Unit 2: Value Creation, Environment, and Competitive Advantage

4 benefits of setting goals

1. Provides direction and guidance

2. Helps allocate resources

3. Defines corporate cultures

4. Helps assess performance

7 stakeholder groups

- stockholders

- managers

- employees

- suppliers/distributors

- customers

- community/society

Internal environment

the events and trends inside an organization that affect management, employees, and organizational culture

- owners

- board of directors

- employees

- physical environment

- organizational culture

External environment

everything outside an organization's boundaries that might affect it

Task/specific environment

includes entities that directly affect a firm on a constant basis

- competitors

- suppliers

- distributors

- customers

General environment

the economic, technological, sociocultural, and political/legal trends that indirectly affect all organizations

5 forces of general environment

- economic forces

- technological forces

- sociocultural forces

- demographic forces

- political-legal forces

SWOT Analysis

- organizational analysis (strengths and weaknesses)

- environmental analysis (opportunities and threats)

Porter's 5 forces

- competitive rivalry

- supplier power

- buyer power

- threat of substitution

- threat of new entry

Business/competitive strategies

- cost leadership

- differentiation

Functional strategy

strategy by which managers decide how to most efficiently achieve corporate goals through productivity

Competitive advantage from corporate strategy

plan of action for choosing which industries or companies your company should invest resources

Corporate strategies

- vertical integration

- diversification

- internationalization

Backwards vertical integration

expand business backwards into industry that produces inputs

Forwards vertical integration

expand business forwards into industry that used, distributes, or sells product

related diversification

business expands existing product lines or markets to create a competitive advantage

- create synergies

unrelated diversification

business adds new or unrelated product lines or markets not linked to current industry or business

global strategy

selling the same standardized product and using the same basic marketing approach gloablly

multidomestic strategy

customizing products and marketing strategies to specific national conditions

dimensions of scope

- vertical scope

- geographical scope

- product scope

corporate vs business strategies

- Corporate: where a firm competes, the scope of its activities, which business should we be in?

- Business: how a firm should compete within market

7 drivers of cost advantage

- economies of learning

- economies of scale

- production techniques

- product design

- input costs

- capacity utilization

- residual efficiency

reasons to differentiate

- growth

- risk reduction

- profit

diversification forms

- vertical integration

- horizontal diversification

- geographical diversification

vertical integration advantages

- input/outputs control

- reduce transaction costs

- independance

- better competitive position

vertical integration disadvantages

- increased risk (outsourcing)

- decreased flexibility

- loss of specialization advantages

- increased administrative costs

primary activities of Porter's value chain

- inbound logistics

- operations

- outbound logistics

- marketing and sales

- service

secondary activities of Porter's value chain

- procurement

- HR management

- technological development

- infrastructure