Exam 1 Flashcards
What do we mean by a company’s strategy?
The coordinated set if actions that its managers take in order to outperform the company’s competitors and achieve superior profitability.
Sustainable competitive advantage
- Giving buyers lasting reasons to prefer products or services over competitors
- develop expertise and long term capabilities that cant be readily overcome
- putting the constant quest for sustainable competitive advantage at center stage in your strategy
Competitive advantage
Requires meeting customer needs more effectively(value higher) or more efficiently(low cost).
Deliberate strategy
Proactive strategy elements that are both planned and realized as planned
Fit test
- does it exhibit a good fit with the external and internal aspects of the firm’s dynamic situation?
- internal: capabilities
- external: buyer trends, economics
Emergent strategy
Consists of reactive strategy elements that emerge as changing conditions warrant
Competitive advantage test
- is it likely to result in a sustainable competitive advantage?
- is the company investing in one or more of its competitive advantages to make it sustainable in the long term
Sustainable business model
Sets forth the logic for how its strategy will create value for customers at the same time generate revenues sufficient to cover cost and realize as a profit
Performance test
- is it producing superior performance, as indicsted by the firm’s profitability, financial and competitive strengths, and market standing?
- asks if its meeting, falling short, or beating goals
Corporate straregy
Multibusiness strategy- how to gain synergies from managing a portfolio of businesses together rather than as separate businesses
Business strategy
- how to strengthen market position and gain competitive advantage
- actions to build competitive capabilities of single businesses
- monitoring and aligning lower level strategies
Functional area strategies
- add relevant detail to the hows of business strategy
- provide a game plan for managing a particular activity in ways thst support the business strategy
Operational strategies
- add detail and completeness to business amd functional strategies
- provide a game plan for managing specific operating activities with strategic significance
Strategic plan
Lays out its direction, business model, competitive strategy, and performance targets for some specified period of time
Values
The beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company’s business and pursuing its strategic vision and mission
Strategic intent
Used to describe the aspirational plans, overreaching purpose, or intended direction of trebel needed to reach an organizational vision
Balanced scorecard
Strives to place balanced emphasis on achieving both financial and strategic objectives by tracking measures of both financial performance and the competitiveness of its market position
4 Dimensions of scorecard
- financial objectives
- strategic objectives that signal greater competitive strength
- internal process objectives relating to productivity and quality
- organizational objectives concerning human capital, culture, infrastructure, and innovation
Strategic vision
Decribes a firm’s aspirations for its future(answers the questions- where we are going)
Objectives
Are an organizations performance targets- the specific results management wants to achieve
Objectives are:
- specific
- measurable
- time limited
- challenging
- achievable
Financial objectives
Communicate managements goals for financial performance
Mission
Depicts its purpose and its business (answers who are we, what we do, why we are here)
Strategic objectives
Layout target outcomes concerning a company’s market standing, competitive position, and future business prospects
Stretch objectives
Promotes better overall performance
- push a firm to be more inventive
- create an exciting work environment
Macro Environment
Encompasses the broad environmental context in which a company’s industry is situated
Five Forces
Rivalry Potential new entrants Threat of substitute products Supplier bargaining Buyer bargaining power
Strategic Group Mapping
Technique for displaying the different market of competitive positions that rival firms occupy in the industry
PESTEL Analysis
Used to assess the strategic relevance of the six principal components of the macro environment
Political (Taxes, political views)
Economic (Growth/recession)
Social/cultural (Values, culture, beliefs)
Technological (advances)
Environmental (natural resources, impact on environment)
Legal (taxes, natural resources, etc)
Complementors
The producers of complementary products, which are products that enhance the value of the focal firm’s products when they are used together
Strategic group
A cluster of industry rivals that have similar competitive approaches and market positions.
Rivalry
Competitive rivalry is a measure of the extent of competition among existing firms
Driving forces
The major underlying causes of change in industry and competitive conditions
Key success factors
The strategy elements, product and service attributes, operational approaches, resources, and competitive capabilities that are essential to surviving and thriving in the industry
Competitive assets
What the company’s resources and capabilities represent. Determinants of its competitiveness and ability to succeed in the marketplace
Resource bundle
Linked an closely integrated set of competitive assets centered around one or more cross-functional capabilities.
Causal ambiguity
Makes it very hard to figure out how a complex resource contributes to competitive advantage and therefore exactly what to imitate
Value chain
Identifies the primary activities and related support activities that create customer value
Resource
A competitive asset that is owned or controlled by a company
VRIN
Asks whether a resource is valuable, rare, inimitable(hard to copy), and non-substitutable
Dynamic capability
An ongoing capacity of a company to modify its existing resources and capabilities or create new ones
Benchmarking
Is a potent tool for improving a value chain activities that is based on learning how other companies perform them and borrowing their “best practice
Capability or competence
An activity that a company has learned to perform with proficiency
Social complexity & causal ambiguity
Two factors that inhibit the ability of rivals to imitate a firm’s most valuable resources and capabilities
SWOT Analysis
Is a measure of a company’s strengths, weaknesses, opportunities, and threats
Best practice
A method of performing an activity that consistently delivers superior results compared to other approaches
Core competences
Is an activity that a company performs proficiently and that is also central to its strategy and competitive success
Distinctive competence
A capability that enables a company to perform a particular set of activities better than its rivals
How a comprehensive evaluation of a company’s competitive situation can assist managers in making critical decisions about their next strategic moves
Develop a quantitative strength rating for the company and its key competitors on each industry key success factor and each competitively pivotal resource, capability, and value chain activity
How to take stock of how well a company’s strategy is working
Whether the company is achieving its stated financial and strategic objectives
Whether its financial performance is above the industry standard
Whether it is gaining customers and market share
How to use multiple frameworks to determine whether an industry’s outlook presents a company with sufficiently attractive opportunities for growth & profitability
Using the results of each analyses performed to determine whether the industry presents the company with strong prospects for competitive success and attractive profits
How to use analytic tools to diagnose the competitive conditions in a company’s industry
Using value net, driving forces, strategic groups, competitor analysis, and key success factors properly can provide managers with the understanding needed to craft a strategy that fits the companies situation within their industry environment
How to recognize the factors in a company’s broad macro-environment that may have strategic significance
PESTEL Analysis
The role and responsibility of a company’s board of directors in overseeing the strategic management process
Is well informed about the firm’s performance.
Guides and judges the CEO and other executives.
Can curb management actions the board believes are risky.
Can certify to shareholders that the CEO is doing what the board expects.
Provides insight and advice to top management.
Is intensely involved in debating the pros and cons of key strategic decisions and actions
The importance of setting both strategic and financial objectives
To convert the vision and mission into specific, measurable, challenging yet achievable, deadline performance targets
To focus efforts and align actions throughout the organization
To serve as yardsticks for tracking a firm’s performance and progress
To provide motivation and inspire employees to greater levels of effort
Why it is critical for companies to have a clear strategic vision of where a company needs to head and why
Delineates management aspirations for the firm to its stakeholders (Shareholder, employees, customers, etc)
Provides direction: “where we are going”
Sets out the compelling rationale (strategic soundness) for the firm’s direction
Uses distinctive and specific language to set the firm apart from its rivals
Five basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage
- Low cost provider - Walmart
- Focused low cost – Dollar Shave Club
- Best cost provider – Applebees, Toyota
- Focused differentiation – Lamborghini (Narrow product market)
- Broad differentiation – Apple
Some financial ratios used to measure financial performance?
Gross profit margin
Operating profit margin
Net profit margin
