Policy Ch 1

Flashcard maker : Lily Taylor
Above-average returns
returns in excess of what an investor expects to earn from other investments with a similar amount of risk
Average returns
returns equal to those an investor expects to earn from other investments with a similar amount of risk
capability
the capacity for a set of resources to perform a task or an activity in an integrative manner
competitive advantage
a firm has this when it implements a strategy competitors are unable to duplicate or find too costly to imitate
core competencies
resources and superior capabilities that are sources of competitive advantage for a firm over its rivals
global economy
one in which goods, services, people, skills, and ideas move freely across geographic borders
mission
specifies the business or businesses in which the firm intends to compete and the customers it intends to serve
vision
a picture of what the firm wants to be and what it ultimately wants to achieve, emotional appeal
strategy
an integrated and coordinated set of actions designed to exploit core competencies and gain a competitive advantage
strategic management process
the full set of commitments, decisions, and actions required for a firm to achieve strategic competitiveness and earn above-average returns
strategic leaders
people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission
strategic flexibility
set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment
strategic competitiveness
achieved when a firm successfully formulates and implements a value-creating strategy
stakeholders
the individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm’s oerformance
risk
an investor’s uncertainty about the economic gains or losses that will result from a particular investment
resources
inputs into a firm’s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers
profit pool
entails the total profits earned in an industry at all points along the value chain
organizational culture
refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business
When a firm successfully formulates and implements a value-creating strategy, it creates:
a. an above-average profit pool.
b. successful core values.
c. sustainable competitive advantage.
d. strategic competitiveness.
d. strategic competitiveness.
Above-average returns are:
a. profits greater than the firm earned last year.
b. profits greater than the industry average over the last 3 years.
c. profits greater than an investor expects to earn from a historical pattern of performance of the firm.
d. profits greater than an investor expects to earn from other investments with a similar level of risk.
d. profits greater than an investor expects to earn from other investments with a similar level of risk.
Apple has reemerged as a significant player in the computer industry, a regeneration attributed mainly to:
a. implementation of strict cost controls.
b. increased economies of scale.
c. the development of capabilities in innovation.
d. the creation of monopoly power.
c. the development of capabilities in innovation.
One effect of globalization is:
a. lower operational efficiency as firms must transport raw materials and finished goods farther.
b. increasing loyalty of customers for products made domestically.
c. declining returns from investment in research and development.
d. increased product quality.
d. increased product quality.
The rate of technological diffusion is increasing. Other than the Internet, which of the following was fastest in penetrating 25 percent of homes in the United States market?
a. telephone
b. television
c. personal computer
d. radial tires
c. personal computer
A central premise of the industrial organization (I/O) model is that:
a. the key factor in success is choosing the correct industry in which to compete.
b. the firm’s internal resources and capabilities represent the foundation for development of a value creating strategy.
c. the key to earning above-average returns is strategic commitment.
d. the internal structure of the organization must match the industry in which it competes in order to earn above-average returns on investment.
a. the key factor in success is choosing the correct industry in which to compete.
Firms competing under the resource-based view of the firm:
a. should focus on their homogeneous capabilities to compete against their rivals.
b. argue that the industry environment has a stronger influence on firms’ ability to implement strategies more successfully than does the competitor environment.
c. emphasize that it is difficult to develop and sustain a competitive advantage based on resources alone.
d. suggest that vision and mission are closely linked to sustainable competitive advantage.
c. emphasize that it is difficult to develop and sustain a competitive advantage based on resources alone.
A firm’s mission:
a. is a statement of a firm’s business in which it intends to compete and the customers which it intends to serve.
b. is an internally-focused affirmation of the organization’s financial, social, and ethical goals.
c. is mainly intended to emotionally inspire employees and other stakeholders.
d. is developed by a firm before the firm develops its vision.
a. is a statement of a firm’s business in which it intends to compete and the customers which it intends to serve.
Capital market stakeholders include all of the following EXCEPT:
a. banks.
b. shareholders.
c. former employees.
d. bond holders.
c. former employees.
A profit pool is:
a. the pool of assets that is distributed to investors.
b. the total profits earned in an industry along all points of the value chain.
c. the profits available to firms which earn above-average returns.
d. the total profits available to be divided up among the competitors within an industry.
b. the total profits earned in an industry along all points of the value chain.
business-level strategy
providing value to customers and gaining competitive advantage by exploiting core competencies in individual (specific) product markets.
cost leadership strategy
an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors.
differentiation strategy
an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.
focus strategy
an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment.
integrated cost leadership/differentiation strategy
involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation
Market segmentation
a process used to cluster people with similar needs into individual and identifiable groups.
total quality management (TQM)
a managerial innovation that emphasizes an organization’s total commitment to the customer and to continuous improvement of every process through the use of data-driven, problem-solving approaches based on empowerment of employee groups and teams.
Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core competencies:
a. in the selection of industries in which the firm will compete.
b. in specific product markets.
c. for all of the businesses in which the firm operates.
d. for each particular geographic location in which the firm operates.
b. in specific product markets.
Using Internet technology and e-commerce to increase information volume, Amazon has built a cost effective capability around information exchanges with its customers. This represents which of the three dimensions of service?
a. reach
b. richness
c. affiliation
d. advantage
b. richness
In order to meet and exceed customer expectations, firms must:
a. constantly manipulate customers’ perceptions of their wants.
b. address the who, what, when, where, how, and why as they apply to need satisfaction.
c. continuously improve, innovate, and upgrade their core competencies.
d. successfully defend their established core competencies to repel innovation and imitation.
c. continuously improve, innovate, and upgrade their core competencies.
Value creating strategies satisfy customer needs through:
a. firm resources.
b. firm assets.
c. core competencies.
d. capabilities.
c. core competencies.
A company using a business strategy with a narrow scope:
a. is following a cost leadership business strategy.
b. is focusing on a broad array of geographic markets.
c. seeks to limit the group of customer segments served.
d. faces a decreasing number of activities on its value chain.
c. seeks to limit the group of customer segments served.
An effective cost leader seeks to continually improve levels of efficiency to enhance profit margins. Which of the following elements of industry structure does this affect most directly?
a. potential entrants
b. substitutes
c. buyer power
d. supplier power
a. potential entrants
A service that is effectively differentiated from that offered by rivals has qualities that are:
a. perceived as standardized by the customer.
b. perceived by the customer to add value for which they are willing to pay a premium.
c. valued by the typical industry customer.
d. seen as essential attributes.
b. perceived by the customer to add value for which they are willing to pay a premium.
Which of the following is NOT a common risk associated with the differentiation strategy?
a. Customers find the price gap between the low-cost product and the differentiated product too large.
b. Customers’ experience with other products may narrow their perception of the value of a product’s differentiated features.
c. Counterfeit goods are widely available to customers.
d. Suppliers of raw materials erode a firm’s profit margin with price increases.
d. Suppliers of raw materials erode a firm’s profit margin with price increases.
Focus strategies:
a. shelter a firm from the risks associated with industry-wide strategies because of their niche focus.
b. allow a firm to avoid global risk by focusing on niches in national or regional markets.
c. face different types of risks than industry-wide strategies.
d. are more likely to fail than industry-wide strategies.
c. face different types of risks than industry-wide strategies.
The business strategy that benefits the most from investments in TQM is:
a. cost-leadership.
b. integrated cost-leadership/differentiation.
c. focused cost-leadership.
d. focused differentiation.
b. integrated cost-leadership/differentiation.
Business-level strategies key issues
which good or service to provide?
how to manufacture it?
how to distribute it?
customers
foundation of successful business-level strategy
Reach
firms’s success and connection to customers
Richness
depth and detail of two-way flow of information between the firm and the customer
Affiliation
facilitation of useful interactions with customers
To position itself, the firm must decide whether it intends to
perform activities differently
perform different activities as compared to its rivals
Types of potential competitive advantage
achieving lower overall costs than rivals
possessing the capability to differentiate the firm’s product or service and command a premium price
Broad scope
the firm competes in many customer segments
narrow scope
the firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others
5 business-level strategies
Broad: cost leadership & differentiation
narrow: focused cost leadership & focused differentiation
both: integrated cost leadership/differentiation
cost leadership strategy key aspects (3)
Relatively standardized products
Features acceptable to many customers
Lowest competitive price
Cost saving actions required by cost leadership strategy
Building efficient scale facilities
Tightly controlling production costs and overhead
Minimizing costs of sales, R and service
Building efficient manufacturing facilities
Monitoring costs of activities provided by outsiders
Simplifying production processes
How to obtain a cost advantage (determine and Control)
cost drivers: alter production process, change in automation, new distribution channel, new advrtising media, direct sales in place of indirect sales
how to obtain a cost advantage (reconfigure, if needed)
value chain: new raw material, forward integration, backward integration, change location relative to suppliers or buyers
Value creating activities for cost leadership
Cost-effective MIS
Few management layers
Simplified planning
Consistent policies
Effecting training
Easy-to-use manufacturing technologies
Investments in technologies
Finding low cost raw materials
Monitor suppliers’ performances
Link suppliers’ products to production processes
Economies of scale
Efficient-scale facilities
Effective delivery schedules
Low-cost transportation
Highly trained sales force
Proper pricing
competitive risks for cost leadership
Processes used to produce and distribute good or service may become obsolete due to competitors’ innovations
Focus on cost reductions may occur at expense of customers’ perceptions of differentiation
Competitors, using their own core competencies, may successfully imitate the cost leader’s strategy
Differentiation strategy aspects
Nonstandardized products
Customers value differentiated features more than they value low cost
How to obtain a differentiation strategy
lower buyers’ costs
raise performance of product or service
create sustainability through: customer perceptions of uniqueness & customer reluctance to switch to non unique product or service
Value – Creating activities and Differentiation
Highly developed MIS
Emphasis on quality
Worker compensation for creativity/productivity
Use of subjective performance measures
Basic research capability
Technology
High quality raw materials
Delivery of products
High quality replacement parts
Superior handling of incoming raw materials
Attractive products
Rapid response to customer specifications
Order-processing procedures
Customer credit
Personal relationships
competitive risks of differentiation
The price differential between the differentiator’s product and the cost leader’s product becomes too large
Differentiation ceases to provide value for which customers are willing to pay
Experience narrows customers’ perceptions of the value of differentiated features
Counterfeit goods replicate differentiated features of the firm’s products
aspects of a focus strategy
Particular buyer group (e.g. youths or senior citizens
Different segment of a product line (e.g. professional craftsmen versus do-it-yourselfers
Different geographic markets (e.g. East coast versus West coast)
types of focus strategies
Focused cost leadership strategy
Focused differentiation strategy
To implement a focus strategy, firms must be able to
Complete various primary and support activities in a competitively superior manner, in order to develop and sustain a competitive advantage and earn above-average returns
factors that drive focused strategies
Large firms may overlook small niches.
A firm may lack the resources needed to compete in the broader market
A firm is able to serve a narrow market segment more effectively than can its larger industry-wide competitors
Focusing allows the firm to direct its resources to certain value chain activities to build competitive advantage
competitive risks of focus strategies
A focusing firm may be “out focused” by its competitors
A large competitor may set its sights on a firm’s niche market
Customer preferences in niche market may change to more closely resemble those of the broader market
sources of “strategic inputs”
resources
core competencies
capabilities
Industrial Organization (I/O) Model
the external environment is the primary determinant of a firm’s strategic actions
identifying and then competing successfully in an attractive industry or segment of an industry are the keys to competitive success
resource – based model
suggests that a firm’s unique resources and capabilities are the critical link to strategic competitiveness
concerned primarily with internal environment
hypercompetition
results from the dynamics of strategic maneuvering among global and innovative combatants
assumptions of market stability are replaced by notions of inherent instability and change
used to capture the realities of the competitive landscape
two primary drivers of hypercompetition
global economy
technology
globalization
the increasing interdependence among countries and their organizations as reflected in the flow of their goods and services, financial capital, and knowledge across country borders
product of a large number of firms competing against one another in an increasing number of global economies
liability of forgiveness
the risks of participating outside of a firm’s domestic country in the global economy
technology related trends and conditions
technology diffusion and disruptive technologies
the information age
increasing knowledge intensity
technology diffusion
the speed at which new technologies become available and are used
perpetual innovation
term used to describe how rapidly and consistently new, information-intensive technologies replace older ones

Get instant access to
all materials

Become a Member