401

Front 1

what are the five definitions of strategy?

Back 1

Plan, ploy, pattern, position, and perspective

Front 2

what is strategy as a plan

Back 2

plans are made in advance and developed consciously and purposely
EX: Military, Game theory, management

Front 3

Strategy as plan

Back 3

A purposeful and conscious course of action (a set of guidelines for using means to achieve ends).
- thought of in advance and purposeful

Front 4

Strategy as ploy

Back 4

A set of tactics used to outsmart rivals

Front 5

Strategy as pattern

Back 5

Consistency in a firm’s behavior or pattern in a stream of actions

Front 6

Strategy as position

Back 6

Creation of a unique and valuable position vis-a-vis rivals involving different set of activities.

Front 7

Strategy as perspective

Back 7

Ingrained way of perceiving the world; Organizational culture, ideology or “collective mind”

Front 8

Roles of Strategy

Back 8

1) focuses effort by creating a unifying theme
2) Defines the organization by acting as a communication device
3) Provides consistency

Front 9

Differences in various definitions of strategy can be summarized as follows:

Back 9

Explicit vs. Implicit
Intended vs. Emergent vs. Realized
Business level vs. Corporate level
Corporate Strategy: Where to compete?
Business (competitive) strategy: How to compete?

Front 10

Competitive advantage

Back 10

Creation of superior value through the difference between 1) the market’s willingness to pay for a unit of output and
2) the firm’s cost for producing that unit of output

Front 11

What is Superior Advantage and how do you create it?

Back 11

Superior refers to better than/greater than rivals
1) Increasing customers’ willingness to pay (product attractiveness)
2) Decreasing the firm’s unit cost
3) A combination of the two

Front 12

The I/O Model Stages

Back 12

1) Study the external environment, especially the industry environment:
2) Locate an attractive industry with a high potential for above-average returns.
3) Identify the strategy called for by the attractive industry to earn above-average returns
4) Develop or acquire assets and skills needed to implement a chosen strategy
5) Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy

Front 13

Assumptions of the I/O Model

Back 13

1) External environment imposes constraints, must choose strategy that fits the environment
2) Industry firms have similar resources and pursue similar strategies
3) Resources used to implement strategies are highly mobile and transferable across firms
4) Managers are assumed to be rational actors; with complete information and unlimited information-processing ability

Front 14

Attractive Industry

Back 14

High entry barrier, low suppliers and buyer power, few threats from substitute products, moderate rivalry

Front 15

Porter: Strategy rests on unique activities

Back 15

Variety-based positioning -- based on the choice of product or service varieties rather than customer segments
Needs-based positioning -- serving most or all of the needs of a particular group of customers
e.g. Ikea
Access-based positioning -- segmenting customers who are accessible in different ways
• e.g. urban vs rural

Front 16

What is Strategy according to Michael Porter (1996)?

Back 16

o Creating a fit between companies activities
o Success depends on doing many things well, not just a few, and integrating them

Front 17

What is the difference between strategic positioning and operational effectiveness?

Back 17

o Operational effectiveness -- performing similar activities better than rivals
o Pushes productivity frontier outward, raising the bar for everyone, however no relative improvement for anyone
o Strategic positioning -- performing different activities from rivals or similar activities in different ways

Front 18

Why are trade-offs critical for Porters definition of Strategy?

Back 18

o Leads to image or reputation inconsistencies
o Different activities require different product configurations, skills, employee behaviour, management systems, etc.
o Limits on internal coordination and control
• Organizational priorities become unclear

Front 19

“Stuck in the Middle” argument

Back 19

Each strategy involves compromises
Becoming neither the lowest cost nor the most differentiated firm.
Differentiator cannot reduce the costs at the same level as cost leader without sacrificing their quality or image.
Cost Leaders cannot achieve differentiation without increasing their costs

According to Porter, firms that are “stuck in the middle” will be less profitable than rivals achieving generic strategy.

Front 20

RBV Model

Back 20

Resource-Based View of Strategy that leads to superior returns
Includes: Resources, Capabilities, competitive advantage, attractive industry, strategy formulation & implementation

Front 21

What are and explain the aspects of RBV?

Back 21

1. resources- strengths and weaknesses compared with competitors
2. capabilities—what it can do better than its competitors
3. competitive advantage- whats their potential
3. find an attractive industry and strategic position with in it
4. select a strategy that allows a firm to utilize its capabilities and opportunities

Front 22

What are the assumptions and propositions of the RBV model?

Back 22

Differences in firms performances are based on their unique resources and capabilities
1) Resources are not perfectly mobile across firms
2) Competitive advantages are sustainable
3) Superior profits exist when rivals cease their efforts to erode firms’ competitive advantages

Front 23

What are resources?

Back 23

A firm’s assets that are inputs into a firm’s production process. they are Tangible resources
(Financial, Physical, Technological) and Intangible resources (Human. innovation, reputation)

Front 24

What are capabilities?

Back 24

Capabilities (competences): firm’s capacity to deploy resources for developing superior products and services - learned, patterned, repetitious collective activity or simply a routine

Front 25

What are the properties of Core Competencies?

Back 25

VRIN:
Value, Rarity, Inimitability,
Nonsubstitutability

Front 26

Value

Back 26

Competences are valuable when they are relevant for developing superior products and services
They are needed to compete in an industry

Front 27

Rarity

Back 27

Competences need to be scarce to contribute to a firm’s competitive advantage
If a firm controls a competence that is controlled by a numerous competitors, then the competence is unlikely to be a source of competitive advantage

Front 28

What are the sources of sustainable competitive advantage?

Back 28

Inimitability: Competences need also be difficult to imitate
Nonsubstitutability: Competences do not have strategic equivalence

Front 29

Why do rivals find difficult to imitate a focal firm’s competences?

Back 29

Four reasons:
Time Compression Diseconomies
Asset Mass Efficiencies
Social Complexity
Causal Ambiguity

Front 30

What are some of the mechanisms for sustaining first mover advantages?

Back 30

1. Brand Loyalty and Reputation 2. Learning Curve
3. Rival response lag:
• time it takes for competitors to recognize, evaluate, and formulate a response
• waiting times for specialized equipment
• rivals are unwilling to let go of their existing profitable businesses.
4. Patents and Trade marks

Front 31

What are some of the disadvantages of being the first mover?

Back 31

1) Free-rider effects
2) First movers can quickly lose their advantage when commercialization is high, shifts in technologies are frequent and they are reluctant to self cannibalize

Front 32

What is ACF and what are the types?

Back 32

AFC= Advantage-creating Frequency
1) Disruptive ACF- Technological innovation (discover radically new technologies) and Product innovation (frequently introduce new products ahead of rivals)
2) Incremental ACF: frequently improve and upgrade the value of their existing products and services.

Front 33

What are some of the early mover advantages?

Back 33

- early movers can quickly respond through imitation
- able to study customer reactions
- avoid both mistakes and huge costs of first movers
- can develop more efficient processes and technologies

Front 34

Economies of scope

Back 34

onomies of scope are cost advantages that result when firms provide a variety of products rather than specializing in the production or delivery of a single product or service. Economies of scope also exist if a firm can produce a given level of output of each product line more cheaply than a combination of separate firms, each producing a single product at the given output level

Front 35

Economies of substitution

Back 35

The costs of designing a brand new complex product is higher than the costs of designing an upgraded system through partial retention of existing components

Front 36

What are the acceleration costs trade offs (as advantage creating frequency increases, why do costs also increase?

Back 36

Three reasons:
– Increased rate of self-cannibalization
– Time compression diseconomies
– Red Queen phenomenon

Front 37

what are strategic networks?

Back 37

• Products are complex systems consisting of many interdependent components designed and manufactured by different companies
• Interfirm collaboration and coordination are critical for achieving compatibility across components

Front 38

From Competing on the Edge Strategy, what does it mean to manage change?

Back 38

– Reacting
– Anticipating
– Leading

Front 39

Characteristics of competing on the edge
strategy:

Back 39

– Unpredictable – Uncontrolled – Inefficient
– Proactive
– Continuous
– Diverse

Front 40

Competing on the Edge Strategy Assumptions

Back 40

– Unclear industry boundaries
– Unpredictable competition
– Uncertain environmental changes
(technological advances or customer
preferences)
– Decentralized decision making (at business
units)

Front 41

How do firms achieve semicoherent strategic tendency? (Edge strategy)

Back 41

Edge of Chaos, Edge of time, and Time Pacing

Front 42

How do firms create competitive advantage according to the I/0, RBV, and DS models?

Back 42

I/O: Selecting favorable industry or position within industry
RBV: Identifying/developing strategic resources
DS: Recognizing and exploiting profit opportunities

Front 43

How do firms sustain competitive advantages according to the I/0, RBV, and DS models?

Back 43

I/O: Defend your market position;
RBV: Ex-post limits to competition (inimitability and nonsubstitutability); Leveraging core competences across markets;
DS: Competitive advantages are not sustainable. Firms create series of temporal advantages

Front 44

What is the role of top managers according to the I/0, RBV, and DS models?

Back 44

I/O: To identify profitable industry context, strategic positioning
RBV: To identify strategic resources and design strategy based on those resources
DS: Create flexible structure; entrepreneurial culture; strategy emerges from below; from middle managers and knowledgeable employees

Front 45

What are the main propositions of the Blue Oceans Strategy

Back 45

- Firms that compete in “blue oceans” gain above average profits.
-Technological innovation is not critical driver of discovery of “blue oceans”
-Incumbents are not at a disadvantage
-Strategic moves are basic unit of analysis

Front 46

How does “Blue Ocean” strategy lead to competitive advantages:

Back 46

-They proactively change the industry structure
-They make competitors irrelevant
-They create new market spaces (product categories)
-They pursue cost leadership and differentiation strategy simultaneously (trade-offs become irrelevant)

Front 47

Within the "Action-Reaction" Framework, how is strategy defined, and how do you define competitors?

Back 47

Strategy- a unique position that evolves around exploiting core competences and creating a series of temporal advantages
Competitors-

Front 48

What is competitor intelligence?

Back 48

An ethical gathering and interpretation of all information about the companies that a firm competes against
Includes: Knowing a competitors direction (future objectives), capabilities and intentions (current strategy), beliefs about the industry (its assumptions) and their capabilities

Front 49

In the Strategy as Action model, how are firms successful?

Back 49

Success is based on a firms
- ability to make new competitve actions
- ability to anticipate and respond to a competitors competitive action
- ability of rivals to react to your first move (max value when the likelihood and speed is low)

Front 50

Explain Competitive Analysis for the A-M-C Moel

Back 50

1. Market Commonality (# of markets both compete in, and the degree of importance of those markets)
2. Resource Similarity: how comparable the tangible and in tangible resources are (if similar, strengths, weaknesses, and strategies)

Front 51

What are the drivers of competitive behavior in the A-M-C

Back 51

Awareness of rivals actions
Motivation to attack or react/respond
Capability to attack and respond

Front 52

Explain the Model of Multi-Market Competition (part of AMC model/Market commonality)
In other words, what is MUTUAL FORBEARANCE?

Back 52

When
- Awareness (greater interdependence and attention)
and Capability (ability to hurt and opportunity to attack)
are HIGH, there is a decreased Motivation to attack

Front 53

Forbearance Hypothesis

Back 53

A firm is less likely to attack a rival with whom it has high market commonality

Front 54

How does resource similarity impact Motivation?

Back 54

When firms have equal resource potential to attack and respond (awareness and capability are HIGH)
- they are less likely to attack, but retaliation is high
- more likely to quickly respond
Dissimilar resources: a rival with resource disadvantage has a longer response time and the rival with the advantage is more likely to attack

Front 55

Which has higher predictive power, market commonality or resource similarity (why?)

Back 55

Market Commonality because resources are both tangible and intangible, making awareness very challenging

Front 56

In the Action Response Frame Work, what are the three types of competitive stances?

Back 56

1. Ignore the move: choose this when no significant impact on firms performance or when using a "wait and see" attitude
2. Accommodation: choose when entry can contribute to the market size, cooperation is less costly then destructive battle *this strategy can show signs of weakness which encourages attack on you
3. Retaliation: protect market position *could lead to Red Queen competition
4. Abandonment: attacker has a large competitive advantage and the market is unattractive for the incumbent

Front 57

In the Action-Response Frame Work, what are the different magnitudes for response?

Back 57

1) Match the attackers move- signals that the incumbent is unwilling to cede/surrender market share
2) Out do the attacker- signals that the incumbent has the ability to prevent the attacker from building a strong position (new entrants usually compete on price)

Front 58

In the Action-Response model, how fast should an incumbent react to an attack?

Back 58

1) Immediately: helps reduce the potential impact & prevents the attacker from building a unique position
2) Delayed reaction: helps to avoid over reaction and waste of resources
3) Preemptive strike: prevent the attacker from entering the market

Front 59

What should be the domain of response?

Back 59

Respond in the market of attacker (use when you have competitive advantage and dont want to show weakness)
Respond in the attackers market (create mutual forbearance)
Respond in a neutral market/segment (creates new market space and potentially less powerful rivals)

Front 60

According to the Competitive Behavior model, what are the characteristics for competitive actions?

Back 60

1) Strategic
-require substantial commitment of time and resources to develop
- highly visible and complex
- elicit fewer numbers of competitive responses (less motivation and capability) and create a longer delay for response
2) Tactical Actions- competitors will respond quickly to tactical actions

Front 61

According to the action types and response characteristics (competitive behavior models) how do competitors react to PRICE AND NON PRICE

Back 61

PRICE- 75% chance of response, 98% matching move in Short period (5.8 days)
NON PRICE; 17% chance of response, 90% matching move in longer time period (14.7)

Front 62

How does the organization size impact competitive activity? SMALL

Back 62

Likelihood of attack:
Like more motivated to be fast to execute and compete with a wide range of action types (guerilla warfare)
likelihood of response: lower capability to respond effectively and timely, less motivated to quickly respond

Front 63

How does the organization size impact competitive activity? LARGE

Back 63

Likely to
- initiate more competitive actions and strategic actions
- quickly respond
- have lots of resources to launch both tactical and strategic actions
- rivals are more likely to respond to large firms because they are more visible

Front 64

How can we predict a rivals performance?

Back 64

Future preformance- by looking at their market depedance (extent that revs are derived from one market) - high dependance means they will respond to protect their position, however response will be slow
- looking a past performance, poor preforming rivals are likely to respond more quickly then better preforming

Front 65

Describe how REPUTATION impacts firms

Back 65

- reputation is a positive or negative attribute that one rival ascribes to another
- based on previous responses when attacked
innovative firms: Apple is closely monitored by competitors
aggressive and unpredictable firms: delay in responses by rivals

Front 66

What is a standard and why is it important?

Back 66

A standard is a format, an interface or a system that allows interoperability - can be public or private
- important because control over standards is the basis for competitive advantage

Front 67

Why do standards appear?

Back 67

NET WORK EFFECTS- winner takes all markets: value of a given product is contingent on the number of other consumers that have it (telephones, fax, electronic mil, video games)

Front 68

Explain the theory of network externalities

Back 68

Network dep- direct value is from the # of users/installed base, indirect is derived from availability of complementary products that are critical to use the product
Network independant- intrinsic features/aspects of the product

Front 69

Why do network effects lead to winner takes most markets?

Back 69

1. path dependance: future performance is based on past events
2. positive feedback: leading firms become more successful and follow firms decline

Front 70

How is strategy defined in Network Industries?

Back 70

strategic actions
- installed base development
- managing complementary products
- assessing network intensity

Front 71

Why do market leaders fail to adequately respond to disruptive technologies?

Back 71

Performance trajectories
- those in sustaining technologies expect next generation items and upgrades but disruptive technologies produce low end products that appeal to new/different markets- start much lower in demand, but eventually meet and surpass

Front 72

What are the main principles of Disruptive Innovation theory?

Back 72

1. Companies depend on customers and investors
2. Small markets do not solve the growth needs of large companies
3. Markets that do not exist cannot be analyzed
4. An organization capabilities define its disabilities
5. Technology supply may not equal market demand (preformance over shoot)

Front 73

How can Managers embrace disruptive technologies?

Back 73

1. determine whether the technology is disruptive
2. define the strategic significance of the disruptive technology
3. locate the initial market for it
4. set up a separate organization (small enough to get excited by small gains) - leaders should be able to respond if they recognize the technology in a timely manner and establish a separate market

Front 74

What are the FOUR CONSTRAINTS against non consumers?

Back 74

1. skill related constraints
2. wealth-related constraints- draw a consumption pyramid
3. Access-related constraints- occasions where you cant get it,
4. time-related- takes too long to consume
EXAMPLES

Front 75

How do organize an internal structure to innovate?

Back 75

Idea Discovery (stimulate): Innovation training units Innovation Discovery Boards
Idea Evaluation (shepherd): growth council or intrepreneur funds
Opportunity Assessment (Spearhead): incubator group or autonomous growth groups
Opportunity Commercialization (strengthen): Corporate venture investment unit or business development units

Front 76

Product Innovation and the Missile Approach

Back 76

Discovery Stage (34-30 weeks prior), Idea Evaluation Stage (30-27 weeks prior), Opportunity Assessment Stage (26-14 weeks prior), Concept Development Stage (14-0 weeks prior)

Front 77

Why does time depression dis economies occur?

Back 77

1) higher development costs because aceleated learning leads to costly mistakes, higher testing costs, takes more people to complete quickly
2) Lower learning potential because learning is a cumulative process and it takes time to make sense of complex issues

Front 78

What are the limitations of the VRIN Model?

Back 78

- doesnt tell us how to develop core competences, only how to evaluate them
-doesnt suggest how firms should adapt to changes in the environment
- begs the question can a firm develop socially complex resources
- suggests that a company cant explain how their cc's were developed because of casual ambiguity