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91 Cards in this Set
- Front
- Back
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What is strategic management about?
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Understanding how firms create, capture, and sustain
competitive advantage |
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How does a company sustain competitive advantage?
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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 |
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What are two important things needed to be developed in order to sustain competitive advantage?
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Resources and Capabilities
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What are Core Competencies?
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resources and capabilities that serve as a source of competitive advantage for a firm over its rivals.
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What does strategy link together?
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A firm (goals & values, resources & capabilities, structure & systems) and the industry enviornment (competitors, customers, and suppliers)
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Define strategy in your own words.
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The determination of the basic long-term goals and objectives of an enterprise
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List 4 elements of Strategy.
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1) Long-term objectives
2) Understanding of competitive enviornment 3) Apprasial of resources and capabilites 4) Effective implementation |
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List a few operational goals
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Customer focus
More Rapid new product development Raise manufacturing quality Reduce costs Gain access to critical knowledge through strategic alliances Benchmarking Maintain proprietary technology |
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How does Southwest Airlines set itselft apart from competition?
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Lower price, shorter routes, fun and friendly corporate culture, one aircraft
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What does Strategy require? (3 things)
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1) Discipline
2) Communication 3) Leadership |
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What are 4 benefits of implementing a strategy?
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1) Neutralize any threats we face
2) Utilize available opportunities 3) Capitalize on our strengths 4) Avoid or improve upon current weaknesses |
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What is the main goal of having a strategy?
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To maximize economic return
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How does a firm achieve Superior Economic Performance?
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Sustainable Competitive Advantage (SCA)
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How is SCA (Sustainable Competitive Advantage) achieved?
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By using a value-creating strategy that cannot be (easily) duplicated
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What are 3 factors needed to be thought when creating a strategy?
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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 |
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What are 2 Conceptual traps managers fall into?
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1) Accounting Cost vs. Opportunity Cost
2) Market share is not competitive advantage |
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What's the difference between Corporate Strategy and Business Strategy?
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Corporate Strategy deals with industry attractiveness (asking what business should we be in)
Business Strategy deals with competitive advantage (asking how should we compete) |
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What is a main issue when trying to maximize shareholder wealth?
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Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management nowadays.
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Who are Stakeholders?
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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
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What is Wal-mart's Strategic Position? (3 things)
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1) Everyday low prices
2) Nationally branded products 3) Rural areas/small town living |
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What were Wal-Mart's Resources and Capabilites?
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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) |
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What were a few of Wal-Mart's threats?
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Backlash from small towns/communities because of "bigness," Squash little man
Limits to Growth Employment (lowest paid, employee law-suits) |
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What was the main issue in the Wal-Mart case? Explain.
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Growth. Oversea problems, vendor relationships do not transfer easily. Future success relies on transfer of knowledge, culture, and fit.
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What is an efficient market?
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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. |
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How do you outperform the stock market? (2 things)
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1) Luck, or
2) Asymmetric information |
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What is a key criterion when focusing on an industry's boundaries?
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Substitutability
- Demand side: Are buyers willing to substitute between types of car and across countries? |
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What are Porters Five Forces?
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1) Rivalry
2) Bargaining Power of Suppliers 3) Bargaining Power of Buyers 4) Threat of New Entrants 5) Threat of Substitution |
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What are Strategic Groups?
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a framework that explains & classifies firms' differences based on different strategies within a sector.
By clustering different firms into groups based on a few key strategic variables/dimensions that define a strategy. i.e: Restaurant industry Sector Does McDonalds' compete with Nobu? pairs of dimensions being compared are: 1) price 2) ambiance 3) cuisine... |
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Example Strategic Groups
Dimensions being compared are x) Advertising expenditure (High / Low) Y) Level of diversification (High/ Low) |
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Strategic Positioning |
Firms within the same industry can position themselves in different ways.
Afirm’sability to create value and enjoy a competitive advantage over other firmsdepends on theability of its positioning within its market–Notall positions will be equally profitable or lead to the same odds of survival. –Identificationof the strategy that creates higher value –Identificationof potential new strategies (Blue Ocean vs Red Ocean) |
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What are some of the most common barriers to entry a new entrant in the clothing industry may face?
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Capital Requirements
Economies of Scale Product Differentation Channels of Distribution Retaliation |
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What is Rivalry based on?
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Prices wars. Not advertising because advertising can expand or enhance the level of product differentiation in the industry for the benefit for all firms
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What is the difference between Static Analysis and Dynamic Analysis?
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Static Analysis explains current rivalries and profitability
Dynamic Analysis explains where the industry is headed in the future. |
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What could be a Sixth Force to Porter's 5 forces?
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Complements
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How does a firm determine their Key Success Factors?
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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.) |
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What are the internal factors of the SWOT analysis? External?
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Strengths and Weaknesses make up internal factors, and Opportunities and Threats make up external factors
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What is multi-point competition?
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Occurs when firms compete against each other simultaneously in several product or geographic markets.
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What are the advantages of a First Mover?
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Economies of Scale
Experience or Learning Curve Effects Brand Equity “Network Externalities” |
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Disadvantages of a First Mover?
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High risk
High development costs High demand uncertainty |
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What are the advantages of Second Mover?
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-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 |
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How can a second mover capitalize off of a first mover's mistakes?
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-Technology (react and change to perfect)
-Adhere to a change in consumer tastes |
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What is the value of game theory to management?
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Useful in explaining past competitive behavior—
Weak in predicting future competitive behavior |
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What are the 4 factors in a Competitor Analysis? What do they collectively do?
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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?) |
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Is the Cola industry attractive? Why?
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Yes,
1) Selling concentrate requires little capital; 2) It produces superb returns; 3) It demands minimal reinvestment 4) It spills an ocean of cash. |
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What is a main challenge Coca-Cola faces based on the information we have learned in class?
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Threat of substitutes (changes on customers’ preferences/taste)
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What does the Resource and Capabilites Matrix highlight?
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1) Exploit key Strengths
2) Managing key Weaknesses |
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Benchmarking
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Important tool and is the process of identifying, understanding and adapting outstanding practices from organisations anywhere in the world to help your organisation improve its performance.
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What is a resource?
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Concrete assets owned by the firm
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What are Capabilities?
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What they CAN (know to) do with those resources!
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What are three types of resources?
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Intanigible (brand names, copyrights, etc.)
Tangibles (assets, etc.) Human Resources (Individual Skills) |
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How do we use resources to create Competitive advantage? (3 things)
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1) Efficiency
2) Scope Expansion 3) Innovation and Growth |
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What is the VRIO test?
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Valuable
Rare difficult to Imitate Organization |
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What are organizational capabilities?
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A “firm’s capacity to deploy certain resources for a desired end result”
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What is a problem with Outsourcing?
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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.
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What are 3 steps in linking resources and capabilities to SCA?
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1) Establishing Competitive Advantage (Scarcity)
2) Sustainability of Competitive Advantage (Replicability?) 3) Appropriating the returns of CA (Property Rights, Bargaining Power) |
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What are the two forms of competitive advantage?
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Differentiation and Cost advantage
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factors affecting tangible and intangible differentiation:
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Scarcity: If a resource or capability is widely available within the industry then it may be essential to possess it in order to compete- however it won’t be sufficient to attain CA
Relevance: A resource or cap. must be relevant to the key success factors in the market - Durability: Resources that are more durable than others are a more secure basis of establishing a durable CA. Changing tech makes durability of certain resources shorter. Transferability: The simplest means of acquiring the resources and cap necessary for imitating another firm’s strategy to buy them. Replicability: capabilities based on complex organisational routines are less easily replicable. I.e: Toyota lean production system. |
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Does Market Share generate CA?
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Does not alway guarantee success (profit). However, scale economies with high exit cost can make market share a CA
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How can corporate culture be a CA?
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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
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Can corporate culture be a factor that aggregates to the corporations' Sustainable Competitive Advantage?
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Yes, corporate culture is an intangible asset and in essence due to its intangible nature it is difficult to imitate.
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Name a few Drivers of Cost advantage.
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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 |
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How do you create cost advantage?
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TQM- total quality management
Just-in-time Inventory (Think Wal-Mart) |
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What are some disadvantages to Cost advantage?
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Changing Production Technology
Changing Customer Preference Increasing Supplier Power |
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Explain Differentiation Advantage.
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When a firm is able to obtain from its differentiation a PRICE PREMIUM in the market which exceeds the cost of making such a unique product/service available
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Opportunites of Differentiation is divided into what two categories?
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Characteristics of the Buyer (Segmentation)
Characteristics of the Product (Differentiation= |
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When do you use differentiation?
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To achieve:
Quality Service Brand Image & Reputation Packaging |
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Can distribution be a Sustainable Competitive Advantage (SCA)?
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Yes, can also provide value to the customer.
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Value of game theory to strategic management
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Helps strategic managers and firms understand business situations by deeply understanding the past, and speculating what may occur in the future.
It creates value because it provides a set of tools that allows us to structure our view of competitive interaction (Establishing competitive advantage by exploiting uniqueness). Weaknesses: Unrealistic assumptions, lack of generality, and an analysis of dynamic situations through a sequence of static equilibriums. |
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Nash Equilibrium |
No player can increase his/her payoff by a unilateral change in strategy
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Prisoner's Dillema |
When given the choice of keeping quiet or “ratting” out the other prisoner in the interrogation room, the result was that both prisoners if choosing to rat on the other would end up in jail for a period of 6 months, whilst if both had remained silent, both would have faced a mere 3 months at most in a prison cell, or they would have been released due to lack of evidence. This Dilemma arises in almost all competitive situations (Lobster game clear portrayal): everyone could be better off with collision (Tacit collusion in this case).
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Deterrence |
The act of imposing costs on the other players for actions deemed to be undesirable. Mafia example: through the use of draconian reprisals (clear establishment that deserters would be shot/disavowed and killed), the mafia was able to enforce its “code of silence". Key for effectiveness: deterrence must be credible (hence the threat should be believable or realistic) Another example of deterrence: Nuclear Arms Race between US and Soviet Union: based on the logic of mutual assured destruction. |
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Dilemma with Nash Equilibrium Theory |
Even if NE can be achieved, just achievement is unstable as incentives for cheating are always high. |
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Changing Game Structure
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Creative strategies: establishing alliances and agreements with competitors can increase the value of the game by increasing the size of the market and building joint strength against possible entrants.
- Stone brewery alliances with other new craft beer makers in San Diego |
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Signalling |
Selective communication of information to competitors (or customers) designed to influence their perception and hence to provoke or avoid certain types of reactions. |
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What is Vertical Integration?
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The number of stages in a product’s or service’s value chain that a particular firm engages in
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What is forward integration? Backward?
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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. |
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Why vertically integrate?
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To gain more of the Market Share
Efficiency |
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Focused integrated strategy
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what happens within the company is reflected outside the company |
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How did Harley Davidson develop a focused integrated strategy
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By linking various activities of the value chain through the exploitation of it unique image and heritage (Intangible Assets) - Narrow segment concentration of motocycle market : Super heavyweight cruiser and touring bikes |
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Weaknesses that impact Harley Davidsons' competitive advantage ?
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1) Distribution channel and networking only strong in the US, hence expanding to other countries and attempting to establish a worldwide dealer network like Honda harder. 3) Lack of a strong patent portfolio |
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Resources and Capabilities in Harley Davidson
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Resources: Plants, skilled employees, brand, customer loyalty dealership network, financial resources
Capabilities: Purchasing/supply chain management capability, R&D/Technological capability, Engineering capability, marketing capability, customer service capability and design/customisation capability, Just-in-time capability, team production capability |
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Value Chain Analysis
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identifies a sequential chain of the main activities that the firm undertakes, and divides these activities from primary to supporting. (Customer is always the focal point)
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Strengths that aggregate to HD's maintenance of its CA |
Brand image: Brand linked to a tradition " a way of life" Brand reputation supported by promotional events. Customer service: HOG allows direct linkage with customers Design/customisation |
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How are resources and capabilities correlated? |
the process of transforming a resource to a capability is a very obscure one Different types of capabilities are classified as: 1) CORE capabilities 2) Ordinary Capabilities 3) Dynamic Capabilities Resources are NOT capabilities (its all a matter of how the company utilises its resources to create value through capabilities) |
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What is the connection between resources and competitive Advantage? |
Resources should be utilised as a means to sustain CA
- They should add value to a company and should also follow the VRIO test: Valuable, Rare Inimitable (Legal protection: IPR's, Patents..) and Organised (Resources should be utilised for a clear purpose) |
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What is the Porter Value chain? |
Sequential chain that individuates the main activities of the company: from raw material to distribution (How a company can create a certain type of product and give it to the market)
Porter VC can have - A primary activity: which allows the company to create something physical and also intangible - Supporting activities: If a company does not have amazing or very rare resources, how can it utilise the resources it bestows in an unique way that creates value and that differs from its competitors. |
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What factors affected the tangible and intangible differentiation of Harley Davidson?
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HD was able to utilise its Value chain to identify differentiation opportunities |
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Strategic Positioning and ValueCreation –Where will the firm create value? –How willthe firm create value? |
Where will the firm create value? - Broador narrow segments? Matter of segmentation and positioning How willthe firm create value? - Benefit leadership or Cost leadership? Matter of competitive advantagesourcesderived from positioning
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What are some of Harley Davidson's threats to competitive Advantage? |
Image appealing: Threat of inexistent market for them in the future, because the market and the segment will become saturated, or the image of HD may loose its value over time. Economy: Demography: |
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What were some of HD key weaknesses? |
Resource weaknesses: - Small scale - Lack of tech -Lack of global distribution |
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Distinctive Capabilities: |
An organization’s resources which are critical in imparting it with competitive advantage. Basically when the capabilities originate from an attribute which other firms do not have then they form an organization’s distinctive capabilities - How uniquely an org utilise its resources when creating its capabilities. |
