BUSN 495 Kirk Ring La Tech Exam 1

Sustained competitive advantage

Attracting a large number of buyers who have lasting preference for your products over your rivals'

Strategy

Set of actions that it's managers take to outperform the company's competitors and achieve superiority

Business Model

Managements blueprint for how the company is going to make money

3 tests of a winning strategy

1. How well does the strategy fit the company's situation?

2. Is the strategy helping the company achieve a sustainable competitive advantage?

3. Is the strategy producing good company performance?

Deliberate strategy

What we set out to do

Emergent Action Strategy

Reactions to the market; Unplanned

Abandoned Strategy

Anything you got rid of

Realized strategy

Combinations of Deliberate, Emergent, and Abandon, at any given point in time

Vision Statement

"Where we are going and which course were going to take"

What makes a good vision statement

It's forward looking and future oreinted

Why a well communicated vision statement matters

It communicates to stakeholders about "where we are going" and helps steer the energies of company personnel in a common direction

Mission Statement

Who we are, what we do, and why we're here

Profit Formula

V-P = value provided

P-C = Profit

Strategic objectives

Look forward to the future & bring (pain) and success

Financial objectives

Lagging indicators of past success

Strategic objectives formula

Change X (what) by Y (how much) over Z (time)

Board of director obligations

1. Oversee financial accounting and reporting practices

2. Diligently critique and oversee the company's approaches

3. Evaluate the caliber of senior executives

4. Institute a compensation plan

Strategic inflection point

When the market has changed and you change your vision statement

5 Competitive Strategies

Broad low cost,

Focused low cost,

Broad Differentiation,

Focused Differentiation,

Best Cost Provider

Broad low-cost

Ways to create profit: lower overall costs than rivals and appealing to broad spectrum

Pitfalls/disadvantages: overly aggressive price cutting & too fixated on cost reduction

When it works best: 1. Price competition is vigorous 2. Rival products are essentially identical 3. Few ways to achieve differentiation 4. Low switching costs

Focused Low-Cost

Ways to create profit:concentrating on narrow buyer segment and beating rivals by lower prices

Pitfalls/disadvantages:

When it works best:

Broad Differentiation

Ways to create profit: differentiate from rivals in ways to appeal to a broad spectrum

Pitfalls/disadvantages: Diff. Is easily copied, can falter buyers, overspending on diff. efforts

When it works best: 1. Buyer need/uses are diverse 2. Many valuable ways to differentiate

Focused Differentiation

Ways to create profit: concentrating on a narrow buyer segment (or market niche) and out competing rivals by offering more customized attributes

Pitfalls/disadvantages: preferences and needs change

When it works best: When market is big enough

Best Cost Provider

Ways to create profit: giving customers more value for money buy satisfying their expectations

Pitfalls/disadvantages: not having core competencies to manage value chain activities

When it works best: markets where product diff. is the norm and they're positioned in the middle of the market

Cost driver

Factors that have a strong effect on costs of a company's value chain

Uniqueness Driver

Have a high impact on differentiation

What stuck in the middle means in terms of strategies?

The cost structure isn't low enough to attractively price its products and that its products aren't sufficiently differentiated enough to create value for the customer

Macroenvironment (PESTEL)

External to company

(Company can't change it unless it's very large)

Not all companies have to react the same way

PESTEL

Political

Economic

Sociocultural

Technological

Environmental

Legal

Driving forces of change

Underlying causes of change

Strategic group maps

Show clusters of industry rivals that have similar competitive approaches and market positions, geographical approach and price / quality. Objective is to establish these clusters to reveal close / distant competitors.

Key Success Factors

the strategy elements, product attributes, competitive capabilities, or intangible assets with the greatest impact on future success

Competitive Intelligence

gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately

VRIN Resources

Valuable

Rare

Inimitable

Nonsubstitutable

Social Complexity/Casual Ambiguity

are two factors that inhibit the ability of rivals to imitate a firm's most valuable resources and capabilities

Competence

Anything the company does well

Core Competence

The best thing the company does internally

Distinctive Competence

They also do this better than their competitors

Two best indicators of how a company's strategy is working

Gains in financial strength/profitability and improvement in competitive strength/market standing

SWOT

Strength,

Weakness,

Opportunities,

Threats

(S creates O & W creates T)

Value Chain Analysis

a systematic way of examining all of the activities a firm performs and determining how they interact to form a source of competitive advantage

Benchmarking

Potent tool for learning which companies are best at performing particular activities and then using their techniques to improve cost effectiveness of their own internal activities

Best Practices

methods that lead to superior results

Ways to remedy a cost or value disadvantage

Implement best practices?

Competitive strength analysis

addresses the question "how does the company rank relative to competitors?"; develops strength ratings for the competitors on each industry key success factor