Chp 4: Strategic Management(Additional Concepts)

Front 1

Rarity

Back 1

1. For a company to hold a competitive advantage, no other firms can have the capabilities needed to provide the quality and quantity of products and services it produces.

2. Most competitive advantages are temporary because competitors are trying to wrest an advantage from the market leader.

Front 2

Difficult to imitate

Back 2

Firms must make their superior value difficult to imitate by putting up barriers such as company culture, size, and corporate reputation(brand recognition).

Front 3

Strategic management process: setting direction

Back 3

1. Establish the organization's general direction and objectives

2. Formulate a specific strategy

3. Plan and carry out the strategy's implementation

4. Monitor results and make necessary adjustments

Front 4

Conducting an external environmental analysis

Back 4

Firms must analyze the external environment(general, industry, and competitor environment) because it can significantly affect the strategy a firm might develop, as well as whether the firm is likely to succeed or fail.

Front 5

Technological forces

Back 5

External environmental force that can critically affect organizations(spell the development or death of one).

1. Product technological changes

2. Process technological changes

Front 6

Product technological changes

Back 6

Those that lead to new features and capabilities in existing products or to completely new products

Front 7

Process technological changes

Back 7

Typically relate to alterations in how to make products or how to manage enterprises.

Front 8

Economic forces

Back 8

1. Not all economic forces affect all organizations equally, which is reliant on the industry of the firm

2. Current economic conditions clearly can affect the demand for products and cost of producing them. ex: inflation, interest rate increase

3. Economic activity tends to move in cycles(more so in specific industries), which are tough to predict. Understanding it is important for planning.

4. Most difficult to determine whether economic changes are permanent or temporary.

5. Structural changes, such as a shift from an industrial to a service economy, affect the current and future dynamics of economic activity.

Front 9

Political and legal forces

Back 9

1. Laws spell out what organizations can and cannot do, creating challenges and opportunities

2. Regulations can have major influence on business strategies, such as by creating uncertainty for firms.

3. Federal government spending, most important political aspect, can impact overall economy.

Front 10

Global forces

Back 10

1. Global environment's importance depends on the size and scope of the business

2. Global forces affect each of the other four general environmental factors

3. Two additional dimensions of the external environment:

a. institutional forces

b.physical forces

Front 11

switching cost

Back 11

When it's difficult and expensive for customers to switch from one company to another.

Front 12

Customers

Back 12

1. Firm must provide superior value to customers to achieve a competitive advantage.

2. However, if customers have too much power, it puts the firm in a poor bargaining position

3. Firms should strive to give customers superior value without giving them too much power.

Front 13

Suppliers

Back 13

1. Suppliers can have too much power over a firm if they control a valuable good necessary for the products or services provided by the firm.

2. Firms should strive for a power balance with suppliers.

3. Firms must maintain good relationships with suppliers,because of its benefits(such as customizing processes), despite the potential for power imbalances.

Front 14

Internal analysis

Back 14

1. value chain

2. primary activities

3. support activities

*Absolute value of a firm's product or service is a function of how many customers are willing to purchase the product or service and how much they are willing to pay for it.

Front 15

Inbound logistics

Back 15

consists of activities that are designed to receive , store, and then disseminate various inputs related to the firm's products or services.

ex: raw materials

Front 16

Operations

Back 16

includes a variety of activities that transform inputs into the products and services of the firm. Also includes maintenance activities.

Front 17

Outbound logistics

Back 17

includes activities that move the product or service from the firm to the customers.

Front 18

Marketing and sales activities

Back 18

Designed to inform potential customers about the products and services the firm has available and entice them to purchase them.

Front 19

Service activities

Back 19

designed to do what is necessary to ensure that the product satisfies the customer after the purchase and to increase the probability of a repeat purchase.

Front 20

Procurement

Back 20

1. The activity of procuring usable and consumable assets, which is found in each of the primary activities.

2. Critical in the process to ensure quality and timeliness of raw materials needed.

3. Suppliers influence the quality, cost, and timeliness of raw materials delivered to the firm.

4. Suppliers also participate in the innovation process

Front 21

Technology and development

Back 21

Revolves around expertise and the tools or equipment used in the exercise of the expertise.

Front 22

Human resource management

Back 22

The process of acquiring, training, evaluating, compensating, and developing human resources.

Quality of people is critical to activities to a firm, but especially critical to service firms such as banks and accounting firms.

Expertise is the basis of the service provided.

Front 23

Firm infrastructure

Back 23

Consists of its planning, finance, accounting, legal, government relations, and other activities supplied by its various primary activities.

Administrative functions that support a firm's primary activities

Front 24

Leveraging the value chain

Back 24

1. Determining where there is potential to add the greatest value

2. Segmenting the firm's business activities, allows a better understanding of the linkages among them.

3. Analysis is required to identify which activities add the most value, and which linkages are most important.

4. Need to analyze value chain as well as how suppliers, distributors, and other business partners fit into a value net.

5. Strengths and weaknesses of one partner affect a firm's competitive position and advantage.

Front 25

Evaluating the management of resources

Back 25

1. Need to develop valuable capabilities and use them to provide products and services that are superior in value to customers

2. Capabilities are areas of importance in the specific industry

3. Critical issues regard how managers obtain and bundle resources to develop capabilities and how they leverage those capabilities.

Summary:

Capabilities can consist of tangible and intangible resources, which provide special value to customers. Under certain circumstances, capabilities may become core competencies.

Firms must be able to leverage capabilities.

Front 26

Dynamic capabilities

Back 26

Resources in continual state of development

Front 27

The strategic management process: formulating a strategy

Back 27

Three levels of strategy: corporate, business level or competitive strategy, functional or unit strategy.

1. Corporate-level determines the markets in which the firm will compete

2. Business-level determines how a firm will compete in each of these markets

3. Unit-level focuses on the operations of each function or unit and their contribution to help the firm achieve a competitive advantage.

4. Most important for achieving competitive advantage is business-level strategy.

Front 28

Other generic strategies

Back 28

1. integrated differentiation-cost leadership strategy

2. multipoint competition strategy

Front 29

Strategy implementation

Back 29

1. average strategy superbly implemented is better than good strategy badly implemented

2. Internal organization must be consistent with new strategy for it to be successfully implemented.

3. Strategy may call for firms entering new products or geographic markets organically(developing products internally and greenfield ventures[establishing operations in new locations]), pursuing acquisitions, and pursuing strategic alliances.

Front 30

Monitoring and evaluating the strategy's implementation

Back 30

1. Final step in strategic management process.

2. Can improve performance of individuals and enhance the organization's performance.

3. Most organizations carry out annual or even quarterly organizational performance evaluations

4. reinforces efforts that have contributed to the desired results and corrects those that have not.

Front 31

Comparative advantage

Back 31

Selling products to customers at a superior value compared to others.

Front 32

Distinctive competence

Back 32

Competence that is distinctive, which is provided by a product with superior value; a product with superior value has distinctive competence.

Front 33

Nature of rivalry

Back 33

First dimension of porter's five forces.

1. Learn strengths of competitors and consider market segments that they avoid

2. Learn weaknesses of competitors, which may represent opportunities that can be exploited.

Front 34

New entrants

Back 34

Second dimension of porter's five forces

1. Will increase competition

2. Company can either increase switch costs or provide greater value to customers

3. Increased competition usually produces lower profit margins because customers have more choices

Front 35

Substitutes

Back 35

Third dimension of porter's five forces.

1. Focuses on the extent to which alternative products or services can substitute for existing products or services.

2. Generally fewer available substitutes leads to greater profits.