Final Exam Flashcards
Parts in the Diamond E
Organization
management preferences
resources
strategy
environment
Diamond E: Organization
Culture: who are we
Responsibilities: what are we good at
Structure: how do we divide work
Diamond E: Resources
Human
Capital
Financial
Diamond E: Management preferences
Vision, mission, preferences, biases
What is diamond e
a strategic tool used to analyze and align a business’s internal and external factors to ensure effective strategy execution.
elements of porters 5 forces
new entrants
bargaining power of suppliers
substitutes
bargaining power of buyers
industry competitors/rivalry among existing firms
when to apply porters 5 forces
what factors in my industry are negatively impacting profitability and what is driving these factors
Key success factors
Financial resources
customers
innovation
employees
uniqueness
products and services
financial resources importance
enable growth
customers importance
provide revenue
innovation importance
environmental alignment
uniqueness importance
market advantage
products and services importance
revenue means
Financial resources actions
improving profit, ROI
customers actions
customer satisfaction
target
understand
satisfy
innovation actions
innovation and creativity, valuable change
employees actions
employee commitment
loyal
productive
hire
train
motivate
uniqueness actions
distinctive competitive advantage
products and services actions
quality products and services
financial resources related KPI
revenues
profit
ROIs
firm value
customers related KPI
market share
share of wallet
churn
NPS
innovation related KPI
new products
new approaches
idea generation
cycle time
employees related KPI
turnover
applications
productivity
uniqueness related KPI
strong
unique reputation
superior comparative performance
products and services related KPI
returns
defects
warranty claims
waste
Canadian population
40 mil
life expectancy
83 years
people per household
2.5
median household income
$61400
smartphone penetration
86%
online shopping
28.1 mil
urban
81%; toronto, montreal, calgary, ottawa, etc
What are the estimation proxys
individual, household, proxy(stores, gas pumps)
individual
individuals consumables or demand
market size/share
revenue
profitability
supply needed
saturation
competition
household
calculate group/demand
market size/share
revenue
profitability
supply needed
saturation
competition
proxy
of stores in area; population/store
company revenue/profitability
market size
supply
saturation of the market
Market sizing: TAM
total addressable market
entire market for your product
Market sizing: SAM
serviceable addressable market
size of your segment (target)
Market sizing: SOM
serviceable obtainable market
your share: how much of segment you can win
profitability framework
price
revenue
profitability - quantity
fixed
costs quantity
variable
cost/unit
whats the market sizing approach
population (household or infividual) x % of pop x purchase frequency x purchase quantity x unit cost
how do estimate revues
revenues per day/store/customer -> number of stores/days/customers -> total revenues
PEST: social factors elements
customs
habits
values/attitudes
demographic characteristics
what to look for in demographics
cohort size
cohort characteristics
cohort participation
future and trends
factors affecting cohort size
fertility rate
birth rate
whats activity participation rate
% of cohort that engages in a behaviour
whats a forcefield analysis
a strategic tool used to evaluate the forces driving and restraining a particular change or decision.
whats demographics
study of human populations
whats cohorts
homogenous groups within the large population
whats bulge
boomers
create challenges as they age
sandwich generation
smaller youth group
what are the factors of demographics
economics
technology
world events/news
parenting
characteristics
values and priorities
lifestyle
habits (digital/other)
mindset
why is understanding demographics important to business
customer preferences
worker attitude/behaviour
market segmentation
boomers opportunity
increased demand for healthcare and retirement services
boomers threat
strain on pensions and healthcare systems
gen z opportunity
tech savy and adaptable
presenting opportunities in digital marketing
gen z threat
high turnover rates in employment
urban concentration opportunity
easier to target urban markets
urban concentration threat
shrinking rural markets
increasing immigration opportunity
diverse markets and younger labour force
increasing immigration threats
need for cultural adaptability
PEST: economic factors elements
inflation/deflation
interest rates
employment rates
exchange rates
what are the pillars of the Canadian financial system
banks and alternate banks
specialized lending/saving intermediaries
investment dealer
banks and alternate banks
-make deposits, borrow money
-small and medium enterprises (SMEs) primary lending source
-primary source for businesses and SMEs
specialized lending/saving intermediaries
-for mid-large businesses
-private equity financing and borrowing
-offers more money then a bank
-private
-for investing in businesses
investment dealer
-for large and established companies
-for going public; stocks and bonds
-for large organizations
-for businesses who are willing to give up privacy
debt
borrow money
retain control
must be repaid
must pay interest(tax deductible)
legally binding
equity
give up ownership
no interest or repayment
share control and profuts
whats apital gain
what you make on a stock
how do you calculate capital gain
selling price-purchase price-relevent expenses
whats yield
percentage return expected or recieved on investment
why use yield
enables comparison of investment returns and pricing of investments
whats expected yield
risk free return+risk free premium
risk free return
what the bank pays on your deposits
risk free premium
extra return expected for riskiness of investment
YIELD formula
coupon rate x face value + (FV-price paid/time to maturity)
__________________________________________
price paid
characteristics of bonds
legal, binding agreement
fixed annual return (paid semiannually)
fixed term principal repaid at maturity
priority over stock holders
assumptions to make about bonds
pay semiannually and compound semiannualy
what happens to bond prices after interest rates rise
they fall, and other way around
is bond equity or debt
debt
is stock equity or debt
equity
whats a bond
When you buy a bond, you’re lending money to a company, government, or other organization. In return, they promise to pay you back the amount you lent (called the principal) after a certain amount of time (the maturity date), plus interest payments along the way (called the coupon).
stocks charateristics
voting rights
no fixed term
variable return(capital gain upon selling)
discretionary payment (dividends)
higher risk then bond
whats going long
using your own money for an investment
buying on margin
portion of your own money plus money from broker
margin requirment
% that represents portion of equity that you need to cover
TVM variables: r
interest rate or discount rate
TVM variables: n
number of periods
n=yearsxpayments (nxp)
TVM variables: PMT
payment amount
TVM variables: rnom
nominal rate given in the question (used to calculate r)
TVM variables: m
compounding frequency per year
TVM variables: p
payment frequency per year
whats APR
use when m and p are the same
ammortization
full length of mortgage
mortgage term
length of agreement of interest rate
effective interest rate
when m and p are not the same
down payment
money you put down before anything else
VENT
variables
equations
numbers
therefore
principal repaid
amnt originally owed-amnt still owing
interest
total payments made-principal repaid
BOND factors affecting price
interest rate changes (inverse relationship)
risk premium and market conditions
STOCK factors affecting price
company performance
market conditions
investor sentiment and economic outlook
is mortgage equity or debt
debt
whats margin buying
borrowing money to invest in stocks using the stock itself as colateral
rules of margin buying
must qualify for a margin account and sugn hypothecation agreement
maintain min. margin requirment
margin call
happens when an investor borrows money from a broker to buy more stock than they could afford with their own cash
bull markets
growth stocks and high investments yield higher returns
bear markets
focus shifts to defensive stocks and bonds
why is $1 worth less one year from today
risk
real interest
inflation
present value
amount of money of current time
(need now, worth today, how much willing to pay)
future value
amount of money at some point in the future
(how much will you have, how much should you invest to have ___ in ___ years, you need ___ to retire)
single payment
single, lump sum that accumulates interest
(how much will you need today, make a deposit today)
annuity
stream of equal payments that accumulate interest
(how much do you have to save per month, you are looking to finance, annual payments be)
annuity due
payment occurs at beginning of the period
(starting now)
ordinary annuity
payment at the end of the period
(savings questions)
annuity vs perpetuity
annuity: ends after certain term. retirement plans, investment plans, mortgages
perpetuity: payment occurs forever
PEST: political factors elements
laws
regulations
taxes
trade agreements or conditions
how do businesses influence the gov.
lobbying
collaboration/input
advertising
lobbying
the act of trying to influence decisions made by government officials, such as legislators, regulators, or public officials. It is typically done by individuals, groups, or organizations that want policies or laws to reflect their interests.
lobbying act
must register and follow rules, have to describe who you represent
collaboration/input
CRTC consults with industry members
advertising
corporations influence voters
get to gov. through people ex. with contracts
how gov. influence businesses
service provider
business support
laws, regulations
taxation
service provider approach and impact
approach: canada post, public education
impact: competition, social goals
business support approach and impact
approach: subsidies, trade agreements
impact: opportunity, protection
laws, regulations approach and impact
approach: competition, consumer, pollution, laws, IP rights
impact: competition, consumer protection, innovation, social goals, barriers
Taxation approach and impact
approach: income(business and personal), sales, property restrictive
impact: consumer spending, incentives, barriers
6 entry strategies
indirect export
sales agent
licensing/franchising
joint venture
sales office
foreign subsidiary
indirect export
selling via third party exporters
sales agent
local distributor or agent
licensing/frachising
allow local use of IP
joint venture
partnership with local firms
sales office
maintain production domestically
foreign subsidiary
full control with local operations
indirect export risks
limited control
sales agent risks
limited marketing control
licensing/franchising risk
licensing/franchising risk
joint venture risks
partner incompatabilities
sales office risks
trade barriers
foreign subsidiary risks
high costs
forms of ownership
sole proprietorship
partnership
corporation
types of corporation
public and private
types of partnerships
general partnership
limited partnership
general partnership
all partners have joint and several liability
limited partnership
limited partners liability
cannot be active in management
at least one general partner
social enterprise
prioritize value over profit
ex. SOS, garmeen bank
key facets of social enterprises
help overcome market inequalities/failures
social value is primary objective but financial sustainability imperative
social enterprises implications
economic value not required priority
dual stakeholders
globalization
world becoming single interdependent system
globalization driving forces
cost and market benefits
technology makes it easier, faster, cheaper
competitive pressure
international trade barriers and factors
internal: knowledge/capabilities, production, preference, finances
political: quotas, tariffs, subsidies, protectionism, local content laws, business practice laws
social & cultural: customer needs, customer values, language, norms
5 forces: distribution, customers, competition, suppliers, substitutes
economic: exchange rate, foreign GDP
technological: IP laws, technology standards
public vs. private corp.
PUBLIC: expensive, complicated, many regulations, BOD control, can afford resources, taxation taxed separately from shareholders; higher than private, liability limited to investment
PRIVATE: straightforward and inexpensive formation, few simple regulations, control shared with other shareholders, resources are whatever owners bring, taxation private corp. rates, liability limited to investment except personal assets brought into business
what are the things part of ansoff matrix
market penetration
market development
product development
diversification
product development
develop related or unrelated products your customers value; product line extension
product development benefit
build on customer knowledge and brand equity
distribution strategies and product complementary/bundling
product development challenge
cannibalization
give up production efficiency
must know how to develop new product
what is cannibalization
rather then generating new sales, customers switch which product they buy.
adding costs but no new customers which is bad
product development tactics
extend product
repackage existing products
create bundles of complementary products that add value to eachother
product development diamond E questions
Can I leverage existing brand and/or distribution?
Can my facilities manage or do I have to build new ones?
Can I produce & sell at a profitable scale?
How much new product expertise will I need?
product development porters relation
if the products are not product line extensions but completely new and complementary, you are entering a new industry:
Will customers be willing to switch to my new product?
Rivalry: aggression?
Barriers to entry for this new industry?
market penetration
Sell more of existing product to existing target market = greater market share and/or greater purchase frequency
why do market penetration
build on what you have and know
no change
economies of scale in production and selling
do more of same=low cost per unit
market penetration challenges
competitor reaction
winning customers
market penetration tactics
Cut prices
Increase advertising, loyalty schemes
Increase distribution channels
Volume incentives
Buy a competitor
market penetration diamond e questions
Capabilities: Can I persuade customers to consume more of my product?
Resources: Do I have to use new distribution channels? Should I? Can I?
Resources: Do I have the production capacity to meet the increased demand?
market penetration porters questions
Buyers: Propensity to switch? Lock in/switching costs? Brand loyalty?
Rivalry: Fragmented vs concentrated, growing vs declining, aggressive vs passive competitor - How much share do I already have? Can it grow?
market development
Selling what you already produce to new target markets (market segments) or new geographic markets
why do market development
Capitalize on production capabilities
economies of scale
pursue less contested or larger market; diversification of customer base
market development challenge
customer access and awareness
market development tactics
Create awareness in new market – pitch benefits to new customers
Expand geographically
market development diamond e questions
Resources: Will this affect brand image? Should I use a different brand name?
Capabilities: Will the product need any adjustments? Can I make them?
Do I have the resources and capabilities to go international?
market development porters questions
Entry barriers: Can I access the distribution channels to reach this new market?
Are the customers accessible? Will they switch?
Rivalry: fragmentation, aggression, growth? Differentiation – are there market segments that are under-served?
diversification
chasing new customers with new products; creating new businesses
concentric/horizontal
vertical
conglomerate
concentric/horizontal
related products/services
similar market
vertical
moving up or down supply chain
conglomerate
unrelated industries/products
greatest risk
diversification benefit
diversify business portfolio by building new business
capitalize on existing capabilities in higher growth areas
diversification challenge
many activities and capabilities must be created or changed = high risk of failure
diversification tactics
Acquire other business
Use joint ventures and alliances
diversification diamond e questions
What new capabilities and resources will I need?
Can I build or buy them?
How much will I have to change operations? HR? structure?
diversification porters questions
Can I access the distribution channels to /enter reach this new market?
Are the customers accessible? Will they switch?
Rivalry: fragmentation, aggression, industry growth?
Other barriers to entry?
Can I access the needed suppliers?
what do you need to do for each quadrant
understand your:
company
customer
competition
product
what are the 4 questions to ask when deciding to go international
can we? - diamond e internal
should we? - diamond e external
where? - PEST, porters
how? - strategy
PEST: technologic factors elements
internet
information tech
material and equipment
5 industries radically changed by tech.
music
travel
transportation
publishing
retail
complementary goods
needed for value
additional products required for main products value
technology standard
enables compatibility of complementary goods
installed base
number of users for a product
lock in
extent to which a customer is committed to a product/service
larger lock in
greater resistence to switch
causes of lock in
habit or system
learning
investment
switching costs
solution of lock in
lower switching costs
offer leap in performance
network effect
value increases as user base grows
solutions of network effect
compatibility
partnerships
incentives
build base
what’s the vicious/virtuous cycle
positive or negative feedback loop in which network effects either enhance or diminish products appeal
virtuous
positive
A virtuous cycle is a positive feedback loop where one favorable action or condition leads to another, reinforcing overall success and growth.
ex. network effect
vicious
negative
A vicious cycle is a negative feedback loop where one unfavorable action or condition leads to another, reinforcing decline or failure.
what are the elements in the virtuous/vicious cycle
availability of complementary goods -> attractiveness to users -> number of users (installed base) -> attractiveness to producers of complementary goods ->
current business tools
ecommerce and omni channel
virtual and augmented
artificial intelligence
ecommerce and omni channel
online research/shopping
seamless experience between platforms, online/physical experience
benefit of ecommerce and omni channel
enhanced marketing
improved efficiency
enhanced data
higher margins
virtual and augmented
replicates an environment or maps over reality
benefit of virtual and augmented
experience without purchase
reduced cost
enhanced experience
artificial intelligence
machines that are programmed to think like humans
fast gathering of data
AI benefits
task automation
less bias
better/faster decisions
predictive capabilities
opportunities of technology
products-innovation, uniqueness, value
improved info use - access and sharing
competitive advantage; barriers to entry
customization
technology threats
imitation - info costly to develop but cheap to share
new tech. and new entrants in unfamiliar areas - need new capabilities, resources and learning
info overload and security
disconnected employees/customers
4 types of innovation
radical/disruptive
architectural
modular
incremental/sustaining
sustaining innovation
improves existing products in expected ways
ex. tesla updates
disruptive innovation
different performance attributes not valued by mainstream
ex. Netflix disrupting Blockbuster
modular innovation
Changes to one or more components of a product without altering its overall structure or architecture.
ex. digital camera compared to film camera
architectural innovation
Reconfiguring existing components of a product or system in new ways to create new value.
ex. Sony’s Walkman, which combined existing technologies in a portable format.
tech impact on KSF
achieving financial performance
meeting customer needs
building quality products/services
encouraging innovation/creativity
creating comp. advantage
gaining employee commitment
tech in 5 forces
new entrants
substitutes
