Terms in this set (50)
Robert Grant view of Strategy
Overall plan for deploying resources to establish a favorable positions
1) goal achievement
2) allocation of resources
3) consistency, integration fit between activities
Schemes for a specific action
Extent to which a firm performs similar activities better than rivals
Porter's view of strategy
Performing different activities from rivals or performing them differently
Choosing the right configuration of activities, incentives, systems
Making the right trade offs
Fit: Grant's view
Strategy is designed to help the firm use its internal resources and characteristics to deal with its industry and competitive environment. Strategy therefore must fit with the firm and its environment.
Fit: Porter's view
Strategy is about combining activities.
Strategic fit among activities is fundamental to competitive advantage and its sustainability
Henry Mintzberg: Strategy Design
Involves planning and rational choice to develop an intended strategy
Henry Mintzberg: Strategy as procss
Involves many decision makers responding to many external and internal forces for an emergent strategy to form.
Combine strategy as design's intended strategy and strategy as process' emergent strategy to form a realized strategy
Pitfalls of SWOT analysis
Strengths and weaknesses may be the same.
Doesn't tell us anything about industry avg profits
does not give definitive information about firm-level sources
not sufficiently structure to explain Fit
Decisions regarding the industries and value chain steps in which a firm competes
-What product adjacencies to sell?
-Build in house or outsource?
Competitive Strategy (Business Unit)
Decisions about how a firm will compete in its various activities
-Cost or differentiation?
-How to exploit resources to achieve aforementioned goals?
Difference between strategy and management
Strategy refers to unifying themes of organization, whereas management refers to the organization's specific policies and practices
Fundamental Fact in Strategy
Profits vary across industries and within industries
-Some industries have higher profits than others
-Some firms have average higher profits than others
-Patterns persist over time
Similar products that have common suppliers and buyers
Organizations that firms in the industry pay
Organizations that pay firms in the industry
Firms in the same industry
Products/services that could be used as an alternative to industry's products
Firms current and potential that could enter industry
Who gets profits in an industry is determined by the power of buyers, industry rivalry, and supplier power
Level of Profitability
Threat of entry, rivalry and threat of substitutes determine whether the industry value chain can even generate profits
Suppliers & Buyers
Are price sensitive and therefore tend to have high bargaining power..they can squeeze profits out of industry
Monetary and non monetary costs that customers must bear when they try to switich from one product to another
Difference between rivals and substitutes
Rivals are all firms competing in the same industry, whereas substitutes are products that are outside the industry
Economies of scale
Arise when average costs decline as output increases. This occurs when there are very large fixed costs.
Invest in assets to lower operating expenses
deliver a product of OK quality at lowest cost
if well executed translates to above average profits due to lower costs
must maintain proximity in quality
often involves tradeoffs with product differentiation
Offer products and services that are widely acknowledged as superior on at least one dimension
May be multiple dimensions of differentiation
Selectively incurs costs as necessary to create quality
Invest in assets to maximize generation of value for buyers
Above average profitability only if firms maintains cost proximity to its competitiors
Broad market strategy
Exploits same fundamental types of competitive advantage and serves all or nearly all segments of an industry
Takes advantage of economies of scale and scope within industry
Narrow (focus) strategy
Exploits same fundamental types of competitive advantage
Selects narrow target segment with unusual needs
Configure the organization to serve only targeted segment
-Sacrifice incremental business
- Advantage lies in limited scope
This could be a geographic or segment focus
Better off Test
Do the business units create and capture more value if they are related than they could as separate, single-business entities
Mark to Market Accounting
Enables an organization to record NPV of expected future profits on deals as
Applies when the value of an asset is well known and variation minimal.
Person who wants task performed...Owner/investor/lead manager...also wants to achieve a particular objective
Person who carries out the task...Manager...wants to keep their job and earn the highest possible salary
Providing substantial bonuses based on performance targets
Providing limited bonuses, or simply recognition for "softer" targets
Makes the rules on:
Who controls what?
Who makes decisions?
Who has claims over revenue?
The goal is to ensure that managers act to serve the goals of shareholders
Board of Directors
Responsible for representing firm's owners by monitoring top-level manager's strategic decisions
usually a mix of internal and external directors
Relative amounts of stock owned by individual shareholders and institutional investors
use of salary, bonuses and long term incentives to align managers' interests with shareholders' interests
Market for Corproate control
More efficient corporations may acquire underperforming firms and improve their performance simply by better management
Serve as a check on the accounting & management practices of corporate leaders
Laws & Regulators
external check for alignment between managers and shareholders
Adding value scorecard
Improving industry attractiveness
Country Portfolio Analysis
Technique used to help decide where a company should cmopete using
levels of consumer wealth
people's propenisty to consume
Does NOT integrate costs and risk arising from distance between markets
Language, ethnicity, religion, social norms.
Industries most affected with products having high linguistic content, reflecting country specific quality and products reflecting national identity
political or monetary associations, political hostility, government policies, colonial ties, institutional environment...affects staple goods, large employers, suppliers to public sector, national champions, is vital to national security and tied to natural resources
Physical remoteness, common border, accesibility, infrastructural development, climate
Industries most affected: high transportation cost industries, fragile & perishable goods, those requiring developed infrastructure and on the ground supervision
differences in consumer incomes, costs or quality of factors of production including natural, financial and human resources & infrastructure.
Industries most affected:
discretionary goods, indsutries with economies of scale/high start up costs, industries where cost of labor is important