MGMT 4312 Midterm

Strategy

The set of actions that companies take to outperform competitors and achieve superior profitability.

Low-Cost Provider

Striving to achieve lower overall costs than rivals on products that attract a broad spectrum of buyers.

Broad Differentiation

Seeking to differentiate the company's product or service from rivals in ways that will appeal to a broad spectrum of buyers

Focused Low Cost

concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower priced.

Focused Differentiation

Concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals products.

Best Cost Provider

Giving customers more value for the money by satisfying buyers' expectations on key quality/feature/performance/service attributes, while beating their price expectations.

Sustainable Competitive Advantage

an advantage that cannot be copied by the competition

Competitive Advantage

An advantage over competitors gained by offering a high value or the same value at a lower cost.

Deliberate Strategy

consists of proactive strategy elements that are both planned and realized as planned.

Emergent Strategy

consists of reactive strategy elements that emerge as changing conditions warrant.

Business Model

Sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit.

What 3 tests make a strategy a winner?

1. The Fit Test

2. The sustainable Competitive Advantage Test

3. The Performance Test

The Fit Test

Does it exhibit fit with the external and internal aspects of the firm's dynamic situation?

The sustainable competitive advantage test

Does the firm strategy help the firm achieve a sustainable competitive advantage?

The performance test

Will it produce superior performance as indicated by the firm's profitability, financial and competitive strengths, and market share?

1. Developing a strategic vision, mission, and core values

2. Setting Objectives

3. Crafting a strategy to achieve the objectives and the company vision

4. Executing the strategy

5. Monitoring developments, evaluating performance, and initiating corrective adjustments

What are the 5 stages of "strategy making and strategy execution"?

Strategic Vision

portrays a firm's aspirations for its future.

Mission Statement

describes the scope and purpose of its present business (who are we, what we do, and why we are here)

What are some things included in the ideal mission statement?

identifies the firm's products/services, specifies buyer needs, identifies customer groups/markets, specifies approach to pleasing customers, sets the firm apart from rivals, and clarifies the firm's business to stakeholders.

Core Values

the important principles that will guide decisions and actions in the company

PESTEL

an analysis focused on six principal components of strategic significance in the macro-environment. The six principles are Political, Economic, Social, Technological, Environmental, and Legal.

Strategic Group

a cluster of industry rivals that have similar competitive approaches and market positions.

Strategic Group Mapping

a technique for displaying the different market or competitive positions that rival firms occupy in the industry.

Porter's Five Forces of Competition

1. Rivalry among competitors, 2. Threat of New Entrants, 3. Threat of Substitutes, 4. Bargaining Power of Suppliers, and 5. Bargaining Power of Buyers

resources

a competitive asset that is owned or controlled by a firm.

competitive asset

determinants of its competitiveness and ability to succeed in the marketplace

capability or competence

the capacity of a firm to perform an internal activity competently through deployment of a firm's resources.

What are the types of tangible resources?

physical resources, financial resources, technological resources, and organizational resources.

physical resources

land and real estate; manufacturing plants, equipment, or distribution facilities; the locations of stores, plants, or distribution centers, including the overall pattern of their physical locations; ownership of or access rights to natural resources (such as mineral deposits)

Financial Resources

cash and cash equivalents, marketable securities, other financial assets such as a company's credit rating and borrowing capacity.

Technological Assets

patents, copyrights, production technology, innovation technologies, and technological processes

Organizational Resources

IT and communication systems (satellites, servers, workstations, etc.) other planning, coordination, and control systems, the company's organizational design and reporting structure

What are the types of intangible resources?

human assets and intellectual capital; brands, company image, and reputation assets, relationships, company culture and incentive system

Human assets and intellectual capital

The education, experience, knowledge, and talent of the workforce, cumulative learning, and tacit knowledge of employees, collective learning embedded in the organization, the intellectual capital and know-how of specialized teams and work groups; the knowledge of key personnel concerning important business functions; managerial talent and leadership skills; the creativity and innovativeness of certain personnel.

Organizational Capability

the intangible but observable capacity of a firm to perform a critical activity proficiently using a related combination of its resources as well as the knowledge-based, residing in people and in a firm's intellectual capital or in its organizational processes and systems, embedding tacit knowledge.

Resource Bundle

a linked and closely integrated set of competitive assets centered around one or more cross-functional capabilities.

The VRIN test for sustainable competitive advantage asks if a resource or capability (bundle of resources) is....

valuable, rare, inimitable, non-substitutable

Competitive Strategy

deals exclusively with the specifics of its efforts to position itself in the marketplace, please customers, ward off competitive threats, and achieve a particular kind of competitive advantage.

What are the key factors that distinguish one competitive advantage strategy from another?

Is the firm's market target broad or narrow? Is the competitive advantage pursued linked to low costs or product differentiation?

Cost Driver

A factor with a strong influence on a firm's costs and can be asset-based or activity-based

Differentiation

enhances profitability whenever a company's product can command a sufficiently higher price or produce sufficiently greater unit sales to more than cover the added costs of achieving the differentiation.

Broad Differentiation Strategy

offers unique product attributes

best-cost provider strategy

a hybrid of low-cost provider and differentiation strategies that aim at providing more desirable attributes (quality, features, performance, service) while beating rivals on price.

What are the conditions that lead to first-mover advantage?

1. when pioneering helps build a firm's reputation and creates strong brand loyalty

2. When a first mover's customers will thereafter face significant switching costs

3. when property rights protections thwart rapid imitation of the initial move

4. When an early lead enables movement down the learning curve ahead of rivals

5. When a first mover can set the technical standard for the industry

What are the conditions that lead to late-mover advantages and first mover disadvantages?

1. pioneering is more costly than imitating and offer negligible experience of learning-curve benefits.

2. products of an innovator are somewhat primitive

3. rapid market evolution allows fast followers to move ahead of a first mover's products with more attractive next-version products.

4. market uncertainties make it difficult to ascertain what will succeed

5. When customer loyalty is low and first mover's skills, know-how, and actions are easily copied or surpassed.

Horizontal Scope

the range of product and service segments that a firm serves within its focal market

Vertical Scope

the extent to which a firm's internal activities encompass one, some, many, or all of the activities that make up an industry's entire value chain system, ranging from raw-material production to final sales and service activities.

backward integration

involves entry into activities previously performed by suppliers or other enterprises positioned along earlier stages of the industry value chain system.

What are the reasons for backward integration?

reduced supplier power, reduced cost in major inputs, assurance of the supply and flow of critical inputs, and protection of proprietary know-how

Forward integration

involves entry into value chain system activities closer to the end user.

What are the reasons for integrating forward?

lower overall cost, increase bargaining power, gain better access to end users, strengthen and reinforce brand awareness, and increase product differentiation

Outsourcing

involves contracting out certain value chain activities that are normally performed in-house to outside vendors.

Strategic Alliance

a formal agreement between two or more seperate companies in which they agree to work cooperatively toward some common objective

joint venture

a partnership involving the establishment of an independent corporate entity that the partners own and control jointly, sharing in its revenues and expenses.