Total Quiz 1 What is Strategy Article Flashcards
The productivity frontier is constantly shifting outwards due to what 3 causes?
- new technologies 2. new management approaches 3. new inputs become available
through programs such as TQM, time based competition, and benchmarking, managers have changed how they perform activities in order to do what 3 things?
- eliminate inefficiencies 2. improve customer satisfaction 3. achieve best practice
what does the popularity of outsourcing and the virtual corporation reflect?
the growing recognition that is is difficult to perform all activities as productively as specialists
the popularity of outsourcing and the virtual corporation reflects the growing recognition that is is difficult to perform all activities as productively as who?
specialists
the growing recognition that is is difficult to perform all activities as productively as specialists is reflected by what ?
popularity of outsourcing and the virtual corporation
Can companies improve on multiple dimensions of performance at the same time?
Yes
Is it a tradeoff between defects and costs now or in the past?
NO it used to be thought that it was
T/F Constant improvement in operational effectiveness is necessary to achieve superior profitability
T
T/F Constant improvement in operational effectiveness is sufficient to achieve superior profitability
F
What is the most obvious reason that constant improvement in operational effectiveness is not sufficient to achieve superior profitability?
the rapid diffusion of best practices. competitors can quickly imitate management techniques, new technologies, input improvements, and superior ways of meeting customer needs
Which solutions diffuse the fastest (companies copy them)?
the most generic (those that can be used in multiple settings)
what is the issue if competition in operational effectiveness produces absolute improvement in operational effectiveness?
it leads to relative improvement for no one
it is common that through competition in operational effectiveness, there are major productivity gains that are not retained in superior profitability for the company. why is this and who does gain from it?
everyone is doing it so no one company gains a competitive advantage and reaps the rewards. The ones who do benefit are the customers and in the case of commercial printing industry also the equipment suppliers
What is a second reason that improved operational effectiveness is insufficient?
Competitive convergence- companies through competition start to look and be more alike losing any competitive advantage being different gains them
what is a major tool that brings about competitive convergence and why?
benchmarking. the more companies try and compete with rivals by being more like them, the more they are indistinguishable from their rivals losing sustainable competitive advantage
T/F Outsourcing activities to often the same efficient third parties makes those activities more generic and can help along competitive convergence
T
Why is competition based on operational effectiveness alone mutually destructive for companies?
it leads to wars of attrition (wearing the other company down) that can be arrested only by limiting competition alot of times through mergers (buying their rivals)
according to Porter, managers have gradually let operational effectiveness supplant what?
strategy
operational effectiveness tools easily lead to what? (2)
- imitation 2. homogeneity
What are some results from letting operational effectiveness supplant strategy? (3)
- zero sum competition 2. static or declining prices 3. pressures on costs that compromise companies ability to invest in the business for the long term
competitive strategy means deliberately choosing what?
a different set of activities to deliver a unique mix of value
how does southwest airlines demonstrate competitive strategy?
it does shorthaul, lowcost, point to point service. its low fares and frequent departures attract pricesensitive customers and convenience oriented travelors
The essence of strategy is in the activities…in what two instances is this shown?
- performing different activities than rivals 2. performing same activities differently from rivals
Ikea performs activities differently from its rivals how?
designs their own los cost ready to assemble furniture, displays every product in room like settings so customer can see how they go together, they have warehouse with products so no waitingt, customers pick up and transport thier own furniture . cusomers do everything themselves. they also have instore child care and extended hours
what are the 3 distinct sources of strategic positions?
- variety based positioning 2. needs based positioning 3. access based positioning
are variety based , needs based, and access based positioning mutually exclusive? Do they overlap?
No. often
Strategic competition can be thought of as what 2 processes?
- precieving new positions that woo customers from established positions 2. drawing new customers into the market
what is an example of strategic competition involving superstores and broadline department stores? What is an additional example involving not using brick and mortar stores?
superstores will offer depth of merchandise in a single product category taking share from broadline department stores offereing a more limited selection in many categories. ex. hobby lobby yarn vs Walmart selection . mail order and online shopping take customers who want convenience from physical location stores
why do new entrants have the edge in finding new strategic positions?
- they find unique positions that have been available but overlooked by established competitiors 2. they can prosper by occupying a position that a competitor once held but has ceded through years of imitation and straddling 3. entrants coming from other industries can create new postions because of distinctive activities drawn from their other businesses 4. new positions open up because of change and new entrants are unencumbered by a long history in the industry so they can more easily perceive the potential for a new way of competing. 5. they can be more flexible because they face no trade offs with their existing activities
what is variety based positioning? why is it called this?
positioning based on producing a subset of an industries products or services.because it is based on the choice of product or service varieties rather than on customer segments
what 2 companies utilizes variety based positioning? how do they do this?
Jiffy Lube They only do automotive lubricants and do not offer other car repair or maintance services Vanguard. provide common stock, bond, and money market funds that offer predictable performance and rock bottom expense
T/F Variety based positioning can serve a wide array of customers, but for most it will only meet a subset of their needs
T
what is needs based positioning? when does it come about?
serving most or all the needs of a particular group of customers. when there are groups of customers with differing needs and when a tailored set of activities can serve those needs best.
which strategic positioning of the 3 main ones come closes to traditional thinking about targeting a segment of customers?
needs based positioning
what companies are examples of needs based positioning and how is this demonstrated? (2)
IKEA- seeks to meet all the home furnishing needs of its target customers not just a subset of them. Bessemer Trust Company- private banking that targets families with minimum of 5M in investable assets who want capital preservation combined with wealth accumulation. they have one officer for every 14 families. very personalized
what is a critical elelment of needs based positioning that is not intuitive and is often overlooked?
differences in needs will not translate into meaningful positions unless the best set of activities to satisfy them also differs
what is access based positioning?
segmenting customers who are accessible in different ways. although their needs are similiar to those of other customers, the best configuration of activities to reach them is different
which strategy positioning is the least common or least well understood?
access based positioning
what company is an example of access based positioning and how is it demonstrated.
Carmike Cinemas- operates movies theaters in cities and towns with populations under 200,000. makes money with lean cost structure. standardized, low cost theater complexes with few screens and less projection technology. dont need much administration staff. low corporate overhead. personal marketing in small communities. dominant if not only theatre in town
T/F Rural vs urban based customers are not an example of access driving differences in activiities
F
what are 3 examples of access driving difference in activies. activies based positioning
- rural vs urban based customers 2. small rather than large customers 3. densly rather than sparsely situated customers
T/F Positiioning is only about carving out a niche
F
TF A position emerging from any of the 3 sources can be broad or narrow
T
A focused competitor thrives on what 2 groups of customers?
- those who are overserved and overpriced by more broadly targeted competitors 2. those who are underserved and underpriced
what is a broadly targeted competitor? 2 examples?
they serve a wide array of customers, performing a set of activities designed to meet their common needs. It ignores or meets only partially the more idiosyncratic needs of particular customer groups ex. delta and vanguard
what were the 3 generic strategies porter introduced to characterize strategic positions at the simples and broadest level?
- cost leadership 2. differentiation 3. focus
Positioning requires a tailored set of activities because it is always a function of differences on the supply/demand side, of differences in activities
supply
_____ requires a tailored set of activities because it is always a function of differences on the supply side, of differences in activities
Positioning
Positioning requires a tailored set of ____ because it is always a function of differences on the supply side, of differences in activities
activities
Positioning requires a tailored set of activities because it is ____a function of differences on the supply side, of differences in activities
always
Positioning requires a tailored set of activities because it is always a function of ____on the supply side, of differences in activities
differences
Positioning requires a tailored set of activities because it is always a function of differences on the _____ side, of differences in activities
supply
Positioning requires a tailored set of activities because it is always a function of differences on the supply side, of differences in ____
activities
positioning is not always a function of differences on the demand/supply side
demand
which 2 positions do not rely on any customer differences?
variety and access
in practice, variety or access position differences often accompany what kind of differences? what is an example of this
needs. ex. carmike small town customers needs run more towards comedies and family films
what is strategy?
the creation of a unique and valuable position, involving a different set of activities
the creation of a unique and valuable position, involving a different set of activities is a ?
strategy
____ is the creation of a unique and valuable position, involving a different set of activities
strategy
strategy is the ____ of a unique and valuable position, involving a different set of activities
creation
strategy is the creation of a ____ and valuable position, involving a different set of activities
unique
strategy is the creation of a unique and ____ position, involving a different set of activities
valuable
strategy is the creation of a unique and valuable ____ , involving a different set of activities
position
strategy is the creation of a unique and valuable position, involving a different set of ____
activities
strategy is the creation of a unique and valuable position, involving a _____ set of activities
different
the essence of strategic positioning is to choose activities that are what?
different from your rivals
the essence of strategic positioning is what?
to choose activities that are different from your rivals
if the same set of activities were best to produce all varieties, meet all needs, and access all customers, what would determine performance?
operational effectiveness
Is choosing a unique position enough to guarantee a sustainable advantage? why or why not?
No because a valuable position will attract imitation by incumbents
incumbents are likely to copy a valuable position in what 2 ways?
- they reposition themselves to match the superior performer 2. they straddle by trying to match the benefits of a successful position while maintaining its existing position
grafting new features, services, or technologies onto activities a company already performs in order to copy a valuable position of another company is an example of what?
straddling
T/F A strategic position is not sustainable unless there are trade offs with other positions
T
Trade offs occur when activities are what?
incompatible
a company can not do two activities that are incompatible without having major what?
inefficiencies
T/F Tradeoffs create the need for choice
T
how do tradeoffs protect against repositioners and straddlers?
they create the need for choice ….the company can’t reposition without losing their original position or straddle without causing inefficiencies so thay may choose not to try and imitate afterall which can hurt them in the long run
What are the 3 reasons for trade offs coming about?
- you don’t want inconsistencies in image or reputation 2. from the activities themselves- different positions (with their tailored activities) require different things (different product configuration, equipment, employee behaviors, skills, management sysstems) 3. limits on internal coordination and control-ex. managers choose to compete in one way and not another which makes organizational priorities clear
why do inconsistencies in image or reputation result in the need for a trade off?
because if a company known for delivering one kind of value tries to deliver another kind of value or attempts to deliver 2 inconsistent things at the same time , this can hurt their credibility with and confuse customers.
why is creating a new image in order to compete with a rival actually end up being a powerful barrier to imitation?
it costs millions of dollars
Many tradeoffs reflect inflexibilities in what? (3)
- machinery 2. people 3. systems
what is an example of a tradeoff involving inflexibility of systems?
Ikea configures its activities to lower costs having customers do thier own assembly and delvery so its trade off is its not able to satisfy customers who require higher levels of service
how does productivity improve when variation of an activity is limited?
without variation to slow it down, it can achieve efficiencies of learning and scale
T/F Positioning tradeoffs aren’t pervasive in competition and are not essential to strategy
F
T/F positioning tradeoffs create the need for choice and purposefully limit what a company offers
T
why do positioning trade offs deter straddling or repositioning?
because competitors that engage in these approaches undermine their strategies and degrade the value of their existing activities
False tradeoffs between cost and quality occur primarily when there are what 3 things present?
- redundant or wasted effort 2. poor control or accuracy 3. weak coordination
simultaneous improvement of cost and differentiation is possible only during what two times?
- if the company begins far behind the productivity frontier 2. when the productivity frontier shifts outward
The trade off bewetten cost and differentiation is the most real when?
the company is at the productivity frontier where they have achieved current best practice
what will a company never achieve without tradeoffs?
sustainable advantage
T/F Strategy doesn’t involve making trade offs in competing
F
T/F The essence of strategy is choosing what not to do
T
positioning choices not only determine which activities a company will perform and how it will configure these activities but also what?
how these activities relate to one another
While operational effectiveness is about achieving excellence in individual activieies, strategy is about what?
combining activities
fit locks out imitators by creating a chain that is as strong as its what?
strongest link
what is one of the oldest ideas in strategy?
the importance of fit among functional policies
why is fit important?
because discrete activities often affect one another
why is the most valuable fit strategy specific?
because it enhances a position’s uniqueness and amplifies tradeoffs
What are the 3 types of fit?
- simple consistency between each activity and the overall strategy 2. activities are reinforcing 3. optimization of effort- coordination and information exchange across activities to eliminate redundancy and minizmize wasted effort are types of optimization of effort
what is first order fit?
simple consistency between each activity and the overall strategy
____ ____ fit is the simple consistency between each activity and the overall strategy
first order
first order fit is the simple ____ between each activity and the overall strategy
consistency
first order fit is the simple consistency between each ____ and the overall strategy
activity
first order fit is the simple consistency between each activity and the overall ____
strategy
what is an example of the consistency fit?
vanguard aligns all activities with its low cost strategy
consistency of fit ensures that the competitive advantages of activities accumulate and do not what?
erode or cancel themselves out
consistency of fit makes strategy easier to communicate to everyone and improves implementation through what?
the single-mindedness in the corporation
what is second order fit? what is an example of it?
when activities are reinforcing. ex. neutrogenas medical and hotel marking activities reinforce one another lowering total marketing costs
when activities are reinforcing this is what kind of fit?
second order
what is third order fit? what is an example?
optimization of effort ex. gap optimizes effort across activities of holding store inventory and restocking from warehouses by restocking daily to avoid having a large instore inventory
what are the 2 most basic types of optimation of effort fit?
coordination and information exchange across activities to eliminate redundancy and minimize wasted effort
what is an example of higher level optimation of effort fit?
product design choice- can eliminate need for after sale service or make it possible for customers to do their own service activities
T/F Competitive advantage grows out of the entire system of activities of a company
T
the fit among activities substantially reduces ____ or increases _____
cost differentiation
T/F The competitive value of individual activities or associated skills, competencies, or resources can be decoupled from the system or the strategy
F
why is it misleading to explain success of competitive companies by specifying individual strengths , core competencies, or critical resources?
because their strengths cut across many functions and one strength blends into others
When thinking about the success of competitive companies, it is more useful to think in terms of what instead of individual strengths, core competencies, or critical resources?
themes that pervade many activities. ex. low cost, a particular notion of customer service, a particular conception of the value delivered. these themes are embodied in nests of tightly linked activities
strategic fit is fundamental not only to competitive advantage but to the what of that advantage?
sustainability
why is strategic fit among many activiites fundamental to the sustainability of competitive advantage?
because it is harder for a rival to match an array of interlocked activities than it is to imitate a particular activity, match a technology, replicate product features, etc
which is more sustainable…positions bulit on systems of activities or positions built on individual activites?
systems of activies
The probability that a competitior can match any activity is often what number?
less than one (.9)
The probability of a rival matching someone elses entire system is highly unlikely/likely
unlikely
the more a company’s positioning rests on activity systems with fit, the more sustainable its advantage will be. what 2 orders of fit make this more likely
2nd- reinforcement 3rd- optimization of effort
achieving fit is difficult because it requires the integration of what?
decisions and actions across many independent subunits
Is it beneficial to performance for a rival to copy some activities without matching the whole?
No. performance can decline as well. ex. continental couldn’t imitate SW since they only imitated some of their decisions and it was a disaster
why does fit among a company’s activities create pressures and incentives to improve operational effectiveness?
because fit means that poor performance in one activity will degrade the performance in others exposing weakness which will then get attention. it also means that improvements in one activity will pay dividends in others
when activities complement one another, rivals have to copy the whole system to get any benefit from imitation. this causes a winner take all competitions. this is the reason why it is preferable to do what in regards to strategic positioning?
find a new strategic position as opposed to being the second or third to imitate an occupied position
the most viable strategic positions are those whose activity systems are compatible/incompatible because of what?
incompatible trade-offs
strategic positioning sets the trade off rules that define how individual activities will be what? (2)
configured and integrated
T/F tailoring organization to strategy makes complementarities more achievable and contributes to sustainability
T
Strategic positions should have a horizon of how long?
a decade or more
Continuity of strategic position is important why (2)
- it fosters improvement in individual activities and fit across activiites, allowing an organization to build unique capabilities and skills tailored to its strategy 2. reinforcdes a company’s identity
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… ONE IDEAL COMPETITIVE POSITION IN THE INDUSTRY
implicit strategy from the last decade
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… BENCHMARKING OF ALL ACTIVITIES AND ACHIEVING BEST PRACTIC
implicit strategy from the last decade
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… AGRESSIVE OUTSOURCING AND PARTNERING TO GAIN EFFICIENCIES
implicit strategy from the last decade
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… ADVANTAGES REST ON A FEW KEY SUCCESS FACTORS, CRITICAL RESOURCES, CORE COMPETENCIES
implicit strategy from the last decade
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… FLEXIBILITY AND RAPID RESPONSES TO ALL COMPETITIVE AND MARKET CHANGES
implicit strategy from the last decade
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… UNIQUE COMPETITIVE POSITION FOR THE COMPANY
strategy that considers sustainable competitive advantage
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… ACTIVITIES TAILORED TO STRATEGY
strategy that considers sustainable competitive advantage
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… CLEAR TRADE-OFFS AND CHOICES VIS-A-VIS COMPETITORS
strategy that considers sustainable competitive advantage
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… COMPETITIVE ADVANTAGE ARISES FROM FIT ACROSS ACTIVITIES
strategy that considers sustainable competitive advantage
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… SUSTAINABILITY COMES FROM THE ACTIVITY SYSTEM, NOT THE PARTS
strategy that considers sustainable competitive advantage
does this come from the view of implicit strategy from the last decade or from the view of strategy that considers sustainable competitive advantage…… OPERATIONAL EFFECTIVENESS IS A GIVEN
strategy that considers sustainable competitive advantage
What is strategy?
Creating fit among a company’s activities
The success of a strategy depends on what?
doing many things well (instead of a few) and integrating among them
T/F If there is not fit among activities, there is no distinctive strategy and little sustainability
T
when there is no fit among activities, management’s job amounts to what?
overseeing independent functions
when there is no fit among activities, what determines an organization’s relative performance?
operational effectiveness
commonly threats to strategy are seen to come from outside the company. what are some examples of this?
changes in technology the behavior of competitiors
do threats to strategy come from the inside or the outside
both
are threats to strategy more likely to come from the inside or the outside?
inside
what are 3 threats to strategy that come from inside the company?
- misguided view of competition 2. organizational failures 3. desire to grow
what is the biggest threat to strategy that comes from inside the company?
the desire to grow
why do managers have the impression that they do not have to make trade-offs in order to compete, that a well run company should be able to beat its ineffective rivals on all dimensions simultaneously?
because they have been taught that by popular management thinkers. in turn when many companys operate far from the productivity frontier, trade-off appear unnecessary giving them a false sense that they are never necessary.
managers increase the likelihood of hyper competition how?
by imitating everything about their competitiors
why do managers chase every new technology for its own sake?
because they have been taught to think in terms of revolution
why do so many managers not understand the need to have a strategy?
they have been taught that operational effectiveness is the goal and are caught up in the race to achieve it. Operational effectiveness is concrete and actionable and managers have been under pressure to deliver tangible, measurable performance improvements
what is example of something that reinforces the best practice mentality which is detrimental to strategy?
business publications and consultants flood the market with info on what other companies are doing
what is an example of something that homogenizes competition and leads to company’s avoiding or bluring strategic choices?
conventional wisdom within an industry is often strong so everyone follows it
how does the organizational reality of trade-offs work against strategy?
managers are afraid of making tradeoffs because they don’t want to risk being blamed for a bad choice so they might prefer to make no choice instead
why do companies imitate one another without knowing if it’s the best decision in a herd type behavior?
they assume rivals know something they do not
what are 3 organizational realities that work against strategy?
- tradeoffs are frightening so they may choose to make no decision instead of getting in trouble for a bad one 2. companies imitate each other assuming rivals know something they dont 3. newly empowered employees , directed to seek improvement, lack vision of the whole and the perspective to recognize tradeoffs
compromises and inconsistencies in the pursuit of growth will erode what?
the competitive advantage a company had with its original varieties or target customers.
what is the result of attempting to compete in several ways at once?
confusion and undermining organiational motivation and focus. you can have more revenue but less profit
what is often the end result of rivals continuing to match each other over a long period?
they cycle is broken by a merger or downsizing to the original positioning
