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BUS 478 > MT1 > Flashcards

MT1 Flashcards

1
Q

Strategy (business-level)

A

A set of actions designed to exploit core competencies and gain a competitive advantage.

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2
Q

3 questions to ask about Strategy

A

1) Where are we now?
2) Where do we want to go?
3) How are we going to get there?

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3
Q

Rents

A

Economic profits

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4
Q

In competitive markets…

A

No rents in the LR

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5
Q

Shareholder value perspectives

A

1) Descriptive perspective
2) Normative perspective
3) Legal perspective
4) Evolutionary perspective

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6
Q

Descriptive perspective

A

Profits simply are the goal of many private-sector companies

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7
Q

Normative perspective

A

Shareholder value should be the goal of managers who are appointed by shareholders

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8
Q

Legal perspective

A

Corporate governance rules in publicly listed companies require managers to maximize shareholder value

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9
Q

Evolutionary perspective

A

Only firms that maximize profits survive in the LR

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10
Q

Competitive advantage

A

Creating superior value for customers that competitors cannot replicate.

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11
Q

Performance (via profits or rents)…

A

depends on the position of the business’s demand and cost curve, which depends on the external environment, its strategy, and its internal characteristics

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12
Q

Owners/Shareholders/Board of Directors

A

Set company goals

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13
Q

General Managers (CEO)

A

Define and execute strategy

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14
Q

Functional Managers

A

Define and execute tactics

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15
Q

Today’s competitive markets are affected by…

A

1) Globalization
2) The global economy
3) Rapid technological change
4) Increasing importance of knowledge and people

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16
Q

The global economy

A

One in which goods, services, people, skills, and ideas move freely across geographic borders

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17
Q

Globalization

A

The increasing economic interdependence among countries and its organizations

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18
Q

Knowledge

A

Information, intelligence, and expertise. An intangible resource

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19
Q

I/O Model of Above-Average Returns

A

1) Study the external environment
2) Locate an above-average return industry
3) Identify the strategy
4) Develop or acquire assets and skills to implement strategy
5) Use the firm’s strengths to implement strategy

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20
Q

IKEA Example (US)

A

1) Competitive advantage: Low cost, product selection, experience, user-friendly building
2) Core competency: Operational efficency
3) Strategy (Business model): Manufacture and distribute low cost DIY furniture for the mainstream family
- Outsourcing labour to the buyer, since labour cost is high in developed countries
4) Tactics: Focus on DIY, sell at lower price since cost is coming from consumer’s time

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21
Q

IKEA Example (Japan)

A
  • Entered the market in 1974 during Japanese boom, through a JV
  • Exited in 1986
  • Consumer market does not like wasting time on DIY projects, since TIME IS MONEY
  • DIY favour larger, open spaces. Japan has small, cramped spaces
  • Japan’s labour cost was low at the time
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22
Q

Core competencies (How can your capabilities add value to the business?)

A

Capabilities that serve as a source of competitive advantage over rivals

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23
Q

Capability (What can you do with what you own?)

A

The capacity for a set of resources to perform a task

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24
Q

Resources (What do you own?)

A

Input into a firm’s production process. The firm’s assets. Includes capital equipment, employees, patents, etc.

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25
Q

Vision

A

A enduring picture of what the firm wants to achieve

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26
Q

Mission

A

Specifies the industry in which the firm intends to compete in (5-10 years), changes according to new environmental conditions

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27
Q

Goals

A

Gives you milestones. Communicates:

  • Objective
  • Issues
  • Impact
  • Solution
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28
Q

Disproportionate your efforts

A

80% of efforts into your strengths, 20% in improving weaknesses

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29
Q

How to build a competitive advantage?

A

Need core competencies, including:

1) Product Excellence
2) Service Excellence
3) Locational Excellence
4) Operational Excellence

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30
Q

Product Excellence

A

Superior quality eg. Apple

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31
Q

Service Excellence

A

Superior quality eg. Mercedes

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32
Q

Locational Excellence

A

Market by location (like high foot traffic, high visibility) eg. McDonalds

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33
Q

Operational Excellence

A

Quality at an affordable price. Efficiency in production and ability to maintain quality standards eg. Walmart

34
Q

TIM HORTONS Example

A

Offer operational excellence via combo’d products. Product excellence isn’t there, as quality of coffee is inferior to competitors.

35
Q

Competitive Strategy Decision is formed by (which models?)…

A

1) Industry Organization (I/O) model

2) Resource-based model

36
Q

Resource-based model of Above-Average Returns

A

Resources –> Capabilities –> Core competencies –> Competitive advantage –> Locate attractive industry –> Form strategy

37
Q

External environment

A

Contains industry environment (Porter’s 5 forces) and competitor environment

38
Q

External environment segments

A

1) Demographic –> Age, pop. size
2) Economic –> Deficits, interest rates, inflation rates
3) Political/Legal –> Tax laws, antitrust laws, privacy laws
4) Sociocultural –> Social trends
5) Technological –> Product innovation
6) Global –> Political events, global markets
7) Sustainable physical environment –> Energy consumption, renewable energy

39
Q

PEST (The macro-environment)

A

Contains political, economic, social, and technological changes

40
Q

Porter’s 5 forces

A

1) Threat of new entrants
2) Buyer power
3) Supplier power
4) Threat of substitute products
5) Rivalry among competing firms

41
Q

Threat of new entrants

A

Likelihood that firms will enter the market. Factored by two things:

1) Barriers to entry (EoS, Differential advantages, switching costs)
2) Expected retaliation

42
Q

Bargaining power of suppliers

A

Increasing prices, reducing supply, and even reducing quality are means.
- More power when dominated by a couple firms

43
Q

Bargaining power of buyers

A

Exerting the lowest acceptable rate of return for the companies’ invested capital
- More power when large portion of total output its purchased from buyers, low switching costs

44
Q

Threat of substitute products

A

Goods/services from outside a given industry that perform similar or the same functions as a product that the industry produces

45
Q

Intensity of rivalry among competitors

A

When the firm is challenged by a competitor’s actions or when a company recognizes an opportunity to improve its market position

46
Q

APPLE (lifestyle and tech) example

A
  • Threat of entry: Low. iOS is their IP
  • Rival intensity: Low, only Android competes
  • Threat of substitute: Low, only Android competes
  • Supplier power: Full control, they make their own software in-house
  • Buyer power: No control
    THIS MAKES APPLE PROFITABLE
47
Q

SEMI CONDUCTOR INDUSTRY example

A
  • Threat of entry: High, easy to enter a mature market
  • Buyer power: High, there’s many options… cuts into margins
  • Supplier power: Ultra high
  • Only 5 semiconductor manufacturers, 3 semiconductor designers, 1 software
  • Threat of substitutes: Low
  • Rivalry intensity: High, since buyer & supplier power is high. Firms entering market have mature tech
48
Q

Competitor intelligence

A

The ethical gathering of needed information and data that provides understanding of competitor’s:

  • objectives
  • strategies
  • assumptions
  • capabilities
49
Q

SAMSUNG (manufacturing) example

A
  • Threat of entry: High, Lots of smartphones have Android
  • Rival intensity: High
  • Threat of substitute: High
  • Supplier power: Little control, software is outsourced to Google
  • Buyer power: Full control
    THIS MAKES SAMSUNG BARELY PROFITABLE
50
Q

KITKAT case

A
  • Cutthroat competition, top 3 market leaders own 40% market share
  • Copycat products
  • KITKAT was focused on PRODUCT EXCELLENCE and a COST-LEADERSHIP APPROACH to compete in a mature and saturate market
  • Differentiation via branding and marketing
  • Promoted UK heritage, promoted “high-end brand”, then targeted mothers via symbolic approach (good luck charm)
  • Smaller packaging for Japanese convenience stores
51
Q

SAMSUNG case

A
  • Problem: No differentiated OS, diminishing consumer base, low product price, cannot up-sell
  • Competitive advantage: Vast product portfolio, screens, market share
  • How to overcome OS problem? Acquire company with tech in development, form partnership w/ company
52
Q

Sustainable competitive advantage

A

When competitors are unable to duplicate the benefits of a firm’s strategy or when they lack the resources to attempt imitation

53
Q

Factors of sustainable competitive advantages

A

1) Valuable capabilities
2) Rare capabilities
3) Costly to imitate capabilities
4) Nonsustainable capabilities

54
Q

Valuable capabilities

A

Help a firm neutralize threats or exploit opportunities

55
Q

Rare capabilities

A

Are not possessed by many others

56
Q

Costly-to-imitate capabilities

A

Historical: A unique and a valuable organizational culture or brand name
Ambiguous cause: The causes and uses of a competence are unclear
Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers

57
Q

Nonsubstitutable capabilities

A

No strategic equivalent

58
Q

What’s needed in a sustainable competitive advantage?

A

Unique resources, capabilities, and competencies

59
Q

Types of resources

A

Tangible and intangible

60
Q

Tangible resources

A

Financial, physical, technological, organizational

61
Q

Intangible resources

A

Human, innovation, reputation

62
Q

Value Chain Analysis

A

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

63
Q

Outsourcing

A

The purchase of a value-creating activity from an external supplier
- By performing fewer capabilities, a firm can concentrate on the areas which create value

64
Q

Advantages of outsourcing

A

1) Improves business focus
2) Provides access to world-class capabilities
3) Accelerates re-engineering benefits
4) Shares risks
5) Frees resources for other purposes

65
Q

SONY CA example

A

Producing audio & video related devices to end-consumer

66
Q

HONDA CA example

A

Developing performance based engines

67
Q

AMAZON CA example

A

User data and IT infrastructure

68
Q

SHANDA GAMES CA example

A

Local knowledge

69
Q

TOYOTA Org. Culture example

A

Kaizen: Continous improvement… 1% improvement per week = 50+% improvement per year

70
Q

To position itself, the firm must decide if they intend to…

A

Perform activities differently OR perform different activities

71
Q

When selecting a business-level strategy, the firm determines…

A

1) Who are the consumers?
2) What are the needs of the consumer?
3) How will we satisfy those needs?

72
Q

Types of business-level strategies

A

1) Cost-leadership
2) Differentiation
3) Focused cost leadership
4) Focused differentiation
5) Integrated cost leadership/differentiation

73
Q

Cost leadership

A

Producing products with features that are acceptable to customers at the lowest cost, relative to competitors (MINIMAL VIABLE PRODUCT)

  • Outsource manufacturing
  • Above average returns despite presence of competition
74
Q

Differentiation

A

Producing products that customers perceive as being different in ways that are important to them
- Product innovation is key

75
Q

Focused cost leadership/differentiation

A

Producing products that serve the needs of a niche market

- Include a particular buyer group, a different segment product line, a different geographic market

76
Q

Integrated cost leadership/differentiation

A

Firms engage in primary value-chain activities and support functions to achieve low-cost position with some product differentiation

  • Efficient production is source of low costs
  • Differentiation is source of unique value
77
Q

Two types of target market

A

Broad and narrow

78
Q

Cost leadership and differentiation target the…

A

Broad market segment

79
Q

Focused cost leadership and differentiation target the…

A

Narrow market segment

80
Q

CHIPOTLE case

A
  • Problem: Drop if profits due to health reasons in store
  • Differentiated strategy as it offers customization and flexibility to the consumer, Subway style, while also providing sustainability and local sourcing supplier-side
81
Q

HAIER example

A
  • Problem: US washer market was saturated, Haier was a foreign entrant and its hard to get individuals to throw out old appliances just to buy a cheaper product
  • Business-level strategy: Cost-leader
  • Downside of strategy: Great for grabbing market share, but to receive profitability and increase in market share, firms must differentiate
  • Solution: Sold mini-washers and mini-appliances for one-person use (focused cost leadership strategy)
  • Solution: Bought GE to compete in rural China. Introduced a dual-usage washing machine for washing agricultural products and clothes. DIFFERENTIATION!

BUS 478 (6 decks)

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