BUS 475 final exam

How do you determine the sustainability of a competitive advantage?

Assess core competencies and see if they pass VRIO… Look for barriers of imitation and also see how they perform in the industry with financials and economic measures

VRIO

valuable, rare, not imitable, and organized

barriers of imitation

path dependence, causal ambiguity, social complexity, and intellectual property protection

competitive advantage

look at performance… accounting/finance and economic measures like EVA and ROIC

What are the elements of the different generic business-level strategies? What are the risks and requirements of each? Stuck in the middle meaning?

Cost leadership and differentation… stuck in the middle meaning the company has failed to make a clear strategic choice

Cost leadership

requirements: focus on efficency and process innovation, work on high volume, have strong control over operations

risks: competitors can innovate a cheaper way, which makes u lose ur status… and company might focus way too much on costs that it ignores customer tastes… which neglect value

differentiation

requirements: unique, premium features that increase customer’s willingness to pay… focus on quality, innocation, and customer responsivenesss… requires strong marketing, r&d, and premium brand equity

risks: competitors over time can copy your product, price might be too high and not worth it to customers and will buy elsewhere with less features

stuck in middle

firm fails to make a clear strategic choice… think of Levi and how they failed to innovate their products to capture value with its jeans. differentation raises costs and the products are not unique enough… you perform poorly and trapped in low margins

What are red ocean vs blue ocean strategies? Similarities? Differences?

Red—> traditional market with high competition

Blue—> offerings so unique that they break off from red ocean and make new demand

similarities: both business level frameworks designed to achieve a competitive advantage

differences: red forces a tradeoff between differentation and low cost while blue does not need to choose as it pursues value innovation which raises value and lowers costs.

Are blue ocean strategies at odds with porter’s three key principles of strat?

Although they both have a goal of achieving a sustainable competitive advantage, blue ocean does not conform to his framework. Porter says that there must be a choice made between low cost or differentation and blue ocean says that you dont need to as you can focus with value innovation which lowers price and heightens value. Technically, it does not break the industry structure one because you are ultimately competing no one in that industry until competition arises… which will definitely happen over time. Think of trader joes.

Are blue ocean strategies at odds with porter’s five forces?

Porter’s five forces are essentially the forces of the industry that must be looked at within the industry contexts. since blue ocean created its own industry to compete in, they are basically pioneering and setting the standards. overtime blue becomes red as the industry becomes attractive, which then will continue to enforce the five forces

Porter’s 3 key principles

cost leadership vs differentiation, tradeoffs and strategic choices, industry structure and competitive advantage

Porters 5 forces

new entrants, suppliers, buyer power, competition rivalry, substitutes

Does concentric (related) or conglomerate (unrelated) diversification create more value and why?

Concentric creates more value as it allows the firm to exploit its economies of scale, since it can use its same resources, they do not need to buy new equipment and reduces overhead costs.

Conglomerate destroys value as the firm cannot use the same resources it has and will lower efficiency.

What are the five key principles of disciplined execution?

common objectives + success criteria

defined roles and responsibilities

prioritized and sequenced milestones

plans for engaging with stakeholders

continuous improvement (kaizen)

common objectives and success criteria

organizations must have a success criteria and key performance indicators

defined roles and responsibilities

assigning roles of tasks is important as it prevents operational overlap, jobs not getting done

engage with stakeholders

keep stakeholders informed as it reduces pushback and it ensures that everyone is on the same page and committed

continuous improvement

kaizen, always make improvements to identify bottlenecks for efficiency

Approximately what percentage of change efforts fail to achieve target impact?

70% fail… a strategy is no good if there is no proper implementation

What are the potential strategies the company should consider in operating in a foreign market? How do you determine which one?

global

multidomestic

transnational

You determine which one to use to enter new foreign markets by analyzing internally and externally to see what you have

global

same product in different countries, low cost and low customer responsiveness… a lamborguine does not need to be changed as everyone wants it no matter what

multidomestic

different products in different countries, high cost and high customer responsiveness… mattel thought their products would be multidomestic but ended up being global as kids want the same thing due to being exposed to the same media

transnational

global efficenciy but also allows local flexibility… mcdonals has a core menu but tweaks it slightly to suit local diets

Which entry mode would you reccommend for a company when pursuing foreign markets?

exporting

license

franchise

joint ventures

wholly-owned subsidiaries

look at the internal and external environment of your firm to determine

exporting

low cost, low control… ideal for dabbling into a new country to test initial customer demand… vulnerable to high shipping and tariffs

licensing

licensee buys rights to produce the product and puts up most of the overseas capital

franchise

franchiser sells intangible property and insists franchisee follow rules on doing business

joint venture

both parties put in equal amount of effort and assets to enter new country

wholly-owned subsidiaries

high cost but high control, parent company owns 100%, risky and expensive