Strategy Flashcards
What are the two viewpoints of business strategy?
- Industrial organization economics
- Resource-based view
What is the ‘Industrial Organization Economics’ viewpoint when looking at business strategy?
Industry analysis & competitive positioning
- central characteristic of the business environment = competition
- sources of profit => external environment
What is the ‘Resource-based’ viewpoint when looking at business strategy?
Emphasis on resources & capabilities
- source of profit => within the firm
What is the starting point of the outside-in approach?
Understand the market (competitors, ease of entry, …)
What is the starting point of the inside-out approach?
Prior experience, capabilities, resources, …
What is the outside-in approach?
STRUCTURE (industry structure)
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CONDUCT (firm behavior)
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PERFORMANCE (firm results)
What is the inside-out approach?
RESOURCES (firm resources)
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CONDUCT (firm behavior)
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PERFORMANCE (firm results)
Both viewpoints have something in common, what?
Both viewpoints link superior performances to a competitive advantage
What are the five P’s for describing strategy? (Mintzberg)
- Plan
- Pattern
- Position
- Perspective
- Ploy
What does ‘Plan’ stand for in the five P’s for strategy?
=> INTENDED STRATEGY
Strategy is a plan:
- direction, guide, course of action into the future
- path to get “from here to there”
What does ‘Pattern’ stand for in the five P’s for strategy?
=> REALIZED STRATEGY
Strategy is a pattern: consistency in behavior over time
What does ‘Position’ stand for in the five P’s for strategy?
Strategy is a position: locating particular products in particular markets
- looking down => product meets customer
- looking out => external marketplace
What does ‘Perspective’ stand for in the five P’s for strategy?
Strategy is a perspective:
An organization’s fundamental way of doing things
(how does the organization perceive the environment and acts upon it)
- looking up => grand vision enterprise
- looking in => inside the organization
When comparing corporate and business strategy, what is corporate strategy?
Which industries should we be in?
-> growth direction company (+speed)
-> markets/products (portfolio management)
-> how to coordinate activities/business units (communication structure, power business units, etc,…)
When comparing corporate and business strategy, what is business strategy?
How should we compete within a particular industry or market?
-> how to compete in a particular market
-> how to position yourself in a particular market
When comparing corporate and business strategy, we saw that there was also a third strategy. Which one and explain?
Functional strategy
- functional areas such as marketing, manufacturing, HR, logistics, etc,…
=> corporate and business level strategies - operation level: which resources to use, how many, …
Explain: mission, values, vision
Mission: Why do you exist?
Vision: What do you want to be?
Values: (ethical values)
=> what you believe in + how you will behave
Why is it necessary to develop a clear strategy statement?
formulation/implementation
Strategic objective: explain + opinion about “maximizing shareholder value”
Strategic scope: explain the dimensions
Strategic advantage: what is a customer value proposition?
Mapping your value proposition against those of rivals
Why should customers buy YOUR product or service?
Outside-in
What is the difference between total costs, average costs and marginal costs?
Marginale kost:
dit geeft u de mate waarin de totale kosten toenemen wanneer de output met één eenheid stijgt
What is/are the economies of scale?
the average cost declines over a range of output
-> fixed costs are spread over additional output => higher operational efficiency, implying lower variable costs
Explain: economies of scale, constant returns to scale, diseconomies of scale
- When average cost decreases as output increases = economies of scale
- When average cost remains unchanged with respect to output increase = constant returns to scale
- when average cost increases as output increases = diseconomies of scale
What is the minimum efficient scale?
The smallest level of output at which economies of scale are exhausted
Why is the economies of scale curved U-shaped?
Variable costs = increase as output increases, such as expenses for labor and materials
Often when output increases: capacity constraints
Bottlenecks! (increased variable costs)
What is/are the economies of scope?
The firm achieves saving as it increases the variety of activities it performs
Why does the economies of scope work?
Investments made in developing for example know-how, can be applied to producing related products
Thus
- the firm leverages its core competences
- the firm competes on capabilities
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