ACC 459 Part 1

What is the primary question for shareholders / board of directors?

Is the company creating sustainable value and managing risk appropriately?

What is the primary question for Investment Analysts / Rating Agencies?

What do the financial results suggest about future performance, risk, and valuation or creditworthiness?

What is the primary question for Employees / Job Candidates?

Is this company financially stable, growing, and likely to offer good future opportunities?

What is the primary question for Creditors / Suppliers?

Can this company pay what it owes, on time, without creating excessive collection risk?

What is the primary question for Customers / Partners?

Is this company reliable enough to continue serving us or working with us?

What are Competitors and Regulators interested in?

Competitors: strategy, strengths, weaknesses, and market position. Regulators: whether the company complies with rules and presents information fairly.

What is contained in Parts I and II of Form 10-K?

Part I: Business, risks, legal context. Part II: Financial results and management discussion.

What is contained in Parts III and IV of Form 10-K?

Part III: Governance, ownership, compensation. Part IV: Exhibits, schedules, signatures.

What is a cognitive bias, and when can it affect analysis?

An unconscious, systematic error in thinking that affects how we process information and make decisions

What question helps prevent bias when defining the problem?

“Are we analyzing the issue, or are we only analyzing one explanation someone already believes?”

What is Framing Bias?

Making a decision based on how the information is presented rather than the facts. Cue: identical facts sound different depending on wording.

What is Anchoring Bias?

Relying too heavily on the first number or piece of information encountered. Cue: an initial estimate keeps influencing later analysis.

What is Authority Bias?

Disproportionately trusting the opinions, decisions, and instructions of perceived authority figures.

What question helps prevent bias when gathering evidence?

“What evidence would change my mind?”

What is Confirmation Bias?

Seeking or interpreting evidence in ways that support pre-existing beliefs.

What is Availability Bias?

Overestimating likelihood or importance of events based on how easily they come to mind.

What question helps prevent bias when interpreting results?

“What does the data show, and what does it not show?

What does confusing correlation and causation mean?

Mistaking a statistical relationship as evidence that one variable caused another.

What is Overconfidence Bias?

Overestimating the accuracy of one’s knowledge or judgment.

What is Optimism Bias?

Overestimating the likelihood of positive events and underestimating the likelihood of negative events.

What question helps reduce bias when making recommendations?

“If this recommendation fails six months from now, why will it have failed?

What is the Sunk Cost Fallacy?

Continuing something because substantial time, money, effort, or emotional energy has already been invested, even when giving up is clearly better.

What is the Planning Fallacy?

Underestimating the time, cost, and effort needed to complete a task.

What are the three sources of competitive advantage?

Cost/Scale; Product/Service; Experience.

Define Cost/Scale advantage.

Ability to produce goods or provide service at a superior volume and/or cost per unit.

Define Product/Service advantage.

Advantage based on a superior product or service.

Define Experience advantage.

Advantage based on superior customer experience/service provided.

What are Porter’s Five Forces?

Rivalry among existing competitors; Threat of new entrants; Threat of substitutes; Bargaining power of buyers; Bargaining power of suppliers.

Define Rivalry among existing competitors.

Intensity of competition among existing players.

Define Threat of new entrants.

Ease with which new competitors can enter the market.

Define Threat of substitution.

Extent to which consumers can find alternative products or services.

Define Bargaining power of buyers.

Customers' ability to drive down prices or demand higher quality.

Define Bargaining power of suppliers

Suppliers' leverage to raise prices or demand strict terms.

What are the five questions in Playing to Win?

What is our winning aspiration? Where will we play? How will we win? What capabilities must be in place? What management systems are required?

What does Winning Aspiration address

Our guiding aspiration — the purpose of the enterprise

What does Where will we play? address?

Where to compete: geographies, product categories, consumer segments, channels, vertical stages of production

What does How will we win? address?

Our value proposition and our competitive advantage.

What does What capabilities must be in place? address?

Our reinforcing activities and our specific configuration

What does What management systems are required? address?

Systems, structures, and measures required to support our choices.

What is the basic SWOT framework?

Strengths: internal + positive. Weaknesses: internal + negative. Opportunities: external + positive. Threats: external + negative.

What question does each strategy framework answer?

Five Forces: “What is the nature of competition in this industry?” Playing to Win: “How has the company chosen to compete and win?” SWOT: “Is the company well-positioned to execute its strategy and navigate its environment?”