Strategic Management

Terms in this set (52)

process by which managers select and then implement a set of strategies that aim to achieve competitive advantage

• The competitive environments become characterized by increasing rates of unpredictable change
• proactively anticipate change
• continually refine and make significant changes to firm's strategy

4 Key Attributes of Strategic Management

1. Directs the organization toward overall goals and objectives (what is the best for the entire organization, not just a single functional area)
2. Includes multiple stakeholders in decision making (owners, employees, customers, suppliers, community)
3. Needs to incorporate short-term and long-term perspectives(maintain a vision for the future of the organization as well as a focus on its present operating needs)
4. Recognizes trade-offs between effectiveness and efficiency (allocate and use resources wisely)

What is the overall purpose of a corporation?-What is the overall purpose of a corporation?

• To maximize long-term return to owners

Who is responsible for this? (purpose of a corporation)

Corporate governance:

Shareholders
• Management (led by the CEO)
• Board of Directors

Corporate governance

the relationship among various participants in determining the direction and performance of corporations

Board of Directors

• Elected representatives of the owners
• Ensures interests and motives of management are aligned with those of the owners
• Ensure that management is acting in the best interests of shareholders (agency problem)

Stakeholders & stakeholder management

•Individuals and groups who can affect, and are affected by a firm's actions and who have enforceable claims on the firm's performance
•They provide valuable inputs to the firm's business
•In return, they expect the firm to satisfy their interests
•They have a direct exchange relationship with the firm

2 Views of Stakeholder Management

Zero Sum
Symbiosis

Zero SUm

Stakeholders compete for attention and resources of the organization.
-Gain of one group is a loss to another

Symbiosis

•Stakeholders are dependent upon each other
•Mutual benefits

Stakeholder Analysis

• Identify key stakeholders
• Classify them according to potential for cooperation and threat
• Develop and implement strategies to minimize threats and maximize cooperation

Social Responsibility

• the expectation that businesses or individuals will strive to improve the overall welfare of the society
• Firms must take active steps to make society better
• They must participate in initiatives that benefit society
• i.e. Target (5% of its profit goes to local communities)
• i.e. Google Green (support renewable power in their offices)

Triple Bottom Line

• Assessment of financial, social, and environmental performance

Two views of social responsibility

classical view
socioeconomical view

The Classical View

• Management's only social responsibility is to maximize profits (create a financial return) by operating the business in the best interests of the stockholders (owners of the corporation)
• Expending the firm's resources on doing "social good" unjustifiably increases costs that lower profits to the owners and raises prices to consumers

socioeconomic view

• Management's social responsibility goes beyond making profits to include protecting and improving society's welfare
• Corporations are not independent entities responsible only to stockholders
• Firms have a moral responsibility to larger society to become involved in social, legal, and political issues
• "To do the right thing"

General Environment

• Dimensions in the broader society that influence an industry and the firms within it:
Demographic
Economic
Political/legal
Sociocultural
Technological
Global
• General environmental trends have an impact on a firm's strategic choices

General environmental trends and events

Little ability to predict them
Even less ability to control them
Can vary across industries

1) Demographic Segment

• These trends show firms opportunities and threats**

2) Sociocultural Segment

• Changes in values, beliefs, and lifestyles of a society *****

3) Political/Legal Segment

• Government alters its perspective toward business (pro or anti-business)
• Government determines environmental regulations with which industries must comply
• Increased or decreased government oversight of businesses (regulation)
• Government can create favorable or unfavorable climate for companies
• Antitrust laws (i.e. Microsoft)
• Taxation laws
• Deregulation philosophies (i.e., telecommunication industry)
• Deregulation eliminates legal barriers to entry
• Deregulation allows new companies to enter

4) Technological Segment

• Developments in technology lead to new products and services
• Firms can achieve higher quality and lower costs
• Firms can speed up new product development
• Firms innovate more frequently
• Firms offer greater variety
• Technological changes can have a sudden and dramatic effect on companies' environment
• The Internet altered the rules of competition in most industries
• Telecommunication industry (integration of voice, video and data)

5) Economic Segment

• Changes in the living standards and general well-being of a society****

• These changes affect consumers' incentives to buy****

6) Global Segment

• Changes in markets, economies, and political systems

• All these events can have an enormous impact on the ability of a company's strategies to create competitive advantage

Porter's 5 Forces

1. the threat of new entrants
2. the bargaining power of buyers
3. the bargaining power of suppliers
4.The Threat of Substitute Products and Services
5.The Intensity of Rivalry among Competitors in
an Industry

1) The Threat of New Entrants

• New entrants: companies that have either recently started operating in an industry or that threaten to start operations soon
• New entrants are motivated by superior profits of established companies in the industry
• New entrants can increase the level of competition and reduce the performance of established companies
• With the absence of entry barriers, entry will continue
• Barriers to entry

New entrants

New entrants: companies that have either recently started operating in an industry or that threaten to start operations soon

Barriers to entry

Economies of scale ( low and high)
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of scale

2) The Bargaining Power of Buyers

• Buyers: individuals or companies that purchase a company's products or services
• Buyers threaten an industry
• Force down prices
• Bargain for higher quality or more services
• Play competitors against each other
• A buyer group is powerful when
• It is concentrated or purchases large volumes relative to seller sales (i.e., automobile industry buys large volume of steel)
• The products it purchases from the industry are standard or undifferentiated
• The buyer faces few switching costs (i.e., Coke-can, glass or plastic)
• The buyers pose a credible threat of backward integration (a firm controls its inputs) (i.e., Wal-Mart's Great Value products)
• The industry's product is unimportant to the quality of the buyer's products or services

The Bargaining Power of Suppliers

• Suppliers: Companies that provide raw materials, services and labor to companies in an industry
• Suppliers can exert power by threatening to raise prices or reduce the quality of purchased goods and services
• A supplier group will be powerful when
• The supplier group is dominated by a few companies and is more concentrated than the industry it sells to (i.e., Microsoft and Intel)
• The supplier group is not obliged to contend with substitute products for sale to the industry
• The industry is not an important customer of the supplier group
• The supplier's product is an important input to the buyer's business
• The supplier group's products are differentiated or it has built up switching costs for the buyer
• The supplier group poses a credible threat of forward integration
• ( they can control their own distribution channels) (i.e., Nike)

4) The Threat of Substitute Products and Services

• Substitute: Other products or services that can perform the same function (meet the same customer needs in different ways)
• i.e. energy drinks vs. coffee
• The threat of substitute products increases when:
• Buyers face few switching costs
• The substitute product's price is lower
• Substitute product's quality and performance are equal to or greater than the existing product

5) The Intensity of Rivalry among Competitors in
an Industry

• Rivalry occurs when competitors sense the pressure on an opportunity to improve their position
• Price competition (airline companies)
• Advertising battles (Pepsi vs. Coke)
• Product introductions (consumer electronics)
• Increased customer service or warranties (automobile industry)

The Intensity of Rivalry among
Competitors in an Industry

• Industry rivalry increases when:
• There are numerous or equally balanced competitors (airline industry: Boeing, Airbus)
• Industry growth slows or declines (fight for market share) (i.e., fast food industry)
• There are high fixed costs or high storage costs (i.e., airline industry)
• There is a lack of differentiation opportunities or low switching costs (i.e., steel industry)
• When the strategic stakes are high (i.e., consumer electronics)
• When high exit barriers prevent competitors from leaving the industry (i.e., express mail delivery industry)

Strategic Groups

• Cluster of firms that share similar strategies ( exact def know)
Breadth of product and geographic scope
Price/quality
Degree of vertical integration ( I picked this as answer idk if right tho)
Type of distribution system
• Internal competition between strategic group firms is greater than between firms outside that strategic group
• There is more heterogeneity in the performance of firms within strategic groups

Strategic Group Mapping

• Firms in the same strategic group have two or more competitive characteristics in common
• Have comparable product line breadth
• Sell in same price/quality range
• Emphasize same distribution channels
• Use same product attributes to appeal
to similar types of buyers
• Use identical technological approaches
• Offer buyers similar services
• Cover same geographic areas

Value Chain:

• Sequential process of value-creating activities
Chain of activities for transforming inputs into outputs

Value-Chain Analysis

• Each activity in the value chain defines the company's internal cost structure
• The value chain analysis tells us which internal activities are a source of cost advantage or disadvantage

1. Primary activities

• A product's physical creation
• A product's sale and distribution to buyers
• The product's service after the sale

. Support Activities

• Provide the assistance necessary for the primary activities to take place
It said HR gen admin procurement and tech and then gave ones with primary to confuse you ( know the four)

Inbound Logistics

• Associated with receiving, storing and distributing inputs to the product
• These activities provide opportunities to lower inventory ordering and storage cost and minimize overall operational costs
• Example: Just-in-time Inventory System

Operations

• Associated with transforming inputs into the final product form ( exact def)
• Operations help the firm reduce total cost and shorten the processing time to facilitate fast delivery of products
• Example: Southwest Airlines

Outbound Logistics

• Associated with collecting, storing, and distributing the product or service to buyers
• Example: Amazon

Marketing & Sales

• Associated with purchases of products and services by end users and delivering the message to the consumer
• Marketing adds value by creating a favorable image of the company and its products
• Example: Nike

Service

• Associated with providing service to enhance or maintain the value of the product
• Example: Caterpillar

Support Activities

Procurement
Technology Development
Human Resource Management
General Administration

Resource-Based View of the Firm

• Companies differ in fundamental ways because each company has a unique bundle of resources
• Each company develops competencies from these resources
• Performance differences in firms can be better explained on the basis of their internal strengths

2 types of resources

1. Tangible Resources
2. Intangible Resources

. Tangible Resources

• Difficult for competitors (and the firm itself) to imitate, typically embedded in unique routines and practices that have evolved over time= human, innovation & creativity, and reputation
• Examples: Nemo movie (creative environment). Canon (new product development). Honda (reputation).

2. Intangible Resources

Organizational Capabilities!!!!! Know that's its capabilities she writes organization structure to mess with you as another choice

• Competencies or skills that a firm employs to transform inputs to outputs, and capacity to combine tangible and intangible resources to attain desired end
• Organizational capabilities are a subset of resources that enable a firm to take full advantage of other resources
• Examples: marketing skills, product development capabilities, ability to hire, motivate and retain human capital.

Firm Resources & Sustainable Competitive Advantages (4)

Rare
valuable
inimitable
substituability

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