Midterm 1 Flashcards
Strategy 1
Pattern of objectives, purposes, or goals and the major policies and plan of achieving these goals, stated in such a way as to define what business the company is in or is to be, and what kind of company it is or is to be
Strategy 2
Integrated and coordinated set of commitments and activities designed (fit) to exploit core competencies and gain sustainable competitive advantage
Porter’s perspective on strategy
Operational effectiveness is about achieving excellence in individual activities and strategy is about combining activities
Economies of Scale
Cost advantages that companies obtain due to size, scale operation or output.
Underlying mechanism is the decreasing average cost per unit of output with increasing scale
Price sensitivity
Price of the product affects the consumers buying behaviors
Switching cost
Impediment (su ngan cho) when we change business partners (sellers or buyers)
Barriers to entry
Obstacles that make it difficult to enter a given market
Market concentration
Extent or degree to which small number of firms account for large % of the market.
An industry in which market share is “concentrated” in the hands of a few firms is likely to be less competitive than one in which market share is disperses among many small firms
Hirschman-Herfindahl Index (HHI)
Measure market concentration
Five Forces framework
understand how to get bigger slice of profit portion by putting the company in the part of the market where there is less competition
What unit of Five Forces framework?
industry
Benefit of examining Five Forces framework
understand how we can create/capture value in the market
It is important to define industry boundary
What if a company’s businesses are involved in several industries?
One Five Forces analysis for an industry may not completely give insights for diversified company
=> Company may need > 1 industry analyses to use in strategy formulation
Limitations about Five Forces framework?
- The framework views other parties in the firm’s environment as a potential threats not as potential allies
- The framework analyzes industries. It tells almost nothing about the specific firm
- It provides no guidance on relative weights for the 5 factors or interaction between them
- There should be other factor such as “the role of Government, or “the role of complements.” They can affect the industry structure
- Industry boundaries are rarely clear and also can shift
Overall cost leadership
Company creates competitive advantages by pursuing high efficiency.
Achieve by driving scale economies, tight cost and overhead control, cost reduction from experience, cost minimization in areas like R&D, sales forces, advertising
This strategy provide substantial entry barriers
Differentiation strategy
Charging higher margin (premium) by providing differentiated value
Company can differentiate themselves in design, brand image, tech, features, cus service
Strategy can insulate higher margin because it increases brand loyalty by customers and lowers price sensitivity
Focus strategy
Related to targeting customer
Comp focus on particular buyer group, segment of product line or geographic market
Do not attempt to appeal all normal cus in market
Focus strategy implies some limitations on the overall market share achievable
Resource-based view (RBV)
views company as collection of resources.
resources are productive assets owned by firm and capabilities are what firm can do
Individual resources do not confer (grant) competitive advantage alone; they must work together to create organizational capabilities
Capability
Essence of superior performance
Resources that are distributed heterogeneously (unlike) across companies
cannot be transferred from company to company without cost bc resources are sticky
When resources are valuable, rare, inimitable and non-substitutable
company can create sustainable competitive adv in the market
Resource do not guarantee what?
sustainable competitive advantage
Value chain analysis
Set of activities that firm operating in specific industry to deliver valuable product or service for the market
Product pass through activities of a chain in order, and at each activity product gain some value
Primary activities
- Inbound Logistic: arranging inbound movement of materials, parts, or finished inventory from suppliers to manufacturing, assembly plants, warehouse and retail store
- Operation: managing the process that convert inputs (in form of raw materials, labor, energy) into outputs (in form of finished goods or services)
- Outbound Logistics: process related to the storage and movement of final product and related info flows from the end of production line to end user
- Marketing & Sales: selling a product or service and processes for creating, communicating, delivering, and exchanging offerings that have value for cus, clients, partners and society
- Service: activities required to keep product/service working effectively for buyer after it is sold and delivered
