Week 2 Flashcards
What are the foundation for strategy?
Resources
In general, the sustainability of competitive advantage is a function of?
- The rate of core competence obsolescence because of environmental changes
- The availability of substitutes for the core competence
- The imitability of the core competence
When is a business-level strategy effective?
A business-level strategy is effective only when it is grounded in exploiting the firm’s core competencies and competitive advantages.
Name the conditions affecting managerial decisions about resources, capabilities and core competencies:
- Uncertainty (Regarding characteristics of the general and the industry environments, competitors actions, and customer preferences)
- Complexity (Regarding the interrelated causes shaping firms environments and perceptions of the environment)
- Intra-organizational conflicts (among the people making managerial decisions)
Tangible resources are assets that can be..
..observed and quantified.
Name the 4 types of tangible resources according to S&O
- Financial
- Organisational
- Physical
- Technological
Intangible resources are assets that are..
..rooted deeply in the firms history routines. They are relatively difficult for competitors to analyse and imitate.
Same three types of intangible resources
- Human (like knowledge)
- Innovative (like ideas)
- Reputational (like reputation with customers)
Capabilities exist when resources have been purposely __________ to achieve a specific task or set of tasks.
Integrated
Define core competencies
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. They distinguish a company competitively and reflect its personality
What does VRIN stand for?
Valuable
Rare
Costly to Imitate
Nonsubstitutable
Define the value-chain analysis
A value chain analysis shows how product moves from the raw material stage to the final customer.
What does the Value-chain analysis allow the firm?
- Allows the firm to understand the parts of its operations that create value and those that do not.
What is a value-chain segmented into?
- Primary activities
- Support activities
Define primary activities (value-chain)
Primary activities are involved with a products physical creation, its sale and distribution to buyers and its service after the sale.
Define Support activities (value-chain)
Support activities provide the assistance necessary for the primary activities to take place.
What must a resource or capability allow the firm to be a source of competitive advantageness?
It must allow the firm to perform an activity in a manner that provides value superior to that provided by competitors; or to perform a value-creating activity that competitors cannot perform
What is outsourcing used for?
Outsourcing is used for for resources and capabilities that are not a source of core competence and competitive advantage.
Where must firms outsource?
Firms must outsource only activities where they cannot create value or where they are at a substantial disadvantage compared to competitors.
Whats the consequences of outsourcing?
- Potential loss in firm’s innovative ability
- loss of jobs within companies
What is the fundamental objective of using any type of strategy?
-> gain strategic competitiveness and earn above-average returns
Define Business-level strategy
Business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
How does a firm position itself differently from competitors?
To position itself differently from competitors, a firm must decide whether it intends to perform activities differently or to perform different activities.
Does a firm competing in a signle-product market area in a single geographic location need a corporate-level strategy to deal with geographic diversity?
No
Name the three dimensions by which a firm’s relationship with customers are characterized.
- The reach (firms access and connection to customers)
- The richness (depth and detail of the two-way flow of information between the firm and the customer)
- Affiliation (facilitating useful interactions with customers)
In terms of customers, when selecting a business-level strategy, what does the firm determine?
The firm determines who will be served, what needs those target customers have that it will satisfy, and how those needs will be satisfied.
Firms choose from among five business-level strategies to establish and defend their desired strategic position against competitors. Name them:
- Cost leadership
- Differentiation
- Focused cost leadership
- Focused differentiation
- Integral cost leadership/ differentiation
Define the cost leadership strategy
The cost leadership strategy is an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.
What do cost leaders concentrate on?
Cost leaders concentrate on finding ways to lower their costs relative to competitors by constantly rethinking how to complete their primary and support activities to reduce costs still further while maintaining competitive levels of differentiation
Why do firms use value-chain analysis?
To identify the parts of the company’s operations that create value and those that do not
What are the risks of using a cost-leadership strategy?
- Processes used by cost leader to produce and distribute its good or service could become obsolete because of competitors innovations
- Too much focus by the cost leader on cost reduction may occur at the expense of trying to understand customers perception of competitive levels of differentiation.
Define the Differentiation strategy
The differentiation strategy is an integrated set of actions taken to produce goods or services taht customers perceive as being different in way that are important to them
What customers do cost leaders serve?
Typical customer in an industry
What customers do differentiators target?
Customers whom value is created by the manner in which the firms products differ from those produced and marketed by competitors.
When does continuous success with the differentiation strategy result?
When the firm consistently upgrades differentiated features that customers value and/ or creates new ones without significant cost increases
Name the risks of a differentiation strategy:
- Customers might decide that the price differential between the differentiator’s product and the cost leader’s product is too large
- A firm’s means of differentiation may cease to provide value for which customers are willing to pay.
- Experience can narrow customers perceptions of the value of product’s differentiated features
- counterfeiting
Define focus strategies
The focus strategy is an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.
Give some examples of specific market segments that can be targeted by a focus strategy
A particular buyer group, a different segment of a product line, or a different geographic market.
Whats the essence of the focus strategy?
The essence of this strategy is the exploitation of a narrow target’s differences from the balance of the industry.
What are the risks of focus strategies?
- A competitor may be able to focus on a more narrowly defined competitive segment and out-focus the focuser
- A company competing on an industry-wide basis may decide that the market segment served by the firm using a focus strategy is attractive and worthy of competitive pursuit
- This one involved with a focus strategy is that the needs of customers within a narrow competitive segment may become more similar to those of industry-wide customers as a whole, over time.
Define integrated cost leadership/ differentiation strategy
The integrated cost leadership/ differentiation strategy involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation.
What the objective of using a integrated cost leadership/ differentiation strategy
the objective is to efficiently produce products with some differentiated features
Name three sources of flexibility that are particularly useful for firms trying to balance the objectives of continuous cost reductions and continuous enhancements to sources of differentiation:
- Flexible manufacturing systems
- information networks
- total quality management systems
Define total quality management
Total quality management is a managerial innovation that emphasizes an organisations total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on the empowerment of employee groups and teams.
Firms that fail to perform the primary and support activities in an optimum manner become stuck _______
in the middle.
Define competitors
Firms operating in the same market, offering similar products and targeting similar customers are competitors.
Define competitive rivalry
Competitive rivalry is the ongoing set of competitive actions and competitive responses that occur among firms as they manoeuvre for an advantageous market position.
Define Competitive behaviour
Competitive behaviour is the set of competitive actions and competitive responses the firm takes to build or defend its competitive advantages and to improve its market position.
Define multimarket competition
The firms competing against each other in several product or geographic markets are engaged in multimarket competition
Define competitive dynamics
All competitive behaviour is the competitive dynamics
Where does competitive rivalry evolve from?
From the pattern of actions and responses as one firm’s competitive actions have noticeable effects on competitors, eliciting competitive responses for them.
Define Competitor analysis
Competitor analysis is the first step the firm takes to be able to predict the extend and nature of its rivalry with each competitor
Define the market commonality
market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
When firms produce similar products and compete for the same customers, the competitive rivalry is likely to be _________
high
A firm with greater multimarket contact is ______ likely to initiate an attack, but _____ likely to move aggressively when attacked.
Less; More
Multimarket competition ________ competitive rivalry
reduces
Define resource similarity
Resource similarity is the extent to which the firms tangible and intangible resources are comparable to a competitors in terms of both type and amount
Name Three drivers of competitive actions and responses
- Awareness
- Motivation
- Ability
Why is it useful to understand a competitors awareness, motivation and ability?
It helps the firm predicting the likelihood of an attack by that competitor and the probability that a competitor will respond to actions taken against it.
Define competitive action
Competitive action is a strategic or tactical action the firm takes to build or defend it competitive advantages or improve its market position.
Define a competitive response
A Competitive response is a strategic or tactical action the firm takes to counter the effects of a competitors competitive advantage
Define “First mover”
A first mover is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve market position.
Define “The second mover”
The second mover is a firm that responds to the first movers competitive action, typically through imitation.
Define a “late mover”
A late mover is a firm that responds to a competitive action a significant amount of time after the first movers action and the second movers response
How can a late mover be successful?
They can be successful if they develop a unique way to enter the market and compete.
