MGT 499 Final – Flashcards

Encompasses all of the relevant factors making up the broad environmental context in which a company operates; by relevant, we mean the factors are important enough that they should shape management's decisions regarding the company's long term direction, objectives, strategy, and business model

The relevance of macro environmental factors are evaluated using this

Political, Economic, Sociocultural, Technological, Environmental, Legal/Regulatory

Market size/growth rate, geographic boundaries or the market, market demand-supply conditions, market segmentation, and the pace of technological change

Buyer bargaining power, Supplier bargaining power, Substitute products, Potential new entrants, and Competitive forces

Major underlying causes of change in industry and competitive conditions

Revealing the market positions of industry competitors

Consists of those industry members with similar competitive approaches and positions in the market

Knowing about rivals' strategies, their latest actions and announcements, their resources and organizational capabilities, and the thinking and leadership styles of their executives is valuable for predicting the strategic moves competitors are likely to make next

Competitive factors that most affect industry members' ability to prosper in the marketplace

Switching costs to substitutes is low, buyers are large and can demand concessions with large quantities, large volume purchases important to sellers, buyer demand is weak, only a few buyers, and quality/quantity of information improves

Substitutes are readily available, substitutes are attractively priced, substitutes have better performance features, and end users have low costs in switching

High costs in switching purchases to alternative suppliers, needed inputs = short supply, supplier has differentiated input that enhances products, and only a few suppliers of a particular input

Pool of entry candidates are large, enter barriers are low, existing industry members want to expand market reach, newcomers expect to earn profits, and buyer demand is growing

Sellers make fresh moves to improve market standings, buyer demand growing slowly/excess inventory, number of rivals increases, products of rival sellers are commodities, and buyer costs to switch brands is low

It helps a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves

Is a cluster of industry rivals that have similar competitive approaches and market positions

High utilization of fixed assets

All of the above (the competitive pressures associated with rivalry among competing sellers to attract customers, competitive pressures coming from the attempts of companies in other industries attempting to win buyers over to their substitute products, competitive pressures associated with the threat of new entrants into the marketplace, and competitive pressures associated with the bargaining power of suppliers and customers

Are the strategy elements, intangible assets, and competitive capabilities that most affect industry members' abilities to prosper in the marketplace

Rapid growth in buyer demand and high buyer switching costs

Buyers are relatively comfortable with the quality and performance of substitutes and the costs to buyers of switching over to the substitutes are low

Rapid market growth

The costs incurred by buyers in switching to competing brands or to substitute products are relatively high

Financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers

Industry driving forces and competitive pressures favor some companies or groups and hurt others and the potential profit of different strategic groups varies because of strengths and weaknesses in each strategic group's position

All the strategically significant forces and factors outside a company's boundaries - general economic conditions, population demographics, societal values and lifestyles, technological forces, and governmental legislation and regulation

Employ similar competitive approaches and occupy similar positions in the market

When buyer demand is growing rapidly

Only a small number of suppliers exist and when it is difficult for industry members to switch to attractive substitutes

Are the strategy elements, intangible assets, and competitive capabilities that most affect industry members' abilities to prosper in the marketplace

Coca-Cola as a substitute for Pepsi

The competitive pressures associated with rivalry among competing sellers to attract customers, competitive pressures coming from the attempts of companies in other industries attempting to win buyers over to their substitute products, competitive pressures associated with the threat of new entrants into the marketplace, competitive pressures associated with the bargaining power of suppliers and customers ALL OF THESE

Demand for the product is growing slowly, one or maybe several industry members become dissatisfied their market position, buyers have low switching costs, and when strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to build market share

Are major underlying causes of change in industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions

Recording gains in financial strength and profitability and whether competitive strength and market standing is improving

Identifies the company's resources and capabilities then examines them to ascertain which are the most competitively important and whether they can support a sustainable competitive advantage over rival firms

Are competitive assets that are owned or controlled by the company and may either be tangible and intangible

Plants, distribution centers, manufacturing equipment, patents, information systems

Well known brand or results oriented organizational culture

Capacity of a firm to competently perform some internal activity

Also called capability (Capacity of a firm to competently perform some internal activity)

Measures the competitive power of a resource or capability (valuable, rare, inimitable, and nonsubstitutable)

A capability that passes the "competitively valuable" test and is central to a company's strategy and competitiveness

A competitively valuable capability that is performed with a very high level of proficiency

Management may determine that it doesn't possess a resource that independently passes all four tests listed here with high markets, but not a lot of resources that can pass the test

Ability to build and integrate new competitive assets, which modifies, deepens, reconfigures the company's existing resources and capabilities in response to its changing environment or market opportunities

Easiest applied tool for conducting this examination (strengths, weaknesses, opportunities, threats)

Value chain analysis and benchmarking

All of the various activities that a company performs internally

Entails comparing how different companies perform various value chain activities - how materials are purchased, how inventories are managed, how products are assembled, how customer orders are filled and shipped, and how maintenance is performed - then making cross-company comparisons of the costs and effectiveness of these activities

VRIN tests and SWOT analysis

Competence

Learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis a vis key

How to gain access to information regarding rivals' practices and costs

Trying to negotiate more favorable prices with suppliers and switching to lower priced substitute inputs

Comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities

Attempts to exploit resources in a manner that offers value to customers in ways rivals are unable to match

The lack of a distinctive competence

Consists of two broad categories of activities: the primary activities that create customer value and the requisite support activities that facilitate and enhance the performance of the primary activities

Ranking the company against major rivals on each of the important factors that determine market success and ascertaining whether the company has a net competitive advantage or disadvantage versus major rivals

Distinctive competence

deals exclusively with the specifies of managements game plan for competing successfully - its specific efforts to please customers, strengthen its market position, counter the maneuvers of rivals, respond to shifting market conditions, and achieve a particular competitive advantage

Lower overall costs than competitors

Eliminating and/or curbing "nonessential" activities and/or outmanaging rivals in performing essential activities

Cost-efficient management of value chain activities and revamping the value chain; Revamping firms overall value chain to eliminate or bypass cost activities

A factor having a strong effect on the cost of a company's value chain activities and cost structure

When there are few ways to achieve product differentiation that have value to buyers

Getting carried away with overly aggressive price cutting and ending up with lower, rather than higher profitability, relying on an approach to reduce costs that can easily be copied by rivals, and becoming too fixated on cost reduction

Attractive whenever buyers' needs and preferences are too diverse to be fully satisfied by a standardized product or service

Command a premium price, increase unit sales, and gain buyer loyalty to its brand

Unique taste, multiple features, wide selection/one-stop shopping, superior service, spare parts availability, engineering design/performance, luxury/prestige, product reliability, quality manufacturing, technological leadership, full range of services, and a complete line of products

A value chain activity or factor that can have a strong effect on customer value and creating differentiation

R&D activities, quality improvement, human resource management, marketing, customer service

Based on low cost aims at securing a competitive advantage by serving buyers in the target market niche at a lower cost and a lower price than rival competitors

Are keyed to offering carefully designed products/services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers

Hybrid of low-cost provider and differentiation strategies that aim at satisfying buyer expectations on key quality/feautres/performance/servie attributes and beating customer expectations at price

The size of the buyer group that a company is trying to appeal to

With a product offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers

The specifies of management's game plan

Few ways to achieve product differentiation that have value to buyers (buy also price competition among rival sellers is vigorous, buyers incur low costs in switching their purchases from one seller/brand to another, industry newcomers use low introductory prices to attract buyers and build a customer base)

It results in added shareholder value

The industry attractiveness test, the cost of entry test, and the better-off test

Is an effective way to hurdle such entry barriers as acquiring technological know-how, establishing supplier relationships, achieving scale economies, building brand awareness, and securing adequate distribution

Whether to pay a premium price for a successful firm, or to buy a struggling company at a bargain price

Parent company has skills and resources, ample time to launch business, internal entry has lower costs, targeted industry is populated with small firms, adding new production capacity not impact supply/demand, incumbent firms are likely to be slow or ineffective in responding to new entrant's efforts to crack the market

Possess competitively valuable cross-business value chain and resource matchups

Have dissimilar value chains and resources requirements, with no competitively important cross-business value chain relationships

Exists when value chains of different businesses present opportunities for cross-business skills transfer, cost sharing, or brand sharing

Are cost reduction stemming from strategic fit along the value chains of related businesses

Converting the competitive advantage potential into greater profitability is what fuels 1+1=3 gains in shareholder value

Very demanding managerial requirements and Limited competitive advantage potential beyond what each individual business can generate on its own

Risk reduction, growth, earnings stabilization, and managerial motives

Provides clear, logic way for why a diversified company needs to consider both industry attractiveness and business strength in allocating resource/investment capital to different businesses

Exists when businesses, individually, strengthen a company's overall mix of resources/capabilities and when the parent company has sufficient resources to support its entire group of businesses without spreading itself too thin

Allows a difersified company to add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential

Ensuring financial fit among the firm's businesses is based on the fact that different businesses have different cash flow and investment characteristics

Generates operating cash flows that are too small to fully fund its operations and growth; a cash hog must receive cash infusions from outside soruces to cover its working capital and investment requirements

Generates operating cash flows over and above its internal requirements, thereby providing financial resources that mayb e used to invest in cash hogs, finance new acquisitions, fund share buyback programs, or pay dividends

Restructuring the company's business lineup and putting a whole new face on the company's business markup; Radically altering the business lineup by divesting businesses that lack strategic fit or are poor performers and acquiring new businesses that offer better promise for enhancing shareholder value

Application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel

Overzealous pursuit of wealth and other selfish interest, heavy pressures on company managers to meet or beat performance targets, and a company culture that puts profitability and good business performance ahead of ethical behavior

Visible costs, internal and admin costs, and intangible or less visible costs

The same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms; hence, common ethical standards can be used to judge employee conduct in a variety of country markets and culture circumstances

Shows different societal cultures and customs create divergent standards of right and wrong - thus, what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another

Limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions/behavior in all situations, circumstances of local culture's traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not, first order universal ethical norms always take precedence over second order local ethical norms

Entails undertaking actions that earn trust and respect from all stakeholders - operating in an honorable and ethical manner, striving to make the company a great place work, demonstrating genuine respect for the enviornment, and trying to make a difference in bettering society

Defined by the specific combination of socially beneficial activities it opts to support with its contributions of time, money, and other resources

Improving the company's triple bottom line (economic, social, and enviornmental)

Concerned with the relationship of a company to its enviornment and its use of natural resources

Defined as those capable of meeting the needs of present without compromising the ability to meet the needs of the future

Entail deliberate and concerted actions to operate businesses in a manner that protects and maybe even enhances natural resources nad ecological support systems, guards against outcomes that will ultimately endanger the planet

Are not materially different from ethical principles

A strategy that is unethical not only damages the company's reputation but it also can have costly consequences

The company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen