Management Exam

2. Semester BWL

What are the core functions of Management?

1) Planning

2) organizing

3) leading

4) controlling

How are lower-level managers and top managers different?

• top management: focused on strategy, long term direction (planning)

• lower-level managers: spend more time on leading and controlling

How are family firms and public firms different?

• regarding ownership

• regarding long-term perspective

• regarding decision-making

• regarding profit-making

• regarding taking risks

What is a strategy?

goal-directed actions to gain and sustain competitive advantage

What is a sustainable competitive advantage?

customers prefer your offering + this preference is durable and hard to imitate

What are hidden champions?

• small to medium sized firms

• often family owned

• world market leaders in niches

Why is strategy dynamic?

• market changes

• technology changes

• competitors react

What is part of the Business Model?

• Customer value proposition: V-P (price customers will consider a good value)

• Profit formula:P-C (How the company generates more revenues than costs)

What are the stages of the strategy process?

1) vision, mission, values, objectives

2) strategic analysis: where are we now? external/internal analysis

3) crafting a strategy

—> corporate, business, functional, operating strategy

4) Execution and implementation of strategy

5) evaluate performance

—> fit test, competitive advantage test, CEO Fit test

What does strategy consist of?

• proactive strategy elements: designed to anticipate possible challenges

• reactive strategy elements: respond to unanticipated events only after they occur

==> planned strategy ≠ realised strategy

What are reactive elements of a strategy? (examples)

• enter new geographic or product markets/ exit existing ones

• actions to strengthen competitiveness (alliances, collaborations, …)

What is Stage 1 of the strategy Process?

• Mission, mission, values, objectives

—> vision: “dream with expiration date” (desired future state)

—> mission: company’s present state and purpose

—> values: guiding principles, beliefs, behaviour norms

—> objectives: concrete performance targets (financial, strategic: measurable, specific, ambitious)

What is stage 2 of the strategy process?

• strategic analysis

—> external analysis (market, competition, customer, threats/opportunities)

= environmental analysis

—> internal analysis (resources, capabilities, strengths/weaknesses)

= corporate analysis

—> misfit analysis

What is stage 3 of the strategy process?

• crafting a strategy

—> Corporate strategy (overall direction of the firm)

—> business strategy (market position + competitive advantage)

—> functional strategy (marketing, R&D, production, finance, …)

—> operating strategies (day-to-day execution)

What are generic competitive strategies?

• low-cost leader

• differentiation

• niche market

• best-price leader

What is stage 4 of the strategy process?

• execution and implementation of the strategy

→ depends on the employees’ attitude toward internal changes (leadership, policies, corporate culture, …) = no single “magic lever”

What is stage 5 of the strategy process?

• strategy evaluation

→ fit test (internal fit, external fit, dynamic fit)

→ competitive advantage test (hard to imitate? durable?

→ performance test (profitability, financial strength, market position)

==> if misfit: adjust strategy

What are tangible resources?

= physical, financial, technological, organisational

→ PP&&E

→ cash/cash equivalents

What are intangible assets?

= human assets, intellectual capital, brands, company image, repetitional assets, relationships, company culture

What are resources?

productive input or competitive asset that is owned or controlled by the company

What are capabilities?

organizationall and managerial skills necessary to orchestrate a diverse set of resources and to deploy them strategically

What are core compentencies?

unique strengths, embedded within a company

What are activities?

add value by transforming inputs (e.g. raw materials) into outputs (e.g. goods and services)

How are resources, capabilities, core competencies and activities linked to competitive advantage and superior performance?

• starting point: resources (tangible and intangible)

→ do not create value on their own but are potential sources

• combining resources with capabilities (intangible)

→ determine how well a firm uses its resources

• core competencies are created when certain capabilities are valuable, rare, difficult to imitate and well organized

→ representation of a firms unique strengths

• activities are concrete actions a firm performs in its value chain: production, marketing, logistics, …

→ core competencies are realised and made visible through activties

→ transform inputs into outputs: creating more customer value or reduce costs

• competitve advantage results (is sustainable if rooted in core competencies rather than easily copied resources)

• final result: superior performance

→ when aligning resources, capabilities, competencies and activities successfully

• is a circle: reinvesting, upgrading

What is the “dynamic capability”

a firms’s ability to change, adapt and renew itself when the environment changes

→ resources and capabilities: what a firm has and can do today

→ dynamic capabilities: how well can a firm change what is has over time

What is the resource based view?

= a company’s success mainly comes from what it owns and what it can do, not just from the market it operates in

What is the VRIO framework?

• valuable: Would the firm be worse off without this resource?

• rare: Can most competitors easily access this resource?

• inimitable: Could a competitor replicate this within short time?

• organized: Does the firm actually use this resource effectively?

What is resource heterogeneity?

firms do not all possess the same resources and capabilities

→ if all firms had the same resources: competitive advantage wouldn’t exist

What is resource immobility?

important resources cannot be easily transferred, copied or bought from other firms( valuable resources tend to “stick” to the firm)

→ otherwise competitive advantages would be temporary

What is part of the Internal Analysis?

1) VRIO analyis

2) Value chain

3) SWOT analysis

What is the value chain?

describes all the activities a company performs to create value for customers and to make profit

→ Primary activities "(“What the firm does”: directly involved in creating and delivering products or services

→ Support activities (“How the firm enables value creation”: support all primary activities

What are relational capabilities?

a firm’s ability to successfully build, manage and benefit from relationships with other organisations

What is a strategic alliance?

voluntary cooperation between two or more independent firms that share resources, knowledge, or capabilities while remaining legally seperate

Why do firms enter strategic alliances?

• access to complementary resources

• reduce risk and uncertainty (risk-sharing)

• enter new markets

• learning

• speed (faster innovation, faster market entry)

==> competetive advantage

What types of strategic alliances exist?

• non-equity alliances

→ contracts, licensing, supply agreements

→ no shared ownership

• equity alliances

→ one firm owns a minority stake in another

• joint ventures

→ two or more firms create a new legal entity

→ shared ownership and control

What makes strategic alliances successful?

• partner selection

• governance and design

• trust and commitment

• communication and coordination

What is a strategic network?

= set of interconnected firms that are linked through multiple cooperative relationships and jointly create value

→ not just one partnership but a web of relationships

What is a SWOT analysis?

• strengths and weaknesses (internal)

• opportunities and threats (external)

four strategic directions:

• S&O strategies: use strengths to exploit opportunities

• W&O strategies: overcome weaknesses using opportunities

• S&T strategies: use strengths to defend against threats

• W&T strategies: addressing weaknesses that will make threats reality

What are isolating mechanisms to sustain a competitive advantage?

= protecting a firms competitive advantage from being copied by competitors

• causal ambiguity

→ relying on multiple sources of competitive advantage

• deterrence

→ discouraging competitors from imitation/entry (e.g. bc of unprofitability)

• preemption

→ firm acts early and occupies key strategic positions/resources before competitors can

How can the economic profit increase?

(price - costs)

1) increasing price

→ possible with differentiation (customers willingness to pay needs to increase)

2) decreasing costs

→ possible through cost leadership, efficient value chain, …

==> Niche + differentiation + cost leadership

What are types of competitive advantages?

• cost leadership

→ firm can produce and deliver products/services at lower costs that competitors

• differentiation

→ customers are willing to pay a higher price because the product/services are perceived as unique

• focus (Niche)

→ firm focuses on a narrow customer segment and applies either cost advantage or differentiation advantage

What is economies of scope?

= a firm can produce several different products cheaper together than separately

What are the drivers of cost advantage? (4 examples)

= explain why one firm can produce at lower costs than others

• economies of scale

• capacity utilisation (using production capacity as fully as possible)

• learning effects (the more a firm produces, the better/faster it becomes)

• production techniques

…

What does being “stuck in the middle” mean? (regarding cost vs differentiation leadership)

firm fails to achieve either a clear cost advantage or a clear differentiation advantage

→ firm not cheap enough to compete on cost

→ not unique enough to justify higher prices