Strat Management 1
Flashcard maker : Lily Taylor
A winning strategy is one that
Fits the company’s internal and external situation, builds sustainable competitive advantage, and….. something about performance
A winning strategy must pass
Fit test, competitive advantage test, & performance test
What question can be used to distinguish winning vs mediocre?
How well does the strategy fit the company’s situation? Can the strategy help the company achieve a sustainable competitive advantage? Is the strategy producing good company performance?
What question tests merits of strategy to determine if it’s a winner?
The Fit Test, The Competitive Advantage Test, The Performance Test
Crafting and executing strategy are top managerial tasks why??
Nothing affects a company’s ultimate success or failure more fundamentally than how well its management team charts the company’s direction, develops competitively effective strategic moves and business approaches, and pursues what needs to be done internally to produce good day-in day-out strategy execution and operating excellence. Good strategy and good strategy execution are the most telling signs of good management.
Company strategy concerns… what goes into a company strategy? (action plan)
How to attract and please customers,How to compete against rivals, How to position the company in the marketplace, How best to respond to changing economic and market conditions, How to capitalize on attractive opportunities to grow the business, How to achieve the company’s performance targets
Good strategy+ Good strategy execution=
Are the most telling signs of good management
Every strategy needs what?
A distinctive element that attracts customers and produces a competitive edge
Which is NOT something that strategy concerns? (NOT Question)
SEE QUESTION 6
What’s the foremost question in running a business enterprise?
What must managers do and do well to make a company a winner in the marketplace?
What are the integral parts of the managerial process in creating and executing strategy? (Not Question)
Choosing Employees who can support the strategy execution and strive for change, Developing a Strategic Vision, Setting Objectives, Crafting a Strategy, Executing the Chosen Strategy, Monitoring Developments, Evaluating Performance, and Initiating Corrective Adjustments
What is important for managers in thinking strategically about which directional path a company should take? (NOT question)
What business approaches and operating practices should we consider in trying to implement and execute our business model
What do managers consider when choosing to pursue one strategic course over another?
(Question on the quiz was which is not one of the hierarchy: Financial Strategy), All four levels of the strategy making hierarchy must be unified. Levels are: Corporate Strategy, Business Strategy, Functional-Area Strategy, and Operating Strategy
What’s an effectively worded strategic vision statement? (do’s and don’ts chart)
Flexible, desirable, and directional, DO: Be graphic, be forward looking and directional, keep it focused, have some wiggle room, be sure the journey is feasible, indicate why the directional path makes good business sense, make it memorable, DONT’S: Be vague or incomplete, don’t dwell on the present, don’t use overly broad language, don’t state the vision in bland or uninspiring terms, don’t be generic, don’t rely on superlatives (best, most), don’t run on and on and on
Whats the most important benefit of an engaging and convincing strategic vision?
Winning the support of employees to help make the vision a reality, Gaining wholehearted organizational support for the vision and uniting company personnel behind managerial efforts to get the company moving in the intended direction
What’s the difference between a mission and a vision statement?
A mission statement typically concerns a company’s present business scope and purpose whereas a strategic vision sets forth “where we are going”, Mission = describes its purpose and its present business (who we are, what we do, and why we are here), Vision = portrays a company’s aspirations for its future (where are we going)
A company exhibits strategic intent when it does what?
It relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective
What are stretch objectives?
Stretch objectives: push an enterprise to be more inventive, to exhibit more urgency in improving both its financial performance and its business position, and to be more intentional and focused in its actions; help spur exceptional performance
Provide a good example of a financial objective (SMART goals)
financial objectives: communicate management’s goals for financial performance (ex: percent increase in annual revenues, profit margins of “x” percent, bond and credit ratings of “x”, etc), SMART: specific, measurable, achievable, realistic, timely
What tasks go into crafting a company’s strategy?
How to attract and please customers, How to compete against rivals, How to position the company in the marketplace, How to respond to changing market conditions, How to capitalize on attractive opportunities to grow the business, How to achieve strategic and financial objectives
Management is obligated to monitor new external developments, evaluate the company’s progress, and make corrective adjustments in order to:
Decide whether to continue or change the company’s strategic vision, objectives, strategy and/or strategy execution methods
What are the principle components of PESTEL analysis?
Political, Economic, Socio-cultural, Technological, Environmental, Legal
What makes the marketplace a competitive battlefield?
The constant jockeying of industry members to strengthen their standing with buyers and win a competitive edge over rivals
Rivalry among competing sellers is usually more intense when?
There is excess supply or unused production capacity, especially if the industry’s product has high fixed costs or high storage costs, As the number of competitors increases and they become more equal in size and capability, As the diversity of competitors increases in terms of long term directions, objectives, strategies, and countries of origin
What are the factors that affect whether competitive rivalry is strong, moderate or weak?
It is strong if buyer demand is growing slowly or decreasing, it becomes less costly to switch brands, products of rivals become less differentiated, there is excess supply, there are more competitors, diversity of competitors increases, or high exit barriers keep people from leaving competition, When Strong: Battle for market share is vigorous and profits are low, When Moderate/Weak: Most firms are able to earn acceptable profits
The strength of competitive pressures that suppliers can exert on industry members is MAINLY a function of:
Whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product
What are the factors that cause buyers bargaining power to be stronger?
Weak when buyers are not price-sensitive, It is strong if buyer demand is weak in relation to industry supply, number of buyers is shrinking, industry goods/services are standardized, switching costs to other brands are low, buyers are well informed, have the ability to integrate backwards into the business of the seller (i.e. a firm becomes its own supplier of a component), have the ability to delay a purchase
Collaborative relationships between buyers and sellers can represent a source of strong competitive pressure when:
Sales are made to buyer groups with either strong bargaining power or high sustainability
What are the influences when evaluating industry’s driving forces (Not Question)
Increasing efforts on the part of industry members to collaborate closely with their suppliers, 12 things: Changes in long term industry growth rate, increasing globalization, emerging new internet capabilities/applications, changes in who buys the product/how they use it, technological change/manufacturing process innovation, product/marketing innovation, entry or exit of major firms, Diffusion of technical know-how across companies/countries, change in cost/efficiency, change in uncertainty/business risk, regulation/government policy change, changing societal concerns/attitudes and lifestyles
What is a strategic group?
Cluster of industry rivals that have similar competitive approaches and market positions. Think beer example where you are able to look at what each type of strategy a company like Coors or a microbrewery pursues.
The payoff of good scouting reports on rivals is an improved ability to:
It helps managers construct up-to-date strategic profiles of rivals, have the firm take defensive steps when a competitor implements a new strategy, it also allows the firm to attack the rival if there is a competitive misstep/mistake (see page 71), this is done through Porter’s Framework for competitive analysis by looking at current strategy, objectives (financial or strategic), capabilities (what they can do now or acquire in future) and assumptions (how firm views itself), Anticipate what moves rivals are likely to make next, thereby providing a valuable assist in outmaneuvering them in the marketplace
What goes into identifying an industry’s key success factors (KSF)?
Are those competitive factors that most affect industry members’ ability to prosper in the marketplace, Three things: What product attributes and service characteristics are crucial to selling product, what resources and competitive capabilities must a company have to successfully compete, and what shortcomings put the firm at a large competitive disadvantage? (Page 74) Ultimately the firm should focus on meeting every crucial KSF and excelling in 1 or 2.
The 4 tests of a resources competitive power are: (VRIN);
Whether the resource or capability is competitively valuable and/or is something that rivals lack; whether the resource is hard to copy or/and can be trumped by different types of resources and capabilities, Valuable, Rare, Inimitable, Non-Substitutable
Be able to know what is a clear representation of a company’s capability (performing activities):
Firm’s ability to do an internal activity well, look at resources and infer what they allow you to do, look at firm’s functions and see what it can do (this method gives you cross functional capabilities, which are competitive assets from multiple areas and linking them together creates resource bundles)
Understand the examples of company resources:
Resources are a productive input or competitive asset owned by firm, Tangible Resources are things that can be quantified/seen (a factory or money), Intangible Resources are things that don’t have a physical existence and are often included in material things (skills, knowledge, relationships), when listing resources the key is to include everything so firm has a good idea of seeing everything
Competitive Power of a company’s resource strengths or capabilities hinges on?
The four factors of VRIN (Valuable, Rare, Inimitable, Non-Substitutable)
What are potential core competencies?
Internal activity that firm has learned to perform with proficiency (consistent execution at acceptable costs) that are central to competitive strategy and success, Examples: Book is 3M’s innovation; Apple’s ability to launch new products, iPhone, iPad, Apple Pay etc.
What is a distinctive competence?
A competence that is competitively important and the firm does better than its rivals. Examples: Book is Disney’s Animation; Google’s Search engine
Market opportunities that are important to a company are those:
that offer the best potential for growth and profitability
External threats may pose…. (d)
Demographic shifts that can curtail product innovation
The higher a company’s costs are above those of close rivals the more: (a)
Vulnerable! they are to competitors taking away market share, profits, etc.
One of the most telling signs of whether a company’s market position is strong is:
the cost of each activity (maybe, page 101 in the middle section), done by looking at activity based costing
Focus on value creating activities….
Is an ideal tool for examining how a company delivers on its customer value proposition
Determining whether a company’s price or costs are competitive requires entire value chain analysis which contains what?
Two broad categories: primary activities that are foremost in creating value for customers and the requisite support activities, Firms, suppliers and forward channel allies (dealers, distributors, etc.)
What is benchmarking?
Firm looks at how other firms structure their value chain and compare activities to identify best practices within a value chain and copy it if the firm doesn’t do it
The options for remedying a supplier related cost disadvantage include…
Pressuring suppliers for more favorable prices, switching to lower-cost substitute inputs, and collaborating closely to identify mutual cost-saving opportunities
For a company to translate its performance of value chain activities into competitive advantage it must:
Undertake ongoing and persistent efforts to be cost-efficient and develop differentiation advantages