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Nipissing U > MIDTERMS 1 & 2- ADMN 4606 > Flashcards

MIDTERMS 1 & 2- ADMN 4606 Flashcards

1
Q

Strategy

A

Integrated and coordinated set of commitments and actions designated to exploit core competencies and gain a competitive advantage and above average returns.

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2
Q

Strategic competitiveness

A

Achieved when a firm successfully formulates and implements a value-creating strategy.

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3
Q

Core competency

A

A capability of a firm that is rare, valuable, costly to imitate and non-substitutable. Creates a competitive advantage.

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4
Q

Competitive advantage

A

Implemented strategy that creates superior value for customers that competitors are unable to duplicate or find too costly to imitate. No competitive advantage is permanent.

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5
Q

Above average returns

A

Returns in excess of what investor expects in comparison to other investments with similar risk.

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6
Q

Reasons for hyper-competition

A

Globalization and technology

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7
Q

Hyper-competition

A

Extremely intense rivalry among competing firms characterized by escalating & increasingly aggressive competitive moves.

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8
Q

I/O based model

A

Explains dominant influence of the external environment on a firm’s strategic actions and performance. AAR are earned when firms implement the strategy dictated by environment.

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9
Q

Four assumptions of I/O based model

A
  1. External environment imposes pressures and constraints that determine strategies leading to AAR
  2. Most firms competing in an industry control similar strategically resources and pursue similar strategies
  3. Resources used to implement strategies are highly mobile across firms
  4. Organizational decision makers are assumed to be rational and committed to acting in firm’s best interest
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10
Q

Implementation of I/O based model

A

-Study external environment (especially industry)
-locate an industry with high potential for AAR
-Identify strategy called for by attractive industry
-develop or acquire assets and skills needed
-use firm’s strengths to implement strategy

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11
Q

Resource based model

A

Suggests a firm has a superior performance because of unique resources and capabilities and the combination makes them different and better than competition.

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12
Q

Four assumptions of resource based model

A
  1. firms acquire different resources and develop unique capabilities based on how they combine and use them.
  2. Resources used to implement strategies are not mobile across firms.
  3. differences in firms’ performance are due primarily to their unique resources and capabilities rather than structural characteristics of the industry.
  4. Differences in resources and capabilities is the source of competitive advantage.
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13
Q

Implementation of resource based model

A

-identify firm’s resources. Study its strengths and weaknesses compared to competitors
-determine firm’s capabilities
-determine potential of firm’s resources and capabilities in terms of competitive advantage
-locate attractive industry
-select strategy that allows firm to utilize its resources and capabilities relative to opportunities in external env.

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14
Q

Inputs into a firm’s production process (resources)

A

Money, machines, methods, material, men and information (5m’s and I)

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15
Q

Capability

A

capacity for a set of resources to perform a task or activity in an integrative manner

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16
Q

Vision

A

Big picture (dream) of what the firm wants to be. Tends to be short term and concise. Ex. A computer on every desk running Microsoft software

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17
Q

Mission

A

Specific business(es) in which the firm intends to compete and the customers it intends to serve. The firm’s reason for existence. Ex. McDonalds wants to be the best employer and give best customer service.

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18
Q

Stakeholders

A

Can affect and are affected by strategic outcomes/performance of a firm.

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19
Q

3 Stakeholder groups

A

-Capital market (shareholders, suppliers of capital)
-Product market (customers, suppliers, unions, host communities)
-organizational (employees, managers, non-managers)

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20
Q

8 Performance measures

A

-firm survival
-accounting measures
-multiple stakeholder approach
-present value
-market value added and economic value added
-balanced scorecard
-CSR
-sustainability and triple bottom line

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21
Q

Multiple stakeholder approach

A

Views firm’s performance relative to the preference of stakeholders. Problem is different stakeholders have different interests.

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22
Q

Present value and NPV

A

Grounded in finance theory. Avoids short term bias by measuring cash flows over time. Values all resources by using discount rate concept. NPV < 0, below average. >0, above average, =0, average.

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23
Q

Balanced scorecard

A

Translates firm’s vision and strategy into operational terms by asking four interrelated questions: customer, financial, internal business process, learning and growth.

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24
Q

Corporate social responsibility

A

Firm voluntarily taking steps to improve quality of life for employees and families as well as local community and society.

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25
Q

Four areas of CSR

A

Brand differentiation, human resources, risk management, licence to operate.

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26
Q

Triple bottom line

A

People first, planet second, and profit last. Stakeholders expect firms to be environmentally, socially and financially responsible.

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27
Q

3 sub-environments of external environment

A
  1. general environment
  2. industry environment
  3. competitor environment
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28
Q

7 elements of general environment

A
  1. economic
  2. demographic
  3. socio-cultural
  4. political/legal
  5. global
  6. technological
  7. physical
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29
Q

5 forces model (industry analysis)

A
  1. threat of new entrants
  2. threat of substitutes
  3. power of buyers
  4. power of suppliers
  5. competitors
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30
Q

Opportunity

A

General environment condition that when exploited can yield strategic competitiveness

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31
Q

Threat

A

General environment condition that may hinder strategic competitiveness

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32
Q

4 activities for external environment analysis

A

scanning- identifying early signs of environmental changes
monitoring-see if important trends are emerging
forecasting- developing feasible projections of outcomes
assessing- determining the timing and importance of environmental changes and trends

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33
Q

Industry

A

Group of firms producing products that are close substitutes

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34
Q

Barriers to entry

A

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

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35
Q

Economies of scale

A

As quantity of production increases, cost of production declines

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36
Q

Tangible resources

A

Those that can be seen, touched and quantified.

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37
Q

Four types of tangible assets

A

Financial, organizational, physical, technological

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38
Q

Intangible assets

A

Assets rooted deeply in the firm’s history and accumulated over time. Can’t be seen or touched which makes them most valuable to firms as they are not easily replicable.

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39
Q

Three types of intangible resources

A

innovation, human resources, reputational resources

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40
Q

Value chain analysis

A

Allows a firm to understand the parts of its operations that create value and those that do not

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41
Q

primary activities

A

Involved with a product’s physical creation, sales & distribution to buyers and service after sale

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42
Q

Support activities

A

Provide assistance necessary for the primary activities to take place (firm infrastructure, HRM, technological development, procurement)

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43
Q

Inbound logistics

A

Activities such as materials handling, warehousing, and inventory control. Used to receive, store, and disseminate inputs into a product

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44
Q

Outbound logistics

A

Activities involved with collecting, storing, and physically distributing the final product to customers

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45
Q

Procurement

A

Activities involving purchase of inputs needed to produce products

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46
Q

Technological development

A

Activities to improve a firm’s product and the processes used to manufacture it

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47
Q

Firm infrastructure

A

Activities such as general management, planning, finance, accounting, legal support and government relations that support the value chain

48
Q

Outsourcing

A

Purchase of value-creating activity from an external supplier. Solution to primary and secondary activities that are not a source of competitive advantage.

49
Q

Business level strategy

A

Integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets

50
Q

Three questions of business level strategies

A

Who will be served?
What needs of target customers will be satisfied?
How?

51
Q

Corporate level strategy

A

Determining which business to enter

52
Q

Types of competitive advantage

A

Cost advantage, uniqueness

53
Q

Types of competitive scope

A

Broad and narrow (niche)

54
Q

5 generic business level strategies

A

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

55
Q

Competitors

A

Firms operating in the same market, offering similar products and targeting similar customers

56
Q

Competitive rivalry

A

Ongoing set of competitive actions and responses occurring between competitors as the content with each other for an advantageous market position

57
Q

Competitive dynamics

A

Total set of actions and responses of all firms competing in a market

58
Q

New ways of competing

A

-bringing new goods/services more quickly
-use of new technologies
-diversification
-shifting product emphasis
-consolidation
-combining online selling with physical stores

59
Q

Drivers of competitive actions and responses

A

Market commonality and resource similarity influence three drivers of competitive behaviour:
awareness, motivation, ability.

59
Q

Competitor analysis

A

firms are direct competitors based on:
-market commonality
-resource similarity

60
Q

Awareness

A

refers to the extent competitors recognize degree of mutual interdependence that results from market commonality and resource similarity. Greatest when firms have similar resources.

61
Q

Motivation

A

Firm’s incentive to take action or respond to competitor’s attack as it relates to perceived gains and losses.

62
Q

Ability

A

Firm’s resources that allow competitive action and flexibility responsiveness

63
Q

Resource dissimilarity

A

The greater the resource imbalance between acting firm and competitors or potential responders, greater delay in response.

64
Q

Strategic actions/responses

A

Market-based moves that signify a significant commitment of organizational resources to pursue a specific strategy

65
Q

Tactical action (response)

A

Market-based move the firm makes in order to fine-tune a strategy

66
Q

Likelihood of attack

A

depends on 3 factors:
1. first mover incentives
2. organizational site
3. quality

67
Q

Slow-cycle market

A

Markets in which the firm’s competitive advantages are shielded from imitation for long periods of time. Monopoly situation.

68
Q

Fast-cycle markets

A

Competitive advantages are not shielded from imitation. Focus is to innovate to stay ahead.

69
Q

Merger

A

Two firms agree to integrate their operations on a relatively co-equal basis.

70
Q

Acquisition

A

One firm buys a controlling 100% interest in another firm with the intent of making the acquired firm a subsidiary within its portfolio.

71
Q

Takeover

A

Special type of acquisition strategy wherein the target firm did not solicit the acquiring firm’s bid. Hostile takeovers are unexpected and undesired.

72
Q

Reasons for acquisitions

A
  1. increase market power
  2. overcome entry barriers
  3. cost of new product development & increased speed to market
  4. lower risk
  5. increased diversification
  6. reshaping firm’s competitive landscape
  7. learning/developing new capabilities
73
Q

Determinants of success in acquisitions

A

-well-conceived strategy for selecting target
-not paying a high premium
-effective integration process

74
Q

Problems in achieving success in acquisitions

A

-integration difficulties
-inadequate evaluation of target
-large debt
-inability to achieve synergy
-too much diversification
-overly focused on acquisitions
-too large

75
Q

Synergy

A

Value created by units exceeds value of units working independently

76
Q

Private synergy

A

Occurs when the combination and integration of acquiring and acquired firms’ assets yields capabilities and core competencies that could not be developed by combining and integrating the assets with any other company.

77
Q

Restructuring

A

A strategy through which a firm changes its set of businesses or financial structure

78
Q

Downsizing

A

Reduction in number of firms’ employees and possibly operating units that may or may not change composition of businesses in the company’s portfolio

79
Q

Down scoping

A

Eliminating businesses unrelated to firms’ core businesses through divesture, spin-off etc.

80
Q

Leveraged buyouts

A

One party buys all of a firm’s assets in order to take the firm privateP

81
Q

Private equity firm

A

Firm that engages in taking a public firm private

82
Q

Three types of LBOs

A

management buyouts
employee buyouts
whole-firm buyout

83
Q

Corporate-level strategy

A

Actions a firm takes to gain competitive advantage by selecting and managing a group of different businesses competing in different product markets. An effective strategy creates synergy and AAR.

84
Q

Low levels of diversification

A

-single business: 95% or more revenue comes from single business
-dominant business: 70-75% revenue comes from single business

85
Q

Moderate to high levels of diversification

A

Related constrained and related linked

86
Q

Related constrained

A

Less than 70% revenue comes from the dominant business, all businesses share product, tech, and distribution linkages.

87
Q

Related linked

A

Less than 70% of revenue comes from dominant business and there are limited links between businesses

88
Q

Very high levels of diversification

A

Unrelated: less than 70% of revenue comes from dominant business and there are no common links between businesses.

89
Q

3 reasons to diversify

A
  1. value creating diversification
  2. value neutral
  3. value reducing
90
Q

Value creating diversification

A

increase the firm value by increasing performance. Created through related and unrelated diversification.

91
Q

Economies of scope

A

Cost savings firm creates by successfully sharing some of its resources and capabilities or transferring one or more corporate level core competencies to another of its businesses.

92
Q

Operational relatedness (related constrained)

A

Created by sharing primary or support activities

93
Q

Corporate relatedness (related linked)

A

Core competency transfer. creates value by reducing resource allocation for second business and creates competitive advantage.

94
Q

Corporate level core competencies

A

Complex sets of resources and capabilities linking different businesses through managerial and technological knowledge, experience and expertise.

95
Q

Market power

A

Exists when a firm can sell its products above the existing competitive level, to reduce costs of primary & support activities or both. Gained through related diversification and/or multipoint competition or vertical integration.

96
Q

Multipoint competition

A

Exists when 2 or more diversified firms simultaneously compete in same product/geographic market

97
Q

Vertical integration

A

Exists when a firm produces its own inputs (backward integration) or owns its source of distribution of outputs (forward integration)

98
Q

Three reasons for value creating diversification

A

-economies of scope (related)
-market power (related)
-financial economies (unrelated)

99
Q

Value created by unrelated diversification

A

Financial economies:
-efficient internal capital allocations reduce risk by developing portfolio with different risk levels
-purchasing other corps. and restructuring assets

100
Q

Financial economies

A

Cost savings realized through improved allocations of financial resources based on investments in/outside the firm.

101
Q

Reasons for value-neutral diversification

A

-antitrust laws
-tax laws
-low performance
-uncertain cash flows
-synergy
-risk reduction
-resources and diversification

102
Q

Value-reducing diversification

A

Diversifying managerial employment risk and increasing managerial compensation (in managers interest only)

103
Q

International strategy

A

A strategy through which the firm sells its goods or services outside its domestic market

104
Q

Traditional incentives to using international strategy

A

-extend product life cycle
-secure key resources
-provide access to low-cost labour and production

105
Q

Emerging incentives to use international strategy

A

-Integration of operations on a global scale
-global communication media facilitate people in different countries to model different lifestyles
-universal product demand

106
Q

3 basic benefits of international strategy

A
  1. increased market size
  2. greater economies of scale and learning
  3. location advantages
107
Q

Porter’s diamond model

A

factors of production
demand conditions
related and supporting industries
firm strategy, structure and rivalry

108
Q

Factors of production

A

inputs necessary to compete in any industry:
Basic- natural and labour resources
advanced- digital communication systems and educated workforce

109
Q

Demand conditions

A

Characterized by nature and size of buyers’ needs in the home market for goods and services

110
Q

Related and supporting industries

A

Related industries provide critical networks of suppliers, buyers and services

111
Q

Firm strategy, structure and rivalry

A

Patterns of strategy, structure and rivalry among firms differ from nation to nation and foster the growth of certain industries

112
Q

Multidomestic strategy

A

International strategy in which strategic and operating decisions are decentralized to the strategic business units in individual countries allowing each unit to tailor to local market

113
Q

Global Strategy

A

Firm’s home office determines strategies that business units are to use in each country/region. Seek to develop economies of scale. Assumes customers have similar needs.

114
Q

Transnational strategy

A

The firm seeks to achieve both global efficiency and local responsiveness.

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