Business Policy Test 1
Terms in this set (55)
a firm's theory about how to gain competitive advantage
Elements of strategic management process
a sequential set of analyses and choices that can increase the likelihood that a firm will choose a good strategy; that is, a strategy that generates competitive advantages (elements are aimed at achieving competitive advantage)
What are mission and objective and what is the difference between them? Identify whether a statement is a mission or an objective
mission - a firm's long-term purpose
objective - specific, measurable targets; the things a firm needs to do to achieve its mission
Objectives must be?
identification and examination of the critical threats and opportunities in a firm's competitive advantage environment
identification of a firm's organizational strengths and weaknesses and of the resources and capabilities that are likely to be sources of competitive advantage
a strategy a firm thought it was going to pursue
a strategy that emerges over time or that has been radically reshaped once implemented
What is the difference between intended and emergent strategies?
the strategic management process leads managers to intended strategies. However, conditions often change or new information becomes available and managers respond and adopt emergent strategies
a firm creates more economic value than rival firms
Competitive advantage is based on the situation of imperfect competition. So what are the assumptions of perfect competition?
infinite buyers and sellers
zero entry and exit barriers
perfect factor mobility
zero transaction costs
contstant returns to scale
There are two classes of indicators that can measure competitive advantage. What are they?
accounting and economic measures
a measure of a firm's competitive advantage; calculated from information in the firm's published profit-and-loss and balance sheet statements (exceed industry averages)
measures that compare a firm's level of return to its cost of capital instead of the average level of return to the industry (earning a return in excess of the cost of capital)
a firm creates the same economic value as rival firms
a firm generates less economic value than rival firms
focuses on gaining advantages by reducing costs below those of competitors; lower costs of production/distribution
people choose the firm's output over others'; people are willing to pay a premium
What are the two types of strategies at the firm level?
cost leadership and differentiation
What is the difference between business-level strategy and corporate-level strategy?
business level helps to position a business, or HOW we do it. Corporate level strategy tells WHICH business we should do. In this regard, adding a new business is a corporate level strategy
What are the primary forces in external environment?
buyer, supplier, rivalry, substitute, complementor, potential entrant
those who purchase a firm's products or services
firms that make a wide variety of raw materials, labor, and other critical assets available to firms
the intensity of competition among a firm's direct competitors
products or services that meet approximately the same customer needs but do so in different ways
the value of a firm's products increases in the presence of another firm's products
firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon
What is S-C-P model? What does S, C and P stand for? Which one (S, C or P) is associated with firm strategy?
theory suggesting that industry structure determines a firm's conduct, which in turn determines its performance
conduct is associated with firm strategy
What is the Porter's five forces model?
identifies the five most common threats faced by firms in their local competitive environments and the conditions under which these threats are more or less likely to be present
Which of the six forces (buyer, supplier, rivalry, substitute, complementor, potential entrant) is NOT included in the Porter's model?
What is the relationship between threat of six forces and firm performance? (when firms in an industry can reach their highest performance, external threat high or low?)
while the impact of the industry, the corporation, and the business on business unit performance can vary across industries and across corporations, overall, business unit effects are larger than either corporate or industry effects
Industry conditions that facilitate supplier power (pay attention to forward integration)
1. small number of firms in supplier's industry
2. highly differentiated product
3. lack of close substitutes for suppliers' products
4. supplier could integrate forward
5. no one firm is a significant customer of supplier
Industry conditions that facilitate buyer power (pay attention to vertical integration)
1. small number of buyers for the focal industry's output
2. industry's product is undifferentiated
3. industry's product is significant to buyer
4. buyers are not earning above normal profits
5. buyers can vertically integrate backwards
Example of rival, substitute, and complementor
rival - barnes and noble.com is a rival of amazon.com
substitute - sports magazine is a substitute for ESPN
complementor - producers of TV programming and cable TV companies
Economy of Scale
a firm's costs decrease as its volume of production increases
What are the four categories of resources?
include all the money, from whatever source, that firms use to conceive and implement strategies
include all the physical technology used in a firm
Individual (human) Resources
include the training, experience, judgement, intelligence, relationships, and insight of individual managers and workers in a firm
a firm's formal reporting structure; its formal and informal planning, controlling, and coordinating systems; its culture and reputation; and informal relations among groups within a firm and between a firm and those in its environment
What is the function of internal analysis?
helps a firm identify its organizational strengths and weaknesses
Perceptual Map (ideal slot, two circles)
a marketing tool used to track the position of the company's products against those of the competitors. Customer positioning preferences are reported in the Segment Analyses pages of The Capstone Courier
Measures of Product Reliability
expected time a product lasts
What are the five niche markets in the simulation?
What can you do in the four departments (R&D, Production, Marketing, and Finance)?
The Research & Development (R&D) Department invents new sensors and changes specifications for existing sensors
Marketing is concerned with pricing, promotion budgets, sales budgets and sales forecasts
The Production Department schedules manufacturing runs for each sensor model
The Finance Department is primarily concerned with five issues:
1. Acquiring the capital needed to expand assets, particularly plant and equipment.
2. Establishing a dividend policy that maximizes the return to shareholders.
3. Setting accounts payable policy and accounts receivable policy
4. Driving the financial structure of the firm and its relationship between debt and equity.
5. Selecting and monitoring performance measures that support your strategy.
What is a valid complementor for coffee?
Suppose that someone from Lenovo calls and asks you for advice regarding its strategy. It is considering how Lenovo should design strategy for one of its products. In this scenario, you would be helping with their _________
business level strategy
________ exist when a firm's costs decrease as its volume of production increases
economies of scale
Which one of the followings is associated with ABOVE NORMAL economic return?
What is a valid substitute for a pepsi coke (Not rival!!)?
The presence of infinite buyers and perfect information is the assumption of ______
If Ruby Tuesday is said to be an example of competitive disadvantage, then Ruby Tuesday should experience _____
below average economic performance
In the S-C-P model, what does C mean?
Objectives need to be all of the following, except ____
Online education is a ____ of college of business in Mississippi State University?