Strategic Management Mid-Term

IES Milan

PESTLE acronyms

Political, Economic, Social, Technological, Legal, Envirnomental

Golden Circle layer

why, how, what

Why (Golden Circle)

Where the organization is going, and for what reason (objectives)

How (Golden Circle)

How the organization is going to get there (Business Strategy/ Corporate Strategy)

What (Golden Circle)

What are we doing (everyday) to get there (Tactics/ Operations)

Macro Environment

Bigger factors. Use PESTLE

Micro Environment

Smaller factors, more local, Use Porters 5 forces

Porters five forces model

• Framework for analyzing industry structure

• Includes: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products, competitive rivalry

• Helps assess competitive intensity and attractiveness of an industry

Threat of new entrants

Assesses the risk of new competitors entering an industry, potentially increasing competition, lowering prices, and reducing profits for existing firms.

Threat of subsittutes

Refers to products or services that can fulfill the same need as the original product. This can impact a company's competitiveness and market share. Companies must be aware of potential substitutes to stay relevant.

Buyer power

Refers to the influence customers have over a company in terms of negotiating prices, quality, and terms of sale. It is one of Porter's Five Forces that impact an industry's competitiveness.

Supplier power

Refers to the influence and control that suppliers have over the prices, quality, and availability of goods or services they provide to businesses. It is a key aspect of Porter's Five Forces framework in analyzing industry competitiveness.

Competition

Rivalry between individuals, groups, or entities for resources, recognition, or other goals. It can drive innovation, improve performance, and lead to better outcomes in various fields.

Value chain

Series of activities that a company performs to deliver a valuable product or service to the market. It includes primary activities (inbound logistics, operations, outbound logistics, marketing, sales, and service) and support activities (firm infrastructure, human resource management, technology development, and procurement).

Value chain support activities

Activities such as procurement, technology development, human resource management, and firm infrastructure.

Value chain primary activities

Directly involved in the creation and delivery of a product or service. They include inbound logistics, operations, outbound logistics, marketing and sales, and service.

VRIO framework

Tool used to analyze a firm's internal resources and capabilities. It assesses if resources are Valuable, Rare, Inimitable, and Organized to provide sustained competitive advantage.

Competitive advantage

Refers to a company's ability to outperform its rivals by offering unique products or services, lower costs, or superior value to customers. It allows a company to differentiate itself in the market and achieve higher profits.

VRIO model

Cost advantage

Refers to a firm's ability to produce goods or services at a lower cost than its competitors, giving it a competitive edge in the market.

Differentiation advantage

Stategy where a company seeks to distinguish its products or services from competitors to attract customers. This can be achieved through unique features, branding, quality, or customer service.

Corporate strategy

Set of actions taken by a company to achieve its long-term goals and objectives. It involves decisions on which businesses to enter, how to allocate resources, and how to create value for stakeholders.

Red ocean

Refers to existing market spaces where competition is fierce, leading to limited growth opportunities. Companies compete mainly on price and features, resulting in a bloody battle for market share.

Blue ocean

Theory that focuses on creating uncontested market space by innovating and offering unique value to customers, leading to high growth and profits. It involves moving away from competition to a new market space with less competition

Firm geographical level

Refers to the scope of operations of a company in terms of the geographic areas it serves or operates in. It involves decisions related to market expansion, distribution channels, and location of facilities.

Firm business level

Refers to the strategies and actions a company takes to compete within a specific industry or market segment. It involves decisions related to product differentiation, cost leadership, and focus strategies to gain a competitive advantage.

Horizontal integration

Strategy where a company acquires or merges with competitors at the same stage of the production process to expand its market share or reduce competition. Ex: Amazon acquiring MGM or other logistics companies.

Vertical integration

Strategy where a company controls multiple stages of the supply chain, from production to distribution, to gain more control over costs and quality. It can involve backward integration (towards suppliers) or forward integration (towards customers). Ex: Disney making their own movies without outside help.

Diversification integration

Refers to a strategy where a company expands its business into new markets or industries to reduce risk and increase profitability. This can involve related diversification (entering industries similar to current operations) or unrelated diversification (entering completely different industries) Ex: Virgin industries.

Question mark

High market attractiveness, low market share

electric city scooters

Star

High market attractiveness, high market share

YouTube

Cash Cow

High market share, low market attractiveness

iPhone

Dog

Low market attractiveness, low market strength

DVD’s

Multi-domestic integration

Tailors products to match local preferences in each market where it operates

Nestle

Transnational

Balances global brand consistency with localized offerings

McDonald’s

Global

Offers same products and brand imaging across all markets across the world

Apple

Market Amplification

Extending brand reach to a broader audience through increased engagement and prospective customer acquisition

Example: iPhone when it became popular

Market reduction

Situations where interference significantly affects prices or market behavior, often caused by government regulations or monopolies

Example: Government bans like cigarettes

Market Distortion

Occurs when external factors, like government interventions or monopolies, disrupt the regular functioning of a market, affecting prices and resource allocation

Example: US intervening with car companies