Strategy formulation and strategic choice Flashcards
What is a competitive advantage?
CA are defined by 3 indicators:
- They deliver a benefit to customers.
- They have a superior price-performance ratio.
- They achieve high profitability.
Explain the concept and diagramm of Porters strategic positioning.
Two axis: X and Y. On the Y axis is perceived performance and on the X axis is cost/price.
- High performance and High prices: Differentiation
- Low performance and Low prices: Cost/Price leadership.
- High performance and Low prices: Outpacing
- Low performance and High prices: Monopoly.
All others are “Stuck in the middle”.
The Value net is the starting point for implementing game theoretic thinking. Which players enter in this net?
The own company is located in the middle. Then, on each side are customers, complementors, suppliers and competitors.
Which are the three steps you have to follow to apply game theory to strategic issues?
- Define the game: What is the strategic issue? Who are the players? What are their objectives? What are the options available? What influences results? What are the rules?
- Solve the game: See what comes out with given incentives, activities and results without influencing the game.
- Influence the game: How can we change the outcome based on understanding possible influences?
How can we influence the outcome of the game?
Developing a PARTS model we can know if it is possible to influence the game.
- Players: can number/role of the players be influenced?
- Added value: can the payoff distribution be influenced?
- Rules: can rules/conditions be influenced?
- Tactics: can perceptions be influenced?
- Scope: can the scope of the game be influenced?
What does inertia in the context of strategic innovation mean?
Inability of stablished players to foster internal change when faced with environmental change.
What is disruptive innovation?
Is a phenomenon that can be achieved in many industries. Repeatedly, industries are faced with disruptions, for example new technologies, new business models that threaten even stablish market leaders and let new players take leadership in these markets.
Even market leaders are again and again in danger to be displaced by new companies.
What could be the different reasons for inertia to occur?
- Perception: too busy to deal with new developments or poor knowledge of new technologies.
- Evaluation: low interest of costumers, low interest of shareholders.
- Decision: protection of former business model, waiting for reaction of other players.
- Implementation: implementation of procedures similar to those in the core business.
How can strategic innovation destroy the competitive advantage of industry leaders?
At the time when industry leaders are performing above the requirements of customers, new disruptive innovations may enter the market with lower prices and meet the requirements of costumers. Winning those customers back can be very difficult.
Name the checklist for identifying disruptive threats through customers, new service offerings and own perception.
- Customers: complaints about too complex and too expensive products? features or services, which are not used? customers lack ability or money to use the products?
- New service offerings: establish in the lower market segment? offer primarly a price advantage? emphazise new customer benefits?
- Own perception: rejection by regular customer? own performance lowly valued? sidestepping into the upper market segments appears attractive?
Name and explain the sources and objectives of innovations.
- Markets: new regions, unmet demand.
- Technology: New uses, transfering technology, new technology.
- Business system: old game, new game.
- Customer: understanding needs, creating needs.
What are the two steps of the concept of value innovation?
- Defining the product/service elements (architecture, quality, price, …).
- Defining the performance level of each element.
Explain the customer-oriented approach to value innovation.
4 Questions:
- Which factors should be introduced?
- Which of the common factors should be discontinued?
- Which factors should be reduced below standard?
- Which factors should be raised above standard?
Explain the three steps necessary to determine the internationalization strategy for a company.
- Determine the character of the industry: what are the davantages of global standardization? what are the advantages of local adaptations?
- Specify the internationalization strategy: export strategy, multinational strategy, global strategy or transnational strategy.
- Implement the internationalization strategy: design of international added value and organization of the international business.
Under which circumstances arise advantages out of global standardization or rather local adoption?
- Global standardization: homogeneity of customer needs, R&D-intensive industries, capital-intensive industries.
- Local adaptation: heterogeneity of customer needs, differences in purchasing power, labour-intensive industries, heterogeneity in regulations, culture, language or religion.
