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Strategic Management Midterm > Strategic Management > Flashcards

Strategic Management Flashcards

0
Q

Strategy

A

An integrated and coordinated set of commitments Nd actions designed to exploit core competencies and gain a competitive advantage
- decides how well or poor a firm will perform

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1
Q

Strategic competitiveness

A

Achieved when a firm successfully formulates and implements a value creating strategy.
Exploits core competences

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2
Q

Strategic management process

A

1) analyze internal and external environments- to understand capabilities and competencies ( strategic inputs)
2) using the analysis above firms develops vision/mission statements and their competitive strategy
3) achieve above average returns and change strategy inputs to keep up with market evolution

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3
Q

Strategic management process defined

A

A full set of commitments, decision , and actions required to achieve strategic advantage to earn above average returns

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4
Q

Global economy

A

When goods, services, people , skills, and ideas move freely across geographic boarders.

  • relatively un fretted by constraints like tariffs
  • always expanding and becoming more complicated
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5
Q

Globalization

A

Increasing economic interdependencies among countries and their organizations as reflected in the flow of goods,services,capital, and knowledge.

  • product of large firms competing against each other
  • increases range of opportunities and performance standards
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6
Q

Core competencies

A

Resources and capabilities that serve as a source for competitive advantage over rivals.
Visible in a firms organizational function.
(R&d in apple)

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7
Q

Vision

A

A picture of what the firm wants to be and ultimately achieve.
The ideal description of an organizations intended future

The foundation of the mission statement

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8
Q

Mission

A

Specifies the business in which the firm tends to compete and the customers they intend to serve.

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9
Q

Vision vs mission

A
  • Mission statement is more concrete than the vision
  • vision states ethical standards and who it will become
  • mission states how’s it’s going to serve individuals and groups
  • -Mission deals more with product markets and customers
  • Vision statements are more vague than missions which can change at any time
  • Vision is usually short and easily remembered p
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10
Q

Stakeholder vs stockholder

A

Stakeholders- individuals, groups, or organizations that can affect a firms mission/vision and are affected by strategic outcomes

Stockholders- individuals or groups that have invested capital in a firm and expect a positive return

  • stockholders always want to maximize returns on investments while stakeholders want to max. Quality and reliability
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11
Q

Capital market stakeholders

A

Shareholders and suppliers of capital

Want large returns

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12
Q

Product market stakeholders

A 
Primary customers 
Suppliers
Host communities 
Unions 
Reliable products at low prices 
Very important
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13
Q

Organizational stakeholders

A

Employees
Managers
Non managers

Provide rewarding work environment

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14
Q

Strategic leader

A

Are people located in different areas and levels of the firm using strategic management process to select strategic actions to help firm achieve mission and vision
-no matter what position they have are decisive, committed and nurturing to those around them
CEO most important and prominent

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15
Q

Organizational culture

A

Refers to the complex set of ideologies, symbols, and vote values that are shared throughout the firm and that influence how the firm conducts business
–social energy drives or fails a business.
Important for strategic leaders to understand org. Culture

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16
Q

Purpose of external environment analysis

A
  • creates opportunities and threats
  • influences firms as they seek strategic competitiveness and above average returns.
  • foundation for forming vision and mission and implementing strategic action
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17
Q

Components of external environment analysis

A

Scanning- identifying signals of environmental changes and trends
Monitoring- detecting meaning through ongoing observations of environmental changes
Forecasting- developing projections of anticipated outcomes based on monitored changes and trends
Assessing- determining the timing and importance of environmental changes and trends for firms strategies and environments

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18
Q

Scanning

A

Identify potential changes in external environment

  • often reveals ambiguous, incomplete, and unconnected data or information
  • use special software to ID events
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19
Q

Monitoring

A

Observation of external environmental changes and see is an important change is emerging.

  • it is critical to be able to detect the meaning of environmental changes and trends
  • important to ID important stakeholders
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20
Q

Forecasting in external environment

A

Develop feasible projections of what might happen and how quickly
- challenging to be accurate results in economic downturns

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21
Q

Assessing in external environment

A

Determine timing and significance of the environmental changes and trends that have been ID’ed
- specify implications and intent. Without assessing their is an unknown competitive relevance

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22
Q

Industry define

A

A group of firms producing products that are close substitutes.
-In the course of competition these firms influence each other

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23
Q

Purpose of industry environment analysis

A

Industrial environment has more direct effect on the firms strategic competitiveness

  • study other firms to identify their capabilities so they can compete against what they are producing
  • recognize that suppliers and buyers can become competition by them producing adequate substitutes
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24
Q

Economies of scale

A

The cost of producing additional units decreases on a per unit basis as quantity produced increases

  • can be developed in most business functions
  • make entering your market more difficult for competition
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25
Q

Strategic groups

A

A set of firms that emphasize similar dimensions and use a similar strategy

  • competition in strategic group is greater and more intense
  • high mobility and entry barriers and low resources limit the formation on strategic groups
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26
Q

Competitor analysis

A

-Future objectives( what drives the competitor)
Current strategies(what is the competition doing and can do Assumptions ( what does the competition believe about the industry?
Strengths and weaknesses( what are their capabilities )
All of these lead to a response

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27
Q

Five forces Michael porter

A
  • Threat of new entrants
  • bargaining power of suppliers
  • bargaining power of buyers
  • Threat of substitutes
  • Rivalry among competing firms
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28
Q

Internal environment analysis components

A

-What a firm can do
Matching what a firm can do with what it might do
Turning resources into strategic competitiveness

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29
Q

Characteristics of core competencies

A

Serve as a source of competitive advantage.

Reflect a companies personality

30
Q

What makes a sustainable competitive advantage

A

Capabilities that are
valuable-neutralize external env. Threats/ exploit opportunities
Rare- capabilities that are few if any
Costly to imitate- capabilities firms cannot easily develop
Nonsubstitutable - capabilities that do not have strategic equivalents

31
Q

Value chain

A

Allows the firm to understand the parts of operation that create value and those that do not
Analyzes their cost positions of activities

32
Q

Describe value chain analysis

A

Support function of finance, hr, and MIS go into value chain activities that create customer value

33
Q

Customer value in the value chain analysis

A 
Created by 
Supply chain management
Distribution 
Marketing
Operations
Follow up sales
34
Q

Tangible resources

A

Assets that can be observed and quantified

35
Q

Intangible resources

A

Assets rooted deeply in the firms history, accumulated over time,
Relatively difficult for competitors to imitate and analyze

36
Q

Outsourcing

A

The purchase of a value creating activity or support function activity from an external supplier

37
Q

capabilities into core competencies

A

-Must allow a firm to perform an activity in a manner that provides value superior to their competitors
Or - perform a value creating activity a competitor cannot perform

38
Q

What are capabilities

A

A firm combines Individual tangible and intangible resources to create them

  • used to complete organizational tasks
  • value of human capital in developing and using capabilities
39
Q

Outsourcing contribution to creating value

A

Firm recognizes they cannot create value in an activity that activity can be outsourced to create more value

40
Q

Conditions affecting Managerial decisions about resources capabilities and core comp.

A

Is it creating value?
Resources and capabilities must be acquired to form a competitive advantage
Not quantity that matters but have the right resources
Take internal and external environment into consideration

41
Q

Business level strategy

A

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

How a firm intends to compete in a specific product

42
Q

Business level strategy determines

A

Who will be served
What needs those target customers have that the product will satisfy
How will those needs be satisfied

43
Q

Market segmentation

A

Is a process used to cluster people with similar needs into individual and identifiable groups

44
Q

Purpose of business level strategy

A

To create differences betweens the firms position and those of its competitors

Defines the path which provides the direction of actions to be taken by leaders of the firm

45
Q

Types of business level strategies

A

Cost leadership - lowest cost to broad market - kia’s
Differentiation - distinctiveness to broad market - Lexus/ Toyota
Focus cost leadership - narrow market at low cost -ikea
Focused differentiation - narrow market distinctiveness - lunch trucks in the city

46
Q

Cost leadership vs. focus strategy

A

Cost leadership is the cheapest product to most people
Focus strategies focus on a particular market segment

People perceive cost leaders to have bad quality

47
Q

Risks pertaining to cost leadership strategy

A

Powerful customers can force cost leaders to reduce prices

Cost of production is major factor

Rivals to produce at a lower price
Imitation

48
Q

Risks pertaining to differentiation strategy

A

Customers decide price is too high for uniqueness
Differentiation could exceed customers needs
Differentiation may cease to provide value to the customer
Competitors counterfeiting your differentiation strategy

49
Q

Risks of focus strategy

A

Same risks as a company using cost leadership or differentiation.
Additionally
Could focus on too narrow of a market
Competitions can differentiate to the same market
Needs of customers within a narrow segment may become more similar over time resulting in reduced advantage

50
Q

Corporate level strategy

A

What business should a firm compete in
selecting and managing a group of different businesses competing in different product markets to gain a competitive advantage

51
Q

Vertical integration

A

Becoming your own supplier or distributor through acquisition. Vertical movement up or down value chain

52
Q

Levels of diversification

A

–Low level diversification -
-Single business- 95% or more of revenue comes from a single business
Dominant business- 70-95% of rev. Comes from single business

  • -Moderate to high level -
  • Related constrained - less than 70% comes from dominant business and businesses share product/tech/distribution linkages
  • related linked - less than 70% from dominant business and only some limited linkages
  • -high level diversification -
  • unrelated - less than 70% from one business and no linkages
53
Q

Low level diversification

A

Single business- 95 or more percent of revenues come from single business

Dominant business- 70-95 percent come from single business area

54
Q

Moderate to high level diversification

A

Related constrained diversification - less than 70 percent from dominant business and direct product, tech , or distribution links between firms

Related linked diversification - less than 70 percent from dominant business and share a few links mostly transfer of knowledge and core comps

55
Q

High level diversification

A

Unrelated diversification - less than 70% from dominant business and no relationships between businesses

56
Q

Reasons for diversification

A

Operational relatedness : sharing activities

Corporate relatedness: transferring skills or corporate core competencies Among units

57
Q

Value reducing diversification

A

Div. managerial employment risk- spread the blame for poor performance

Increasing managerial compensation - more duties and responsibilities means more money is required

58
Q

Economies of scope

A

Related diversification

The average total cost of production. Decreases as a result of increasing the number of different goods produced

Sharing resources to lower costs

59
Q

Operational relatedness

A

Sharing activities

Share primary support activities in value chain to reduce total average costs

Risk and not easy to achieve - synergies not realized and ties create links between outcomes

60
Q

Corporate relatedness

A

Sharing core competencies on a corporate level

Intangible resources can be transferred to an acquired business that will not be easily counterfeited by competitors

61
Q

Financial economy in diversification strategy

A
  • cost savings realized through improved allocations of financial resources based on investments inside or outside firm ( efficient internal capital market allocation)
  • restructuring of acquired assets firm buys business to make it better and more profitable then to sell off business at a profit
62
Q

Merger

A

Firms agree to integrate their operations on a relatively equal basis

Usually one firm will be more benefitted

63
Q

Acquisition

A

One firm buys controlling 100 percent interest in another firm with intent of making the acquired firm a subsidiary business in its portfolio

64
Q

Take-over

A

Special type of acquisition strategy wherein the target firm did not solicit the acquiring firms bid

Acquiring firm bought out business that did not want to be bought out

65
Q

Reason for acquisition.

A

To try and spread risk in uncertain environment

Increase market power due to competitive threats

Manage industry and regulatory changes

66
Q

Horizontal acquisition

A

One company in the same industry acquires a company in the same industry
Must be careful not to violate antitrust laws
Expand your product range and sell more ( economies of scale)

Geography advantages

67
Q

Vertical acquisition

A

Enable you to integrate your supply chain as a basis for improving efficiency and costs. Such as acquiring a supplier

Provides indirect method of increasing market share by controlling competitions access to supplies

68
Q

Problems with acquisitions

A

Clashing corporate cultures -integration difficulties
Managers more focused on acquisitions than reasons for obtaining new businesses

Inadequate evaluation of target - paid too much for firm , new tax consequences, ineffective due diligence

Inability to achieve synergy

Too much diversification can lead to decline in performance

Large debt - issuing junk bonds

69
Q

Successful acquisition attributes

A

Select right target

Avoid paying too much

Integrate operations of the acquiring and target firm effectively

Retain the target firms human capital ( intangible resources)

70
Q

Downsizing Restructuring strategy

A

Reduction in firms employees or operating units

Reduce labor costs to increase profitability
Want more efficiency

71
Q

Down scoping restructuring

A

Eliminating businesses unrelated to firms core businesses

May accompany downsizing but should avoid key employees

Smaller firm can be better managed by top management team

72
Q

Leveraged buyout restructuring or LBO’s

A

One party buys all of a firms assets I’m order to take the firm private

Significant debts may by incurred

Immediate sale of non-core assets to get rid of debt

Can correct managerial mistakes

73
Q

Types of LBO’s

A

Management buyouts MBO
Employee buyouts EBO
Whole firm buyouts

EBO and whole-firm buyouts lead to downs coping and increase in strategic focus plus improved performance

Strategic Management Midterm (1 decks)

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