Exam 1 Flashcards
Strategy
An organizations overall direction to gain and sustain a competitive advantage to achiever mission and purpose
What is the big picture
Why do some organizations succeed and others fail?
Strategic leadership
Creating competitive advantage through amazement of an effective strategy making process
Strategy formulation
Selecting strategies based on analysis of an organizations external and internal environment
Strategic thinking
Plan, pattern, position, perspective, process
ROIC
Return on investment capital
Strategy is the link between what and what
The firm and it’s environment
Components of a mission statement
Mission, vision, values, major goals
Vision vs mission
Strategic vision concerns an organizations future, a mission conveys current business of the organization
Cognitive bias
Systematic errors in the human decision making process that arise from the way people process information
Prior hypothesis bias
Occurs wen decision makers already have a strong beliefs from something that has occurred before
Escalating commitment
Cognitive bias that occurs when decision makers commit even more after they hear that a project is failing
Reasoning by analogy
Use of simple analogies to make sense out of complex problems
Representativeness
Bias rooted in the tendency to generalize from a small sample or even a single vivid anecdote
Illusion of control
Cognitive bias rooted in the tendency to overestimate ones ability to control events
Availability error
Bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine
Techniques to improve decision making
Decision making, dialect inquiry, and outside view
Dialect inquiry
Generalization of a plan and a counter plan that reflect plausible but conflicting courses of action
Outside view
Identification of past failed/successful strategic initiatives to determine if they will work for current project
Process of identifying opportunities and threats
Scanning, monitoring, forecasting, assessing
Economies of scale
Reductions in unit costs attributed to a larger output
Absolute cost advantage
Used by leaders of an industry so new entrants cannot expect to match
Switching costs
Cost consumers beat to switch from the products offered by established companies to products offered by a new entrant
Risk of entry by potential competitors
Economies of scale, absolute cost advantage, brand loyalty, and switching costs
Unattractive industry conditions
Low entry barriers, suppliers and buyers have strong positions, strong threats from substitute products, intense rivalry among competitors
Mobility barriers
Factors that inhibit movement of a company between strategic groups
Building blocks of competitive advantage
Superior: quality, efficiency, innovation, and customer responsiveness
Ways to increase ROUC
Increase company’s return on sales, increase sales revenue from invested capital
4 types of generic business strategies
Broad low cost, broad differentiation, focused low cost, focused differentiation
Broad low cost
Company establishes a cost structure that allows it to provide goods and services at lower unit costs than competitors, does not try to be industry innovator, positions product to appeal to average consumer
Broad differentiation
Creates a product that is distinct from competitors in a unique way, concentrates on innovation or quality
Focus business level strategy
Strives to serve the need of a target market segment
Differentiation
When a company positions itself to have low prices and deliver differentiated products
Primary activities
Related to the design, creation, and delivery if the product, it’s marketing and it’s support and after sales service
Support activities
Activities of the value chain that provide inputs that allow the primary activities to take place
4 functions of support activities
Materials management, human resources, information systems, company infrastructure
Competitive advantage building blocks
Efficiency, quality, innovation, customer responsiveness
