EXAM PREP

Chapter #1:

• Different strategies for gaining CA

  • differentiation and cost leadership

    *3rd would be niche market (segment over industry)

    = You gain profit & mkt share (money and popularity)

• Strategy impact analysis

  • tool for how we manage stakeholders’ needs

    → they have power, urgency, and legitimacy

    → who are they, what do they value, what opps and threats are they, what do we owe them, how do we deliver

• Pyramid of corp responsibility

  • Economic, Legal, Ethical, Philanthropic

• Talked about Walmart

  → how does Walmart have CA

  • cost leadership

  • efficient supply chain

  • brand recognition

    *makes them sustainable against their competition

Chapter #2:

• Levels of leadership

  • Target: individual (intern), team member (me), manager (jenn), Lead (teris), Exec (john)

    • 3 distinct areas

      1. corporate: where

      2. business: how to compete

      3. functional: how to implement business strategy

• Flywheel effect: small, consistent efforts build momentum over time, eventually leading to massive success

• Vision statements

  • customer vs product oriented

  • vision, mission, values

    → Vision: what we want to accomplish (goals, long-term), Mission: how we accomplish it (customers, products/service), Value: how we go about completing it in a legal/ethical matter → resolve it an issue

    *relationship is strongest when:

    • vision is CUSTOMER-ORIENTED

    • internal stakeholders HELP DEFINE the vision

    • organizational structures ALIGN W/ THE VISION (compensation)

• Microsoft case

• Org.Strategy: Strategy top-down planning, scenario planning, emergent strategy

  • settings where they’re effective

    1. Strategy top-down

       • comes from executives and passed down to employees

         A: - clear goal and guidelines - set timeframe

         D: -restrictive input - limited feedback - slow adjustments

       • Ideal Settings: - military - highly regulated inst. - gov’t ex: Divergent

    2. Scenario Planning

       • “the over-thinkers” → plan for what if situations

         → potential changes in legislation, policies, advancements etc.

         *Can be pessimistic or optimistic

         A: - flexible version of the top-down strategy planning

         D: - difficult to predict all scenarios [black swan] - limited feedback - distance between top exec and front line *people avoid the bad

       • Ideal setting: fairly stable industries for firms w/ few large competitors → UPS

    3. Emergent Strategy

       • bottom-up approach that comes from employees and passed on up

         → relies on data AND personal experiences and insights

         A: - lots of input/feedback - combines elements of AFI framework in a good way - flexible

         D: - unclear strategic goal, process, or communication

       • Ideal settings: New ventures, small firms

• Black Swan: a big cataclysmic event that no one saw coming (9/11)

  • a rare, unpredictable event that has a major impact

• Cognitive biases

• Emory

Chapter #3:

• PESTEL framework

  a tool/framework that lets us identify opss and threats in the market that will affect a firm

  • Political

    *P&L are really similar → political pressure usually results in a change in legislation

  • Economic

    *macroeconomic, affect economy-wide phenomena

  • Sociocultural

    *differs across groups and should be monitored

  • Tech

    *new processes and products, AI

  • Environment

  • Legal

    *many industries have been deregulated , but still → Legal factors often coexist with or result from a political will

• Airbnb & Soft Drinks

• Industry and Firm affects

  • industry structure and profitability

  • Industry Effects: factors that affect all companies in the industry, no matter what their individual strategies are:

    • Entry and exit barriers

    • Types of products

      → These factors impact how well businesses in that industry can perform

      Industry Analysis helps us understand:

      • Profit potential: How much money can be made in the industry overall.

      • Strategic Position: Where a company stands in the industry compared to others

  • Firm Effects: impacts on a company's performance based on what decisions and actions the company’s leadership makes. It’s more about what the company itself does, like its business strategy and leadership.

    ****Firm effects are more important than industry effects because what a company does (its actions) can have a bigger impact on its success than the industry it’s in

• Strategic positioning

  • Corporate: where to compete

  • Business: How to compete

  • Functional: how to implement

• Porter 5 forces in industry

  Purpose:
  1. Help strategic leaders understand the profit potential of different industries
  2. Position their firms to gain and sustain a competitive advantage

  framework that helps businesses understand the level of competition in an industry and how it affects their profitability

  • know how they interact!!

    1. Bargaining power of suppliers

       • can threaten to increase costs or decrease quality value → increase cost production and eat at profit

    2. Bargaining power of buyers

       • power that customers or buyers have to drive prices down → customers can demand lower prices or better quality, which could affect your profits

    3. Threats of new entrants

       • how easy it is for new competitors to enter the mkt → more competition means less profits

    4. Threat of Substitutes

       • how easy it is for customers to find a suitable sub for your product → switching costs

         ex: Energy drinks vs coffee

    5. Industry rivalry

       • level of competition amongst the firms already in the industry → high competition eats at business (pressure to gain cost leadership)

*PESTEL and 5 Forces Models provide static snapshots

• Economic Moat: describe a company's ability to maintain a competitive advantage over its rivals

  → 5 sources

  • Intangible assets

  • Customer Switching costs

  • Cost advantage

  • Network Effect

  • Efficient Scale

Chapter #4

• VRIO framework

  tool used to analyze a company’s resources and capabilities to determine if they provide a sustainable competitive advantage

  • Valuable, rare, imitable, organized

    → Helps identify company strengths.

    → Shows which resources provide long-term advantages.

    → Helps companies focus on what to protect and develop.

• Resources vs capabilities

  • Dynamic capabilities allows firms to adapt and develop with the changing market and maintain CA

  • Primary Activities: directly support the firm

    → ops, marketing, and sales

  • Support Activities: indirectly support the firm or aid the primary sources

    → accounting/financials, HR, ISOM, R&D

• Bathtub example [inflows and outflows]

  • The Faucet (Inflow) – Represents resources flowing into the company.

    • This could be new customers, revenue, employees, or innovation

  • The Water Level (Stock of Resources) – Represents the current state of resources

  • The Drain (Outflow) – Represents resources leaving the company.

    • This could be customers leaving, employees quitting, or competitive advantage eroding

* Each activity adds incremental value but also costs

Chapter #5:

• Public Stock Company: ownership divided into shares that can be traded by the general public

  • 4 attractive reasons why:

    • limited liability for investors (shareholders)

    • Transferability of investor ownership

    • Legal personality

    • Separation of legal ownership and management control

• Shareholder and stakeholder capitalism

  • Shareholders: primary goal is to maximize value for shareholders (the company’s owners).

    → Companies make decisions based on increasing stock prices, dividends, and financial performance

  • Stakeholders: primary goal of Creating Shared Value, focus on everybody (employees, customers, suppliers etc.)

    → Focuses on long-term sustainability, ethical business practices, and social responsibility

• Why TOMS failed: - easy to replicate [sketchers], - high cost production -weak brand loyalty

• Different accounting metrics - determining competitive advantage

  help determine where the firm stands based on profitability, efficiency, and mkt-position

  • 3 traditional frameworks to measure and assess firm performance

    1. Account Profitability

    2. Shareholder Value Creation

    3. Economic Value Creation

* 1 + 2 = market & stock valuation

• Economic Value Creation:

  • difference between customers WTP and cost to produce the product

Frameworks that combine quantitative data and qualitative assessment:

• balance scorecard

  • what do SH value, what do customers value, What do we have (core competencies), how do we create value from that?

• triple bottom line

  • people, places, profit = sustainable CA