Badm 449- Strategy Exam 1

Front 1

What is strategic management about?

Back 1

Understanding how firms create, capture, and sustain
competitive advantage

Front 2

How does a company sustain competitive advantage?

Back 2

When a firm implements a value-creating strategy of which
other companies are unable to duplicate the benefits or
find it too costly to imitate

Front 3

What are two important things needed to be developed in order to sustain competitive advantage?

Back 3

Resources and Capabilities

Front 4

What are Core Competencies?

Back 4

resources and capabilities that serve as a source of competitive advantage for a firm over its rivals.

Front 5

What does strategy link together?

Back 5

A firm (goals & values, resources & capabilities, structure & systems) and the industry enviornment (competitors, customers, and suppliers)

Front 6

Define strategy in your own words.

Back 6

The determination of the basic long-term goals and objectives of an enterprise

Front 7

List 4 elements of Strategy.

Back 7

1) Long-term objectives
2) Understanding of competitive enviornment
3) Apprasial of resources and capabilites
4) Effective implementation

Front 8

List a few operational goals

Back 8

Customer focus
More Rapid new product development
Raise manufacturing quality
Reduce costs
Gain access to critical knowledge through strategic alliances
Benchmarking
Maintain proprietary technology

Front 9

How does Southwest Airlines set itselft apart from competition?

Back 9

Lower price, shorter routes, fun and friendly corporate culture, one aircraft

Front 10

What does Strategy require? (3 things)

Back 10

1) Discipline
2) Communication
3) Leadership

Front 11

What are 4 benefits of implementing a strategy?

Back 11

1) Neutralize any threats we face
2) Utilize available opportunities
3) Capitalize on our strengths
4) Avoid or improve upon current weaknesses

Front 12

What is the main goal of having a strategy?

Back 12

To maximize economic return

Front 13

How does a firm achieve Superior Economic Performance?

Back 13

Sustainable Competitive Advantage (SCA)

Front 14

How is SCA achieved?

Back 14

By using a value-creating strategy that cannot be (easily) duplicated

Front 15

What are 3 factors needed to be thought when creating a strategy?

Back 15

1) The value we create for our customer
2) How we appropriate some of the value in the form of higher prices
3) Cost incurred in creating value

Front 16

What are 2 Conceptual traps managers fall into?

Back 16

1) Accounting Cost vs. Opportunity Cost
2) Market share is not competitive advantage

Front 17

What's the difference between Corporate Strategy and Business Strategy?

Back 17

Corporate Strategy deals with industry attractiveness (asking what business should we be in)

Business Strategy deals with competitive advantage (asking how should we compete)

Front 18

What is a main issue when trying to maximize shareholder wealth?

Back 18

Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management nowadays.

Front 19

Who are Stakeholders?

Back 19

The individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm’s performance

Front 20

What is Wal-mart's Strategic Position? (3 things)

Back 20

1) Everyday low prices
2) Nationally branded products
3) Rural areas/small town living

Front 21

What were Wal-Mart's Resources and Capabilites?

Back 21

Technology investments for Low Cost/ Efficient Operations (RFID, point of scale scanning, etc.)

Vendor Relationships (Scan-and-pay, economies of scale)

Culture (no frills management)

Front 22

What were a few of Wal-Mart's threats?

Back 22

Backlash from small towns/communities because of "bigness," Squash little man

Limits to Growth

Employment (lowest paid, employee law-suits)

Front 23

What was the main issue in the Wal-Mart case? Explain.

Back 23

Growth. Oversea problems, vendor relationships do not transfer easily. Future success relies on transfer of knowledge, culture, and fit.

Front 24

What is an efficient market?

Back 24

A market is efficient when prices reflect information instantaneously and one in which extra-ordinary profit opportunities are thus rapidly dissipated by the action of profit-seeking individuals in the market
individuals in the market.

Front 25

How do you outperform the stock market? (2 things)

Back 25

1) Luck, or
2) Asymmetric information

Front 26

What is a key criterion when focusing on an industry's boundaries?

Back 26

Substitutability

Front 27

What are Porters Five Forces?

Back 27

1) Rivalry
2) Bargaining Power of Suppliers
3) Bargaining Power of Buyers
4) Threat of New Entrants
5) Threat of Substitution

Front 28

What was the major problem with RTE cereal?

Back 28

Problem with high price, spend back strategy and changes in
industry’s barriers to entry stimulated demand for private
label cereals

Front 29

Who are the Big 3 cereal companies?

Back 29

General Mills, Kellogg, and Post

Front 30

What were some of the barriers of entry in the RTE industry?

Back 30

Capital Requirements
Economies of Scale
Product Differentation
Channels of Distribution
Retaliation

Front 31

What is Rivalry based on?

Back 31

Prices wars. Not advertising because advertising can expand or enhance the level of product differentiation in the industry for the benefit for all firms

Front 32

What is the difference between Static Analysis and Dynamic Analysis?

Back 32

Static Analysis explains current rivalries and profitability

Dynamic Analysis explains where the industry is headed in the future.

Front 33

What could be a Sixth Force to Porter's 5 forces?

Back 33

Complements

Front 34

How does a firm determine their Key Success Factors?

Back 34

1) Understand what CUSTOMERS want and how to survive COMPETITION
2) Do an analysis of demand and competition (Who are my customers, What drives competition, etc.)

Front 35

What are the internal factors of the SWOT analysis? External?

Back 35

Strengths and Weaknesses make up internal factors, and Opportunities and Threats make up external factors

Front 36

What is multi-point competition?

Back 36

Occurs when firms compete against each other simultaneously in several product or geographic markets.

Front 37

What are the advantages of a First Mover?

Back 37

Economies of Scale
Experience or Learning Curve Effects
Brand Equity
“Network Externalities”

Front 38

Disadvantages of a First Mover?

Back 38

High risk
High development costs
High demand uncertainty

Front 39

What are the advantages of Second Mover?

Back 39

-Reduction in demand uncertainty
-Market research to improve satisfying customer needs
-Learn from the first mover’s successes and shortcomings
-Gaining time for R&D to develop a superior product

Front 40

How can a second mover capitalize off of a first mover's mistakes?

Back 40

-Technology (react and change to perfect)
-Adhere to a change in consumer tastes

Front 41

What is the value of game theory to management?

Back 41

Useful in explaining past competitive behavior—
Weak in predicting future competitive behavior

Front 42

What are the 4 factors in a Competitor Analysis? What do they collectively do?

Back 42

1) Strategy (How is the firm competing)
2) Objectives (What are competitors current goals, how will they change)
3) Assumptions (Competitors view on industry)
4) Resources and Capabilities (Competitors key strengths and weaknesses?)

These factors all determine our PERDICTION (What are the competitors strategy changes and how will they react to ours?)

Front 43

Is the Cola industry attractive? Why?

Back 43

Yes,
1) Selling concentrate requires little capital;
2) It produces superb returns;
3) It demands minimal reinvestment
4) It spills an ocean of cash.

Front 44

What is a main challenge in the Cola Wars case?

Back 44

Threat of substitutes (changes on customers’ preferences/taste)

Front 45

What does the Resource and Capabilites Matrix highlight?

Back 45

1) Exploit key Strengths
2) Managing key Weaknesses

Front 46

What was the main problem of Montague?

Back 46

Creating a brand image recongizable by consumers

Front 47

What is a resource?

Back 47

Concrete assets owned by the firm

Front 48

What are Capabilities?

Back 48

What they CAN (know to) do with those resources!

Front 49

What are three types of resources?

Back 49

Intanigible (brand names, copyrights, etc.)
Tangibles (assets, etc.)
Human Resources (Individual Skills)

Front 50

How do we use resources to create Competitive advantage? (3 things)

Back 50

1) Efficiency
2) Scope Expansion
3) Innovation and Growth

Front 51

What is the VRIO test?

Back 51

Valuable
Rare
difficult to Imitate
Organization

Front 52

What are organizational capabilities?

Back 52

A “firm’s capacity to deploy certain resources for a desired end result”

Front 53

What is a problem with Outsourcing?

Back 53

Can have the Unintended Consequence of damaging the firm’s potential to evaluate continuously its key assumptions, learn, and create new capabilities and core competencies.

Front 54

What are 3 steps in linking resources and capabilities to SCA?

Back 54

1) Establishing Competitive Advantage (Scarcity)
2) Sustainability of Competitive Advantage (Replicability?)
3) Appropriating the returns of CA (Property Rights, Bargaining Power)

Front 55

What are the two forms of competitive advantage?

Back 55

Differentiation and Cost advantage

Front 56

What is a Business-level Strategy?

Back 56

Commitments and actions designed to provide value to customers and gain a competitive advantage

Front 57

Does Market Share generate CA?

Back 57

Does not alway guarantee success (profit). However, scale economies with high exit cost can make market share a CA

Front 58

How can corporate culture be a CA?

Back 58

An organization’s culture creates value because it allows that organization to strike deals with its suppliers, customers, and employees that are not available to other firms. Thus, culture is an organizational asset

Front 59

Can corporate culture be SCA?

Back 59

Yes, it is an intantigible asset and often the only SCA a firm has because it is so difficult to imitate.

Front 60

Name a few Drivers of Cost advantage.

Back 60

Economies of scale (specialization of labor)
Economies of learning (improved organization)
Production Techniques
Production Design
Input Cost (location advant.)
Capacity Utilization (ratio of fixed to variable costs)
Organizational efficiency

Front 61

How do you create cost advantage?

Back 61

TQM- total quality management
Just-in-time Inventory
(Think Wal-Mart)

Front 62

What are some disadvantages to Cost advantage?

Back 62

Changing Production Technology
Changing Customer Preference
Increasing Supplier Power

Front 63

Explain Differentiation Advantage.

Back 63

When a firm is able to obtain from its differentiation a PRICE PREMIUM in the market which exceeds the cost of providing differentiation

Front 64

Opportunites of Differentiation is divided into what two categories?

Back 64

Characteristics of the Buyer (Segmentation)
Characteristics of the Product

Front 65

When do you use differentiation?

Back 65

To achieve:

Quality
Service
Brand Image & Reputation
Packaging

Front 66

Can distribution be a SCA?

Back 66

Yes, can also provide value to the customer.

Front 67

What is the difference between Strategy and Finance?

Back 67

Finance: Payoffs are determined exogenously or by chance

Strategy: Our actions affect the payoffs we are likely to experience

Front 68

What is corporate-level strategy?

Back 68

A plan taken to gain a competitive advantage through the selection and management of a MIX of businesses competing in several industries or product markets. (Publicis)

Front 69

To add value corporate-level strategy should:

Back 69

Perform one or more of the value creation functions at a lower cost,

or in a way which supports a differentiation advantage

Front 70

List corporate-level strategies.

Back 70

Diversification
Vertical Integration
Other options

Front 71

What is Vertical Integration?

Back 71

The number of stages in a product’s or service’s value chain that a particular firm engages in

Front 72

What is forward integration? Backward?

Back 72

Forward integration: When Coca-Cola began buying its previously franchised independent bottlers.

Backward integration: When Home Box Office began producing its own movies for screening on the HBO Cable Channel.

Front 73

Why vertically integrate?

Back 73

Market Share
Efficiency

Front 74

What is the BCG matrix consisit of?

Back 74

Stars, Question marks, Cash cows, Dogs. Measures industry growth rate to relative market share. Would like to be in the stars and cash cows region.

Front 75

What are the 3 Essential Tests?

Back 75

1) Attractiveness Test
2) The Cost-of-Entry Test (cost of entry must not capitalize future profits)
3) The Better-off Test (synergy)

4) Option Value?

Front 76

How can a bidder for an acquistion do well?

Back 76

Luck
Asymmetric Information
Synergies

However, The most optimistic bidder usually over-estimates the true value of the firm.

Front 77

What are the two viewpoints in why people buy Starbucks coffee?

Back 77

High Quality Coffee

Experience

Front 78

What was the main problems in the Starbucks case?

Back 78

Starbucks needs to keep up with the rapid growth of the company bystrategically addressing:
1. Their Limited Supply: Inbound Logistics
2. Leveraging On‐Site & Brand Retail Locations: Marketing
3. The Real Estate Plateau: Marketing
4. Equity & Debt Financing: Infrastructure

Front 79

What technique was used for the Starbucks case?

Back 79

Value Chain Analysis

Front 80

What are three key features of an organizational structure?

Back 80

Division of Task
Span of Control
Delegation

Front 81

What are two different types of hiearchys?

Back 81

Self organizing team (10 interactions)

Bureaucratic hiearchy (4 interactions, top down approach)

Front 82

What is Corporate Governance?

Back 82

The relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations

Front 83

What are Agency Costs?

Back 83

The sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals

Front 84

What are the instutions of capitalism? (8 things)

Back 84

1. Takeovers (the market for corporate control)
2. Recruitment of executives from outside the firm
3. Monitoring by boards of directors
4. Executive compensation heavily weighted toward stock options
5. Monitoring by institutional investors
6. Debt (minimize free cash flow): E.g., LBOs
7. Separate chairperson and CEO
8. Internal control of multidivisional as a “miniature capital market”

Front 85

What was the major problem in the Publicis case?

Back 85

How to integrate Digitas with Publicis. Question if synergies work.

Also, VivaKi showed potential but no results.

Front 86

What technique was used in the Publicis case?

Back 86

The 3 essential test