BUS475 Midterm

What is the organization vision?

A goal that is massively inspiring, overarching, and long-term.

What does a mission statement encompass?

The purpose of the company and the basis of competition and competitive advantage.

What are strategic objectives?

They operationalize a mission statement and are specific with a defined time frame.

What criteria must objectives satisfy?

Specific

Measurable

Appropriate

Realistic

Timely

What does SWOT analysis analyze?

Firm and industry conditions, focusing on internal strengths and weaknesses and external opportunities and threats.

What are the five forces plus one in Porter’s model?

Threat of new entrants

Bargaining power of buyers

Bargaining power of suppliers

Threat of substitutes

Industry rivalry

Technology

What is the threat of new entrants?

The possibility that profits of established firms may be eroded by new competitors.

What factors affect the threat of new entrants?

Existing barriers to entry and reactions from existing competitors.

What does the bargaining power of buyers do?

It forces down prices and negotiates for higher quality or more services.

What does the bargaining power of suppliers do?

Raises prices or reduce quality

How do substitutes affect an industry?

They limit potential returns by capping prices that firms can charge.

What are complements in a business context?

Products or services that enhance the value of a firm’s offerings.

What does PESTEL Analysis examine?

Macro-environmental factors affecting businesses:

Political

Economic

Social

Technological

Environmental

Legal

What is the purpose of Value Chain Analysis?

To view the organization as a process of value-creating activities.

What determines the value in Value Chain Analysis?

The amount buyers are willing to pay, measured by total revenue.

When is a firm considered profitable?

When value received exceeds total costs of creating its product or service.

What are the primary activities in Value Chain Analysis?

Inbound logistics

Operations

Outbound logistics

Marketing and sales

Service

What does inbound logistics involve?

Receiving, storing, and distributing inputs to the product.

What is the focus of operations in the value chain?

Transforming inputs into the final product form.

What does outbound logistics encompass?

Collecting, storing, and distributing the product or service to buyers.

What activities are included in marketing and sales?

Purchases by end users and inducements to encourage purchases.

What does the service activity involve?

Providing service to enhance or maintain the value of the product.

What are support activities in Value Chain Analysis?

Activities that support the entire value chain, including:

General administration

HR management

Technology development

Procurement

What is the role of procurement in the value chain?

Acquiring goods and services needed for the value chain activities.

What is the purpose of primary activities in a value chain?

Contribute to the physical creation of the product or service, its sale, transfer to the buyer, and post-sale service.

What do support activities do in a value chain?

Add value by themselves or through relationships with primary activities and other support activities.

What does OEM stand for?

Original Equipment Manufacturer.

What is the role of an OEM?

Produces components used in another company’s product, typically B2B.

What is a VAR?

Value-Added Reseller that enhances OEM products with additional features.

What is market segmentation?

Breaking down customers into groups based on demographics, geographics, psychographics, and behavioral factors.

What is scenario planning?

Prepares for different future situations.

What are black swan events?

Unpredictable events with major impact.

What is a business strategy?

Plan for a specific business unit to achieve competitive advantage in its industry.

What does a corporate strategy define?

What businesses or industries a company should be in, focusing on long-term growth and resource allocation.

What are Strategic Business Units (SBUs)?

Independent units within a corporation, each with its own strategy.

What are the categories of SBUs?

Stars: High growth, high market share

Cash cows: Low growth, high market share

Question marks: High growth, low market share

Dogs: Low growth, low market share.

What is the strategy for Stars?

Invest heavily to maintain dominance

What is the strategy for Cash Cows?

Maintain and use profits to fund other SBUs

What is the strategy for Question Marks?

Invest selectively or divest

What is the strategy for Dogs?

Divest or phase out

What are the advantages of SBUs?

Simple and easy to understand

Efficient resource allocation

What are the limitations of SBUs?

Uses only two dimensions: relative market share and market growth rate

Neglects synergy: SBUs may compete internally if they overlap

What is the shareholder view?

Maximize shareholder value by increasing profits and stock prices.

What is the stakeholder view?

Balance the interest of employees, customers, and society.

What is an income statement?

Measures revenue and expenses to determine net profit or loss.

What does a balance sheet show?

A company’s financial position at a specific point in time.

What does a cash flow statement measure?

Measures liquidity.

What is revenue?

Total sales indicating business growth and market demand.

What is gross profit?

Profit after deducting COGS.

What is EBIT?

Operating income before interest and taxes; used to compare profitability.

What does ROA measure?

Efficiency; high ROA means assets are utilized effectively.

What does ROS measure?

Profit made per dollar of revenue; higher ROS means better cost efficiency.

What does ROIC measure?

Return generated on equity and debt capital; indicates efficient capital use.

What does ROE measure?

Profitability for investors.

What is the Balanced Scorecard?

Method of evaluating a firm’s performance using various performance measures.

What perspective does the Balanced Scorecard use?

Customer

Internal business

Innovation and learning

Financial

What perspective does the customer perspective focus on in the Balanced Scorecard?

Satisfaction of customers' expectations

What does the internal business perspective evaluate?

Internal processes contributing to customer satisfaction

What does the innovation and learning perspective focus on?

Adaptation of products and services to changes

What does the financial perspective evaluate?

Strategy's contribution to bottom-line improvement

What are some limitations of the Balanced Scorecard?

Viewed as a quick fix

Insufficient commitment to learning

What are fixed costs?

Expenses that remain constant regardless of output

What are variable costs?

Costs that change with production

What are tangible resources?

Assets that are easy to identify and quantify, including:

Financial resources

Physical resources

Organizational resources

Technological resources

What are intangible resources?

Difficult to imitate, embedded in routines, including:

Human resources

Innovation resources

Reputation resources

What is a line structure in organizational design?

Authority flows top down

What is a matrix structure?

Multiple lines of authority

What is a geographic structure?

Organized by regions

What is a project-based structure?

Temporary teams for specific projects

What are Porter's 3 generic strategies?

Overall cost leadership

Differentiation

Focus

What does overall cost leadership aim for?

Creating a low-cost position

What is the goal of differentiation?

Create unique and valued products/services to justify price premiums.

How does differentiation improve competitive position?

Protects against rivalry

High entry barriers

Reduces buyer power

Reduces supplier power

Enhances customer loyalty

What is the industry life cycle?

Stages of introduction, growth, maturity, and decline in an industry.

What characterizes the introduction stage of the industry life cycle?

New products

Poorly defined market segments

Low sales growth

Rapid technological change

What strategies are emphasized in the introduction stage?

Focus on research and development and marketing to enhance awareness.

What characterizes the growth stage of the industry life cycle?

Strong sales increase

Growing competition

Developing brand recognition

What is the primary key in the growth stage?

Build customer preferences for specific brands.

What characterizes the maturity stage of the industry life cycle?

Slowing demand growth

Saturated markets

Direct competition

What are the two positioning strategies in the maturity stage?

Reverse positioning

Breakaway positioning

What is reverse positioning?

Strips away sacred product attributes while adding new ones.

What is breakaway positioning?

Associates the product with a radically different category.

What characterizes the decline stage of the industry life cycle?

Falling sales

Increasing price competition

Industry consolidation

What are the four strategies in the decline stage?

Maintaining

Harvesting

Exiting

Consolidation

What does maintaining mean in decline strategies?

Keep a product going without reducing support or investment significantly.

What does harvesting mean in decline strategies?

Obtain maximum profit while reducing costs quickly.

What does exiting mean in decline strategies?

Drop the product from the firm’s portfolio.

What does consolidation mean in decline strategies?

Acquire the best of the surviving firms in an industry at a reasonable price.

What is product innovation?

Creating new product designs and applications of technology for end users.

When is product innovation more common?

During the earlier stages of an industry’s life cycle.

What strategy is commonly associated with product innovation?

Differentiation strategy.

What is process innovation?

Efforts to improve the efficiency of organizational processes.

When does process innovation typically occur in an industry’s life cycle?

In the later stages.

What is the main goal of process innovation?

To lower the costs of operations.

What strategy is process innovation associated with?

Overall cost leader strategies.