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EVA > MGCR 423 Midterm > Flashcards

MGCR 423 Midterm Flashcards

1
Q

What is Strategy?

A

An integrated and coordinated set of commitments & actions designed to exploit core competencies and gain a competitive advantage.

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2
Q

When does a firm have a Competitive Advantage?

A

When a firm creates value for customers by implementing a chosen strategy, and when competitors can’t imitate the value of the products/services or find it too costly to imitate.

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3
Q

Formula for the TOTAL value created

A

Willingness to Pay of Buyers - Opportunity Cost of Suppliers

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4
Q

What is operational effectiveness?

A

Performing similar activities better than competitors - efficiency.

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5
Q

What is Competitive Rivalry?

A

The ongoing set of competitive actions/responses that occur among firms as they maneuver for an advantageous market position

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6
Q

What makes firms competitors?

A

When they operate in the same market, offer similar products, and target similar customers.

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7
Q

2 Things Competitive Rivalry influences:

A
  1. Ability to develop/sustain competitive advantage
  2. Level of financial returns (avg, below avg, above avg)
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8
Q

What is Competitive Behaviour?

A

The set of competitive actions and responses a firm takes to build or defend its competitive advantages and to improve its market position.

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9
Q

What are Competitive Dynamics?

A

The total set of competitive actions/responses taken by all firms competing within a market

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10
Q

Why do competitors engage in competitive rivalry?

A

To gain an advantageous market position

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11
Q

How do competitors engage in competitive rivalry?

A

Through competitive behaviour (competitive actions and responses)

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12
Q

What results from competitive rivalry?

A

Competitive dynamics (competitive actions/responses taken by all firms competing in a market)

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13
Q

Why is the competitor important when deciding a competitive strategy?

A

competitors actions and responses affect the firm: marketplace success is a function of both individual strategies and their CONSEQUENCES

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14
Q

What is a competitive action?

A

a strategic or tactical action the firm takes to build or defend its competitive advantages or improve its market position

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15
Q

What is a competitive response?

A

A strategic or tactical action the firm takes to counter the effects of a competitor’s competitive action

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16
Q

What is a strategic response/action (competitive rivalry)

A

A market-based move that involves a SIGNIFICANT COMMITMENT of organizational resources and is DIFFICULT to implement and reverse

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17
Q

What is a tactical response/action (competitive rivalry)

A

A market-based move that firms take to FINE-TUNE a strategy. These actions and responses involve FEWER RESOURCES and are RELATIVELY EASY to implement and reverse

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18
Q

3 drivers of competitive behavior

A

awareness
motivation
ability

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19
Q

What positively increases the likelihood of attack

A
  • first mover benefits
  • organizational size
  • quality
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20
Q

Higher market commonality and higher similarity with a competitor ______ drivers of competitive behaviour

A

increases

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21
Q

Likelihood of response is affected by (competitive strategy)

A
  • type of competitive action
  • actor’s reputation
  • market dependence
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22
Q

The state of best practice (productivity frontier) shows the trade off between:

A

Value for customers and relative cost position

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23
Q

2 models of above-average returns

A

Industrial Organization (IO) and Resource-Based (RB)

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24
Q

T/F: A firm can still earn above average returns if it doesn’t compete in an attractive industry and doesn’t have a competitive advantage

A

F -> can earn at best average

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25
Q

What are above average returns?

A

returns in excess of what an investor expects to earn from other investments with a similar amount of risk

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26
Q

What is the industrial organization (IO) model

A

says that returns are influenced by external factors (external environment determines strategy that results in above avg returns)

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27
Q

4 assumptions of IO model

A
  1. external environment determines strategy that results in above avg returns
  2. most firms competing within an industry are assumed to control similar strategically relevant resources
  3. firms resources are assumed to be highly mobile
  4. decisionmakers are rational (profit-maximizers)
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28
Q

Goal of the IO model

A

find the most attractive industry in which to compete

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29
Q

4 RB model assumptions

A
  1. differences in firms performance is due to unique resources and capabilities
  2. firms acquire different resources and develop unique capabilities are the basis of competitive advantage
  3. firms resources aren’t mobile across firms
  4. differences in resources and capabilities are the basis of competitive advantage
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30
Q

What is a capability?

A

the capacity for a set of resources to perform a task in an integrative manner - MUST NOT BE EASILY IMITATED

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31
Q

What are core competencies?

A

capabilities that serve as a source of competitive advantage of a firm over its rivals

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32
Q

What is a vision?

A

a picture of what the firm wants to be and what it wants to achieve (I.e. McDonald’s vision is to be the world’s best quick service restaurant)

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33
Q

what is a mission?

A

specified the business in which the firm intends to compete and the customers it intends to serve (more specific than a vision statement, specifies a firms individuality)

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34
Q

2 parts of a core ideology

A

core values and a core purpose

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35
Q

t or f: you can create a core ideology

A

F -> a core ideology is not to be created but discovered

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36
Q

What are core values

A

the guiding principles of an organization

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37
Q

what is a core purpose

A

a firm’s reason for being

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38
Q

what are the 2 parts of an envisioned future

A

BHAG and vivid description

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39
Q

What are stakeholders

A

Individuals, groups, and organizations that can affect a firms vision and mission, are affected by the strategic outcomes achieved, and have enforcible claims on the firms performance

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40
Q

What are the 3 types of stakeholders

A

Capital market stakeholders, product market stakeholders, organizational stakeholders

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41
Q

More _____ on an organization -> greater influence by stakeholder

A

dependence

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42
Q

what are capital market stakeholders?

A

Shareholders and lenders. Expect a firm to preserve and enhance their wealth.

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43
Q

What are product market stakeholders?

A

Customers, suppliers, host communities, unions

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44
Q

when are product market stakeholders satisfied?

A

Product market stakeholders are generally satisfied when a firms profit margin reflects at least a balance between the returns to Capital Market stakeholders and the returns in which they share

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45
Q

what are organizational stakeholders

A

employees and leaders

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46
Q

why would stakeholders want above average returns?

A

more resources to satisfy their interests

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47
Q

what is the trade offs rationale

A

basically means that in below/avg returns, firm meets minimum stakeholder expectations to minimize support lost from unsatisfied stakeholders

48
Q

what are the 7 dimensions of the general environment?

A

economic
sustainable physical
sociological
global
technological
political/legal
demographic

49
Q

what is the general environment

A

composed of dimensions in the broader society that influence an industry and the firms within it

50
Q

what does the general environment analysis seek to capture?

A

general environment analysis seeks to capture opportunities

51
Q

What is the industry environment?

A

the set of factors that directly influences a firm and its competitive actions and responses

52
Q

what does the industry environment find?

A

the overall profitability of the industry

53
Q

what is a competitor analysis?

A

understanding the firm’s competitor environment which complements industry and general analysis

54
Q

what are the 4 parts of general environment analysis?

A

scanning
monitoring
forecasting
assessing

55
Q

what is scanning (gen. env. analysis)

A

identifying early signals of environmental changes and trends

56
Q

what is monitoring (gen. env. analysis)

A

detecting meaning through observation of environmental trends

57
Q

what is forecasting (gen. env. analysis)

A

projecting anticipated outcomes based on monitored trends and changes

58
Q

what is assessing (gen. env. analysis)

A

determining their timing and importance of changes and trends for firms strategies and their management

59
Q

segment: inflation rates

A

economic

60
Q

segment: trade deficit

A

economic

61
Q

segment: income distribution

A

demographic

62
Q

segment: women in the workforce

A

sociocultural

63
Q

segment: important political events

A

global

64
Q

what is the economic segment of the general environment

A

nature and direction of the economy in which a firm competes

65
Q

what kind of economy does a firm want to compete in?

A

stable and growing

66
Q

what is the political/legal segment of the general environment?

A

organizations and interest groups compete for attention, resources, and a voice
- how organizations try to influence governments
- how they try to understand the current and projected influences of those governments on their competitive actions and responses

67
Q

what is the global segment of the general environment?

A

relevant global markets and their critical cultural and institutional characteristics, existing markets that are changing and important international political events

68
Q

5 industry environment segments (porters 5 forces)

A

threat of new entrants
bargaining power of suppliers
bargaining power of buyers
substitute products
rivalry intensity

69
Q

examples of barriers to entry

A

economies of scale
differentiation
capital requirements
switching costs
access to distribution channels
cost disadvantages independent of scale
government policy

70
Q

2 factors that affect the threat of new entrants

A

barriers to entry
retaliation from current participants

71
Q

how can suppliers exert power

A
  • increasing prices
  • reducing the quality of their products
72
Q

a supplier group is more powerful when (4)

A
  • dominated by a few large companies
  • industry firms aren’t a significant customer
  • criticality of suppliers’ goods
  • credible threat to integrate into buyers industry
73
Q

customers are powerful when (2)

A
  • they purchase a large portion of an industry’s total output
  • can easily switch to another product
74
Q

how can a firm reduce a substitute’s attractiveness

A

through post-sale service, quality, and location

75
Q

competitive rivalry intensifies when

A
  • a firm is challenged by competitors actions
  • company finds opportunities to improve market position
  • there is slow industry growth, many competitors, high fixed costs, no differentiation
76
Q

competitive rivalry intensifies when

A
  • a firm is challenged by competitors actions
  • company finds opportunities to improve market position
  • there is slow industry growth, many competitors, high fixed costs, no differentiation
77
Q

what are strategic groups?

A

a set of firms emphasizing similar strategic dimensions and using a similar strategy -> BOEING and AIRBUS

78
Q

what does competitor analysis do?

A

focuses on each company against which a firm competes directly
- what drives competitor, what they’re doing, what their capabilities are, what they believe about the industry

79
Q

4 parts of competitor analysis

A

future objectives
current strategy
assumption
capabilities

80
Q

what is competitor intelligence

A

the set of data and information the firm gathers to better understand and anticipate competitors objectives, capabilities, and assumptions

81
Q

who are complementors?

A

companies/networks of companies that sell complementary goods/services

82
Q

4 criteria of sustainable advantage

A

valuable, rare, costly to imitate, non-substitutable/organizational

83
Q

why does competitive advantage have a limited life

A

eventually competitors will duplicate them

84
Q

competitive advantage sustainability is based on 3 factors…

A
  1. Rate of core competency obsolescence due to environmental changes
  2. availability of substitutes for core competency
  3. imitability of core competence
85
Q

creating ___ is the source of above average returns for a firm

A

value

86
Q

why is making decisions about the firms assets difficult for managers

A

increasingly internationalized
need for judgement

87
Q

t or f: by themselves resources can allow firms to earn above avg returns

A

f

88
Q

tangible resources

A

assets that can be observed and quantified

89
Q

4 types of tangible resources

A

financial
organizational
physical
technological

90
Q

intangible resources

A

assets rooted deeply in firm’s history, accumulate over time, relatively difficult for competitors to analyze and imitate

91
Q

4 types of intangible resources

A

human resources
innovation resources
reputational resources

92
Q

why are intangible resources stronger than tangible resources

A
  • you can leverage them (easy to derive additional business)
  • harder to imitate
93
Q

2 tools that help firm find their core competencies

A

4 criteria of sustainable comp advantage
value chain analysis

94
Q

3 Imitatability factors

A

-historical: brand name and reputation
-causal ambiguity: unclear how the firm got there
-social complexity: interpersonal relationships

95
Q

outsourcing pros

A

more flexibility
less risk
fully concentrate in those areas where it has the potential to create value

96
Q

outsourcing cons

A

potential loss in a firm’s ability to innovate
loss of jobs in focal firm (human capital)

97
Q

what determines how much value each player will appropriate in a value chain

A

bargaining

98
Q

4 strategies against competition

A

increase your buyers WTP (I.e. marketing)
decrease buyers WTP for rivals (I.e. airmails)
decrease your opportunity cost (become more efficient w suppliers)
increase competitors opportunity cost (switching costs for suppliers)

99
Q

business level strategy

A

an integrated/coordinated set of actions firm uses by exploiting core competencies in a specific product market

100
Q

____ are the foundation for successful business strategies

A

customers

101
Q

business model

A

part of a business level strat
describes what a firm does to create, deliver and capture value for its stakeholders
i.e. franchise, freemium

102
Q

5 types of business level strategy

A

cost leadership
differentiation
focused cost leadership
focused differentiation
integrated cost leadership/differentiation

103
Q

commonly selling standardized goods with competitive levels of differentiation, with the lowest possible cost is the _______ strategy

A

cost leadership

104
Q

process innovations are needed for a successful _____ strategy

A

cost leadership

105
Q

benefits of having a lower finished cost than competitors

A

creates entry barrier
retains customers against substitutes
absorbs suppliers price increases

106
Q

product innovations are needed for a successful _______ strategy

A

differentiation

107
Q

making products (at an acceptable price) that customers perceive as being different in an important way (strategy)

A

differentiation strategy

108
Q

an integrated set of actions taken to produce products that serve the needs of a particular set of customers

A

a focus strategy

109
Q

what does a focus strategy lead to success

A

serves a segment w very unique needs that other competitors don’t serve
creates more value for a segment than anyone else

110
Q

this strategy finds a firm doing value chain activities and support functions that have low cost and differentiated products

A

integrated cost leadership/differentiation strategy

111
Q

risks of low-cost strategy

A
  • loss of competitive advantage to newer technologies
  • failure to detect changes in customers needs
112
Q

risks of differentiation strategy

A
  • obsolescence of value of differentiated product
  • if competitors imitate them at a lower cost
113
Q

risks of focus strategy

A
  • competitor can out-focus by serving an even narrower group
  • less difference between focus group and general public over time
114
Q

risk of integrated strategy

A

firm might get stuck in the middle

115
Q

why do competitors engage in competitive rivalry?

A

to gain an advantageous market position

116
Q

first mover advantage - smaller firms move ___

A

faster

117
Q

first mover advantage - larger firms make _____ moves

A

bigger

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