Strategic Management Flashcards
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A strategy is a ______________ which positions the firm to _______________________
A strategy is an integrated set of choices which positions the firm to create a sustainable economic advantage
Strategy relies on (3)
Simple agreed goals
Appraisal of resources
Understanding competition
Types of strategy:
Corporate strategy: _____ to compete
Business strategy: ___ to compete
Functional:
Corporate strategy: Where to compete
Business strategy: How to compete
Functional: Technical steps to implement
I/O analysis: Definition and assumption
Industrial organisational economics assumes that outer environment dictates the actions of firms.
Structures incompatible with I/O (4)
Monopoly
Oligopoly
Perfect competition
Monopolistic competition
Assumptions of the I/O model (4)
All firms have similar capabilities
Resources are mobile
All firms act to maximise profit
Restrictions in the external environment
RBV: Definition and assumption
Resource based view says that the source of competitive advantage is the resources that a firm has.
Assumptions of RBV model (3)
Resources aren’t mobile
Resources are inhomogenous
Resources change over time
Definition: an industry is a __________ whose products/services
Definition: an industry is a collection of firms whose products/services are perfect/near perfect substitutes
Uses of I/O analysis: (2)
Helps to identify competitors
Helps to identify success indicators
Define and give example: Monopoly
One firm dominates the entire industry (DeBeers, Microsoft)
Define and give example: Oligopoly
A collection of firms dominate the industry (Wifi or mobile phone networks)
Define and give example: Perfect competition
Many small firms which offer near identical goods (commodity markets)
Define and give example: Monopolistic competition
Collection of small firms who have a different product, with consumers aware of the non-monetary benefits (hairdressers)
Porter’s Five forces (5)
Threat of new entrants Power of buyers Power of suppliers Threat of substitutes Rivalry
Sources: threat of new entrants (9)
Capital requirements Technological requirements Government legislation Economies of Scale Threat of retaliation Established connections Ease of switching Product differentiation Learning Curve cost effect
Threat of substitutes (4)
[ ] of substitutes and level of differentiation
Quality of product
Price of product
Ease of switching
Power of buyers (5)
[ ] of buyers Buyer information Backwards integration threat Lack of differentiation Intensity of competition
Power of suppliers (5)
[ ] of suppliers Necessity of the product in the supply chain Ease of switching Forwards integration Availability of substitutes
Degree of rivalry ((1x5),(1x5))
Intensity of competition: [ ] of competitors, growth in the industry, fixed costs, level of differentiation and more firms supplying
Exit barriers: specialised assets, fixed exit costs, strategic or emotional relationships, government legislation
Define:
Resource
Capability
Core competency
What a firm has
What a firm does: The firm’s capacity or ability to integrate firm resources to achieve a required goal
Actions a firm does particularly well to create a sustainable economic advantage
Types of resources (2)
Tangible and intangibles
Categories of tangible resources (4) and how to identify
Financial
Physical
Technological
Organisational
Can see their value on the balance sheets, check websites etc
Categories of intangible resources (4) and how to identify
Human
Reputation
Innovation
IP
Goodwill after M&A or as Kaplin of Harvard business school states, how closely aligned to the firm’s strategy are they
Types of capabilities (2)
Visual (what we can see and measure) invisible (what is not immediately obvious). Analogous to assets/resources
Core competencies are activities that are _______ and combine _________ and ___________.
Core competencies are activities that are strategically valuable and combine process innovation and production ability
How do we analyse resources and capabilities
VRIO framework is used
V in VRIO
Valuable- Perceived value is higher than the actual value in the eyes of a customer (eg Apple products)
R in VRIO
Rare-Few or a single firm posses the ability to produce this or implement this (Ni superalloys)
I in VRIO
Imitability- can this be copied at a reasonable cost (could you challenge Coca Cola on their budget?)
O in VRIO
Organised to capture value- can the company align everything they have to create value to the product/service
VRIO checklist
Nothing = Competitive disadvantage Just V= Competitive parity V&R=Temporary competitive advantage VR&I = Unused competitive advantage VRIO = Sustainable competitive advantage
Value chain: definition
The value chain describes all values that a firm engages in to add incremental value to their product/service
Primary activities in Porter’s value chain (IOOMS)
Inbound logistics, operations, outbound logistics, marketing and sales and services
Primary: Inbound logistics
Arranging inbound movement of materials and other inputs
Primary: operations
Activities required to convert inputs to outputs
Primary: outbound logistics
Activities required to collect, store and distribute products
Primary: marketing and sales
Retail and advertisement
Primary: services
Actions required after launch to keep the product or service working effectively
Secondary activities in Porter’s value chain;
Firm infrastructure, human resources, technological development and procurement
Business level strategies (Porter’s generic) (4)
Differentiation
Cost leadership
Focused differentiation
Focused Cost leadership
Definition: Cost leadership
Same value in terms of the product, but at a lower cost
Aims of cost leadership (4)
Offer better customer value
Target average customers using little differentiation
Streamline manufacturing and materials management
High volume low margin
Drivers of cost leadership (3)
Lower cost inputs
Economies of scale
Learning curves
Requirements and indicators of cost leadership (9)
Cost control Labour control Scaling Automation Incentives Control reports Cheaper inputs Low cost distribution Organisation
Definition: Differentiation
Higher value for the customers relative to the competitors. Features are unique but priced at a similar level
Aims: Differentiation (2)
Varied products and unique features
Low volume, high margin
Drivers of differentiation (3)
Strong branding
Good market research
Differed product
Indicators and requirements of differentiation (8)
Creative flair Incentive for skilled workers Strong branding Strong engineering Quality led Well coordinated work force
Strategy focusing occurs when firms have _________ which serves the ___________
Strategy focusing occurs when firms have intimate knowledge of a market segment which serves the need of a particular corner of the market
Benefit to focusing
Some core competencies are best serving a niche corner of the market
Successfully implementing a mixed strategy
usually you could get caught in the middle. Can circumvent this by having subsidiary businesses within a firm which cater to particular needs.
Definition: the value chain
The value chain describes all values that a firm engages in to add incremental value to their product/service
Benefits of the value chain (3)
Identify a firm’s position in value chain
Identify the activity which creates value
identify the resources a firm has that create the value
4 stages in industry life cycle and shape of curve
Introduction
Growth
Maturity (stationary point)
Decline
Factors which engender a new industry (2)
Sharing of knowledge
Demand growth
Effect of knowledge on innovation
Process innovation requires diffusion (hence curve looks like it has activation barrier).
Dominant design process (5)
Pioneers in R&D 1st prototype gets industry attention First commercial Front runner Dominant design
Dominant design and the industry cycle
Introduction = Product is innovated Growth = Design & manufacture of the good Maturity = Shakeout, cost cutting, differentiation and commoditisation Decline = Cost cutting and strategic issuees
Exceptions to industry cycle (3)
Food industry (no decline if necessity)
Pharma/ICT (multiple versions)
TV (room for improvement
Sources of corporate inertia (4)
Sticking to core competencies
Imitation (copy each other to gain legitimacy, seen in banks), known as institutional isomorphism
Limited search: accepting temporary solutions
Complementary strategy: interdependent activity in a firm
Signs of mature industries (3)
Slowing of innovation
Low technological change
Market saturation
Cost optimisation of mature industries (4)
Economies of scale
Low cost inputs
Lower overheads
Outsource]
Definition: Strategic innovation
Strategic innovation is a revamp of corporate strategy
Examples of strategic innovation (4)
Dramatic redefinition of the customer base
Dramatic redefinition of the concept of customer value
Dramatic redesign of end to end value chain architecture
Bundle experience
Organisational ambidexterity vs Dual strategy
Organisational ambidexterity is the act of doing both strategy for now that exploits existing resources and capabilities, and future planning by having a strategy for tomorrow, SIMULTANEOUSLY. Dual strategy is doing one at a time.
Dynamic capabilities
Firms that readjust to address rapidly changing industries
Types of dynamic capability (3)
Sensing of threats and opportunities
Seizing of opportunities
Maintain competitiveness whilst overhauling assets
Declining industries: indicators and solutions (4)
Leadership: establish a dominant position. Encourage exit of rivals by commiting
Niche: focus strategy
Harvest: maximise cash flow
Divest: Get out and sell
Innovation:
Commercialisation of an invention
Invention
Creation of products my development of new knowledge
Idea adopters (5)
Innovators Early adopters Early majority Late majority Laggards
Level of profits extracted from an invention (2)
How much value does the invention have to customers
How well can it be appropriated
Appropriation of ideas
Legal IP
Complementary resources
Imitability
Lead time
What is the chasm and how is it surpassed?
It is the gap between the early adopters and early majority. There needs to be a need for the good
Benefits and drawbacks of first movers
Monopoly on the gain of a new product, but have to forge their own path (costly) and also high uncertainty.
Benefits of follower (3)
Can learn from first mover and exploit potential, and have more time to fine tune
Definition: strategic window
A period in time when the firms resources and capabilities are aligned with the market. Larger firms have a longer window, smaller firms have higher pressure to get the product to market quickly
Definition: emergence of standards
A standard is a format that allows inter-operability.
How do standards emerge (2)
This can arise from a public or private fund, and are linked to the dominant design.
Definition: technical standards
These emerge for network externalities, where my experience depends on your participation
Establishing as the standard (3)
Establish allies
Pre-empt the market
Manage expectations
How do you stimulate innovation? (5)
Cross functional product development
Buying innovation
Open innovation
Corporate incubators
Definition: CSR
Coroporate social responsibility
Example of CSR
B-Corp. Private non profit which ranks the behaviour of firms on economics and social issues, so they can brand it.
