Study guide bullet points

1. Factors Affecting a Nation’s Competitiveness: Demand Conditions

-Demand conditions refer to the demands that consumers place on an industry.

-Demanding consumers drive firms in that country to:

• Meet High Standards

• Upgrade existing products and services

• Create innovative products and services

• Better anticipate future global demand

• Proactively respond to product and service requirements

“In your book; the country of Denmark has a lot of Innovation in the environmental area. This is what they call an in-country innovation because demanding consumers can push a lot of stuff.”

1. Slide 4; Factors Affecting a Nation’s Competitiveness: Related and Supporting Industries

-Related and supporting industries enable firms to manage inputs more effectively via:

• A competitive supplier base

  • Reduces manufacturing costs

• Close working relationships with suppliers

  • Allows for joint research and development

• Development of related industries.

  • Forces existing firms to practice cost control, product innovation, and better distribution methods.

“It increases competition and it makes everything efficient.” 

• A competitive supplier base

A company pursues international expansion for many reasons. A company decides to become a multinational firm in order to:

• Increase size of potential markets

  • Attain economies of scale. Middle class asian consumer will grow from $4.9T to over $30T by 2020

• Take advantage of arbitrage opportunities. Call centers in India, manufacturing in Vietnam. Not just product trading.

  • Applied to every stage of the value chain

• Enhance a products growth potential. Cok’es international growth push in light of flat U.S market.

  • Reinvigorate the product life cycle

“Economies of scale, you produce more your unit cost goes down. Produce more product and services your unit cost goes down”

-Attain economies of scale. Middle class asian consumer will grow from $4.9T to over $30T by 2020

-“Economies of scale, you produce more your unit cost goes down. Produce more product and services your unit cost goes down”

1. Slide 6; International Expansion: Motivations

-Take advantage of learning opportunities. L’Oreal purchased an ethnic hair care buisness to understand how african americans buy hair products. With this knowledge it used for international expansion.

-Reverse innovation, Innovation that flows from low-income countries to high-income nations.

• Design and manufacture products locally

• Export no-frills products to developed markets

-Take advantage of learning opportunities. L’Oreal purchased an ethnic hair care buisness to understand how african americans buy hair products. With this knowledge it used for international expansion.

-Reverse innovation, Innovation that flows from low-income countries to high-income nations.

1. Slide 7; International Expansion: Risk

• Political risk due to social unrest, military turmoil, demostrations, terrorism, absence of the rule of law can lead to

  • Destruction of property

  • Disstruption of operations

  • Non-payment for goods and services

  • Arbitray government decisions

• Economic risk due to piracy and counterfeiting  big risk to ur company

• Economic risk due to piracy and counterfeiting  big risk to ur company

• Counterfeiting is economic risk 

• Currency Risk due to fluctuations in the local currency’s exchange rate

  • Affects cost of production or net profit

  • EX US dollars get expensive when they retrade in us they get less dollars for the global company that is currency risk

  • IF us dollar becomes strong what happens to profit of other companies making money in other companies and bring the money to US they will have less money

• Management risk due to culture, customs, language, income level, customer preferences, distribution systems

  • Could lead to the need for local adaption of apparently standard products

• Counterfeiting is economic risk 

• Currency Risk due to fluctuations in the local currency’s exchange rate

  • Affects cost of production or net profit

  • EX US dollars get expensive when they retrade in us they get less dollars for the global company that is currency risk

  • IF us dollar becomes strong what happens to profit of other companies making money in other companies and bring the money to US they will have less money

• Management risk due to culture, customs, language, income level, customer preferences, distribution systems

-Outsourcing. When firm uses other companies to perform value creating activities that were previously performed in house.

-Offshoring. Moving activity from domestic location to a foreign location

Hidden costs from offshoring include:

• Higher total wage and indirect costs, wage inflation

• Increased inventory due to longer lead time

• Reduced market responsiveness

• Increased coordination costs

• Cost of protecting intellectual property

• Transnational Strategy - Local and low cost

• Multi Domestic Strategy - Local and High cost

• Global Strategy - Central and Low cost

• International Strategy - Central and High

Global strategy ECONOMIES OF SCALE and PRODUCTS ARE STANDARDIZED

Multidomestic strategy puts emphasis on differentiating products and services to adapt to local markets

• Key word is differentiating product , THEY ARE NOT STANDARD ITS THE OPPOSITE OF STANDARD

-Likley to increase your cost. Anytime you have differentiating products.

-Pressure for local adaptation is high; pressure for lowering coss is low

1. Slide 15: Entrepreneurial opportunity recognition

Two Phases of Activity:

1. Discovery - Becoming aware of a new business concept

2. Evaluation - Analyzing the opportunity to determine whether it is viable or feasible to develop further

• Viable Opportunities have the following qualities:

  • They are attractive 

  • They are achievable  (can actually do it)

  • They are durable  (last so it can recoup investment)

  • They are value-creating (create value for customer)

AFFORDABLE NOT ONE OF THE OPTION, HITING NOT TO CLICK

-Resources are essential for entrepreneurial success

- Financial resources     (most important one)

- Human capital

-Social capital

-Governemtn resources

Slide 18: Entrepreneurial financial resource

Financial resources depend on the stage of venture development and venture scale

• Initial, startup financing

  • Personal savings, family and friends

  • Crowdfunding

• Early-stage financing

  • Bank loans, angel investors

• Later-stage financing

  • Commercial banks, venture capitalist, equity financing

“Venture capital is not public equity, it is private”

• Personal savings, family and friends

• venture capitalist

• “Venture capital is not public equity, it is private”

  
  

Slide 19: Generic Strategies for New Ventures

• Focus - means ability to:

  • Use niche strategies that fit the small business model

: Topic of focus, deliberately making small books because its a focused strategy

• Focus - means ability to:

  • Use niche strategies that fit the small business model

: Topic of focus, deliberately making small books because its a focused strategy

• New entry threatens existing competitors. Competitive dynamics helps explain why competitive strategies evolve and how to respond.

Why do companies launch new competitive actions

• To improve market position

• To capitalize on growing demand

• To expand production capacity

• To provide an innovative new solution

• To obtain first mover advantages

• To strengthen financial outcomes and capture profits

• To grow the business

• Competitive Dynamics: Actions

• Strategic actions

  • Entering new markets

  • Creating a new product introductions

  • Changing production capacity

  • Pursuing mergers or alliances

• Strategic takes longer time, takes time and takes money. Entering new market takes time

  
  

Tactical Actions

• Doing price cutting (or offering increases)

• Making product/service enhancements

• Increasing marketing efforts

• Developing new distribution channels

Slide 21 competitive Dynamics: Reaction

-Co-opetition : Both cooperating and competing.

-Working together behind the scnes toachieve industry wide efficiencies 

^^Might look like collusion so becareful

Make sure you know three steps

The traditional approach to strategic control is sequential

1. Strategies are formulated, goals are set

2. Strategies are implemented 

3. Performace is measured against predetermined goals (Strategic control)

Concern - Experts question value of rigid planning and goal-setting processes. Fixed strategic goals become dysfunctional for firms competing in highly unpredictable competitive environments. Strategies need to change frequently and opportunistically

^^ Thats the draw back to traditional approach

-Information control is primarily concerned with whether or not the organization is doing the right things. Allows organizational members to question if there is a better path. Google’s moonshot projects.

-Behavioral control is focused on implementation - doing things right. Effectively implementing strategy requires manipulating three key control levers -

-Culture -Rewards -Boundaries

23. Slide 29 Behavioral Control: Culture

Organizational culture is a system of

-Shared Values (what is important)

-Beliefs (How things work)

-Culture sets implicit boundaries regarding dress, ethical matters, the way organization conducts its business

-Culture sets implicit boundaries regarding dress, ethical matters, the way organization conducts its business

Effective reward and incentive systems share common characteristics

• Objectives are clear, well understood, and broadly accepted

• Rewards are clearly linked to performance and desired behaviors

• Performance measures are clear and highly visibles

• Feedback is prompt clear and unambiguous

• The compensation “system” is perceived as fair and equitable

• The structure is flexible; it can adapt to changing circumstances

-Directly connected to rewards and how they will perform

-The effective reward system is agile and flexible 

Effective reward and incentive systems

• Rewards are clearly linked to performance and desired behaviors

• The structure is flexible; it can adapt to changing circumstances

• -Directly connected to rewards and how they will perform

  -The effective reward system is agile and flexible 

  
  

-Effective Rewards system; may be used to reinforce other means of control

People perform better to rewards than to rules

26. Slide 33; Corporate System: Corporate Governance

-Corporate Governance - focus on relationship among

• Shareholders - able to participate in the profit of the enterprise without taking direct responsibility of operations have limited liability.

• Management (led by the CEO) - Runs the company without the responsibility of personally providing the funds

• Board of Directors - elected by shareholders have fiduciary obligation to protect the interest of the shareholders. Enures long-term financial return on the firms

An effective Board of Directors should:

• Long term vision

• Fiduciary responsibility to share holders

• Intermediaries; the shareholders dont talk to management, the board of directors do

Advantages of Simple Structures: (MORE IMPORTANT THAN DIS)

• Highly informal. Centralized decision making

• Coordination of tasks by direct supervision

• Little specialization of tasks

• Few rules and regulations; informal reward systems

Highly informal, people can be highly creative in small companies. People in simple structures are actually very creative. Highly individualistic.

Disadvantages of Simple Structures:

• Responsibilities not understood

• Self-interest, employees taking advantage of lack of regulations resulting in confusion and conflict

• Limited opportunities for upward mobility; flat structure. Recruiting and retaining talend difficult

What happens when a simple structure and their company becomes larger, they turn into functional organziational structure.

Function org structure is →Small company, higher production volume

Disadvantages Slide 39 Functional structure advantages and disadvantage

Advantages

• Enhanced coordination and control

• Centralized decision making

• Enhanced org level perspective

• More efficient use of managerial and technical talen

• Facilitated career paths in specialized areas

Advantages

• Enhanced coordination and control

• Impeded communication and coordination due differences in values and orientations - “silos”

31. Slide 40 Organization structures: Divisional structure

-The divisional organzaional structure is where products, projects, or products market are grouped internally. When the company you have that diversifies into related products. They develop into a divisional structure.

Advantages (of divisional structure)

• Separation of strategic and operating control

• Quicker response to changes in the market environment 

• Fewer problems sharing resource across functions

• Development of general management talent is enhanced

Slide 42; SBU Strucuture advantages and disadvantage 

Advantages.

• Planning and control by the corporate office

• Decentralization of authority

• Quicker response to changes in the market environment by individual business unit 

Disadvantages

• Possible difficult in achieving synergies across SBUs

• Increased personnel and overhead expenses

• Corporate office further removed from the divisions

• Corporate unaware of key changes in market conditions

Corporate office further removed from the divisions