Exam 1 Flashcards
Prep Material
Competitive Advantage
Firm use strategy to create:
1) Superior value for customers
2) Products hard to duplicate
3) Brand to costly to imitate
Strategic competitiveness
When firm successfully uses a formal and value creating strategy
Strategy
Set of commitments and actions to preform task efficiently and gain competitive advantage
Above-Average Returns
More than the investors expected from similar return of same amount
Risk
Uncertainty about economic gains and losses from investments
Average Returns
Investments that are just like others with the same amount of risk
strategic management process
Set of
1) Commitments
2) Decisions
3) Actions
required for strategic competitiveness and earn above-average returns
Hypercompetition
Firms that create:
1) Instability
2) Disruption
to the competitive landscape
global economy
Where Goods and Services move freely across geographic borders
Globalization
Large number of firms competing against each other with Goods and Services
Perpetual innovation
describe how rapidly and consistently new, technologies replace older ones
Knowledge
1) information
2) intelligence
3) expertise
Strategic flexibility
Set of capabilities to deal with demands and opportunities in uncertain competitive environment
Resources
Inputs to production process
1) Capital Equipment
2) Skills of individual employee
3) Patents
4) Finances
5) Talented Managers
Capability
Capability to perform a task
Core competencies
Capabilities serving as sources of competitive advantage
Vision
Plans for where the firm wants to achieve
Mission
Specifies the business in which the firms intends to compete
Stakeholders
Investors
Strategic leaders
people from different location using the strategic management process
Organizational culture
refers to the complex set of ideologies, symbols, and core values of the firm
What are the two Major Model used in Ch1
(I/O) model of above-average returns
The Resource-Based Model of Above-Average Returns
The core assumption of the I/O model is that?
the firm’s external environment has more influence on the choice of strategies than internal resources
What is the I/O Model used for?
I/O model is used to understand the effects on deciding what strategies to use in competing against rivals.
What are the steps for Strategic management process
Analysis, Strategy, Performance
What are the steps for I/O Model of Above-Average Returns
The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns
What is the purpose of strategic group
Analyzing an industry’s competitive structure.
competition, positioning, and the profitability of firms competing within an industry
Five Forces are?
1) Power of Supplier
2) Power of Buyer
3) Threat of new Entrants
4) Threat of substitute products
5) Rivalry among competing firms
Factors that drive Threat of new Entrants & substitute
Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy
3 major parts of external environment
general environment
industry environment
competitor environment
Limitation of Five Forces
- Ignores internal factors
- Assumes zero-sum game
- doesn’t account for performance diff
- No other External factors
- static analysis
PESTLE Analysis
Political Economic Social Technological Legal Environmental
Difference between External & Internal Analysis?
External (Opportunities, Threats)
Internal (Strengths, Weaknessess
Origin of the term Strategy
Strategos(Greek) - Art of the general
2 Important type of Decisions?
Where do we compete - Corp Strategy
how to we compete - Business Strategy
Take away from Alaska Gold Mine
Strategy involve trade-offs, uncertainty, competition
Drivers are External Environment & resources
learning how to be a Team player
What Strategy is not
Big general goals “We want to win”
Operational effectiveness, competitive benckmarking, etc.
Description of what the company wants
I/O Model Assumptions
External Environment imposes pressures
resources cause similar strategies
Resource differences among competitors are short-lived
The Resource-Based Model
Building Competitive Advantage:
1) Resources
2) Capability
3) Core Competence
List 5 business-level strategies
- Cost Leadership
- Differentiation
- Focused Cost Leadership
- Focused Differentiation
- Integrated Cost Leadership/Differentiation
Cost(Leadership)-based Advantage
Provide Goods & Service than competitors with equivalent Willingness to Pay (WTP)
Lower Total delivered cost (TDC)
Differentiation-based advantage
Provides unique product/service at a premium price.
Creates more customer-perceived differentiation increase Willingness to Pay WTP
WTP must be greater than Total delivered cost TDC
Hybrid strategy(integrated cost leadership & differentiation
- Stuck in the middle
- differentiation can help understand
- Org Barrier
- Factors to succeed:
a) Structural Separation
b) Increase effort & complexity
Gucci Case Takeaway
Repositioning(Doing a Gucci) - Turnover was becuz tight fit amongst various activities
Differentiation Strategy: selling more items and the brand (Gucci man)
Role of top management teams: working well as a team (Dom-Tom dream team)
Resources
What a firm HAS
Tangible:
Fin
Physical
Org
Intangible:
Human, Social Capital, Knowledge, Corp culture, reputation
Capabilities
What a firms DOES
Competencies
Resources + Capabilities working together
Value Chain
Shows sequence activities firms engages in when transforming inputs and outputs
What are the 2 types of Activities?
Primary - Directly add value
Support - Indirectly add value
What does Value do?
Explains how firms values creation breaks down
Helps identify relevant resources and capabilities
Resources/Capabilities costly to imitate
History
Time to do it right
complexity
Copyright, Trademarks, patents
VRIN Framework
Valuable Rare Difficult to imitate Without substitutes Sustainable competitive advantage
eHarmony Case
Strong fit between external positioning and internal resources
Resources and Capabilities difficult to imitate
