Final Flashcards
1
Q
Strategy
A
a comprehensive, goal-oriented plan a firm takes to gain and sustain superior performance relative to competitors
2
Q
Purpose of strategy
A
sustainable competitive advantage - a firm that is able to outperform competitors or the industry average over a prolonged period has a sustainable competitive advantage
3
Q
Why Strategy?
A
Entrepreneur - how can you develop a valuable competitive position within an industry dominated by other firms?
Executive - how can you leverage the firms unique resources and capabilities?
Analyst - how can you understand how some firms generate greater economic profit than others?
Consultant - how can you help clients develop low-costs?
4
Q
strategic management
A
the integrative field that combines analysis, formulation and implementation in the quest for competitive advantage
5
Q
competitive disadvantage
A
a firm that underperforms its rivals or the industry average
6
Q
competitive parity
A
when two or more firms perform at the same level
7
Q
strategic positioning
A
steak out a unique position within an industry that allows the firm to provide value to customers, while controlling cost
8
Q
value creation
A
occurs because companies with a good strategy are able to provide products or services to consumers at a price point that they can afford while keeping their costs in check
- both producer and consumer capture part of value created leaving society better off
9
Q
stakeholder
A
organizations, groups and individuals that can affect or be affected by a firm’s actions
10
Q
stakeholder strategy
A
an integrative approach to managing a diverse set of stakeholders effectively to gain and sustain competitive advantage
- stakeholders have a vested claim or interest in the performance and continued survival of the firm
11
Q
Step 1: Identify stakeholders
A
- public companies’ key stakeholders: shareholders and other providers of capital
- second group: customers, suppliers and unions
12
Q
Step 2: Identify Stakeholder Interests
A
- specify and assess the interest and claims of pertinent stakeholders using power, legitimacy, and urgency criteria
- significant variation in the power a stakeholder may exert on firm
13
Q
Step 3: Identify Opportunities and Threats
A
stakeholders have claim on the company, opportunities and threats are two sides of the same coin
- consumer boycotts
14
Q
Step 4: Identify social responsibilities
A
corporate social responsibilities. helps form recognize and address the economic, legal, ethical and philanthropic expectations that society has of the business enterprise at a given point in time
15
Q
Step 5: stakeholder impact analysis
A
strategic leaders need to decide the appropriate course of action for the firm given the preceding factors
16
Q
AFI Framework
A
Analysis
Formulation
Implementation
17
Q
Analysis
A
diagnosis of competitive challenge
- vision, mission, values
- external analysis
- internal analysis
18
Q
Formulation
A
a guiding policy
- corporate strategy
- business strategy
- functional strategy
19
Q
Implementation
A
coherent actions
- structure, culture, control
- corporate governance and business ethics
20
Q
vision
A
captures an organizations aspirations and spells out what it ultimately wants to accomplish
- effective vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target, while leaving room for individual and team contributions
21
Q
consumer-oriented vision
A
defines a business in terms of providing solutions to customer needs
22
Q
product-oriented vision
A
defines a business in terms of a good or services provided
23
Q
mission
A
describes what an organization actually does – that is, the products and services it plans to provide, and the markets in which it will compete
- what organization does to accomplish vision
24
Q
values
A
Core values statement: provides touchstones for employees to understand the company culture, provides moral compass for employees, values support firm ethics
Organization core values: ethical standards and norms that govern the behavior of individuals within a firm or organization, outline vision
- how do we accomplish our goals?
25
Strategic management process
- lays the foundation for sustainable competitive advantage
- strategic leaders design a process to formulate and implement strategy
- rational and structured
26
Top-down strategic planning
derived from military strategy, is a rational process through which executives attempt to program future success
- all intel and decision making is concentrated in office of CEO
- three steps are AFI process
- info flows one way, top down
- unforeseen events can make significantly developed and formalized plans obsolete
27
scenario planning
managers ask what-if questions
- similar to top-down, planning starts with top management envisioning possible scenarios to anticipate plausible futures to derive strategic response
28
Strategy as planned emergence: top-down and bottom-up
managers engage in a more formalized approach to the strategy process may also fall prey to an illusion of control
- managers overestimate ability to control events
- strategy should be based on an inspiring vision and not hard data alone
29
firms realized strategy
generally formulated through a combination of its top-down strategic intentions and bottom-up emergent strategy
30
emergent strategy
describes any unplanned strategic initiative bubbling up from deep within the organization
- if successful, emergent strategy has potential to influence and shape firms overall strategy
31
autonomous actions
strategic initiatives undertaken by lower-level employees on their volition and often in response to unexpected situations
32
serendipity
describes random events, pleasant surprises, and accidental happenstance that can have a profound impact on a firms strategic initiatives
33
Resource allocation process
determines the way a firm allocates its resources and can be critical in shaping allocation process
- combination of top-down strategic intent and bottom-up strategic emergence
34
theory of bounded rationality
core tenet of which posits that rather than to optimize when faced with decisions, we tend to satisfice
35
cognitive limitations
lead us to choose the good enough option that satisfies immediate needs, rather than searching for an optimal solution
36
Two distinct modes of decision making
System 1: the brains default mode, gut reaction and confidence
System 2: logical, analytical and deliberate
37
cognitive bias
cognitive limitations that lead to systematic errors in our decision-making and interfere with our rational thinking
38
illusion of control
tendency to overestimate our ability to control events
39
escalating commitment
when decision-makers continue to support and invest in a project dispute having received feedback that is likely not going to succeed
40
confirmation bias
tendency of individuals to search for information that confirms their existing beliefs, and ignore contradictory evidence
41
reason by analogy
tendency to use simple analogies to make sense out of complex problems
42
representativeness
drawing conclusions based on small samples or even one memorable case or anecdote
43
groupthink
situation in which opinions coalesce around the leader without individuals critically evaluating and challenging that leader's opinions and assumptions
44
devils advocacy
framework team or group or person questioning leaders decisions or ideas
45
dialect inquiry
two teams generate a detailed course of action, second team alters course of action
- thesis and antithesis are discussed
46
Pestel Framework
Political
Economic
Sociocultural
Technological
Ecological
Legal
- analyze firms external environment
47
general environment
external factors strategic leaders have little direct influence over, such as macroeconomic factors
48
task environment
external factors strategic leaders do have some influence over, such as the composition of their strategic groups
49
Political factors
result from process and actions of government bodies that can influence the decisions and behaviors of firms
50
Economic factors
factors in firms external environment that are largely macroeconomic, affecting economy-wide phenomena
51
Economic factors
growth rates, levels of employment, interest rates, price stability, currency exchange rates
52
sociocultural factors
capture society's cultures, norms and values
- constantly in flux but differ across groups
demographic trends capture population characteristics
53
technological factors
capture the application of knowledge to create new processes and products
- major innovations: lean manufacturing, six sigma quality
54
ecological factors
involve broad environmental issues such as natural environment, global warming and sustainable economic growth
- sustainability (manage business and environment)
55
legal factors
include the official outcomes of political processes as manifested in laws, mandates, regulations and court decisions
- have direct bearing on firms profit potential
- affect entire industries at once
56
industry effects
the underlying industry in which the firm competes
- structure of industry determined by elements common to all industries
57
firm effects
attribute firm performance directly to actions strategic leaders take
58
Industry
a group of incumbent firms facing more or less the same set of suppliers and buyers
59
industry analysis
provides a more rigorous bias not only to identify an industry's profit potential but also derive implications for one firm's strategic position within an industry
60
strategic position
relates to firms ability to create value for customers while containing cost to do so
61
porters five forces model
developed to help strategic leaders understand the profit potential of different industries and how they can position their respective firms to gain and sustain competitive advantage
- threat of entry, power of suppliers, power of buyers, threat of substitutes, rivalry among existing competitors
62
threat of entry
risk of potential competitors entering the industry depresses industry profit potential:
1. reduces profit potential (lower current prices)
2. increases in spending among incumbent firms
63
barriers to new entrants
economies of scale, brand loyalty, absolute cost advantages, customer switching for buyers, government regulations
64
competitive rivalry
the competitive struggle between companies in the same industry to gain market share from each other
65
intensity of rivalry
is a function of:
industry competitive stricture (number and size of companies/consolidated vs fragmented), demand conditions (growing or declining-encourages demand), cost conditions, height of exit barriers (prevent companies from leaving)
66
bargaining power of buyers
may be consumers or end-users who ultimately use the product or intermediate that distribute or retail the products
67
buyers are most powerful when:
buyers are dominant (large buyers in few numbers), buyers purchase in large quantities, industry dependent on buyers, switching costs are low, buyers can purchase from several supplying companies at once, buyers threaten to enter industry
68
bargaining power of suppliers
organizations that provide inputs as material and labor into the industry
69
suppliers most powerful when:
product supplied is vital to industry and has few substitutes, industry is not important customer to suppliers, switching costs are significant, suppliers threaten to enter industry themselves, companies in industry cannot make own inputs therefore rely on suppliers
70
Resources
assets owned or controlled by a firm, which the firm can draw on to achieve its goals
71
tangible resource
visible, physical attributes
value: the cost of the tangible resources can usually serve as a point of reference for their actual value
ex: firms borrowing capacity, firms planning, controlling and coordinating systems, plant and equipment and raw materials
72
intangible resources
invisible, no physical attributes
value: have a theoretical asset value, cost of intangible resource usually isn't a good point of reference for their actual value
ex: HR, ideas, scientific capabilities, reputation with customers, brand name, patents
73
capabilities
firms capacity to deploy tangible resources that have been purposely integrated to achieve a desired end state
ex: marketing, R&D, distribution, HR
74
core competencies
activities that a firm performs especially well compared to competitors, adds unique value to its goods or services over a long period of time
ex:
amazon - superior it, customer service, diversification and distribution
75
VRIO Framework
used to build sustainable competitive advantages using firms resources
Valuable
Rare
Inimitable
Organized to capture value
76
Valuable
increase economic value (v - c)
77
Rare
only one or few firms possess
78
inimitable
deterrence against direct imitation and substitute
79
organized to capture value
effective organization structure and coordinating system
80
Isolating Mechanisms for imitation
path dependence, legally protected, causal ambiguity, social complexity
81
path dependence
what a firm does in the past determines what they can do in the future
82
legally protected: exclusive rights
patents
trademarks
copyrights
trade secrets
83
causal ambiguity
the causes or theories of superior performance are unclear
84
social complexity
reputation and trust among suppliers and customers
friendships and collaboration between employees
85
dynamic capability
a firms ability to create, deploy, modify, reconfigure, upgrade or leverage its resources over time
86
business-level strategy
details the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
87
strategic trade-offs
choices between cost or value position
88
generic business strategies
two strategies that can be used by an organization--manufacturing or service, large or small, for-profit or nonprofit, public or private domestic or foreign
89
differentiation strategy goal
add unique features that will increase the perceived value of goods and services in the minds of consumers so they are willing to pay a higher price
90
economies of scope
the savings that come from producing more outputs at less cost than producing each output individually, even though using the same resources and technology
91
value drivers
product features: adjust features to increase perceived value
customer service: increase perceived value of firm's products or service offerings by focusing on customer service
complements: add value to product or service when they are consumed in tandem
92
cost-leadership strategy goal
reduce firm's costs below that of its competitors while offering adequate value
93
cost leader
focuses its attention and resources on reducing the cost to manufacture a product or on lowering the operational cost to deliver a service in order to offer lower prices
94
cost input factors
a firm can have an advantage over its competitors by having access to lower cost input factors such as raw materials, capital, labor, IT services
95
economies of scale
firms with greater market share might be able to reap this, decrease in cost per unit as output increases
96
learning curve
goes down as it takes less and less time to produce the same output as we learn how to be more efficient
- steeper the curve, more has been learned
97
experience curve
we change the underlying technology while holding cumulative output constant
process innovation: new method or technology to produce an existing product can initiate new steeper curve
98
blue ocean strategy
business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs in those two distinct strategy positions
99
red ocean
known market space for existing industries, rivalry among existing firms is cut-throat because of crowded market space
100
innovation
the successful introduction of a new product, process or business model
101
entrepreneurship
the process by which entrepreneurs undertake economic risk to innovate
102
Industry Lifecycle
introduction - slow growth, high price, limited competition, large investments required and high risk
growth - rapid growth, falling prices, limited competition, increasing profitability
shakeout - slowing growth, falling prices, intense competition, focus on survivability, increase failures
mature - slow/no growth, stable prices, consolidated competition, high barriers to entry and superior firms gain market share
decline - negative growth, falling prices, intense competition, further consolidation possible
103
Archetectural Innovation
New Market, Existing Product
a new product in which known components, based on existing technologies are reconfigured in a novel way to create new markets
104
Incremental Innovation
Existing Market, Existing Product
Builds on established knowledge base and steadily improves an existing product or service offering
105
Disruptive Innovation
Existing Market, New Product
leverages new technologies to attack existing markets, invades market bottom-up
106
Radical Innovation
New Market, New technology
draws on novel methods or materials, is derived either from and entirely different knowledge basis with a new stream of knowledge
107
Innovation process
idea, invention, innovation, imitation
108
crossing the chasm
geoffrey moore: many innovators unable to successfully transition from one stake of the industry lifecycle to the next
- each stage dominated by different consumer group
109
technology enthusiasts
customer segment in the introductory stage of the industry life cycle
- smaller market segment 2.65%
- first to try and want to try before product out for everyone, offer feed back
110
Early adopters
customers entering the market in the growth stage
- makeup 13.5% of market potential
- eager to buy into new technology
111
Early Majority
customers entering market int he shakeout stage
- main consideration in deciding whether or not to adopt new tech innovation is strong sense of practicality
112
Late majority
enter market in the maturity stage
- make up 35% of market potential
- prefer to wait until standards have emerged and become entrenched to ensure reduction of uncertainty
113
laggards
enter market in decline stage of life cycle
- make up 16% of market potential
- adopt new product only of it is absolutely necessary
114
platform business
enterprise that creates value by matching external products in a way that creates value for all participants, and that depends on the infrastructure or platform and that the enterprise manages
115
digital platform
a digital product or service provided by the platform owner to connect together two or more groups of participants: complementors and customers
116
direct network effect
the value of a product increases simply because the number of users increases
117
indirect network effect
platform or service depends on two or more user groups such as producers and consumers, buyers and sellers, or developers and users
118
Intellectual Property
an intangible asset that arises out of mental labor, encompasses inventions, designs and artistic work
- federal and state laws give certain rights and protections to those who developed creative works to control intangible assets in the form of exclusively:
patents
trademarks
copyrights
trade secrets
119
Patent
contract between government and inventor granting inventor exclusive rights for invention
- prevents others from making, using or selling similar idea
- issued by patent and trademark office
- USPTO, EUIPO
- rights only applicable in country/region patent has been granted
120
utility patent
new, useful, and unobvious processes such as film processing, machines such as photocopiers, compositions of matter such as chemical compounds, or mixtures of ingredients, and articles of manufacture
- most common
- duration of 20 years
121
design patent
new, original, ornamental, and unobvious designs for articles of manufacture
- reflects appearance of object
- duration of 14 years
122
plant patent
for new varieties of plants
- duration of 20 years
123
Apply for patent
* complete history and description of the invention
* list claims for the product's usefulness
* patent required: Novel, Useful, Non-obvious
◦ novel: features don't appear in any one patent
◦ non-obvious: features that don't appear in any combination of patents
* disclosure: technical information about the invention that must be disclosed in the patent application, and will be published after 18 months
124
provisional application
allows inventors to file without a firmal patent claim, oath or declaration or any information disclosure statement
- 12 month pendency
- help protect new innovation from being copied during 12 month period before formal patent application filed
125
Trademarks
a sign, capable of distinguishing the goods or services of one enterprise from those of other enterprises
- distinguishing word, phrase, name or symbol
- can last indefinitely, but needs to be renewed every 10 years
- can be filed based off intent of use
- must be filed in each country protection is sought
126
Copyrights
the rights that creators have to their own literary and artistic works
- automatic, but need to register with library of congress in order to enforce and prevent infringement
- duration is life of author plus 70 years for works after 1978
127
trade secrets
information that is either actual or potential independent economic value by virtue of not being generally known
- applicable as long as ideas or process remains secret
128
non-compete agreement
contract between the employers and their employees where employee agrees not to starting a competing business or go to work for a competitor for a stated period of time after the employment relationship ends
