Midterm 1

Question 1

Definition of strategy

Answer 1

Creating value in a market by performing different activities or performing similar activities differently

Question 2

Goal of strategy

Answer 2

Gain and sustain competitive advantage

Question 3

Strategy is not…

Answer 3

operational effectiveness because OE is unsustainable

Question 4

Sustainable strategy is difficult to replicate because

Answer 4

It entails tradeoffs
Consists of system of activities

Question 5

strategy formula

Answer 5

science + art + luck

Question 6

science

Answer 6

input: data, info, knowledge

output: facts/how the world works

Question 7

art

Answer 7

creative solutions

strategy formation

Question 8

luck

Answer 8

uncertainties , environmental and internal

Question 9

threat of entry is higher

Answer 9

when barriers to entry are low

Question 10

barriers to entry

Answer 10

economies of scale, demand side benefits of scale (network effects), switching costs and loyalty, capital requirements, first mover advantages (patents), incumbent aggression, government restrictions

Question 11

substitutes are

Answer 11

products outside the focal industry that meet a similar need

Question 12

substitutes pose greater threats when

Answer 12

there is attractive price for performance trade off, customer switching costs are low

Question 13

buyer power is higher

Answer 13

sales concentrated in few buyers, product is undifferentiated (switching suppliers doesn’t matter), buyers have low switching costs, buyers can integrate, buyers are highly price sensitive

Question 14

supplier power is higher

Answer 14

few suppliers, suppliers have many buyers (buyers have little negotiating leverage, product is differentiated, buyers have high switching costs, few substitutes exist, suppliers can integrate forward)

Question 15

Rivalry poses a bigger threat when

Answer 15

many competitors, product undifferentiated, low switching cost, low industry growth rates, high fixed to variable costs, high exit barriers, excess industry capacity, product or service perishable

Question 16

industry

Answer 16

group of incumbent firms facing +/- same set of suppliers/buyers

Question 17

5 forces pros

Answer 17

identify industry profitability, goes beyond an analysis

Question 18

5 forces cons

Answer 18

not company specific, non market forces

Question 19

role of firm, industry, and other in explaining returns

Answer 19

55% firms, 20% industry, and 25% other

Question 20

core rigidity

Answer 20

former core competency that turned into a liability as the environment changed

Question 21

core competencies

Answer 21

unique strengths, embedded within firm, enables firm to differentiate from rivals, results in higher value for customer or lower cost to produce

Question 22

VRIO - competitive advantages likely to result from resources if they are:

Answer 22

valuable, rare, inimitable, organized to capture value

Question 23

two generic strategies to create competitive advantages

Answer 23

differentiation (greater value at same cost), or cost leadership (same value at lower cost)

Question 24

factor cost

Answer 24

input cost per unit of input

Question 25

productivity

Answer 25

output per unit input