Lecture 1 Flashcards
What is strategy? And what are the three steps to creating a strategy?
Defining objectives, goals and trying to achieve them, by having a plan. Plans are made up out of tasks, a set of actions that will help you reach your goals and objectives.
- defining objective and goals
- make a plan (action plan)
- resource and capabilities
What is the ultimate goals of any strategy?
The ultimate goal of using any strategy is to win. Unique is good in a competitive market. You win by being different.
Micheal porter: “strategy is the creation of a unique and differentiated position involving a different set of activities”
Ex. Ryanair and Emirates, focus on different customers. Not competitors, players in the industry. Otherwise it’s a price war.
What are the two types of strategic choices?
- where to compete? which business should we be in? (corporate strategy)
- how to compete? how should we compete in these businesses? (business strategy)
What is competitive advantage?
Two or more firms compete in the same market the firm possesses competitive advantages when it earns more profit then the other. Has to be two or more, otherwise monopoly. Lower cost means higher profit
How does competitive advantage emerge?
External sources of change:
- changing customer demand
- changing prices of input
- technological change
Resource heterogeneity among firms means differential impact. Some firms are faster and more effective differential impact like Zara, fast fashion..
Internal sources of change
- some firms have greater creative and innovative capability
What is performance?
Being effective (capacity to reach goals) and efficient (optimal use of resources) at the same time.
What is an important measure of financial performance?
An important measure of financial performance is positive profit, profitability (revenue - cost).
Why is market share not sufficient to measure a company’s performance?
Apple takes 75% of smartphone profits despite 13% market share.
your market share could increase as a result of a competitor failing as opposed to you actually doing anything better. So while in reality your business might be stagnant in terms of its churn rate and customer conversion rate, market share stats would make it appear that in actual fact you’re improving
How can we define productivity?
We can define productivity as the relationship between the total amount of goods or services produced (output) and the organizational resources needed to produce them (input).
Productivity= Total output/ Total input
At Workplace: Totalvalueofwork/Totalhoursworked
In manufacturing terms, if a company can produce 10,000 table lamps in 13 hours instead of in 23 hours, this is a dramatic increase in productivity.
In business, higher performance & productivity are supposed to help achieve higher?
Higher profitability
What is management, what is planning?
No battle plan ever survives contact with the enemy. You’ll lose the war if you don’t adapt your plan after contact with the enemy.
Plans are useless, but planning is indispensable.
What is a market?
Not to be confused with a market place.
Market is the demand, industry is the offer/supply.
Volkswagen is a player in the car industry.
What’s the difference between Strategic segmentation and
Market segmentation?
Strategic segmentation of an industry integrates resources, customers and competitors.
Market segmentation involves pairing customers with products to better target needs.
Tesla is in the same strategic group as polestar volvo, mercedes, bmw..
Difference between marketing strategy and business strategy
Marketing is the relationship and exchange between buyer and seller and creating and increasing the perception of value.
Marketing strategy only applies at product level contrary to business strategy.
lvmh
What is the value creation and maximization process?
Creating value for customers in the form of Benefit when selling products.
Capturing value from consumers in the form of profit, that will increase the value of the firm.
When is a product bought?
A product is bought when the overall benefits of buying it, using it and keeping it over time is higher than the cost.
How is value created?
By production (physically transforming) and commerce (value creating, repositioning)
Value added - the difference between the value output and the cost of its material inputs
Value Added = Sales revenue from output − Cost of material inputs
How are profits used?
Profit goes into different categories:
- taxes
-working capital in cash
- re-invested
- donations
- salary, bonuses
What is ROS, ROE and ROA?
ROS - how much profit a business can generate out of 1 dollar of sales.
ROE- how much profit a business can generate out of 1 equity.
ROA - how much profit a business can generate out of 1 asset.
How is economic profit different from accounting profit?
Economic profit is different from accounting profit because it involves implicit costs. Accounting profit involves explicit costs.
Why does economic profit have more advantage than accounting profit?
Economic profit has advantages over accounting profit:
- sets more demanding performance discipline for managers
- healthy profits disappear once cost of capital is taken into account.
**accounting and economic loss exemplet i sliden*
How do you calculate ROA?
ROA = Profit/asset = Profit/sales (ROS) x sales/asset (turnover)
look at the chart in slide
Difference between capital and asset?
capital vs asset: anything that is capital is an asset, but not the other way around. Capital often represents the tangible financial resources available to a business, assets represents the resources both tangible and intangible owned by the company. For example your brand is an asset but not capital.
Ex. your brand.
