Strategic Management Mid-Term


Terms in this set (...)

Strategic Management
the analyses, decisions, and actions and organization undertakes in order to create and sustain competitive advantages. Contains three ongoing processes: analysis (strategic goals, internal and external environments), Decisions (domestic and international operations. Addresses: What industries should we be in? How should we compete in those industries?), and actions (makes strategies a reality)
Competitive Advantage
a firm's resources and capabilities that enable it to overcome the competitive forces in its industry.
a manager's challenge to both align resources to take advantage of existing product markets and proactively explore new opportunities.
Operational Effectiveness
performing similar activities better than rivals.
Corporate Governance
"The relationship among various participants in determining the direction and performance of corporations. The primary participants are 1) the shareholders, 2) the management (lead by CEO), 3) the board of directors.
Zero Sum
a form of stakeholder management. Here, various stakeholders compete for the organization's resources. (The gain of one group is the loss of another group.)
Another form of stakeholder management. Recognizies stakeholders are dependent upon each other for their success and well-being.
the ideas, decisions, and actions that enable a firm to succeed.
the function of purchasing inputs used in the firm's value chain, including raw materials, suppliers, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings.
Inventory turnover
Intended strategy
strategy in which organization decisions are determined only by analysis.
Realized Strategy
strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences.
Operational Effectiveness
performing similar activities better than rivals.
Strategy Analysis
The study of a firm's' external and internal environments, and their fit with organizational vision and goals.
Strategy Implementation
Actions made by firms that carry out the formulated strategy, including strategic controls, organizational design, and leadership.
Strategy Formulation
Decisions made by firms regarding investments, commitments, and other aspects of operations that create and sustain competitive advantages.
Perceptual acuity
The ability to sense what is coming before the fog clears.
Environmental scanning
Surveillance of a firm's external environmental changes and detect changing already under way.
Environmental scanning
a firm's analysis of the external environment to predict environmental changes and detect changes already underway.
Environmental monitoring
a firm's analysis of the external environment that racks the evolution of environmental trends, sequences of events, or streams of activities.
Competitive Intelligence
helps firms define and understand their industry and identify rivals' strengths and weaknesses.
Environmental forecasting
involves the development of plausible projections about the direction scope, speed, and intensity of environmental change.
General environment
composed of factors that can have dramatic effects on firm strategy.
Porter's Five Forces Model
- threat of new entrants
- the bargaining power of suppliers
- the bargaining power of buyers
- The threat of substitute products and services.
- the intensity of rivalry among competitors in an industry.
Purpose of Five Forces
a tool for examining the industry-level competitive environment, especially the ability of firms in that industry to set prices and minimize costs.
The Threat of New Entrants (definition)
refers to the possibility that the profits of established firms in the industry may be eroded by new competitors.
Examples of Threat of New Entrants
- economies of scale
- product differentiation
- capital requirements
- switching costs
- access to distribution channels
- cost disadvantages independent of scale
Switching Costs
one-time costs that a buyer/supplier faces when switching from one supplier/buyer to another
The bargaining power of buyers (definition)
the threat that buyers may force down prices, bargain for higher quality or more services, and play competitors against each other.
A buyer group is powerful when:
- it is concentrated or purchases large volumes relative to seller sales.
- the products it purchases from the industry are standard or undifferentiated.
- the buyer faces few switching costs.
- It earns low profits.
- the buyers pose a credible threat of backward integration.
- the industry's product is unimportant to the quality of the buyer's products or services.
The bargaining power of suppliers
the threat of suppliers may raise prices or reduce the quality of purchased goods and services.
the threat of substitute products and services
the threat of limiting the potential returns of an industry by placing a ceiling on the prices that firms in that industry can profitability charge without losing too many customers.
What are substitute products and services?
products and services outside the industry that serve the same customer needs as the industry's products and services.
Intensity of Rivalry among competitors in an industry
the threat that customers will switch their business to competitors within the industry.
Value-Chain Analysis
a strategic analysis of an organization that uses value-creating activities.
Primary Activities
Contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after sale.
Primary activities include:
- inbound logistics
- operations
- outbound logistics
- marketing and sales
- service
Support Activities
activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities.
Overall Cost Leadership
a firm's generic strategy based on appeal to the industrywide market using a competitive advantage based on low cost.
Overall cost leadership requires:
- aggressive construction of efficient-scale facilities.
- Vigorous pursuit of cost reductions from experience.
- Tight cost and overhead control.
- Avoidance of marginal customer accounts.
- Cost minimization in all activities in the firm's value chain, such as R&D, service, sales force, and advertising.
Competitive Parity
a firm's achievement of similarity, or being "on par,
with competitors with respect to low cost, differentiation, or other strategic product characteristic.
Examples of Diverentiation
- prestige or brand image
- quality
- Technology
- Innovation
- Features
- Customer Service
- Dealer Network
Differentiation Strategy
A firm's generic strategy based on creating differences in the firm's product or service offering by creating something that is perceived industry wide as unique and valued by customers.
Focus Strategy
a firm's generic strategy based on appeal to a narrow market segment.
the process of firms expanding their operations by entering new businesses.
corporate-level strategy
a strategy that focusses on gaining long-term revenue, profits, and market value through managing operations in multiple businesses.
core competencies
a firm's strategic resources that reflect the collective learning in the organization.
Related Diversificiation
a firm entering a different business in which it can benefit from leveraging core competencies, sharing activities, or building market power.
To create value and synergy, a core competency must:
- enhance competitive advantage through value creation.
- different businesses in the corporation should be similar in one area.
- must be difficult for competitors to imitate or find substitutes for.
Vertical integration
an expansion or extension of the firm by integrating preceding or successive production processes.
unrelated diversification
a firm entering a different business that has little horizontal interaction with other businesses of a firm.
the intervention of the corporate office in a new business that substantially changes the assets, capital structure, and/or management, including selling off parts of the business, changing the management, reading payroll and unnecessary sources of expenses, changing strategies, and infusing the new business
SBUs competing in high-growth industries with relatively high market shares. These firms have long-term growth potential and should continue to receive substantial investment funding
Question Marks
SBUs competing in high-growth industries but having relatively weak market shares. Resources should be invested in them to enhance their competitive positions.
Cash Cows
SBUs with high market shares in low-growth industries. These unites have limited long-run potential but represent a source of current cash flows to fund investments in "stars" and "question Marks"
SBUs with weak market shares in low-growth industries. Because they have weak positions and limited potential, most analysts recommend that they be divested.
Portfolio Management
helps a company achieve a better understanding of the competitive position of an overall portfolio of businesses, to suggest strategic alternatives, and to identify prioritize for the allocation of resources.
the incorporation of one firm into another through purchase.
the combining of two or more firms into one new legal entity.
the exit of a business from a firm's portfolio.
strategic alliance
a cooperative relationship between two or more firms.
Joint ventures
new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity.
arbitrage opporunitites
an opportunity to profit by buying and selling the same good in different markets.
reverse innovation
new products developed by developed-country multinational firms for the emergence of markets that have adequate functionality at a low cost.
using other firms to perform value-creating activities that were previously performed in-house.
shifting a value-creating activity from a domestic location to a foreign location.
International Strategy
a strategy based on firms' diffusion and adaptation of the parent companies' knowledge and expertise to foreign markets; used in industries where the pressures for both local adaptation and lowering costs are low.
Global Strategy
a strategy based on firms' centralization and control by the corporate office, with the primary emphasis on controlling costs; used in industries where the pressure for local adaptation is low and the pressure for lowering costs is high.
Transnational strategy
a strategy based on firms' optimizing the trade-offs associated with efficiency, local adaptation, and learning; used in industries where the pressures for both local adaptation and lowering costs are high.
producing goods in one country to sell to residents of another country
a contractual arrangement in which a company receives a royalty or fee in exchange for the right use its trademark, patent, trade secret, or other valuable intellectual property.
a contractual arrangement in which a company receive a royalty or fee in exchange fro the right to use its intellectual property; franchising usually involves a longer time period than licensing and includes other factors, such as monitoring of operations, training, and advertising.
Intellectual Capital
the difference between the market value of the firm and the book value of the firm, including assets such as reputation, employee loyalty and commitment, customer relationships, company values, brand names, and the experience and skills of employees.
Intellectual Capital Equation
MV of firm - BV of firm
inbound logisitics
receiving, storing, and distributing inputs of a product.
all activities associated with transforming inputs into the final product form.
Outbound logisitics
collecting, storing, and distributing the product or service to buyers.
Marketing and Sales
activities associated with purchases of products and services by end users and the inducements used to get them to make purchases.
actions associated with providing service to enhance or maintain the value of the product.
general administration
general management, planning, finance, accounting, legal, and government affairs, quality management, and information systems: activities that support the entire value chain and not individual activities.
resource-based view
perspective that firms' competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute.
casual ambiguity
a characteristic of a firm's resources that is costly to imitate because a competitor cannot determine what the resources is and/or how it can be recreated.
The Five Types of Ratios
- Short-term solvency or liquidity
- long-term solvency
- asset management
- profitability
- market value
Examples of Support Activities
- Procurement
- General Administration
- Human Resource Management
Sustainable Competitive Advantage
When competitors are unable to duplicate a company's value-creating strategy.
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 Intent
The leveraging of a firm's core competencies to accomplish the firm's goals in the competitive environment.
Examples of Primary Activites
- Inbound logistics
- Operations
- outbound logistics
- marketing and sales
- service
Examples of Support Activities
- General administration
- Human Resource Management
- Technology Development
- Procurement