MAN 4720 FSU Test 1 - Rousseau

Strategy

a set of goal directed actions aimed to gain and sustain superior performance relative to competitors.

A good strategy is based on what 3 elements?

1. Diagnosis of competitive challenges

2. A guiding policy or formulation

3. Set of actions to implement the guiding policy

Competitive Advantage

superior performance relative to competitors in the same industry

sustainable competitive advantage

the ability to outperform rivals over a period of time.

EX) apple

What is positioning?

A unique position in an industry that allows the firm to provide value to customers while controlling costs.

How to gain competitive advantage

a firm needs to provide either goods or services consumers value more highly than those of its competitors, or goods or services similar to the competitors' at a lower price

What strategy is NOT

1. Grandiose statements

2. A failure to face a competitive challenge

3. Operational effectiveness, competitive benchmarking, or other tactical tools

ex) "pricing strategy" or "branding strategy"

Stakeholders

any persons or groups who will be affected or affect the firms actions

Internal Stakeholders

employees, owners, board of directors, stockholders

External Stakeholders

customers, suppliers, alliance partners, creditors, unions, communities, governments, media

Stakeholder Strategy

an integrative approach to managing a diverse set of stakeholders effectively in order to gain and sustain competitive advantage

Stakeholder management benefits

- increased trust lowers transaction costs

- stronger reputation

- can lead to greater adaptability and stronger returns

3 important stakeholder attributes

power, legitimacy, urgency

stakeholder power

when the stakeholder can get the company to do something that it would otherwise not do

Legitimate claims

perceived to be legally valid or appropriate

urgent claims

require company's immediate attention

pyramid of corporate social responsibility

economic, legal, ethical, philanthropic

What does AFI framework stand for?

- Analysis

- Formulation

- Implementation

What does AFI framework do?

helps leaders formulate and implement a strategy that can result in superior performance.

AFI Part 1: Analysis

External analysis: industry structure, strategic groups

Internal analysis: Resources, core competencies

Competitive Advantage

Firms performance and business models

AFI Part 2: Formulation

Business strategy, innovation, entrepreneurship, platforms

Corporate strategy, vertical integration, mergers and acquisitions, alliances

Global strategy, compete globally

AFI Part 3: Implementation

organizational designs, structure, culture

corporate governance, business ethics

4 keys of strategic leadership

1. successful use of power

2. directing the activities of others

3. pursuing an organizations goals

4. enabling organizational competitive advantage

Power

The ability to influence others to do things

Upper Echelon's Theory (Don Hambrick)

- organizational outcomes reflect that of top management

The level 5 pyramid of strategic leaders

1. highly capable individual

2. Contributing team member

3. Competent manager

4. Effective leader

5. Executive

Contributing Team Member

highly level individual that can work efficiently with others

Competent Manager

efficient and effective in organizing resources to accomplish goals

Effective Leader

Presents compelling vision and mission to guide groups toward superior performance. Does the right things.

Executive

Builds enduring greatness through willpower and humility

Strategy Formulation

- the choice of strategy

- Where and How to compete

Strategy Implementation

- How work gets done

- execution of strategy

Corporate Strategy

Where to compete (industry, markets, and geography)

Business Strategy

How to compete (cost leadership, differentiation, or integration)

Functional Strategy

how to implement a chosen business strategy

vision

- captures organizations inspiration

- long term objective

An effective vision

- is expressed as a statement

- provides meaning to employees

Mission

-How to accomplish the goals

- the products and services the firm will provide

Values

What commitments does the firm make

The relationship between vision statements and performance is strongest when?

The vision is customer oriented

Customer oriented vision statement

- allows companies to adapt to changing environment

- Focus on problem solving for customer

Product-Oriented Vision Statements

Focuses on improving existing products or services

Strategic Commitments

credible actions to back up mission statement

Intended Strategy

the outcome of a rational and structured top-down strategic plan

Emergent Strategy

any unplanned strategic initiative bubbling up from the bottom of the organization

Realized Strategy

combination of intended and emergent strategy

Illusion of Control Bias

tendency to overestimate our ability to control events

Escalating Commitment Bias

continuing to support a project when it is showing signs that it might not succeed

confirmation bias

a tendency to search for information that supports our existing belief

Reason by Analogy Bias

tendency to use simple analogies to make sense out of complex solutions

Representativeness Bias

drawing conclusion based on small samples or anecdotes

Groupthink

when everyone believes the leader without challenging their opinion

The PESTEL Model

1. political

2. Economic

3. Sociocultural

4. Technological

5. Ecological

6. Legal

Political Factors

processes and actions of government bodies that can influence the decisions and behavior of firms

Economic Factors

Changes in the economy

ex) growth rates, employment rates

sociocultural factors

Society's cultures, values, norms

Demographic trends

Technology Factors

innovations, applications of new process

Ecological Factors

Environmental issues such as the natural environment, global warming, and sustainable economic growth

Legal Factors

outcomes of laws, mandates, regulations

industry

similar companies with similar products and services

Porter's 5 Forces Model

1. threat of new entrants

2. bargaining power of suppliers

3. bargaining power of customers

4. threat of substitutes

5. rivalry among existing competitors

Threat of Entry

the risk that potential competitors will enter an industry

Power of Suppliers

- pressures that industry suppliers can exert on an industry's profit potential

- lowers industry profit if suppliers demand higher prices for goods

Power of Buyers (customers)

Pressure customers put on an industry by demanding:

-A lower price or

-Higher product quality

Threat of substitiutes

- meet the same basic need in a different way

ex) energy drink vs coffee

Rivalry among competitors

The intensity with which companies in the same industry jockey for market share and profitability

perfect competition

-many small firms,

- firms are price takers

-commodity product

-low entry barriers

monopolistic competition

-many firms

-some pricing power

-differentiated product

-medium entry barriers

Oligopoly

- Few large firms

-some pricing power

- differentiated product

- high entry barriers

Monopoly

- one firm

- unique product

- very high entry barriers

During periods of high growth...

- consumer demand rises

- price competition among firms decrease

During periods of negative growth

- rivalry is fierce

-price discounts, promotions

complement goods

a product or service that adds value to the original product

co-opetition strategy

cooperation among competitors to achieve a strategic objective

Industry Convergence

When unrelated industries satisfy the same need

core competencies

unique strengths, embedded deep within a firm, that are critical to gaining and sustaining competitive advantage

RBV (Resource Based View)

-model helps identify core competencies, resources are key to firms performance

Resources

assets, capabilities, competencies

Tangible Resources

physical attributes and are visible

Intangible assets

assets that do not have physical substance

RBV Assumptions

- Resource Heterogeneity: a firms unique bundle pf resources

- Resource Immobility: Resources are difficult to replicate and can last for a long time

VRIO Framework

The resource-based framework that focuses on the value (V), rarity (R), imitability (I), and organizational (O) aspects of resources

core rigidity

a former core competency that turned into a liability because the firm failed refine, and upgrade the competency as the environment changed

The value chain

Primary Activities: firm activities that add value directly

- operations, ect.

Support Activities: activities that add value indirectly

- R&D

3 Frameworks to measure firm performance

- accounting profitability

- shareholder value

- economic value

Which 2 performance frameworks can be reflected in stock price?

Accounting profitability & Economic value

Economic value

determined by a buyers willingness to pay for a product vs how much it cost to make the product

Triple Bottom Line

people, planet, profit

What is a business model

-explains how the firm intends to make money

-stipulates how the firm conducts its business (buyers, suppliers, and partners)

Razor - Razorblades

pay for replacements

subscription

pay for access

Pay as you go

pay for what you consume

Freemium

pay for extra features/add ons

wholesale

products sold on discount

Agency

products sold by commission

Bundling

more than one product sold

Which type of resources increase competitive advantage ?

intangible resources

Using the _______, managers can see how competitive advantage flows from a firm's distinct set of activities

Value Chain Analysis

The _______ describes the internal activities a firm engages in when transforming inputs into outputs.

Value Chain Analysis

In the context of SWOT analysis, a firm can develop a defensive strategic option primarily by?

eliminating an internal weakness to mitigate an external threat.