UWEC MGMT 449 Exam 1

PESTEL Analysis

focuses on principal components of strategic significance in the macro-environment

what do the letters in PESTEL mean

Political factors

Economic conditions

Socioeconomic forces

Technological factors

Environmental factors

Legal factors

What are the components in the five-forces model of competition

Buyers

Suppliers

Potential

Firms in other industries w/ sub products

Rivalry among competing firms

How to use the five-forces model

Step 1: ID parties involved in competitive pressures

Step 2: Eval strengths of pressures

Step 3: Determine if the forces are supportive of high industry profitability

define Strategy

set of actions that its managers take to out perform the company's competitors and achieve superior profitability

Rivalry increases and becomes stronger when:

- demand is growing slowly

- cost to switch brands is low

- products are commodities or weakly differentiated

- firms have excess production capacity

- firms have high fixed/storage costs

- competitors are numerous or equal in size and strength

- rivals have diverse objectives, strategies or countries of origin

- rivals have emotional stakes or face high exit barriers

Factors affecting the threat of entry

all types barriers to entry from capital requirements or brand loyalty to government regulations or policies

competitive pressure from substitutes are stronger when:

good substitutes are available and attractively priced, comparable or better features, and have a low cost to switch

competitive pressures from buyers increase when:

they have strong bargaining power and are price sensitive

supplier bargaining power is stronger when

products are in short supply

products are differentiated

costs of switching suppliers

supplier industry is dominated by one/few companies

firm is not able to integrate backward for self-manufacturing

supplier is a small cost overall to the firm

no good subs

firm doesn't account for much of the suppliers sales

Strategic Management Principle

strategy concerns competition and exceptional strategy is doing what competitors don't or cannot do

competitive advantage

superior value compared to the competition or offers the same value at a lower cost to the firm

sustainable competitive advantage

competitive advantage continues indefinitely despite the efforts of competitors to match or surpass its advantage

Basic Strategic Approches

Low-Cost Provider

Focused Low-Cost

Best-Cost Provider

Focused Differentiation

Broad Differentiation

Focused Low Cost

simple products that are inexpensive to produce sold for low costs to a specific trgt mrkt

ex: dollar shave club

Low Cost

selling products for lowest possible cost to compete within the market

ex: amazon

Best Cost

good quality and equally good price for the quality

ex: applebees

focused differentiation

a lot of R&D to create unique and focused products for a very specific market

ex: Luxury Brands such as Redbull, Lamborghini, and designer clothing

Broad Differentiaion

still has a lot of R&D but has a wider target market which allows for lower prices

ex: Apple

Strategy should stay the same

false

it is always changing and evolving

Current Strategy

a blend of proactive and reactive strategies

Deliberate/Proactive Strategy

elements that include both continued and new initiatives

Emergent/Reactive Strategy

elements that are required due to unanticipated competitive developments and fresh market conditions

strategic group

consists of firms within an industry with similar competitive approaches and positions in the market

cluster of industry rivals

strategic group mapping

business model

sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit

Customer Value Proposition

the difference between product price and the value a customer places on it

Profit Formula

the difference between the per unit cost and the price the product is set at

What three tests can you use to test your strategy

strategic fit

competitive advantage

performance test

strategic plan

lays out future direction

3 key indicators if a strategy is working

Achievement of key financial and strategic goals

Financial performance vs industry average

Whether it is gaining customers and increasing its market share

strategic vision

describes managements aspirations for the future and delineates the company's strategic course and long term direction

Key ratios to measure financial performance

Gross, operating, and net profit margins

total ROA and net ROTA

ROE and ROIC

TD/TA, D/A, Current Ratio, Working Capital, LTD/Capital

resource

competitive asset owned or controlled by the firm

capability/competence

the capacity of a firm to perform and internal activity competently through deployment of a firms resources

competitive assets

represented by a firms resources and capabilities, and are determinates of its competitiveness and ability to succeed in the marketplace

Strategic Vision requirements

outlines the rationale for the firms direction in the future and uses distinctive and specific language to set the organization apart from the competition

Mission Statement requirements

specific language, focus on the business not profit, and describes the purpose

Resource Bundle

is a linked and closely integrated set of competitive assets centered around one or more cross functional capabilities

VRIN Test

Valuable

Rare

Inimitable

Non-Substitutable

Support for Competitive Advantage

Valuable and Rare

Support for Sustained Competitive Advantage

Inimitable and Non-Substitutable

Charateristics of Well-Stated Objectives

Specific

Challenging

Quantifiable

Deadline

Objectives

an orgs performance targets

Stretch Objective

sets performance targets high enough to stretch an org to perform at its full potential and deliver the best possible results

strategic intent

when a org relentlessly pursues an ambition strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective

Financial Objectivies

relate to the financial performance targets management has established for the organization to achieve

Strategic Objectives

relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects

balanced scorecard

a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management, a more complete and balanced view of how well and org is performing

SWOT Analysis

simple but powerful tool for sizing up a company's strengths and weaknesses, market ops and external threats

core competence

an activity that a firm performs proficiently and is central to its strategy and competitive sucess

distinctive competence

a competitively important activity that a firm performs better than its rivals, thus representing a competitively superior internal strength

strengths

competitive assets

weaknesses

shortcomings that are competitive liabilities

benchmarking

potent tool for improving a company's own internal activities that is based on learning how other companies perform them and borrowing their best practices

best practice

method of performing an activity that consistently delivers superior results compared to other approaches

value chain

ID's the primary activities and related support activities that create customer value

Competitive Strengths Assessment

Step 1: list the firms key success factors and mist important measures of competitive strength/weakness

Step 2: Assign weights to each measure based upon perceived significance

Step 3: rate the firm and competitors on each factor and multiply the rating by the weight assigned to each factor

Step 4: Sum the weights

Step 5: Draw Conclusions

complentor

producers of complementary products which are products that enhance the value of the focal firm

Macro-environment

The major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies