Strategic Management and Business Policy Exam 1 – Flashcards
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Strategic Management
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The ongoing process companies use to form a vision, analyze their external environment and their internal environment, and select one or more strategies to use to create value for customers and other stakeholders, especially shareholders.
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Strategic Management
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-Performance oriented -Ongoing in nature -Dynamic rather than static -Oriented to the present and the future -Concerned with conditions both outside and inside the firm -Concerned with performing well and satisfying stakeholders
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Vision
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the IDEAL description of the organization. A picture of what the firm wants to be and ultimately achieve
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Mission
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specifies the business or businesses in which the firm competes and the customers it intends to serve
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External Environment
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a set of conditions outside of the firm that affect the firm's performance
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Opportunities
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are conditions in the firm's external environment that may help the firm reach its vision
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Threats
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are conditions in the firm's external environment that may prevent the firm from reaching its vision
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Internal Organization
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the set of conditions inside of the firm that affect the choice and use of strategies
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Resource-Based View of the Environment
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the internal environment is the set of conditions(such as strengths, resources, capabilities, and so forth)inside of the firm affecting the choice and use of strategies.
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Core competencies
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are capabilities the firm emphasizes and performs especially well while pursing its vision
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Distinctive competencies
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are core competencies that differ from those held by competitors
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Competitive advantage
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when the firm's core competencies allow it to create value for customers by performing a key activity better than competitors
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SWOT Analysis: Internal Origin
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S-Strengths(Helpful) W-Weaknesses(Harmful)
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SWOT Analysis: Origin
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O-Opportunities(Helpful) T-Threats(Harmful)
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Strategic Leaders
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individuals who practice strategic leadership-making sure that decisions are made that will ensure their firm's success
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Organizational culture
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is the set of values and beliefs that are shared throughout the firm. Values reflect what is important, while beliefs speak to how things should be done. -Intangible in nature, culture can't be touched or seen, but its presence is felt throughout every organiztion
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Stakeholders
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individuals and groups who have an interest in a firm's performance and an ability to influence its actions
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Primary Stakeholders
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firm relies on continuous survival and prosperity
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Secondary Stakeholders
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not engaged in direct transactions or essential to firm survival, but are still impacted by and have the power to influence and affect the firm
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Ethics
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are concerned with the standards for deciding what is good or bad, right or wrong as defined by most members of a particular society
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Strategic leadership
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involves developing a vision for the firm, designing strategic actions to achieve this vision, and empowering others to carry out those strategic actions
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Strategic Leadership
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-Multifunctional -Ability to attract and manage human capital -Managing through others -Not focused on a department or sub-unit -BROAD vision -Flexible
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Transformational Leadership Style
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-Motivate followers to exceed expectations -Develop and communicate a vision for the organization -Build trust -Mentor and empower
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Transactional Leadership Style
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-Rewards and Punishments -Clear chain of command -Closely monitor subordinates -Innovation and creativity not emphasized
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Laissez-Fare Leadership Style
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-Minimal guidance and oversight -Go with the flow
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Top Management Team
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is a group of managers charged with the responsibility to develop and implement the firm's strategies.
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Benefits of Internal Managerial Labor Market
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-Continuity -Continued commitment -Familiarity -Reduced turnover -Retention of "private knowledge" -Favored when the firm is performing well
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Benefits of External Managerial Labor Market
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-Long tenure with the same firm is thought to reduce innovation -Outsiders bring diverse knowledge bases and social networks, which offer the potential for synergy and new competitive advantage
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Building an Entrepreneurial Culture
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-encourages employees to identify and exploit new opportunities -encourages creativity and risk taking -tolerates failure -championing innovation is rewarded
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Promoting Integrity and Ethical Behavior
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-In an ideal world, all strategic leaders would guide and promote ethical behavior -Recently, cases in which strategic leaders acted opportunistically in managing their firms have been a major concern -Want strategic leaders with integrity who are valued by all the stakeholders of the firm -Sarbanes-Oxley Act supposed to curtail CEO/corporate opportunistic behavior
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Balanced Scorecard
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-Financial(profit, growth) -Customers(valued received from products) -Internal business processes(asset use) -Learning and growth(culture of innovation/change)
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Three parts of a firm's external environment
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-The general environment -The industry environment -The competitor environment
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Demographic trends
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are changes in population size, age structure, geographic distribution, ethic mix, and income distribution
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Economic trends
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concern the direction of the economy in which a firm competes or may choose to compete
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Political/Legal trends
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pertaining to laws and regulations that guide interactions among firms and nations
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Sociocultural trends
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deal with changes in a society's attitudes and cultural values
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Technological trends
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concern changes related to creating new knowledge and translating that knowledge into new products, processes, and materials
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Global trends
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concern changes in relevant emerging and developed country global markets, important international political events, and critical changes in cultural and institutional characteristics of global markets
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Physical environment trends
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refer to the changes in the physical environment and business practices that are intended to sustain it
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Michael Porter and the Five Forces Model of Competition
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-Potential Entrants -Substitute Products -Bargaining Power of Suppliers -Bargaining Power of Buyers -Rivalry among Existing Firms
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Potential Entrants
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-New firms can take market share away from current competitors -Bring additional production capacity -May force incumbents to learn new ways to compete
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Economies of scale
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the improvements in efficiency from incremental increases in the size of a firm's operations
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Switching costs
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the one-time costs that customers incur when deciding to buy a product from a different supplier
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Differentiation
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over time, customers may decide that an established firm's product uniquely meets their needs
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Substitute Products
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-Goods or services that perform functions similar to an existing product -In general, product substitutes present a strong threat to an incumbent firm when the substitutes are more effective and sold at a lower price
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Suppliers tend to be powerful when
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-There are a few large suppliers and the buying firms' industry is not concentrated -Substitute products are not available to the buying firms -The buying firms are not a significant customer for the suppliers -The suppliers goods are essential to the buyers marketplace success -The suppliers products have high switching costs for the buyers -The suppliers pose a credible threat to integrate forward into the buyers' industry
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Buyers or customers tend to be powerful when
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-They buy a large portion of the selling firm's total output -The selling firm is dependent on the buyers for a significant portion of its sales revenue -They can switch to another seller's product with few switching costs -The selling industry's products are undifferentiated or similar to a commodity -They present a credible threat to integrate backward into the sellers' industry
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Competitive rivalry
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the set of actions and reactions between competitors as they compete for an advantageous market position
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Barriers to exiting from an industry include the following
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-Specialized assets -Fixed costs of exit(such as labor agreements) -Strategic interrelationships(shared facilities and access to financial markets) -Emotional barriers -Government and social restrictions
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Market dependence
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the extent to which a firm's revenues or profits are derived from the market -High market dependence-respond strongly to attacks threatening market position
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Complementors
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the network of companies that sell goods or services that are complementary to another firm's good or service
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Internal Organization
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-The set of conditions INSIDE the firm affecting the choice and use of strategies -Any strategy a firm chooses MUST BE based on its resources
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Conducting an Internal Analysis
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A firm cannot successfully implement any strategy without being able to use the appropriate set of resources, capabilities, and core competencies
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Strengths
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Resources and capabilities that allow the firm to complete important tasks(possibilities)
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Weaknesses
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Resource and capability deficiencies(constraints)
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Resources
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tangible and intangible assets held by the firm
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Tangible resources
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are valuable assets that can be seen or quantified -Tangible resources may be bought and sold -Not hard to evaluate through accounting systems and external auditors
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Intangible resources
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are assets that contribute to creating value for customers but are not physically identifiable -Rooted in the firm's history -Accumulated over time -Relatively difficult for competitors to analyze and imitate
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Financial Resources
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-Borrowing capacity -Ability to generate internal funds
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Physical Resources
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-Plant and equipment -Access to raw materials
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Technological Resources
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-Stock of technology
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Top of Mind Brands
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-Shoes -Beer -Airline -Computer -Soft drink -Universities(ranking systems)
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Human Resources
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-Knowledge -Trust -Managerial Capabilities -Organizational Routines
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Innovation Resources
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-Ideas -Scientific Capabilities -Capacity to Innovate
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Reputational Resources
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-Reputation with Customers -Brand Name -Perceptions of product quality, durability, and reliability -Reputation with Suppliers
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Capabilities
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when the firm integrates several different resources in a way that allows it to effectively and sufficiently complete a task or series of tasks.
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Core competencies
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Capabilities the firm emphasizes and performs especially well while pursuing its vision
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Distinctive competencies
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when core competencies are different that those held by competitors
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Competitive advantage
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when core competencies or distinctive competencies allow the firm to create value for customers exceeding the value competitors create for them
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Core competence must satisfy 4 characteristics
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-Valuable -Rare -Difficult to Imitate -Non substitutable
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Competitive consequences
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focus on capabilities that yield competitive parity and either temporary or sustainable competitive advantage
