Exam 1

Question 1

Strategic Management Process

Answer 1

Mission,Objectives,(External Analysis and Internal Analysis), Strategic Choice, Strategy Implementation, Competitive Advantage

Question 2

Mission

Answer 2

• Long-Term Purpose

- Defines both what a firm aspires to be in the long run and what it wants to avoid in the meantime.

Question 3

Objectives

Answer 3

• Specific, Measurable targets;
• the things a firm needs to ‘do’ to achieve its mission
• Should influence other elements in the strategic management process

Question 4

Strategy Implementation

Answer 4

• Occurs when a firm adopts organizational policies and practices that are consistent with its strategy.
• How strategies are carried out; who will do what
• Organizational structure and control
• Who reports to whom
• How does the firm hire, promote, pay, etc.

Question 5

Competitive Advantage

Answer 5

-Competitive advantage is the result of doing something different and/or better than competitors

-A firm has a competitive advantage when…
It is able to create more economic value than rival firms

Question 6

Competitive Advantage Temporary

Answer 6

Competitive Advantage is temporary because profit attracts competition.

Question 7

Competitive parity

Answer 7

• The firm’s offerings are ‘average’
• People do not have a preference for the firm’s offering
• The firm does not have a cost advantage over others

Question 8

Competitive Disadvantage

Answer 8

• People may have an aversion to the firm’s offering
• The firm may have a cost disadvantage
• A firm may have outdated technology/equipment
• A firm may have a negative reputation

Question 9

Emergent

Answer 9

-Emergent strategies are theories of how to gain competitive advantage in an industry that emerge over time or that have been radically reshaped once they are initially implemented.

Question 10

External Analysis

Answer 10

A way to tell what the company should or might choose to do.

-Helps analyze opportunities and threats.

• Technology
• Politics/Law
• Demographics
• Culture
• Economics

Question 11

Structure-Conduct-Performance Model

Answer 11

A way to tell if an industry is going to develop or not.

Question 12

Porter’s Five Forces

Answer 12

• Threat of supplier leverage
• Threat from superior or lower-cost substitute products
• Threat of competition among existing companies.
• Threat of new competition
• Threat of buyer’s influence

Question 13

Threat of existing competitors

Answer 13

Attributes:

• Large number of competitors
• Slow or declining growth
• high fixed costs and/or high storage costs
• low product differentiation

Question 14

Threat of new entrants/competition

Answer 14

Barriers to Entry:

-Economies of scale: finding the profitable and optimal amount for production

-Product differentiation:
entrants are forced to overcome customer loyalties to existing products

-cost advantages independent of scale:
proprietary technology; managerial know-how; favorable access to raw materials; learning curve cost advantages.

-Government policies: governments may impose trade restrictions and/or grant monopolies

Question 15

Threat of substitute products

Answer 15

Direct Competitors: provide products or services in the same ways

Substitutes: provide products or services in a different way.

Question 16

Threat of supplier leverage/bargaining power

Answer 16

• Small number of firms in the suppliers industry
• Highly differentiated product
• Lack of close substitutes for suppliers’ products
• Focal firm is an insignificant customer of supplier
• Supplier could integrate forward.

Question 17

Threat of buyers’ influence/bargaining power

Answer 17

• Number of buyers is small
• Products sold to buyer are undifferentiated and standard.
• Products sold to buyers are a significant percentage of a buyer’s final costs.
• Buyers are not earning significant economic profits.
• Buyers threaten backward vertical integration.

Question 18

Internal Analysis

Answer 18

Helps a firm identify what they can do

• Uncovers a firm’s strengths and weaknesses
• determines if internal resources and capabilities can lead to competitive advantage.
• identifies and implements strategies that best leverage internal resources and capabilities for a competitive advantage.

Question 19

Resource-Based View

Answer 19

Resources: Tangible (factories and products) and Intangible (reputation) assets of a firm

Capabilities: Subset of resources that enable a firm to take full advantage of it’s resources
Examples: Marketing Skill, Cooperative relationships.

Question 20

Resource Heterogeneity

Answer 20

• Different firms may have different resources
• Resources can be bundled
• Unequal distribution of resources(some may have more of others)

Question 21

Resource Immobility

Answer 21

• It can be cost to acquire and/or develop resources

- Some resources may not transfer between firms easily

Question 22

Question of Value

Answer 22

Does a firm and capabilities add value by enabling it to exploit opportunities and/or neutralize threats.

Question 23

Question of Rareness

Answer 23

How many competing firms already posses these valuable resources and capabilities?

Question 24

Question of Imitability

Answer 24

Do firms without a resource of capability face a cost disadvantage compared to firms that already possess it.

Question 25

Question of Organization

Answer 25

Is a firm organized to exploit the full competitive potential of its resources and capabilities.

Question 26

Value Chain

Answer 26

The set of business activities in which it engages to develop, produce, and market its products or services.