FSU MAN 5721 Midterm

Strategy

intended to help firms address the demand of their stakeholder and meet their performance goals

Strategy Formulation

involves planning, goal-setting, and plotting a firm's direction to create/capture value

Strategy Implementation

involves actions and behaviors that enable the execution of formulated strategies

strategies evolve as they are implemented

Firm Performance

- success (or lack thereof) achieve by the firm

- financial metrics

- social metrics

- other indicators

Value Creation

- customers are willing to exchange money for product offerings

- firms are willing to exchange such offering for the money

- thus, both buyers and sellers are better off

Value Capture

- ability to access, retain, or benefit from value that is created

- depends on bargaining power and negotiation

SWOT Analysis

- strengths can become weaknesses, and weaknesses can become strengths

- the same conditions can be opportunities for some firms yet be threats for others

Vision

ideal descriptions of a firm's future, broadly defining its long-term intent; often inspirational

Mission

ideally, they should identify the firm's markets and priorities and be distinctive and measureable

Values

moral standards, norms, and guidelines

Together, visions, missions, and values

help establish a firm's purpose (ends and means)

Competitive Advantage

- differentiate firms from rivals

- often represents firm attributes or abilities that are superior those of rivals

3 views of Strategy

1. I/O Economics View

2. Resource-based View

3. Stakeholder View

I/O Economics View

- Firm performance depends mostly on the external environment

- Industry: firms offering similar products and services; can limit or expand performance potential

Resource-based View

- Firms performance depends mostly on the internal environment

- Resources and capabilities are the primary bases of firm strategy

Stakeholder View

- Firm performance depends primarily on stakeholder management

Primary Stakeholder

provide resources and capabilities

Secondary Stakeholder

can affect other stakeholder's willingness to do business with the firm

Types of Stakeholder Groups

capital market

product market

organizational

capital market

provide financial capital; desire returns on investment

product market

consume or help produce products and services

organizational

provide human capital; supply labor and decision making in exchange for wages, benefits, etc.

Porter's 5 Forces Model of Competition

1. Threat of New Entrants

2. Competitive Rivalry

3. Threat of Substitute Products

4. Bargaining Power of Buyers

5. Bargaining Power of Suppliers

Threat of New Entrants

potential entrants include new ventures and existing firms, who can leverage their resources

resources

tangible and intangible assests

capabilities

the capacity to deploy resources in a coherent manner

Characteristics of R&C that are sources of Competitive Advantage

- Valuable

- Rare

- Inimitable

- Non-Substitutable

3 Resource Management Processes

1. structure the firm's resources

2. bundle resources by combining and integrating them

3. leverage resources and capabilities by using them to exploit market opportunities

Value Chain

the process through which a firm converts raw materials into goods and services

Analyzing the value chain allows firm to

1. Understand costs relative to what customers value

2. Understand operations that create and enable value capture

3. Identify multiple means of strategy formulation and implementation

4. Identify where, how, and by whom activities should be performed

Outsourcing

purchasing a value chain activity from an external supplier

What does Outsourcing do?

- allows a firm to concentrate on areas in which it is more competitive

- partners might perform the outsourced activities more effectively and efficiently

- a firm can share risk with other firms

Core Competencies

essential to the firm's uniqueness and its potential for superior performance

Dynamic Capabilities

essential to the firm's agility or flexibility

Business-level strategies

focus on competing within particular product markets

market segmentation

dividing customers into groups

consumer markets

individuals using their own incomes to make purchases

industrial markets

organizations using their incomes to make purchases

Two ways to be different

1) perform different activities

2) perform the same activities differently

Cost Leadership

- compete based on price; small profit margins

- requires large scale and tight financial controls; suited for standardized offerings and large volumes

- basic quality is necessary, despite low price

Differentiation

- allows premium pricing based on perceived quality

- often based on superior technology, features, and customer service

- price is not irrelevant

Competitive rivalry

- competitive behavior between rivals; at the firm or dyad level

- awareness, motivation, and ability are necessary

- compete aggressively yet try to minimize rivals' responses

Competitive dynamics

- the total competitive behavior of all firms in a product market

- involves analysis at the level of the product market or industry

Strategic action

a move involving significant resources, perhaps altering the firm's strategy, that is difficult to implement and reverse

Tactical action

a move involving few resources, perhaps to fine-tuning existing strategy, that is relatively easy to implement and reverse

market commonality

extent to which firms are involved in the same product markets

resource similarity

extent to which firms' (tangible and intangible) resources overlap

asymmetric competition

one firm may consider another firm to be an important rival; the reverse is not always true

multi-market competition

some firms compete against one another in several markets

First Movers

- can obtain customer loyalty, brand awareness, and profits before other firms enter

- tend to have more influence over market standards

- often must spend heavily on R&D

Second Movers

- can learn about markets by observing first movers, customer, etc

- often can build on the market-building expenses of first movers

- can both imitate and improve on first movers' offerings

Late Movers

- enter once the market has matured

- may have to take market share away from other firms; may face more competition

- success may be slower, more difficult, and lower than that achieved by firms that entered earlier

Factors affecting competitive attacks

- order of entry

- organizational size

- product and service quality

tactical responses

often follow tactical attacks; responses happen more quickly and there tend to be more of them

strategic responses

often follow strategic attacks; responses happen more slowly and there tend to be fewer of them

corporate-level strategy

used by firms with multiple businesses that compete in different product markets

business-level strategy

occurs within product markets; multi-business firms have multiple business-level strategies

product diversification

changes to the industries and markets in which the firm competes

international diversification

changes to the countries in which the firm competes

related diversification

combining similar or interconnected businesses

unrelated diversification

combining dissimilar businesses

economies of scale

per unit cost savings arising from large volumes

economies of scope

revenue gains and/ or cost savings from sharing resources and capabilities across businesses, often due to synergy

synergy

R&C may be worth more in conjunction than any seperately

diversification advantages

- related diversification

- unrelated diversification

- internal markets for capital, labor, and other inputs

diversification challenges

-Often expensive.

-Integration and coordination can be complex.

-Demands attention and resources, which can undermine investments in other opportunities.

- Often subject to regulatory constraints.

-Increases a firm's exposure to multiple competitors.

-Requires expertise in multiple areas.

-Managers' information processing capabilities are limited.

-May increase risk, not reduce it.

Merger

two firms agree to integrate their operations on a relatively co-equal basis

acquisition

one firm buys a controlling interest in another (I.e. the target firm), making it a subsidiary or otherwise absorbing it

takeover

a type of acquisition in which the target firm did not solicit the acquiring firm's bid for outright ownership

restructuring

enables firms to reduce their scale and scope, often following M&A failures

downsizing

Reducing the number of employees

downscoping

eliminating businesses from teh portfolio

buyouts

converts a public firm to a private firm

strategic alliances

cooperative relationship in which firms combine some of their resources and capabilities to pursue specific objectives, usually temporarily

types of cooperative strategies

- Joint Venture

- Equity Alliance

- Nonequity alliance

- Franchising

- Licensing

network cooperative strategy

a strategy wherein several firms agree to form multiple partnerships to achieve shared objectives

stable network

constant and long-term

dynamic network

changing

challenges of cooperative strategies

- partners sometimes have difficulty cooperating

- because many alliance involve both cooperation and competition, bargaining power is important

- alliance functions relate positively to alliance success