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67 Cards in this Set

  • Front
  • Back
What is strategy?
A broad plan for achieving objectives
What is a tactic?
A scheme for a specific maneuver.
WHat are three characteristics of strategic decisions?
1) Important
2) Involve significant commitment of resources
3) Not easily reversible
Three approaches to firm goals?
1) Stakeholder - firm as a coalition of interest groups
2) Shareholder - exists to maximize owners' wealth
3) Social welfare - must respond to internal/external interest groups.
Why is profit maximization a reasonable goal?
1) Boards of dir. legally obliged to pursue shareholder interests.
2) Firm must replace its assets
3) must keep stock market value above break-up value
Intended vs. inferred strategies?
Intended is the articulated strategy of those with formal authority to engage in planning.

Inferred is attributed to org. by those outside the process.
Mintzberg's critique of formal strategic planning?
1) future is unknown
2) difficult to divorce formulation from implementation
3) formalization inhibits firm
How does formalization inhibit firm's actions?
1) inhibits flexibility
2) inhibits spontaneity
3) inhibits intuition
4) inhibits learning
What are the three roles of strategy?
1) decision support
2) coordination and communication
3) target
What is the net present value (NPV) of a firm?
the total value of a firm's discounted cash flows over the life of the firm.
HOw do you apply a value maximiation approach to strategic choices?
1) identify strategic alternatives
2) estimate cash flows associated with the strategies
3) decide on appropriate discount rate
4) select the strategy which generates the highest NPV.
What is the paradox of value and values?
companies that are most successful in creating shareholder value are NOT typically those that put profit maximization as their central goal, but rather those that have consistent mission.
Why do macroenvironmental analysis?
1) best growth may occur as a result of events in the macroenvironment
2) unanticpated macroenvironmental change can threaten plans
What does PEST stand for?
Political, Economic, Social, Technological
What does SPIRE stand for?
Social, Political, INtellectual, Religious, Economic.
What does PEST+ consider?
Political, economic, social, technological, ecological, institutional.
WHat are four components of scenario development?
1) identify specific macroenvironmental forces
2) ask basic what-if questions
3) develop scenario plot and logic
4) describe end-state of relevant world.
What is the value of developing scenarios?
1) identify opportunities and threats
2) test robustness of potential strategies
3) develop common language among managers for dealing with a rapidly changing environment
What are the five objectives of industry analysis
1) how does industry structure drive competition adn the level of idndustry profitability
2) assess industry attractiveness
3) use evidence regarding changes in industrys tructure to forecast future profitability
3) formulate strategies to change industry structure to improve industry profitability
4) identify key success factors
What are four types of competitive possibilities?
Perfect competition, oligopoly, duopoly, monopoly
What are Porter's five forces?
Suppliers, potential entrants, substitutes, buyers, industry competitors
WHat to think about re: threat of entry?
capital requirements, access to resources, legal/regulatory barriers, retaliation
What to think about re: supplier leverage?
buyers' price sensitivity, relative bargaining power
What to think about re: substitute competition?
buyers' propensity to substitute, depends on relative prices and performance
What to think about re: industry rivalry?
concentration, diversity of comeptitors, product differentiation, excess capacity and exit barriers, cost conditions
What to think about re: buyer leverage?
buyers' price sensitivity, relative bargaining power.
Four things to think about re: analysis of potential threats
1) what drives competition?
2) what are the main dimensions of competition?
3) how intense is competition
4) how can we obtain a superior competitive position?
What are substitutes?
products that cause customers to value your products less when they have them relative to having your product alone.
What are complements?
products that cause customers to value your produts more when they have them relative to having your product alone.
What is hypercompetition?
a situation where intense and rapid competitive moves create disequilibrium through the continuous creation of new compettive advantages and the destruction or neutraliation of opponents' competitive advantages.
What is dynamic competition?
continually brings innovation to an industry, resulting in a perpetual transformation of an industry's structure and often an overthrow of established market leaders.
What is a strategic group?
a group of firms in an industry following the same or similar strategy.
How do you identify a strategic group?
1) identify principal strategic variables which distingusih firms.
2) position each firm in relation to these variables
3) identify clusters.
What is rivalry?
competitive external relations
WHat are alliances?
cooperative external relations including business relationships, intercompany relationships, interfirm cooperative arrangements and joint ventures.
What situations do alliances fail?
1) alliance between strong and weak partners
2) technology for market swaps are dangerous
WHy form alliances?
speed matters, a firm can't do everything itself, must find a way to distribute fixed costs over a global base of customers.
Under what 2 situations are cartels likely to emerge?
1) structural conditions
2) internal characteristics of the players
What 5 structural conditions are likely to make cartels form?
high concentration of prodcuers, small fringe, high barriers to entry, nonsubstituability, nondifferentiation.
Four phases of the basic life cycle model
introduction, growth, maturity, decline
What are the two life cycle models?
1) product life cycles
2) industry life cycles
What are firm resources?
firm resources consist of the productive assets owned by a firm and its workforce.
What are 3 categories of firm resources?
1) tangible (physical, financial)
2) intangible (tech, reputation, culture)
3) human (skills, knowhow)
Six steps to identify organizational capabilities?
1) Technology
2) product design
3) manufacturing
4) marketing
5) distribution
6) service
What is Porter's value chain?
Support activities (firm infrastructure, HR mgmt, tech development, procurement)

Primary activities (inbound log., ops, outbound log, mktg&sales, service)
Two approaches to capacity development?
1) internal development
2) external development
What is competitive advantage?
a firm possesses a competitive advantage over its rivals when it earns (or ahs the potential to earn) a persistently higher rate of profit.
How does competitive advantage emerge?
good positioning, adaptation, innovation
What are two sources of competitive advantage?
1) cost advantage
2) differentiation advantage
What are seven drivers of cost advantage?
economies of scale, economies of learning, production techniques, product design, input costs, capacity utilization, residual efficiency
Two approaches to cost reduction?
1) corporate restructuring
2) business process reengineering
What are elements of corporate restructuring?
plant closures
delayering and cuts in admin staff
What are elements of business process reengineering?
several jobs combined into one, minimizing steps, controls, and reconciliation, hybrid centralization/decentralization.
What is product integrity?
the consistency of a firm's differentiation.
Three techniques for analyzing product attributes and positioning?
1) multidimensional scaling
2) conjoint analysis
3) hedonic price analysis.
What is business strategy?
concerned with how a firm competes within a particular market
What is corporate strategy?
concerned with where a firm competes (scope of its activities)
How do you define the scope of a firm's activities?
1) product range
2) vertical integration
3) geography
What are advantages of vertical integration?
1) technical economies from integrating processes
2) superior coordination
3) avoids hold up problems and transaction costs of market contrats
What are limits of vertical integration?
1) limits flexibility
2) may compound risk
3) may create management difficulties
Eight types of vertical relationships?
spot sales/purchases, long-term contracts, agency agreements, franchises, joint ventures, vertical integration, supplier/customer partnerships, informal supplier/custoemr relationships
Two key issues in designing vertical relationships?
1) how is risk allocated between the parties?
2) are the incentives appropriate?
Porter's competitive advantage of nations?
argues that sustained competitive advantage depends on dynamic factors and contends that critical impact of a national environment is on the ability of firms embedded within it to upgrade and innovate.
WHat is Porter's national diamond framework?
Factor conditions, relating and supporting industries, demand onditions, strategy structure and rivalry.
Three motives for diversification
1) growth
2) risk reduction
3) profit
Porter's 3 tests for diversification and shareholder value?
1) attractiveness test (diversification works best when industries are attractive)
2) cost of entry test - entry costs can't capitalize all future profits.
3) better-off test - some form of synergy should be present
3 potential diversification advantages?
1) market power
2) economies of scope
3) economies from internalizing transactions.