Policy Midterm Review Flashcards
An Integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
Strategy
When a firm implements a value creating strategy that is difficult to duplicate or too costly to try to imitate.
Competitive Advantage
An Investors uncertainty about the economic gains or losses resulting from a particular investment.
Risk
Returns in excess of what an investor expects to earn from other investments with a similar amount of risk.
Above Average Returns
MintzBerg’s 5 definition of strategy
Plan, Play, Pattern, Perspective, Position
Plan
An intended and deliberate course of action with dealing with a situation
Ploy
A maneouvre intended to outwit an opponent or competitor
Pattern
A fairly consistent set of actions as opposed to a course of action
Perspective
How the organization perceives the world, ( the right way, wrong way and their way )
Position
Positioning the firm in the environment where it can gain a competitive advantage and obtain above average returns
Plans or conscious corses of actions required to deal with a specific situation. These lead to _________ (2)
Intended Strategy ( deliberate strategies )
Patterns of actions that come about over time in an unintended manner.
Emergent Strategies
Emergent Strategies are: ( attributes )
Bottom Up, Result from everyday actions without conscious planning.
The increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital and knowledge across borders.
Globalization
Specifies that the industry a firm chooses to compete in has a stronger influence on the firm’s performance than choices managers make inside the firm.
I/O Model
I/O Model Underlying Assumptions (4)
1) External environment constrains determine strategies
2) Firms in industry control similar resources and pursue similar strategies
3) Resources are mobile across firms and differentiation in them are short-lived
4) Decision Makers are rational and committed to maximizing the firm’s profits.
Assumes each organization’s unique collection of resources and capabilities are the primary basis for a firm’s strategy and returns.
Resource Based Model
Resources
Inputs into a firms production process such as capital equipment, skills of employees, patents, finances, and talented managers.
Inputs into a firms production process such as capital equipment, skills of employees, patents, finances, and talented managers.
Resources
The capacity for a set of resources to perform a task or activity in an integrative manner.
Capabilities
Resources and capabilities that serve as a source of competitive advantage for a firm over its rivals.
Core Competencies
A picture of what the firm wants to be and in broad terms, what it wants to ultimately achieve.
Vision
Vision
A picture of what the firm wants to be and in broad terms what it wants to achieve.
Mission
Specifies the business or businesses in which a firm intends to compete and the customers to serve.
Specifies the business or businesses the firm intends to compete and the customers it wants to serve
Mission
Stakeholders
Individuals or groups who can affect or affected by the firm’s strategic outcomes and have enforceable claims on the firm’s performance
Groups or individuals who can affect or be affected by the strategic outcomes of a firm and have enforceable claims on the firm’s performance.
Stakeholders
Stakeholder Groups ?
Product Market, Organizational Market, Capital Market
Capital Market Stakeholders?
Shareholders, Capital suppliers
Organizational Stakeholders
Employees, Managers, Non Managers
Product Stakeholders?
Customers, Unions, Suppliers
Returns in excess of what an investor expects to earn with another investment with a similar amount of risk.
Above Average Returns
Returns below what an investor expects to earn with another investment with a similar amount of risk
Below Average Returns
Returns equal to what an investor expects to earn with another investment with a similar risk.
Average Returns
Measures of firm performance (6)
Firm Survival, Accounting Measures, Market Measures, Multiple Stakeholder Approach, Present Value, MVA and EVA, Balanced Scorecard, CSR, Sustainability and triple bottom line
Triple Bottom Line
People, Planet, Profit
Firm Survival Adv/Dis
Adv: Easy to use, dont require detailed information about firms economic condition
Disadv: Difficult to know if firm no longer exists, Firm can die over an extended period of time, doesnt provide information related to above average returns.
Accounting Measures Adv/Disad
Adv: Easily available for publicly traded firms, accounting numbers important for managers to make strategic decisions, provide insight to economic rates of return
Disadv: Short Term Bias, Manager’s manipulation, Undervalue intangible assets.
Multiple Stakeholder Approach Adv/Disad
Adv: Relative to preferences of stakeholders who are important to the firm
Disadv: Different stakeholders have different interests, Different criteria to judge performance, difficult to satisfy all stakeholders
Present Value Approach Adv/Disad
Adv: Close link between PV and performance, Can maximize value creation
Disadv: Inaccurate with predicting cash flows years into the future, measuring discount rate is problematic, adequacy of economic model questioned
Market Based Measure Adv/Disadv
Adv: More accurate reflection of firm’s economic performance, Publicly available information
Disadv: Not designed to measure performance, using systematic risk may not be appropriate for performance measurement, Market indexes questioned
MVA
Difference between cash an investor expects to receive and the amount of cash debt/equity holders invested in the firm since inception.
Difference between cash of what an investor expects to receive and the amount that debt/equity holders invested initially.
MVA
EVA
Internal measure of a firm’s ability to generate MVA in the future.
EVA/MVA Adv/Disad
Adv: captures the ability of a firm to manage resources, how senior managers manage capital
Disadv: doesn’t assess economic value/profit, doesn’t measure cash flow, doesn’t measure future cash flow but past accounting income, too complex, lack of consistent EVA definitions
A firm voluntary taking further steps to improve quality of life of employees and families, communities and society.
CSR
CSR in HR results in :
Higher retention and better recruitment results
CSR results in ( Other than HR ):
Protection from environmental accidents and scandals
Avoid conflict with regulators and tax law.
Triple Bottom Line Adv/Dis
Adv: Allows company to benchmark with other organizations
Disadv: Difficult to assess performance
General Environment
Compromised of dimensions in the broader society that influence an industry and the firms within it
compromised of dimensions in the broader society that influence an industry and the firms within it
General Environment
Dimensions of General Environmental
Political/Legal, Global, Technological, Sociocultural, Demographic, Economic
Political Legal Dimension includes:
Changing regulations, Antitrust laws, taxation laws, labor training laws
Global Dimension includes:
Political events, Global Markets, Different culture and institutional attributes
Economic Dimension includes:
Inflation, Interest Rates, GDP, Budget and trade surplus/deficit
Demographic Dimension includes:
Age structure, Income, geographical distribution, ethic mix,
Technological Dimension includes:
New communication technologies, product innovations, application of knowledge.
Sociocultural Dimension includes:
Women in workplace, Cultural diversity, Attitude on quality of work life
Set of factors that directly influences a firm and its competitive actions and competitive responses.
Industry Environment
I/O Model of above average returns
External environment is primary determinant of firm performance
The industry of which a firm intends to operate and compete has a strong influence on performance
I/O Model
I/O Industry properties (5)
Economies of scale, barriers to market entry, diversification, product differentiation, degree of firm concentration in industry
I/O Model 4 underlying assumptions
1) External environment poses constraints that help formulate the strategy
2) Competing firms have similar resources and strategies
3) Competitor’s differentiated resources are short lived, highly mobile across firms.
4) Decision makers are rational and committed to the firm achieving above average returns.
An analysis of the firms internal weaknesses and strengths and external opportunities and threats.
SWOT
Demographic segment is
concerned with a population’s size, age structure, geographic distribution, ethnic mix and income.
Economic environment is
Refers to the nature and direction of the economy in which a firm competes or may compete.
Political/Legal segment of env. is
arena in which organizations and interest groups compete for attention, resources, and a voice for overseeing the body of laws and regulations guiding the interactions among nations.
Sociocultural Segment is
concerned with a society’s attitude and cultural values
concerned with a society’s attitude and cultural values
Sociocultural Segment
Technological segment is
Includes institutions and activities related to creating new knowledge and translating that knowledge into outputs, products, processes and materials.
Global segment of env. is
Includes relevant new global markets, existing changing markets, important international political events, and critical and cultural and institutional characteristics of global markets.
5 forces of competiton
Rivalry among firms, substitute products, bargaining power of supplier, bargaining power of buyer, threat of new entrants
Suppliers have high bargaining power when: 4
1) Industry dominated by few large companies
2) Substitute products are unavailable
3) Industry firms are not significant customers for supplier group
4) Supplier goods critical to buyer’s success
Buyers have high bargaining power when: 4
1) They purchase a large portion of an industry’s total output
2) Purchased product sales account for a significant portion of sellers annual revenues
3) can substitute at no or little cost
4) Industry products are undifferentiated or standardized
Inputs into a firm’s production process such as capital equipment, employees, pa tenets, finances and managers.
Resources
Resources include:
Capital equipment, Employee skills, Patents, Finances, Managers.
Resources
Input into a firm’s production process
Capability
The capacity for a set of resources to perform a task or an activity in an integrative manner.
The capacity of a set of resources to perform a task or an activity in an integrated manner
Capability
Resource Based Model
Assumes that each organization’s resources and capabilities are the primary source of above average returns and a firm’s strategy.
Assumes that an organizations resources and capabilities are the primary source of above average returns and a firm’s strategy.
Resource Based Model
Core competencies
Resources and capabilities that serve as a source of sustained competitive advantage for a firm over its rivals.
Resources and capabilities that serve as a source of sustained competitive advantage for a firm over its rivals
Core competencies
Tangible resources
Assets that can be seen or quantified.
Intangible resources
Assets that are typically rooted deeply into a firm’s history and have accumulated over time.
Assets that can be seen or quantified.
Tangible Resources
A firm’s formal reporting structure and its formal planning, controlling and coordinating systems
Organizational resources
Sophistication of location of a firm’s plant and equipment
Physical resources
Knowledge, Trust, managerial capabilities, organizational routines and ideas.
Human resources
4 criteria of sustainable competitive advantage
Valuable capabilities, Rare capabilities, Costly to imitate capabilities, Organized to be exploited
Allow the firm to exploit opportunities to generate revenues and/or neutralize threats to reduce costs
valuable capabilities
Capabilities possessed by few if any current of potential competitirs
rare capabilities
Capabilities that other firms cannot easily develop
costly to imitate capabilities
When firms have the correct structure, control systems and reward systems to support each source of competitive parity, temporary competitive advantage and sustained competitive advantage.
Organized to be exploited
Primary activities in value chain analysis means
Involved with a products physical creation, its sale and distribution to the buyers and its service after the sale
Support activities in a value chain means
Provide the assistance necessary for the primary activities to take place
Primary activities components ( Basic value chain )
Service , operations, Outbound logistics, inbound logistics, marketing and sales
Support activities components ( basic value chain components)
Firm infrastructure, HRM, technological development, procurement.
Outsourcing
Purchasing of value creating activity from an external supplier
