Structural Analysis within an Industry Flashcards
Strategic management is a five-stage process:
1) The board of directors drafts the organization’s mission statement and goals
2) The organization performs a situational analysis, also called a SWOT analysis
3) Upper management develops a group of strategies describing how the mission will be achieved
4) Strategic plans are implemented
5) Strategic controls and feedback are used to monitor progress, isolate problems, and take corrective action
Helps an organization formulate its strategy
SWOT analysis
In the internal environment are usually identified by considering the firm’s capabilities and resources.
Strengths and weaknesses
In the external environment are identified by considering macro- and micro-environment factors.
Opportunities and threats
Formulates specific and measurable objectives, plans, policies, and budgets.
Strategic planning
At the highest level, a firm’s strategic planning function involves
1) Formulating its mission,
2) Determining its strategic business units (SBUs),
3) Allocating resources to SBUs,
4) Planning to start new businesses, and
5) Downsizing or divesting old businesses
Can influence the success of strategic implementation:
1) The organizational structure,
2) Personnel,
3) Culture, and
4) Controls
Strategic management is facilitated by managers who think
Synergistically
Occurs when the combination of formerly separate elements has a greater effect than the sum of their individual effects.
Synergy
Is reflected in a long-term plan for using resources to reach strategic objectives.
An operations strategy
Examples include cost, quality, delivery, flexibility, and service strategies
Provides a model of the structure of industries and competition
Porter’s five competitive forces
Porter’s five competitive forces are:
1) Intensity of rivalry among established firms,
2) Threat of new entry,
3) Threat of substitutes,
4) Bargaining power of customers, and
5) Bargaining power of suppliers
Variables cost and differentiation are
Competitive advantage
Variables broad and narrow
Competitive scope
Competitive advantage (low cost) and competitive scope (Broad Industry-wide) is
Cost leadership strategy
Competitive advantage (low cost) and competitive scope (Narrow Market segment) is
Focused strategy: Cost
Competitive advantage (Unique product) and competitive scope (Narrow Market segment) is
Focused strategy: Differentiation
Competitive advantage (Unique product) and competitive scope (Broad Industry-wide) is
Differentiation strategy
Competitive strategies are:
1) Cost leadership
2) Differentiation
3) Cost focus
4) Focused differentiation
Competitive strategy: Such a firm can earn higher profits than its competitors at the industry average price or charge a lower price to increase market share. The risks of this strategy include possibility that advances in technology or successful imitation may eliminate it’s advantage
Cost leadership
Competitive strategy: Such a firm may earn higher profits because consumers are willing to pay a price higher than that charged by competitors. An organization adopting this strategy usually has close cooperation among its R&D and marketing function.
Differentiation
Competitive strategy: Is the narrower market can be better served because the firm knows it well.
Cost focus
Competitive strategy: Is the generic strategy of a firm that seeks competitive advantage through providing a unique product or service but with a narrow competitive scope
Focused differentiation
Market-based strategies include:
1) Market leader,
2) Market challenger,
3) Market follower, and
4) Market nicher
The dominant firm in a market pursues this strategy. The leader should attempt to expand the total market. It should also protect current market share while attempting to obtain a greater market share.
Market-leader
The trailing (runner-up) firms pursues this strategy. a challenger must determine its strategic objective and specific targets.
Market-challenger
Are adopted by firms that do not wish to challenge the leader.
Market-follower
Are followed by small or mid-size firms that compete in small (niche) markets that may be overlooked by large firms. Marketing is specialization.
Market-nicher
According to firm orientations, firms can be categorized as
1) Product-centered firms,
2) Competitor-centered firms,
3) Customer-centered firms, or
4) Market-centered firms
This system helps an organization collect information about its competitors. Permits a firm to create effective competitive strategies that target the appropriate competitors.
Competitive Intelligence
Helps a company target a given class of competitors.
Customer value analysis (CVA)
Customer value analysis (CVA) asks the following questions:
1) What are the most crucial buying factors?
2) How well is our firm performing on key buying factors?
3) Are the prices our firm is charging competitive?
The Boston Consulting Group (BCG) developed this competitive analysis: using Relative Market Share (RMS) and Market Growth Rate (MGR)
Growth-share matrix
The growth-share matrix has four quadrants:
1) Dog (low RMS, low MGR)
2) Question marks (low RMS, high MGR)
3) Cash cows (high RMS, low MGR)
4) Stars (high RMS, high MGR)
The Growth-Share Matrix: Each SBU should formulate a strategy to achieve its objective:
1) Hold strategy
2) Build strategy
3) Harvest strategy
4) Divest strategy
Is used for strong cash cows
Hold strategy
Is necessary for a question mark with the potential to be a star.
Build strategy
Maximizes short-term net cash inflow. It means zero-budgeting R&D, reducing marketing costs, not replacing facilities, etc. It is used for weak cash cows and possibly question marks and dogs.
Harvest strategy
Is normally used for question marks and dogs that reduce the firm’s profitability.
Divest strategy
Is any action by a competitor that provides a direct or indirect indication of its intentions, motives, goals, or internal situation.
Market signal
Market signals may be classified as:
The types of signals vary with the nature of the competitor’s signaling behavior and the media used
1) True signals or
2) Bluffs
