Mid Term Flashcards
Porters Five Forces
- Threat of entry
- Power of suppliers
- Power of buyers
- Threat of substitutes
- Rivalry among existing competitors
Threat of entry
- Entry Barriers - Obstacles that determine how easily a firm can enter an industry. Entry barriers are often one of the most significant predictors of industry profitability.
- Economies of product differences
- Brand equity
- Switching costs
- Capital requirements
- Access to distribution
- Customer loyalty
- Absolute cost
- Industry profitability
Power of suppliers
- Supplier switching costs relative to firm switching costs
- Degree of differentiation of inputs
- Impact of inputs on cost or differentiation
- Presence of substitute inputs
- Strength of distribution channel
- Supplier concentration to firm concentration ratio
- Employee solidarity (labor unions)
- Supplier competition
Power of buyers
- Buyer concentration to firm concentration ratio
- Degree of dependency upon existing channels of distribution
- Bargaining leverage
- Buyer switching cost
- Buyer information availability
- Availability of existing substitut products
- Buyer price sensitivity
- Differential advantage (uniqueness) of industry
Threat of substitutes
- Buyer propensity to substitute
- Relative price performance of substitute
- Buyer switching cost
- Perceived level of product differentiation
- Number of substitute products available in the market
- Ease of substitution
- Substandard product
- Quality depreciation
Rivalry among existing competitors
- Sustainable competitive advantage through innovation
- Competition between online & offline companies
- Level of advertising expense
- Powerful competitive strategy
- Flexibility through customization, volume & variety
VRIO Framework
(V) Valuable
(R) Rare
(I) Costly to imitate?
(O) Organized to capture value?
Valuable (V)
Is the firm able to exploit an opportunity or neutralize an external threat with the resource/capability?
Rare(R)
Is control of the resource/capability in the hands of a relative few?
Costly to imitate? (I)
Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?
Organized to capture value? (O)
Is the firm organized, ready, and able to exploit the resource/capability?
Value Chain
The internal activities a firm engages in when transforming inputs into outputs; each activity adds incremental value. Primary activities directly add value; support activities add value indirectly
Primary Activities
- Raw Materials
- Intermediate Goods/Components
- Final Assembly/Manufacturing
- Marketing & Sales
- Customer Service
Support Activities
- Research & Development
- Information Systems
- Operations Management
- Human Resources
- Finance/Accounting
- General Management
Business-Level Strategy
The actions managers take to gain competitive advantage in a sing product market.
Differentiation Strategy
Add unique features that will increase the perceived value of goods and services in the minds of the consumers so they are willing to pay a higher price.
- Unique product features
- Service
- New product lunches
- Marketing & promotion
(Not focused on price)
Cost-Leadership Strategy
Understanding Cost Drivers
Generic business strategy that seeks to create higher value for customers that the value that competitors create, by delivering products or services with unique features while keeping the firm’s cost structure at the same or similar levels.
Value Drivers
- Product Features
- Customer Service
- Customization
- Complements
Cost Drivers
- Cost of Input Factors
- Economies of Scale
- Learning Curve Effects
- Experience Curve Effects
Integration Strategy
Combining Cost Leadership & Differentiation Strategies
PESTEL
- Political Factors
- Economical Factors
- Sociocultural Factors
- Environmental Factors
- Legal Factors
(SCP) Structure Conduct Performance
- Perfect Competition
- Monopolistic Competition
- Oligopoly
- Monopoly
Competitive Advantage
Superior performance relative to other competitors in the same industry or the industry average.
Co-Opetition
Corporation by competitors to achieve a strategic objective.
AFI Strategy Framework
1) Analyze
2) Formulate
3) Implement
Determining Industry Attractiveness
- Entry Barriers
- Available Complements
- Buyer Power
- Exit Barriers
- Threat of Substitutes
- Supplier Power
Core Competencies
Unique strengths embedded deep within a firm.
