Quiz #1 Flashcards
(115 cards)
What is Strategy?
- A pattern of decisions in a company that reveal objectives,purposes,goals
- Unique and valuable position involving different activities
- A pattern of integrated activities
- Must be specific when targeting market (shouldn’t be vague)
What Makes Good Strategy?
Adjectives (1) Unique (2) Sustainable (3) Specific (4) Creative (5) Feasible/realistic (6) Internal Consistancy
What Strategy is Not?
-Catch all for organizational decisions (integrated set of choices)
-Operational Effectiveness; performing different activities from rivals or performing similar activities in different ways
Ex) Money ball, people catch on
Ex) Southwest Airlines: Not going after first class experience; target markets
Summary Statement of Your Strategy
- Characterizes product line/services offered
- Markets and their market segments
Key Aspects of Strategy: Formulation
o Deciding what to do, how do you decide, what do you look to do
♣ Is the market there? Is there interest?
o Externally/Environment
♣ ID opportunities and risks
♣ Responsibility to society
♣ Sell how you’re different
o Internally
♣ Determine capabilities, resources, weaknesses
♣ Personal values and goals of management
o SWOT analysis
♣ Strengths, weaknesses, opportunities, threats
Implantation of Strategy
o Achieving results, what aspects are thought about?
o Organizational structure and relationships (division of labor)
o Organizational processes and behavior (incentive systems and rewards)
o Culture —> symbols
o Top leadership —> alignment and fit
Model of Strategy in Context
Mission –> Objective –> Strategy –> Implementation
Summary of Strategy
o Strategy is the activities that make it different and unique
o Lots of formulation and implementation
The Five Forces
- Customers
- Suppliers
- Competitors
- Threat of Substitutions
- Possible/potential entrants
o RIVALRY AMONG FIRMS (PORTER)
Power of Buyers
o Why is this a threat?
♣ Limits on profit potential
♣ Demand better quality, more service, or be concerned with prices
o Dependent on…
♣ Negotiating Leverage
• Few buyers
• Industry products are standardized or undifferentiated
• Face few switching costs (doesn’t take much to move between products) different chargers for new phones
♣ Price Sensitivity
• Elastic and inelastic demand
• Big cost, strapped for cash
• Quality not affected by product
• Product has little affect on other costs
o When this is high…
♣ Build on relationship, switching cost is high, make them reliant
♣ Make it hard to leave
Power of Suppliers
o Threat?
♣ Can capture value for themselves
♣ Charge higher prices lower quality or shift costs
o Dependent on power, higher if…
♣ One of a kind, monopoly on the market
♣ Switching costs in a changing suppliers
♣ Products differentiated
♣ No substitute
o If high…
♣ Standardize specifications so you can easily switch
Threat of Substitutes
o Threat?
♣ Perform same or similar functions by different means (outside the industry)
♣ Customers may switch to substitutes
♣ Place ceiling on prices (can’t keep charging more risk of loss)
o When high…
♣ Offers better price-performance trade off
♣ Buyers cost of switching is low
o What do you do?
♣ Uniqueness, differentiation (game day vs. at home)
♣ Better value and wider accessibility
Threat of Entry
o Threat? ♣ Limits profit potential of industry o Depends on… ♣ Cost of start up or entry ♣ Barriers to entry • Benefits of seale (big batches) • Customer switching costs • Capital requirements, unequal access to distribution ♣ Reaction of incumbents • Substantial resources to fight • Won’t cut prices • Industry growth is low ♣ When high… • Keep prices down • Boost investments
Rivalry/Competitors
o Threat? ♣ Limits profitability o Depends on… ♣ Intensity to compete • Competitors are numerous • Slow growth • Exit barriers are high • Rivals are high committed • Firms cannot read signals o Basis of Competition ♣ Price (if people keep lowering price, consumers get better value, lose profitability) ♣ Build in value (customer service, different features, quality)
• Strategy Formulation: Other External Factors
o Industry growth rate
o Technology and innovation
o Government
o Complementary products and services
o Changes to industry structure and 5 forces
Global Sourcing
o Key Decisions:
♣ 1) Outsource or not – “Make or Buy”
♣ 2) Where should value adding activities be located
o Pros: insourcing = more control
o Cons: large initial investment in another country, high short term costs for insourcing
Global Sourcing and the Five Forces
o Activities aim to exploit comparative advantages and maximize competitive advantages, but benefits depend upon…
♣ 5 forces including competitors and relationships with suppliers
♣ all has pros and cons, but need to align with strategic objectives, past experience, and environmental changes
Innovation
new ideas, specific function of entrepreneurship; an have innovation w/ entrepreneurship
Entrepreneurship
• realizing profit, need for something that people didn’t know they needed; difficult to copy, simple, doesn’t costs a lot to get started
o Growth and development overtime
Sources of Good Ideas
o 1) Unexpected Occurrences (IBM Watson, Play-Doh)
o 2) Incongruences (tweaking something)
o 3) Process Needs (make people’s lives easier)
o 4) Demographic Changes
o 5) Changes in Perception (healthy, but not healthy enough, GMOs)
o 7) New Knowledge (new technology)
o 8) Traveling = highlighted sense of awareness
Entrepreneurship Steps
o 1) ID the market o 2) Create business plans o 3) Seek investors o 4) Build enterprise o 5) Put together a team (creation of human capital)
Elements of a Business Plan
o Company overview, mission statement, description of product, competitive analysis, marketing strategy, objectives, financial plans, operations
Lean Start-Up (Blank Article)
o Testing and failing multiple times
o Start slow and small; hypothesis
Business Model Canvas
o Laid out on one sheet
♣ Partners, channels, relationships, customer segments, value propositions, cost structure
o Reduces ricks
Takeaways (Business Model)
o There’s a difference between innovation and entrepreneurship; not all ideas are profitable
o Good ideas come from a variety of places; think like a traveler
o Lean start-ups allow faster, cheaper, less risky ventures