bpol and strat exam 1

strategy

integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage

risk

an investor’s uncertainty about the economic gains or losses from an investment

strategic management process

full set of commitments, decisions, and actions firms take to achieve strategic competitiveness and earn above-average returns

asp process model

analysis, strategy, and performance

firm analyzes the external environment and its internal organization, then formulates and implements strategies to achieve a desired level of performance

strategic competitiveness

accomplished by formulating and implementing a value creating strategy

above average returns

average returns: returns = to those an investor expects to et from other investments that have a similar amount of risk

competitive advantage

achieved when using a strategy to create superior value for customers and competitors are not able to imitate that value

core competency

capabilities that serve as a source of competitive advantage for a firm over its rivals

hypercompetition

condition where competitors engage in intense rivalry, markets change quickly and often entry barriers are low

drivers: emergence of global economy, rapid tech change

mission

specifies businesses in which the firm intends to compete and customers to serve

values

define what matters most to managers and employees when they make and implement strategic decisions

vision

picture of what the firm wants to be and in broad terms what they want to achieve

resources

highly mobile, any resource differences will be short-lived

physical, human, organizational capital

strategic management process

characteristics of the current competitive landscape, 2 drivers

2 drivers = globalization of industries and markets + rapid and significant tech change

nature of competition has changes - need to make strategic decisions and adopt a new mindset that is global

according to I/O model, what should a firm do to earn above-average returns?

conditions and characteristics of external environment are primary inputs and determinants of strategies -

firms should seek out the industry with the greatest profit potential and learn how to use their resources to implement value-creating strategies

I/O model assumptions

1. external environment puts pressures and constraints that determine which strategies will result in better profitability

2. forms competing in an industry control similar resources and will pursue similar strategies bc of it

3. resources used to implement strategies are highly mobile

4. decision makers are rational and committed to acting in firm’s best interests

what does resource-based model suggest a firm do to get above average returns?

firms should formulate and implement strategies that allow the firm to best exploit its ore competencies relative to opportunity in external environment

resource model assumptions

each firm is a collection of unique resources and capabilities that provides basis for its strategy and is primary source of its profitability

overtime, firms acquire different resources and develop unique capabilities

resources not highly mobile

value of vision and mission in strategic management process

externally focused mission provides sense of purpose

internally set vision indicates what ultimately will be achieved

what are stakeholders

individuals and groups who can affect and are affected by strategic outcomes and have enforceable claims of a firm’s performance

three primary stakeholder groups

1. capital market stakeholders (shareholders, lenders)

2. product market stakeholders (customers, suppliers, host communities)

3. organizational stakeholders (employees, managers)

how do 3 primary stakeholder groups influence organizations?

dissatisfied lenders can impose stricter covenants on borrowing of capital

dissatisfied stockholders can sell stock - bad effect on price

dissatisfied employees can organize collective bargaining

dissatisfied community groups can boycott goods

describe work of strategic leaders

people located in different parts of the firm using the strategic management process to reach vision and mission

decisive and committed to nurturing those around them and creating value and returns

hard working, thorough, honest, questioning, visionary, persuasive, analytical, decision makers

elements of strategic management process

• strategic inputs

• strategic actions

• strategic outcomes

how are elements of strategic management process interrelated

inputs are vision and mission and drive the firm’s strategic actions and thus give strategic outcomes from implementing value creating strategies and strategic competitiveness and above average returns - feedback loop

competitive analysis

process of identifying key competitors and researching their products, sales strategies… to evaluate how your business compares - identifying opportunities and risks

competitive intelligence

set of data and information the firm gathers to understand and anticipate competitors’ objectives, strategies, assumptions, and capabilities.

demographic segment

population’s size, age structure, geographic distribution, ethnic mix, and income distribution

economic environment

nature and direction of the economy in which a firm competes or may compete.

general environment

composed of dimensions in the broader society that influence an industry and the firms within it.

1.Demographic

2.Economic

3.Political/Legal

4.Sociocultural

5.Technological

6, Global

7.Sustainable physical environment

global segment

global markets and their critical cultural and institutional characteristics, existing markets that are changing, and important international political events.

industry environment

set of factors that directly influences a firm and its competitive actions and responses:

−The threat of new entrants

−The power of suppliers (airplanes)

−The power of buyers (Retail)

−The threat of product substitutes (Fashion)

−The intensity of rivalry among competing firms (Fast Food)

political/legal segment

where organizations compete for attention, resources, and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various governmental agencies.

socioultural segment

concerned with a society’s attitudes and cultural values.

sustainable environment

potential and actual changes in the physical environment and business practices that are intended to positively respond to those changes in order to create a sustainable environment.

technological segment

the institutions and activities involved in creating new knowledge and translating that knowledge into new outputs, products, processes, and materials.

five competitive forces

1. threat of new entrants

2. bargaining power of suppliers

3. bargaining power of buyers

4. threat of substitute products/services

5. rivalry among existing competitors

strategic group

A set of firms emphasizing similar strategic dimensions and using a similar strategy

why is it important for a firm to study and understand the external environment?

• influences strategic options and decisions

• matched with knowledge about internal environment

• conditions now differ from past - tech changes, information gathering, processing capabilities, labor practices

what are the differences between the general environment and the industry environment? why are these differences important?

• general environment - influence all or most industries/firms, firms cannot directly control (demographic, economic, political…)

• industry environment - directly influences a firm and its competitive actions (threat of new entrants, bargaining power…)

what is the external environmental analysis process? what does a firm want to learn when using this process?

• organize attempt by firm to better understand turbulent, complex, and global environment

1. scanning - studying all segments of general environment, identifying existing or potential changes

2. monitoring - observing pattern of changes over time to detect meanings and trends

3. forecasting - develop feasible projections of what might happen and how quickly from changes and trends saw in scanning and monitoring

4. assessing - determining timing and significance of environmental changes and trends on strategic management of firm

• objective - identify potential threats and opportunities

what are the 7 segments of the general environment? explain the differences among them?

demographic - characteristics of population/society

economic - nature and direction of economy

political/legal - how firms influence government and vise versa

sociocultural - social attitudes and values

tech - creating new knowledge and translating it into outputs, inputs..

global - relevant new global markets and existing ones that are changes

physical environment - global warming, energy consumption, sustainability

how do the 5 forces of competition in an industry affect its profit potential?

• suppliers - raising prices, reducing quality of goods sold

• buyers - can successfully bargain for higher quality, greater levels of service, lower prices

• substitute products - placing upper limit on prices that can be charged

• new entrants - bring additional production capacity to the industry

• rivalry - lower overall profitability of industry, actions and responses influence