Midterm Flashcards
operational effectiveness
being better than enemy
strategy
doing activities differently
what is value creation?
inputs + value = outputs
how does the music industry case relate to value creation?
when value is created people in the supply capture it
what is value capture?
created value each party can internalize (profits they can “capture”)
what is competitive advantage?
firm > industry average
industry evolution
- firms changing the industry
- society influencing the industry
example of industry evolution
ducati didn’t enter the cruiser market to compete against harley (less rivalry)
strategic activity map
aligning strategies to the firm’s goals
example of strategic activity map
trader joe’s:
1. sailor theme
2. worker’s pay
3. attractive to college
what determines industry profitability?
- suppliers
- buyers
- rivalry/substitutes
- threat of entry
how do we approach the five forces?
industry level > ”what does the industry look like right now for the firms in it?”
factors creating low supplier power
- many suppliers
- low switching costs
- industry important to supplier
factors creating low buyer power
- many buyers
- high switching costs
- industry important to buyer
factors creating low rivalry
- few rivals
- growing industry
- low exit barriers
- high switch costs
if barriers to entry are high
threat of entry is low
factors creating high BTE
- high capital req
- cost disadvantage for new entrants
- access to distribution difficult
fixed costs vs BTE
how numerical costs (ie startup) impact barriers to entry
who are the buyers in the grocery industry?
wholesalers not the consumers (so if the wholesalers open a cereal factory they influence threat of entry)
what is differentiation strategy?
about product quality NOT being different
what’s the differentiation strategy impact?
high profits if maintain similar pricing
what’s the cost leadership impact?
cheap but must maintain quality
relative cost analysis
product cost break down by activity
when is relative cost analysis most appropriate?
for less diversified firms (ducati + trader joe’s)
what is the VRIO framework?
- valuable (resource)
- rare (resource)
- hard to imitate (resource)
- organized to capture value (firm)
if you pass the VRIO framework
firm has long term competitive advantage
if a firm’s resource is not valuable
competitive disadvantage
if a firm’s resource is not rare
compete on price
if a firm’s resource not hard to imitate
temporary competitive advantage
if a firm’s not organized to capture value
temporary competitive advantage
what is organized to capture value?
do resources capture value (ie Google’s employees ideas)
what is non market strategy?
things firms do to leverage themselves (ie lobbying, government incentives, etc)
what are market failures?
opportunities for non-market strategies to be relevant (no market failure means no opportunities to lobby)
types of market failures
- monopolies (raise prices w/out losing customers)
- public goods (no rivalry)
- externalities (costs firms can impose on others (ie. carbon affecting the public)
- information asymmetry
- transaction costs
what are non-market strategy goals?
- improve industry profits
- improve against rivals
- improve social environment
OITT framework
- opportunity (improve profits)
- interest (stakeholders)
- targets (goals)
- tools (resources)
what is the opportunity, who is interested, what is their goal and what resources can be used?
why don’t firms pursue CSR?
- let them eat cake (max profit)
- icing on cake (greenwashing)
- deserves cake (stakeholder)
- have cake + eat (win/win)
what is leadership advantage?
not the advantages of first but is first advantageous in the long run? (extended impact!)
network effect
advantageous when other people are on it (social media)
learning effect
producing more units increases efficiency in making the product
pioneering cost
will the guys after benefit from my initial costs? (ie. mobile money case—convincing government + developing infrastructure)
horizontal integration corporate strategy
moving across separate industries (can we lower our costs or raise WTP?)
vertical integration corporate strategy
w/in one industry + quality impacted (can we lower costs or raise WTP?)
better off test
does it lower cost or increase WTP? (ie. Apple iPad + Mac)
- passing = integrating + ownership
- failing = remaining separate
ownership test
failing = firms need to reach contract agreement (long term vs short term)
super soaker
- Johnson create a great toy.
- need distributor
- distributors capture most value
lipitor
value creation declined (generic drug)
music industry
record labels capture most value
coke + pepsi (5 forces)
- bottling hard to replicate
- high barrier to entry
- bottlers have low power
- forward integration (more process control)
- marketing makes rivalry high
coors
- shifted to more store vs bars
- people at home more
- high BTE from economies of scale
- wanted to narrow + differentiation
ducati
- did not fight harley
- differentiation
- increased intangible value
trader joe’s (strategic map + rca)
- small stores
- niche customer
- cost leader
- no branding
zipcar (VRIO)
- marketing
- technology
- parking
- mainly not in VRIO
mpesa
- networking effect
- pioneer cost
tata
- indian law say 2% to CSR
- tata does although unprofitable
apple
- horizontal integration
- economies of scale help
- innovation increase WTP
disney + pixar (toy story)
- vertical integration
- disney needed pixar for toy story
- pixar leverage from relationship specific investment (toy story)
easter eggs
- jellyfish protein
- questrom macy’s + JC penny
- bell telephone
- bu bridge
- US woman phd
