Management First Semester 2nd Partial Flashcards
What is Strategy?
The set of goal-oriented actions a firm takes to gain and sustain superior performance relative to competitors
What 3 elements does good strategy consist of?
Diagnosis, Guiding Policy, Coherent Actions
What is Diagnosis?
Identifying competitive challenge through analysis of firm’s external and internal environment
What is Guiding Policy?
Addressing competitive challenge through formulation of firm’s corporate/business/functional strategies
What does Coherent Actions refer to?
Implementing a firm’s guiding policy through strategy implementation
What is strategy not?
grandiose statements, failure to face competitive challenge, Operational effectiveness/Competitive Benchmarking/other tactical tools
What is competitive advantage?
Superior performance relative to other competitors in sme industry or industry average
How do firms gain competitive advantage?
Combining value and cost through strategic positioning by differentiation or cost leadership
What does good strategy do?
Creates value for shareholders and other stakeholders
What is value creation?
when companies with good strategy are able to provide products/services to customers at a price point tht they can afford while keeping their costs in check, thus making profits at the same time. Both parties benefit from this trade as each captures a part of value created
What is a continuous variable?
Variables that can take on a value in a range (e.g. height, weight, temperature) Unlike discrete can take decimals and are measurable
What is a qualitative/categorical variable?
Variables that do not come from measuring or counting
Whar are dichotomous or binary variables?
Variables that can only take two values
What is uniform distribution?
Every value has the same probability (rolling fair die)
What is normal distribution?
Outcomes tend to distribute around a central value (the mean) for example population heights
What does Left-skewed mean? (analogous for right)
Values of ovservations cluster more around right side of distribution
What is the mean?
Where the center of the distribution of a data set is positioned
What is variance?
A measure of how spread out the values of a data set are around the mean. (high variance means more widely dispersed, low means more clustered around mean)
What is standard deviation?
Square root of variance, measures how much values deviate from mean. high -> more spread out
What is conditional probability?
The probability of an event ocurring given that another event has already taken place (px given y)
What is a contingency table?
shows the values of a variable x contingent on another value y (for conditional probability). The total rows and columns are marginal frequencies (the last row/column)
What is conditional expectation?
The expected value of a random variable given that another event has already taken place
How do you find the conditional expectation?
multiply all the values by their respective conditional probabilities (contingent on Y) and then sum
What is joint probability?
The probabolity that two events take place together at the same time. It is the probabiliy that Y happens multiplied by the probability that X happens once we know Y has happened. ( P(X,Y) = P(X|Y)*P(Y) )
What is independence in statistics?
When the outcome of one variable does not affect the second (e.g. flippping coin twice)
What is a theory?
A series of logical steps linking antecedents to consequences
Why are theories important?
They rell you what data/factors to examine where the factors improve your ability to make an accurate prediction and the data provides signals for conditional probabilities
What steps should you take when predicting events?
Theory (set prior probability) -> Look for more info and update prior ability multiple times based on this info -> define expectations (decide when to stop collecting data/signals and finalize probability what cannot be further improved)
Why do we predict events?
Events are associated with outcome of an action and you want to decide whether or not to take that action.
What are the sources of learning Economies?
Enhanced human skills, Simplification of Products and Processes, Better selection of Materials, Higher Coordination, Higher programmability of Activities
What are economies of scope?
Decribe savings that come from producing two outputs at less cost than producing each output individually while using same resources and tech
What are the drivers for economies of scope?
Complementaries in production/distribution (e.g. shared inputs), deployment of unique assets and capabilites across several products (e.g. brand recognition), Same advertising campaign for multiple products, Amortizing expenses related to generic R&D, Creation of exit barriers and lock-in effects for consumers
What are the benefits of differentiation towards threat of entry?
Protection against entry due to intangible resources such as reputation for innovation, quality, or customer service
What are the risks of differentiation towards threat of entry?
Erosion of margins, Replacement
What are the benefits of differentiation towards the bargaining power of suppliers?
Protection against increase in input prices which can be passed on to customers
What are the risks of differentiation towards the bargaining power of suppliers?
Erosion of margins
What are the benefits of differentiation towards the bargaining power of buyers?
Protection against decrease in sales prices because well-differentiated products are not perfect imitations
What are the risks of differentiation towards the bargaining power of buyers?
Erosion of margins
What are the benefits of differentiation towards the Threat of Substitutes?
Protection against substitute products due to differential appeal
What are the risks of differentiation towards the Threat of Substitutes?
Replacement especially when faced with innovation
What are the benefits of differentiation towards the Rivalry Among Existing Customers?
Protection against competitors if product/service has enough differential appeal to command premium price
What are the risks of differentiation towards the Rivalry Among Existing Customers?
Focus of competition shifts to price, Increasing differentiation of product features that do not create value but raise costs, Increasing differentiation to raise costs above acceptable threshold
What are the benefits of Cost Leadership towards the threat of entry?
Protection against entry due to economies of scale
What are the Risks of Cost Leadership towards the threat of entry?
Erosion of margins, Replacement
What are the benefits of Cost Leadership towards the bargaining power of suppliers?
Protection against increase input prices which can be absorbed
What are the risks of Cost Leadership towards the bargaining power of suppliers and buyers?
Erosion of Margins
What are the benefits of Cost Leadership towards the bargaining power of buyers?
Protection against decrease in sales prices which can be absorbed
What are the benefits of Cost Leadership towards the threat of substitutes?
Protection against substitute products through further lowering of prices
What are the risks of Cost Leadership towards the threat of substitutes?
replacement especially when faced with innovation
What are the benefits of Cost Leadership towards the Rivalry Among Existing Competitors?
Protection against price wars because lowest-cost firm will win
What are the risks of Cost Leadership towards the Rivalry Among Existing Competitors?
Focus of competition shifts to non-price attributes, Lowering costs to drive value creation below acceptable threshold
What is corporate strategy?
The decisions that senior management makes and the goal-directed actions it takes to gain and sustain competitive advantage across the industries and markets where they operate
Why do firms need to grow?
Increase profitability, lower costs, increase market power, reduce risk, motivate management
What three dimensions can firms grow along?
Vertical integration (along industry value chain), diversification (of products and services), geographic scope (in terms of regional/national/global markets)
What concepts guide corporate strategic decisions?
Core competencies (unique strengths deep in firm that allow differentiation of products/services), Economies of scale, Economies of Scope, Transaction Costs
What are transaction costs?
All internal and external costs associated with an economic exchange whether it takes place within the boundaries of a firm or in markets.
What are internal costs?
Pertain to organizing economic exchange within the firm such as costs of recruiting and retaining employees
What are external costs?
Costs of searching, negotiating, and enforcing contracts with firms or individuals in the open market
