Competitive Advantage and Strategic Management Terms (Video Notes)

Vocabulary flashcards covering key terms from the lecture notes.

Competitive advantage

Attributes that allow firms to provide goods and services with higher perceived value than competitors, achieved by lower prices, higher quality, or both; MIS helps managers build on an organization’s strengths to create advantages.

Management Information Systems (MIS)

Systems that help managers leverage an organization’s strengths to create competitive advantages.

Porter’s Five Forces

A framework that analyzes competition via five forces: existing competitors, new entrants, suppliers, buyers, and substitutes.

Rivalry among existing competitors

The intensity of competition among current firms offering similar products/services; more rivals can reduce profit margins.

Threat of new entrants

The risk that new firms will enter the market; barriers to entry determine how easily this can happen.

Barriers to entry

Factors that make it difficult for new competitors to enter the market; strong barriers reduce the threat of new entrants.

Bargaining power of suppliers

The relative strength of suppliers to influence prices and terms; can impact profitability (e.g., unions influencing labor costs).

Economies of scale

Using large production or purchasing power to reduce marginal costs, enabling lower prices and greater profitability.

Bargaining power of buyers

The ability of buyers to influence price and terms, especially when a single buyer represents a large share of sales or information is abundant.

Substitutes

Availability of alternative products; substitutes limit a firm’s ability to raise prices arbitrarily.

SWOT analysis

A framework to identify internal strengths and weaknesses and external opportunities and threats in strategic planning.

5 Ps of internal scan

Five factors to examine internal strengths/weaknesses: Personnel, Plant, Processes, Purse (financial strength), Past experiences.

PESTEL Analysis

A framework evaluating external opportunities and threats across Political, Economic, Socio-cultural, Technological, Environmental, and Legal factors.

Political factors (PESTEL)

Political conditions and regulations that might impact an organization.

Economic factors (PESTEL)

State of the economy influencing success or failure of an organization (e.g., enrollment swings).

Socio-cultural factors (PESTEL)

Societal and cultural changes that affect business operations and strategy.

Technological factors (PESTEL)

Advances in technology that can create competitive advantages or require adaptation.

Environmental factors (PESTEL)

Environmental considerations and sustainability impacts on business practices.

Legal factors (PESTEL)

Safety, consumer rights, labor, advertising, and health regulations; compliance supported by MIS.

Porter’s Generic Business Strategies

Two fundamental strategies for competitive advantage: price leadership and product differentiation, each usable in broad or niche markets.

Price leadership

Offering a product to a large market at the lowest possible price by maximizing efficiencies and economies of scale.

Product differentiation

Offering a product with unique qualities to command a higher price than a pure price-leadership approach.

Broad markets

Applying price leadership or differentiation strategies to large, general markets.

Niche markets (focused markets)

Applying price leadership or differentiation strategies to a focused or niche market.

Blue Ocean Strategy

Creating new products with no existing market, pursuing differentiation while also achieving price leadership to avoid direct competition.

Red Ocean Strategy

Competing in an existing market through price competition or product improvements.

Disruptive innovation

Technology that transforms a market or creates a new one, often requiring resources to improve existing products and processes.

First-mover advantage

Advantages of being first to enter a market: employee experience, securing resources, and customer adaptation.

Fast-follower strategy

Observing a leader’s R&D and rapidly developing a competing product, often at lower cost, to capture early adopters.

Lean manufacturing

A philosophy of minimizing waste and involving all employees in continual improvement and training.

Five Tenets of Lean

Value is specified precisely; value stream mapped; flow to the product is uninterrupted; customers pull value from the producer; relentless pursuit of perfection.

Six Sigma

A set of processing techniques aimed at reducing variance (defects) and improving quality; relies on data analysis.

DMAIC

Six Sigma method for existing processes: Define, Measure, Analyze, Improve, Control.

DMADV

Six Sigma method for new processes/products: Define, Measure, Analyze, Design, Verify.

Just-In-Time (JIT) Inventory

Inventory approach to minimize excess stock; requires smooth supply chains and delivering parts only when needed.

Disadvantages of JIT

Vulnerability to supply disruptions and global supply chain risk (e.g., during events like COVID-19).