Strategy Decision Making 2 Flashcards
What is Strategy?
What is Strategy?
Strategy is the creation of a unique and valuable position, involving a different set of activities
Important points for Strategy
Important points for Strategy
It is about the managers’ theories about how to gain and sustain competitive advantage
It is about being different from your rivals
It is about creating value while keeping costs under control
The Strategic Management Process
The Strategic Management Process
The full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns.
Company Mission
Company Mission
the unique purpose that sets a company apart from others of its type and identifies the scope of its operations in product, market, and technology terms
Company Vision
Company Vision
a company’s purpose or reason for existing
Company Values
Company Values
What a company believes, its business practices around how teammates treat one another, and how the company treats its customers.
Mission Statement
Mission Statement
a statement of the organization’s purpose - what it wants to accomplish in the larger environment
Product Oriented Mission
Product Oriented Mission
defines a business in terms of a good or service provided rather than in terms of the customer need to be met
Customer Oriented Mission
Customer Oriented Mission
defines a business in terms of providing solutions to customer needs
Organizational Culture
Organizational Culture
the set of values, norms, and standards that control how employees work to achieve an organization’s mission and goals
Business Level Strategy
Business Level Strategy
the goal-directed actions managers take in their quest for competitive advantage when competing in a single product market
Quest for gaining and sustaining competitive advantages in a discrete and identifiable product market (How to compete?)
Scenario Planning
Scenario Planning
Strategy-planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses.
Corporate Level Strategy
Corporate Level Strategy
A plan that indicates in which industries and national markets an organization intends to compete.
Quest for selecting and managing the scope and the overall direction of the firm (Where to compete to get competitive advantage?)
Decentralized Planning
Decentralized Planning
An approach where top executives or planning experts work with managers in major divisions or departments to develop their own goals and plans.
Strategic Intent
Strategic Intent
a stretch goal that pervades the organization with a sense of winning, which it aims to achieve by building the necessary resources and capabilities through continuous learning
External Analysis
External Analysis
Examining the organization’s operating environment to identify strategic opportunities and threats.
Why Look at the External Environment?
Why Look at the External Environment?
Threats
Opportunities
Macro-environment
Industry
Political PESTEL
Political PESTEL
the impact of government including taxes, tariffs, trade agreements, and labor regulations
Economic PESTEL
Economic PESTEL
growth rates, interest rates, levels of employment, price stability (inflation and deflation), and currency exchange rates.
Social PESTEL
Social PESTEL
population size, age, ethnic mix, and social movements
Technological PESTEL
Technological PESTEL
impact of the internet, smart devices, and automation on business and society
Legal PESTEL
Legal PESTEL
requirements related to labor and consumer protection, equality, and product safety
Ecological PESTEL
Ecological PESTEL
broad environmental issues such as the natural environment, global warming, and sustainable economic growth
How do firms try to influence the environment?
How do firms try to influence the environment?
Marketing and Lobbying
lobbying
ying
Engaging in activities aimed at influencing public officials, especially legislators, and the policies they enact.
Porter’s 5 Force
orter’s 5 Forces
*Rivalry among competitors;
*Threat of new entrants;
*Threat of substitute products;
*Bargaining power of buyers;
*Bargaining power of suppliers;
Understanding the forces that shape industry competition is the starting point for developing strategy (boundaries often blurry)
Industry Life Cycle
Industry Life Cycle
the stages of introduction, growth, maturity, and decline that typically occur over the life of an industry
What are the five sequential stages of a company’s life cycle?
What are the five sequential stages of a company’s life cycle?
Embryonic
Growth
Shakeout
Mature
Decline
stage 1
Stage 1: Embryonic
The industry is just beginning to develop
Development is slow
Buyers are unfamiliar with a product
High prices
Stage 2: Growth
Stage 2: Growth
Demand takes off
Many new customers
First-time demand
Prices fall with development and higher volume
Entry barriers are relatively low
Relatively low competition
Stage 3: Shakeout
Stage 3: Shakeout
The rate of growth slows
Demand approaches saturation levels
Few potential first-time buyers
Rivalries become intense
Excess capacity may exist
Means of competition: Efficiency
Stage 4: Mature
Stage 4: Mature
The market is saturated
Demand is limited to replacement demand
Growth is low or zero
Barriers increase
The threat of new entries decrease
Competition drives prices down
Stage 5: Decline
Stage 5: Decline
Falling demand = Excess capacity
Growth becomes negative due to
Technology substitution
Demographics
International competition
How to outperform your rivals?
How to outperform your rivals?
by establishing a preservable difference:
delivering greater value to customers … or
create comparable value at lower costs
Strategic Positioning
Strategic Positioning
performing different activities from rivals or performing similar activities in different ways (operational effectiveness similar activities better than rivals)
What does a sustainable strategic position require?
What does a sustainable strategic position require?
requires trade-offs (different positions, with their tailored activities, require different product configurations, skills, equipment, and systems …)
Improving operational effectiveness?
Improving operational effectiveness?
Improving operational effectiveness is a necessary part of management, but it is not a strategy
What is internal analysis?
What is internal analysis?
Analyzing the firm’s current and future performance and sustainability strategies
Value Chain Analysis
Generic building blocks of competitive advantage
Firm resources
Market-based View
Market-based View
Look at the industry structure then decide on a way of acting and then analyze the performance
Resource-based View
Resource-based View
a method of analyzing and identifying a firm’s strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles as an organization
3 Generic Business Strategies
3 Generic Business Strategies
cost leadership, differentiation, and focus
Cost Leadership Approach
Cost Leadership Approach
To outperform competitors by doing everything it can to produce goods or services at the lowest possible cost
Differentiation Approach
Differentiation Approach
The differentiated product can satisfy a customer’s need in a way that competitors cannot
Focus Approach
Focus Approach
Directed toward serving the needs of a limited customer group or segment (e.g. geographic region, customer segment, type of customer)
Building Blocks of Competitive Advantage
efficiency, innovation, quality, responsiveness to customers
Stuck in the Middle Hypothesis
A firm “stuck in the middle” […] “will compete at a disadvantage because the cost leader, differentiators, or focuser will be better positioned to compete in any segment […] Such a firm will be much less profitable than rivals achieving one of the generic strategies”
Which is better between hybrid and pure strategies?
Which is better between hybrid and pure strategies?
Purer strategy positions are associated with above-average operating returns across three out of four major industry sectors
Data and analysis did not identify a single industry in which hybrid strategies outperformed pure strategies
How to sustain the rent-generating potential of a resource?
How to sustain the rent-generating potential of a resource?
Inimitability: physical uniqueness, path-dependent accumulation, causal ambiguity, and social complexity
Non-substitutability: can another/different resource provide the same benefits?
What are a firm’s resources and capabilities?
A firm’s resources and capabilities include all of the financial, physical, human, and organizational assets used by a firm to develop, manufacture, and deliver products or services to its customers
How does a company compete with others based on resources?
How does a company compete with others based on resources?
Resource-based reasoning—a company will outperform its rivals if it has the best and most appropriate stocks of resources
Competitive advantage arises from the ownership and deployment of a valuable resource that enables the company to perform activities better or more cheaply than competitors
What are tangible resources?
What are tangible resources?
Physical assets such as equipment, buildings, land, furniture, owned raw materials, the size and geographic scope of the work force, and financial assets.
What are intangible resources?
What are intangible resources?
assets that are much more difficult for competitors to account for or imitate and are typically embedded in unique routines & practices that have evolved & accumulated over time (brand names and reputations)
