Busi 455 Ch 12

Business Strategy

Involve actions and decisions of a firm toward their goals. Method or plan a company uses toward a goal.

Profitability

Rate of return on investments (net profits / total invested capital).

Profit Growth

% increase in net profits.

Consumer Surplus

The value of a product minus price.

2 types of strategy

Low-cost and differentiation. Low-cost reduces cost while differentiation increases perceived value.

Value Creation

The Value minus Cost (the company has created additional value)

Categories of Operations

Primary and Support Activities. Primary involve the product (R&D, Production, Marketing and Sales, Customer Support). Support involves things that improve efficiency such as infrastructure or information systems

Strategic Positioning

Involves the efficiency frontier of low-cost vs differentiation.

R&D

Primary Activity of Operations. Focused on design and production processes.

Production

Primary Activity of Operations. Focused on product creation.

Basic Strategy Paradigm

Related to the Strategic Positioning. Needs to have enough demand to support the decision and that the business structure and internal operations can support.

Customer Support

Primary Activity of Operations. Focused on services AFTER the sale (warranties, etc).

Marketing and Sales

Primary Activity of Operations. Focused on showcasing the product and gathering customer demands for R&D.

Information Systems

Support Activity of Operations. Focused on electronic systems that TRACK anything related to the product (includes customer service [NOT support] and inventory management).

Logistics

Support Activity of Operations. Involves physically moving the product. Important because it lowers costs.

Human Resources

Support Activity of Operations. Ensures the right people are hired and trained.

Company Infrastructure

Support Activity of Operations. It is all encompassing, or the context, of a value creation activity of the firm. Includes top management, organization structure, culture, and control systems.

Core Competence

A unique firm thing that is NOT EASILY REPLICATED by others.

Location Economies

A physical location where it costs the least for the firm's operations. OPTIMAL SITE

Global Web

Related to location economies. It's where the firm locates is value creation activities where they are cheapest, thus, creating a web.

Experience Curve

A systematic reduction in production costs over the life of a product measured by cumulative output. Includes learning curve and economies of scale.

Learning Effects

A reduction in costs due to the workers learning by doing.

Competitive Forms of Pressure

Cost reductions and Local Responsiveness. They are opposites in terms of cost, but can exist together.

Universal Needs

When customer tastes are very similar across cultures.

Local Responsiveness

A Competitive Form of Pressure. Includes things such as Customer tastes, infrastructure (plugs), Host Gov Demands (pharma, Bombardier), Distribution Channels, Regional Converge.

The Four Basic Strategies

Global Standardization (High Pressure for Cost Reduction, Low Local Responsiveness), International Strategy (Low, Low | Ex: Xerox), Localization (Low, High), Transnational (High, High)

Regionalism

When multiple countries have similar tastes. Obvious example: EU.

Reason for Strategies to change

Competitors

Reservation Price

What a consumer believes to be the value of an object.