Test 2 Flashcards
What are the 7 decisions regarding the firm’s operating scope and jow to best strengthen its market standing.
- Go on the offensive
- Employ defensive strategies
- be a first mover/fast mover or a late mover.
- Integrate backward or forward into value chain
- Outsourcing
- Partnering
- merging or acquiring
What are some possible basis for competitive attack?
Attack weaknesses of rivals.
Offer a better product for less.
Innovate.
Be a first mover in a market opportunity.
When are aggresive strategies scalled for?
Market opportunities to gain profitable market share.
Has no choice but to attack
Can reap benefits of a compettive edge.
What do the best offensives use?
a firm’s resource strengths to attack its rivals’ weaknesses.
What are some ways of launching a preemtive strike?
- Secure best distributors in a region
- Secure most favorable retail locations.
- Tie up high-quality suppliers
Which rivals are the best targets for offensive attacks
- Vunerable market leaders.
- Runner up firms with weaknesses in the arteas where the challenger is strong.
- Struggling enterprises on the verge of going under.
- Small local and regional firms with limited capabilities.
Blue ocean strategy
Firm seeks large and lasting competeive advantage by abandoning existing markets and inventing an exclusive new industry or market sugment that makes former competitors irrevelant
How do defensive stragtegies defend against compeitive challenges?
- Lowering risk of being attacked
- Weakening the impact of any attack that occurs
- Influencing challengers to aim their competitive efforts towards other rivals.
Good defensive strategies can help protect
competitive advantage but rarely
are the
basis for creating it.
What are some examples of bocking avenues open to attackers?
Add new features t oproduct, add new product, make it cheaper.
What are signals that retailation is likely?
- Announcing strong comitment to maintain firm’s market share
- Publicly commiting the firm to a policy of matching competitor’s terms or prices
- Maintaining a war chest of cash and marketable securities
- Making a strong counter response to weak competitor moves to enhance the firm’s image as a tough defender
Scope of a firm’s operations
Describes the breadth and strength of its activities
and the extent of its reach into geographic, product
and service market segments.
• Dimensions of a Firm’s Scope
Breadth of its product and service offerings
The range of activities it performs internally
The extent of its geographic market presence
Its mix of businesses
is the range of product and
service segments that a firm serves within its
focal market.
Horizontal scope
is the extent to which a firm’s
internal activities encompass one, some, many,
or all of the activities that make up an industry’s
entire value chain system, ranging from rawmaterial
production to final sales and service
activities.
Vertical scope
The combining of two or more firms into a single entity,
with the newly created firm often taking on a new name
merger
The combination in which one firm, the acquirer, purchases
and absorbs the operations of another, the acquired firm
acquisition
What are the two best reasons for vertical integration?
Strengthen the firm’s competitive position
Boost profitability
The Achilles’ heel of alliances and
cooperative partnerships is
becoming
dependent on other companies for
essential expertise and capabilities.
What are some reasons companies expand into international markets
- New customers
- Lower costs
- exploit core competencies
- new resources and capabilities
- spread risk across wider market
What are the five strategies for entering a foreign market
- export
- License
- Franchise
- Subsidiary
- alliance/joint venture
What are the advantages of exporting?
- Conservative
2. Minimal risk and capital investment
What is exporting vulnerable?
- Costs more to manufacture at home than in other country
- High transportation
- Rapid economic shifts
What are the two options for developing a foreign subsidiary?
- Acquire foreign Firm
2. Green field venture.
• Mutual Benefits of Cross-Border Alliances:
Facilitating first entry into foreign markets
Strengthening of a firm’s competitiveness in world markets
Capturing of economies of scale in production and marketing
Filling of gaps in technical expertise and local market knowledge
Sharing of distribution facilities, dealer networks, and mutual
access to customers
Attacking of mutual rivals and providing for mutual assistance
Building of working relationships with local political and hostcountry
governmental entities
Gaining of agreements on technical and process standards
What are the three ineternational strategy options
Multidomestic (think, act local) Transnational (think global, act local) Global Strategy (Think, act global)
A firm varies its product offerings and basic
competitive strategy from country to country.
thank local, act local
When is think local, act local useful?
Significant country-to-country differences exist in
customer preferences, buying habits, distribution
channels, or marketing methods.
Host governments enact local content requirements
or trade restrictions that preclude a uniform,
coordinated worldwide market approach.
Think, act global strategy
- Integrates firm worldwide
- Uniform brand from country to country
- Focuses on securing low-cost or differentiation competitive advantages.
Transnational, think global, act local
- Middle ground approach
- Uses basic competitive theme
- Allows local customization
What kind of activities does crafting strategy focus on?
Market-and-resource driven activities
What does crafting strategy success depend on?
Attracting and pleasing customers Outcompeting rivals The firm’s collection of resources and capabilities
What does implementing strategy focus on?
Exeuction of operations-driven activities
What does implementing strategies success depend upon?
Direct change Allocate resources Build capabilities Build strategy-supportive policies and culture Deliver good results
Principal Managerial Components
of the Strategy Execution Process
- Building an organization with the capabilities,
people, and structure needed to execute the
strategy successfully. - Allocating ample resources to strategy-critical
activities. - Ensuring that policies and procedures facilitate
rather than impede effective strategy execution. - Adopting process management programs that
drive continuous improvement in how strategy
execution activities are performed. - Installing information and operating systems that
enable company personnel to perform essential
activities. - Tying rewards directly to the achievement of
performance objectives. - Fostering a corporate culture that promotes good
strategy execution. - Exerting the internal leadership needed to propel
implementation forward.
Structure follows strategy—
a changed strategy requires a new or different structure and new or different key activities and capabilities. Attempting a new strategy
Functional (or Departmental) Structure
Organizes strategy critical activities into functional,
product, geographic, process, or customer groups
• Multidivisional (or Divisional) Structure
Multidivisional (or Divisional) Structure
Organizes value chain activities involved in making a
product or service available to consumers into a
common (self-contained) division
• Matrix Structure
Allows for dual reporting relationships between
divisional heads and departmental heads
• In a centralized structure:
Top managers retain authority for most decisions.
• In a decentralized structure:
Decision-making authority is pushed down to the
lowest organizational level capable of making timely,
informed, competent decisions.
Business process reengineering aims at
quantum gains of 30 to 50%
TQM Focuses on
incremental continuous improvement
Characteristics of
High-Performance Cultures
• A strong sense of involvement by all
employees
• An emphasis on individual initiative and
creativity
• Clear statement of performance expectations
• Prompt addressing of critical issues
• Constructive pressure to achieve good results
Characteristics of adaptive cultures include:
Willingness to accept change and embrace challenge
of introducing and executing new strategies.
Internal entrepreneurship on the part of individuals
and groups is encouraged and rewarded.
Adopting a proactive approach to identifying issues,
evaluating the implications and options, and quickly
moving ahead with workable solutions
What are four strategic options for diversified corporations?
- Stick with existing business
- Diversify into additional markets
- Retrenching into a narrower scope by getting rid of bad businesses
- Resctructuring business lineup
What are some signs diversification is needed?
- Decreasing growth prospects in business
- Complementary expasion opportunity
- Cost reduction by divers.
- Brand name can be transferred
Diversification may result in building
shareholder value if it passes three tests:
Industry attractiveness test
- Cost of entry test
- Better-off test
the target industry
presents good long-term profit opportunities.
Industry Attractiveness Test—
the cost to enter the target
industry does not erode its long-term profit potential.
Cost of Entry Test—
the firm’s businesses will perform
better together than as stand-alone firms, producing
a synergistic 1+1=3 effect on shareholder value.
Better-Off Test—
Have value chains with competitively valuable crossbusiness
relationships that present opportunities for
the businesses to perform better operating under the
same corporate umbrella than they could as standalone
entities.
Related Businesses
Have value chains and resource requirements are so
dissimilar that no competitively valuable crossbusiness
relationships are present.
Unrelated Businesses
Steps Evaluating the Strategy of
a Diversified Company
Step 1
Assess the attractiveness of the industries the firm has
diversified into.
Step 2
Assess the competitive strength of the firm’s business
units.
Step 3
Evaluate the extent of cross-business strategic fit along
the value chains of the firm’s various business units.
Step 4
Check whether the firm’s resources fit the requirements
of its present business lineup.
Step 5
Rank the performance of the businesses from best to
worst and determine a priority for allocating resources.
Step 6
Craft new strategic moves to improve overall corporate
performance.
Value chain matchups provide competitive
advantage when there are opportunities to:
Combine performance of certain activities, thereby
reducing costs and capturing economies of scope.
Transfer skills, technology, or intellectual capital from
one business to another.
Share a respected brand name across multiple product
and/or service categories.
A diversified firm’s lineup of businesses
exhibit good resource fit when:
- Each of a firm’s businesses, individually, strengthen
the firm’s overall mix of resources and capabilities. - A firm has sufficient resources that add customer
value to support its entire group of businesses without
spreading itself too thin.
