JMU COB 487 Rutherford Exam #1

Strategos

Word comes from "The art of the army general"

3 Models of Strategy

1) Strategy Process Model

2) Emergent Strategy Model

3) 5 P Model

Draw the Strategy Process Model

Mission

Goals and Objectives

SW OT

Corporate Level

Business Level

Functional

Strategy Implementation

Results

Draw Emergent Strategy Model

4 boxes

List 5 P's Model

Plan Ploy Position Pattern Perspective

Vision

"What the organization hopes to become in the future"

Mission Statement

"The reason for an organization's existence"

ex. To inspire and nuture the human spirit-one person,one cup,one neighborhood at a time. - Starbucks

SMART Goals

S-Specific

M- Measurable

A- Aggressive

R- Realistic

T- Time Bound

Balanced Scorecard

An approach to assessing performance in 4 major areas (think "CLIF")

1) Financial

2) Customer

3) Internal Processes

4) Learning & Growth

Stakeholder Approach

The firm is a coalition of interest groups - it seeks to balance their different objetives

Shareholder Approach

The firm exists to maximize the wealth of the shareholders (owners)

PESTEL Analysis

P) Political

E) Economic

S) Social

T) Technological

E) Environmental

L) Legal

2 Things about Macro Environments

1) Firms vary in their ability to detect changes and respond

2) Firms are not passive, firms can cause environments to change for their benefit

Porter's 5 Forces

Threat of

1) New entrants

2) Substitutes

Bargaining Power of

3) Suppliers

4) Buyers

5) Rivalry

1) Supplier Power

Buyer's Price Sensitivity

Relative Bargaining Power

2) Buyer Power

Buyer's Price Sensitivity

Relative Bargaining Power

3) New Entrants

Economies of Scale

Absolute Cost Advantage

Product Differentiation

Legal/Regulatory

Retaliation

4) Substitute

Buyer's propensity to substitute

Relative prices and value of substitutes

5) Rivalry

Diversity of competitors

Lack of product differentiation

Excess capacity & exit barriers

Slow industry growth

Strategic Group

group of firms in an industry that follow similar or the same strategies

ex. Honda & Toyota

Strategic FIt

Traditional View: Firm Performance is determined by the degree of fit between strategy and external environment

Variation -> Selection -> Retention

Paradox of Fitness (6 Minimal's)

C onsistency

A ffluence

R ationality

F aith

C onsensus

C ontentment

Bottom Line: Firms must stay flexible in order to adapt to changing environments

VRIO Analysis (Internal)

Resource-based-theory (textbook)

V) Valuable

R) Rare

I) Inimitable

O) Organized

Valuable

Resources that help make a firm create strategies that capitalize on opportunities and ward off threats

Rare

Resources that are unique when contrasted with resources of competitors

Inimitable*

Resources that can not be easily duplicated (often protected by legal means...trademark...patent...etc)

Organized

Organization can use/exploit the resource effectively

Sources of Inimitability* (5 things - "NCUPS")

N) Non Substitute - ex. Gatorade and Powerade

C) Casual Ambiguity - ex. Google's Culture

U) Uniqueness - ex. Mona Lisa

P) Path Dependence - ex. historical conditions that happened (Microsoft and the cpu mouse)

S) Socially Complex - ex. company doesn't directly control "brand name...goodwill"

Tangible Resources (ch 4 textbook)

Resources that can be readily seen, touched, and quantified

Intangible Resources (ch 4 textbook)

Resources that are difficult to see, to touch, or to quantify. ex. Skill level of employees, firms reputation, culture, etc.

Capabilities (ch 4 textbook)

What the organization can do based on the resources it possesses.

Dynamic Capability (ch 4 textbook)

A unique ability to create new capabilities by continually updating a firm's array of capabilities to keep pace with external changes in environment

Distinctive Competence (ch 4 textbook)

A set of activities that an organization performs especially well. ex. Apple's unique ability to devise game-changing products/Exceptionally persuasive defense lawyer for a firm

Marketing Mix = 4 P's Marketing (ch 4 textbook)

Product - what is sells to consumer

Price - should be a "good match" with value perceived

Place - physical purchase point or distribution channel

Promotion - communications to market the product

Intellectual Property Types (ch 4 textbook)

Patents - 18 years of protection of imitation ex. pharma

Trademarks - ex. phrases, pictures, names

Copyrights - ex. books, movies, songs

Trade Secrets - formula unknown to competitors

Value Chain (ch 4 textbook)

*Know the picture too (PowerPoint)

Primary Activities

Support Activities

(These all make the end product VALUABLE to consumer along the way)

Primary Activity

An action directly involved in the creation and distribution of goods/services ex. Inbound logistics, sales, operations, etc. (FRONT OFFICE)

Secondary Activities

An action NOT directly involved in the creation and distribution of goods/services ex. firm infrastructure, resource mgmt, accounting (BACK OFFICE)

What do the best Value Chain's focus on? (Ch 4 Textbook)

Focus on adding the most VALUE, does NOT fixate on TIME

2 Business Level Strategies?

1) Low Cost Leadership

2) Differentiation

3 Sources of Differentiation (PLR)

P) Product itself - ex. features, timing, complexity

L) Linkage between firms ex. product mix, alliances, distribution channels

R) Relationship between firm and customer ex. marketing, reputation, customization

3 Sources of Low Cost Leadership (SLI)

S) Economies of Scale

L) Economies of Learning ex. older firm has more efficiency advantages

I) Input Costs ex. lowest input costs win, Walmart

Pros of Low Cost Leader (Ch 5 Textbook)

1) High Profits if High market Share

2) Can withstand price wars b/c of LOWEST COST not LOWEST PRICE

Cons of Low Cost Leader (Ch 5 Textbook)

1) Perception of lower value

2) Large volumes are a must (slim margins )

Pros of Differentiation (Ch 5 Textbook)

1) Buyer Loyalty

2) Strong Margins

Cons of Differentiation (Ch 5 Textbook)

1) Cyclical Business

2) Imitations may steal customers ex. knock off's (watches...etc.)

Best Cost Strategy (Ch 5 Textbook)

An (additional) business level strategy followed by firms that charge relatively low prices AND offer substantial differentiation

Ex. Chipotle/Southwest Airlines

"Stuck in the middle" (Ch 5 Textbook)

Textbook example: Arby's Restaurant

*Wendy's sold Arby's in 2011 to a PE Fund...they thought the firm would perform poorly because it doesn't really lean one way or another (Low Cost/Different)