Quiz 2: Chapter 4- Introduction to Strategy Flashcards
Strategy
pursuing a set of unique activities that provide value to customers’ making trade-offs about which businesses to pursue, what products to produce, and which customers to serve- a manager’s “game plan” -specifies how the firm will achieve their goals
Competitive Advantage
when a firm creates more economic value than competitors by engaging in a strategy that is difficult or impossible for others to duplicate
The notion of strategy was first described by…
Sun Tzu, in The Art of War (480-221 B.C.) a Chinese military book
The study and application of business strategy emerged from…
Military foundations
The rules of engagement, the manner in which organizations attempt to gain a competitive stronghold
- generating better info that their rivals
- analyzing that info to make strong, informed choices
- quickly selecting among choices
- converting strategic choices into decisive action
Conglomeration
when businesses grow through unrelated diversification, essentially by acquiring companies in different industries
Today most firms view strategy as a framework rather than a…
fixed plan
Goal
an organizationally desired result, product, or end state
Identifying Internal environment
Managers must analyze its goals, resources, and competencies to asses the firm’s capabilities and potential
Identifying External environment
managers must emphasis the contextual forces,
Core competenceis
a network of unique activities that strategically fit together and are difficult to replicate
Vision
a concept or picture of what a firm wants to achieve and how it plans to accomplish it
-a vision is often what motivates individuals to join a firm and perform beyond expectations
Mission
the activities a firm performs for its customers
Mission statement
a statement that defines a firm’s reason for existence
-often states what activities the firm performs or what markets it is trying to serve and how it distinguishes itself from competitors
Objectives
provide a series of quantifiable milestones or benchmarks by which the firm can assess its progress
Strategy Formulation
the process of analyzing a firm’s external and internal environments as well as the firm’s vision and mission
The development of strategy should be both a….
planned and emergent process
Planned Component of Strategy
involves systematic assessment of the external and internal environments, the creation of plans to react to or impact environmental factors
-the establishment of objectives or benchmarks the firm hopes to achieve
Emergent component of Strategy
it should be flexible and adaptable to changing environmental conditions
Operational Effectiveness
performing certain activities that enable a firm to operate more effectively than its competitors do
As a manager develops a strategy, they need to consider three key elements:
1) Manager must realize that competitive strategy is primarily about being different, not about operational efficiency
2) Manager must decided what NOT to do
3) Manager must create a solid fit among the activities so that the product or service being offered cannot be easily copied by competitors
Strategic Positioning
a place in an industry that a firm occupies by way of the products or services it offers and the methods it chooses to deliver them
Return of Equity (ROE)
a measure of the rate of return on the ownership interest (shareholders’ equity) of the common stock owners
Managers should evaluate their strategy based on a number of key criteria:
- External fit
- internal fit
- Differentiation
- Implementable
External fit
does the strategy fit with the environmental landscape?
Internal fit
Does the strategy leverage the firm’s key resources?
Differentiation
Does the strategy provide a distinct, differentiated, and sustainable position in the marketplace?
Implementable
Can the firm effectively execute the strategy?
Business-Level Strategy
the determination of how a company will compete in a given business and position itself among its competitors
-choosing among three general strategies; low cost, differentiation, focus
Corporate-Level Strategy
the way a company seeks to create value through the and coordination of multi-market activities
Multinational Strategies
strategies in which the parent company organizes local subsidiaries and gives them autonomy to develop products tailored to local tastes
-important to be responsive and sensitive to local needs and tastes
Global Strategies
strategies that focus on developing overall scale economies and global efficiency instead of catering to local tastes
International strategies
combine elements of multinational and global strategies by using foreign subsidiaries to produce and distribute products
Transitional strategy
balance a firm’s international activities among efficiency, local responsiveness, and organizational learning
Market Potential
the overall market size of a particular region and its growth prospects
Two large aspects to market entry;
- deciding the extent to which a firm will export its goods or produce them locally
- deciding whether the firm will own all of the production assets or share ownership with another party
Four Major forms or Market Entry
1) Exporting
2) Licensing and Franchising
3) Joint Ventures
4) Alliances
Exporting
involves shipping a firm’s products from its domestic home base to global markets
Licensing
a contractual arrangement “where by the licensor (selling firm) allows its technology, patents, trademarks, designs, processes, know-how, intellectual property, or other proprietary advantages to be used for a fee by the licensee (buying firm)
Franchising
“where the franchisor (parent company/owner) of a service, trademarked product, or brand name allows the franchisee to use the name in return for a lump sum payment or royalty, while conforming to be required standards of quality and service
Both Licensing & Franchising are….
low-cost means of market entry
Joint Venture
two firms come together to form a new company in the market
-the overall success rate of joint ventures globally is about 50%
Alliance
partners come together by contract to engage jointly in activities in a market
-involves firms sharing resources or capabilities with a counter-party for the mutual benefit of both
Alliances are low cost but….
take time and effort to establish and cultivate
Wholly Owned Subsidiary
when a firm sets up a fully operational, independent, entity in a foreign country to conduct business in that market
-an expensive and risky proposition
