Textbook Chapter 1 Flashcards
What does every organization need to know to be successful?
They need to know themselves and they need to know their “enemy:” the external environment, threats, opportunities, and challenges
What can happen if a company does not maintain an appropriate level of financial performance?
It will be less competitive than its rivals and be eventually be forced to close its doors and cease operations
What will happen if you focus on one critical success factor and ignore others?
It will limit the firm’s long run performance and perhaps threaten its survival
Define achieving financial performance
The achievement of positive cash flow and profitability (but also depends on the life stage and the industry of an organization)
Why is financial performance important?
The organization needs financial resources to pay for its day-to-day operations and current projects, and expand its operations in order to grow
How is financial performance connected to all of the other factors?
It impacts the efficiency and effectiveness of how the organization functions and therefore its ability to generate revenues or keep expenses low
Define customers
Current and potential buyers of your products or services
Why are customers important?
Their purchases are the main source of revenue for most organizations. Revenue is a crucial factor in achieving financial performance
What does meeting customer needs involve?
- Understanding what customers want in the current products and services you offer
- Anticipating future needs and wants
What happens if a company does not satisfy its customer needs?
Customers will choose to purchase the goods and services of competitors and your sales revenues will decline. You will also have difficulty attracting new customers if their believe you cannot meet their needs. Your financial performance will be weakened and the financial performance of your competitors will be strengthened
Define producing quality products and services
Producing at a level of quality that customers view as appropriate for the price paid, as well as providing a consistent and reliable level of quality
How is producing quality products and services connected to financial performance?
Through its effects on revenue and expenses. Produced quality products and services affects revenues through its effects on meeting customer needs. It also affects expenses because consistent quality can only be achieved through processes that are continuously improved and standardized (the number of defective products is reduced and the efficiency of production increases)
Define innovation and creativity
The ability to identify and implement new and improved ways to execute any of the organization’s activities
Why are innovation and creativity important?
They lead to improvements. They increase the chances of identifying and even creating opportunities. Also, the environment and your competition are always changing. If you do not change, your activities will fall out of alignment with the business environment and you will fall behind your competitors
How is innovation and creativity linked to customer needs?
It can lead to identifying new needs to new ways to meet those needs
How is innovation and creativity linked to quality products and services?
New ways of producing can be identified that can lead to improved quality in products and/or improved efficiency and effectiveness in production processes
How is innovation and creativity linked to financial performance?
They connect indirectly through their effects on other success factors, but also directly when the firm identifies new markets or new activities or strategies that can generate revenues
Why are employees important?
Without well-trained, knowledge-able employees any organization will have difficulty surviving over the long-run. They are an organization’s key resource
How is employee commitment fostered?
Through the creation of a positive working environment where employees feel respected and valued, and they can meet their personal goals as they meet company goals
What will happen when employees are emotionally/psychologically committed to the organization?
They will be motivated and energized to do a good job, and will often go above and beyond what is required because they take pride in what they do and how the company performs
How is employee commitment connected to the other factors?
Committed employees take greater care in their work and will do their best to ensure that goods and services being produced are free of defects and of the best quality possible. They are more likely to meet customer needs because they will treat customers the way they would want to be treated and take personal pride in customer satisfaction. An employee who is dedicated to the company will also seek and share innovations that are likely to result in improvements or new, beneficial activities and actions. An unhappy or uncommitted employee is unlikely to care to be willing to put in the effort to take any of these actions
What are characteristics of a committed employee?
More likely to work longer and harder
How does a lack of employee commitment affect financial performance?
Lack of effort and turnover directly affect financial performance because they reduce productivity and efficiency, and increase expenses
Define creating a distinct competitive advantage
The organization is able to do something significant in a way that is unique and valuable in comparison to other organizations. Either their products are different or they perform some aspect of their activities in a way that is superior in comparison to competitors
Why is building a distinct competitive advantage important?
Above normal profits are generated by organizations that are able to distinguish themselves in a valuable way from competitors
How does building a distinct competitive advantage relate directly to financial performance?
It can affect the prices that the organization can charge for its goods and services. When consumers believe that company’s products are different from all others in a way that they value, they are willing to pay a higher price for them
How is distinct competitive advantage linked to all other factors? Give at least one example
It can be the result of a strength in one of the factors. For example, Apple’s distinctive competition advantage is its perceived ability to be more innovative and creative in its products in comparison to many other competitors. Another example is Walmart’s distinctive advantage to meet customer needs by offering a wide range of goods in one location at a low price. A universities ability to attract and retain top scholar and foster employee commitment could be considered its competitive advantage. Finally, firm’s ability to produce reliable, high quality goods or services can allow it to stand apart form the competition, and increase its performance either through production efficiencies or through increased revenues
What does Porter’s Five Forces help you to understand?
It helps you understand the industry environment, its degree of competitiveness, and the forces that affect industry profitability. It also can assist you in answering the question of which industries are worthwhile entering, or identify competitive forces that affect industry profitability so that you can develop strategies to mitigate them
How does environment affect strategy?
It is external to the organization and largely beyond its influence. The organization must take the environment as given and develop strategies accordingly
How does strategy affect strategy?
When a firm executes its strategy, it becomes part of and influences the environment as well
How does management preferences affect strategy?
Managerial preferences affect how management interprets the environment, and what it perceives as an opportunity versus a threat. These preferences affect the choices that management makes, and the strategies that it is willing or unwilling to implement
How does strategy affect management preferences?
Successes and failures that are experienced influence future managerial choices, and existing strategies bias management toward or away from those strategies in future
How does management preferences affect resources?
It influences what is pursued in each of those factors. For example, management preferences will determine which resources are perceived as more valuable and therefore acquired more aggressively than others
How does management preferences affect organization?
Preferences influence the culture, structure, and leadership style of the organization, and determine the capabilities that are built
How does resources affect strategy?
They determine what strategies the organization has the resources to pursue and are therefore feasible
How does strategy affect resources?
Strategy determines what resources are needed and must be acquired to properly execute it
How does resources affect management preferences and organization?
Resources will bias management toward using resources which are held in abundance
How does resources affect organization?
Resources influence what capabilities the organization can build
How does organization affect resources?
The resources that the organization’s capabilities allow to generate and stockpile will be used more
How does organization affect strategy?
Capabilities determine what strategies are feasible. The organization must have the ability to execute all of the activities required for the strategy. Its structure must support the efficient execution of the strategy. Organization structure and culture also influence how a strategy can or will be pursued
How does strategy affect organization?
The experience it creates enhances existing capabilities and influences which new ones are developed. Strategy also determines the organization structure required for effective implementation
Define strategy
The plan the organization has put in place to pursue opportunities or avoid threats it has identified in the environment
Why must the strategy be consistent with the demands and opportunities of the environment?
If the strategy is not consistent with the environment, it will not create success for the organization. It’s like planting a tree seed in concrete: no matter how much you nurture it, it will not grow
Why must the strategy be consistent with the internal characteristics?
If the strategy is not consistent with the internal characteristics the organization will not be able to effectively execute the strategy
Why is the Diamond-E a useful tool for strategic and case analysis?
It reminds you of the elements that must be considered and the relationships between them. It is also valuable for determining the appropriateness of the firm’s current or proposed strategy given the environment and its internal characteristics
