products or services that are not considered competitors, but fulfill a strategically equivalent role for the customer.
Threat of substitutes.
the firm most often begins with identifying the firm’s strengths and weaknesses. In Michael Porter’s model of a value chain, activities are divided into primary activities and support activities.
Internal Analysis
enable firms to quickly adapt to emerging markets or major technological discontinuities. This is also the set of abilities that make a firm more agile and responsive to change.
Dynamic capabilities
Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources. The organizational culture may reward employees who are most closely connected to core competencies with higher status and better access to other organizational resources.
The Risk of Core Rigidities
The first entrants to sell in a new product or ser vice category.
first movers (or pioneers)
Entrants that are early to market, but not first.
early followers (also called early leaders)
Entrants that do not enter the market until the time the product begins to penetrate the mass market or later.
late entrants
The company that introduces a new technology may earn a long-lasting reputation as a leader in that technology domain. Such a reputation can help sustain the company’s image, brand loyalty, and market share even after competitors have introduced comparable products.
Brand Loyalty and Technological Leadership
if a product is complex, buyers must spend time becoming familiar with its operation; this time investment becomes a switching cost that deters the buyer from switching to a different product.
Exploiting Buyer Switching Costs
In an industry with pressures encouraging adoption of a dominant design, the timing of a firm’s investment in new technology development may be particularly critical to its likelihood of success.
Reaping Increasing Returns Advantages
Developing a new technology often entails significant research and development expenses, and the first to develop and introduce a technology typically bears the brunt of this expense. By the time a firm has successfully developed a new technology,
Research and Development Expenses
When a firm introduces a new-to-the-world technology, often no appropriate suppliers or distributors exist. The firm may face the daunting task of developing and producing its own supplies and distribution service, or assisting in the development of supplier and developer markets.
Undeveloped Supply and Distribution Channels
.- Component technologies that are necessary for the performance or desirability of a given innovation.
enabling technologies
A learning effects is manifest in the impact of cumulative production on cost and productivity.
Learning Curve
A first mover to the market may face considerable uncertainty about what product features customers will ultimately desire and how much they will be willing to pay for them. For a very new product technology, market research may be of little help.
Uncertainty of Customer Requirements
Also termed positive consumption externalities, this is when the
value of a good to a user increases with the number of other
users of the same or similar good.
NETWORK EXTERNALITIES
to the phenomenon whereby as firms accumulate
knowledge, they also increase their future ability to assimilate
information. A firm’s prior related experience shapes its ability
to recognize the value of new information, and to utilize that
information effectively.
Absorptive capacity
In some industries, the consumer welfare benefits of having compatibility
among technologies have prompted government regulation, and thus a
legally induced adherence to a dominant design. This has often been the
case for the utilities, telecommunications, and television industries, to name
a few.
GOVERMENT REGULATION
Increasing returns to adoption also imply that technology
trajectories are characterized by _________ meaning that
relatively small historical events may have a great impact on the
final outcome.
path dependency
Refers to the number of users of a particular technology.
■ For instance, the installed base of a particular video game
console refers to the number of those consoles that are installed
in homes worldwide
Installed Base
The stages they identify are purchase, delivery, use,
supplements, maintenance, and disposal. The six utility levers
they consider are customer productivity, simplicity, convenience,
risk, fun and image, and environmental friendliness.
JUST FAMILIARIZE!!
The value of
a technological innovation to users will be a function not only of
its stand-alone benefits and cost, but also of the value created by
the size of its installed base and the availability of
complementary goods
NETWORK EXTERNALITY VALUE
The degree to which a system’s components can be
separated and recombined.
■ To understand modularity, consider a product like a computer: A
computer is a bundle of components that includes a
microprocessor, a monitor, a keyboard, and more. Some of these
components can be bought separately and assembled by the
user, and some are typically bought preassembled.
MODULARITY
Conditions that
make it difficult
or expensive for
new firms to
enter an industry
(government
regulation, large
start-up costs,
ENTRY BARRIERS
refers to a system of mutually dependent entities mediated by a
stable core.
■ A platform’s boundaries can be well-defined with a stable set of
members dedicated wholly to that platform, or they can be
amorphous and changing, with members entering and exiting
freely, and participating in multiple platforms simultaneously
Platform Ecosystems
Costs or other commitments that make it difficult for firms to abandon an
industry (large fixed-asset
investments, emotional commitment to the industry, etc.).
EXIT BARRIERS
Modularity becomes increasingly valuable in a product system
when there are (a) diverse technological options available to be
recombined, and (b) heterogeneous customer preferences.
If the firm faces _______ that make it difficult
or expensive to change suppliers, this will also increase the supplier’s bargaining
power.
switching costs
Any entity that
has an interest
(“stake”) in the
organization.
STAKEHOLDER
Resources of
an intangible
nature (such as
knowledge) that
cannot be readily
codified.
tacit resources
Resources or
activities that
emerge through
the interaction
of multiple
individuals.
socially com
plex resources
The relation
ship between
a resource and
the outcome
it produces is
poorly under
stood (the causal
mechanism is
ambiguous).
causal
ambiguity
A set of abilities
that make a firm
more agile and
responsive to
change
dynamic
capabilities
The degree to which the firm relies on one or
a few suppliers will influence its ability to negotiate good terms.
BARGAINING POWER OF SUPPLIERS
When multiple
stages of the
new product
development
process occur
simultaneously.
parallel
development
process
A first mover to the market may face considerable uncertainty about what product
features customers will ultimately desire and how much they will be willing to pay
for them. For a very new product technology, market research may be of little help.
Uncertainty of costumer Requirements
Component technologies that are necessary for the performance or desirability of a given innovation.
Enabling technologies
When a firm introduces a new-to-the-world technology, often no appropriate suppliers
or distributors exist. The firm may face the daunting task of developing and producing
its own supplies and distribution service, or assisting in the development of supplier
and developer markets.
Undeveloped Supply and Distribution Channels
The tendency for incumbents to be slow to respond to changes in the industry environment due to their large size, established routines, or prior strategic commitments to existing suppliers and customers.
incumbent inertia
Once buyers have adopted a good, they often face costs to switch to another good.
For example, the initial cost of the good is itself a switching cost, as is the cost of
complements purchased for the good.
Exploiting Buyer Switching Costs
The word ecosystem comes from biology and is a contraction of ecological sys
tem. This means that when we use the term ecosystem, we are usually referring to
entities that have some degree of mutual dependence.
Platform Ecosystem
The degree to
which a system’s
components can
be separated and
recombined.
MODULARITY
