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Strategic Management Midterm

Strategic Management Midterm

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Published by Brady Shiplet
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Published by: Brady Shiplet on Jun 29, 2010
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Strategic Management Midterm
What are the differences between tangible and intangible resources? Which category of resources is morevaluable to the firm?
Tangible resources are assets that can be seen and quantified; whereas, intangible resources include assetsthat are rooted deeply in the firm’s history and have accumulated over time.Tangible resources include:
Financial Resources
Organizational Resources
Physical Resources
Technological Resources
The value of tangible resources are often constrained because they are hard to leverage.
Intangible resources are difficult for competitors to analyze and imitate. These include:
Human Resources
Managerial Capabilities
Organizational routines
Innovation Resources
Scientific Capabilities
Capacity to innovate
Reputational Resources
Reputation with customers
Brand Name
Perceptions of the product
Reputation with suppliers
For efficient, effective, supportive, and mutually beneficial interactions and relationships.Because its difficulty to be imitated and analyzed, intangible resources are more valuable to a firm.Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that market space (in terms of market share) with its core product, the Palmetto Pidgy. Because this product category was entirely new to themarket, Palmetto had to internally develop the hardware and software sides of the business, and today is both amanufacturer of PDAs and a programmer and licensor of its PDA operating system software. Recently, however,the hand-held device maker's performance has taken a dive as a result of slumping sales and costly inventoryproblems. New large entrants are entering both the equipment and software sides of its business, putting further pressure on margins. Management is currently considering its options, including the break up of Palmetto intotwo separate, independent public companies-one devoted to hardware, the other software.
What primary business strategy issues does Palmetto face?
Palmetto internally develops the hardware and software sides of the PDA business, and today is both amanufacturer of PDAs and a programmer and licensor of its PDA operating system software. The main issuefacing Palmetto’s business strategy is treats by large competition entering the market. These firms arespecializing in either hardware or software. Palmetto’s business strategy is too broad to continuously competewith these specialized companies.2.
What primary corporate strategy issues does Palmetto face?
Competitors are easily able to imitate Palmetto’s technology, and are taking back market share from thecompany’s initial first-mover advantage. The sizes of the emerging competitors are very large, making it difficultfor Palmetto to combat competitive actions.3.
How do the I/O and resource-based models help you make recommendations to Palmetto'smanagement regarding a split into two companies? Do they lead to the same recommendation?
The I/O and resource based models yield different results. Palmetto’s competitive advantage is being eatenaway by large new entrants. The general, competitive, and industry environments have changed since thecompany first entered the market. Its internal resources are too broad in scope to efficiently specialize in bothhardware and software. The firm is capable because it has a unique set of intangible resources that have beendeveloped since first moving into the industry.According to the I/O Model the company should try to leverage these strengths in the strategy it implements.However, if the firm splits then many of these resources will be lost or damaged. Therefore, this model is againstthe idea of splitting into two companies.
The resource-based model says a firm should select a strategy that best allows the firm to utilize its resourcesand capabilities relative to opportunities in the external environment. Therefore, the firm should split into twocompanies to be to develop a stronger competitive advantage through specializing in one aspect.Barracuda Inc. is a lamp fixture manufacturer that is considering an entry strategy into the U.S. home furnishingsmanufacturing industry. The existing landscape consists of many players but none with a controlling share.There are presently 2500 home furnishings firms, and only 600 of those have over 15 employees. Average netprofit after tax is between 4 and 5%. While the industry is still primarily comprised of single-business family-runfirms, which manufacture furniture domestically, imports are increasing at a fairly rapid rate. Some of theEuropean imports are leaders in contemporary design. Relatively large established firms are also diversifyinginto the home furnishings industry via acquisition. Supplier firms to the home furnishings industry are in relativelyconcentrated industries (like lumber, steel, and textiles). Retailers, the intermediate customer of the homefurnishings industry, have been traditionally very fragmented. Customers have many products to choose from, atmany different price points, and few home furnishing products have strong brands. Also, customers can switcheasily among high and low-priced furniture and other discretionary expenditures (spanning big screen TVs to thechoice of postponing any furniture purchase entirely).
Threat of Entry
 There are presently 2500 home furnishings firms, and only 600 of those have over 15 employees.
The industry is still primarily comprised of single-business family-run firms, which manufacture furnituredomestically.Threat of entry is extremely high.
Bargaining Power of Suppliers
 Supplier firms to the industry are in relatively concentrated industries (like lumber, steel, and textiles). Theseprices are easily predicted.
Bargaining power of suppliers is low.
Bargaining Power of Buyers
 Customers have many products to choose from, at many different price points.
Retailers have been traditionally very fragmented; and, few home furnishing products have strong brands.
Bargaining Power of buyers is high..
Threat of Substitute Products:
 Home furnishings are easily imitated. Most companies have access to the same tangible resources.
Intangible resources are less likely to be imitated.Products are easily substituted. However, intangible capabilities and services are not.
The existing landscape consists of many companies, but there are few major competitors.Imports are increasing rapidly and pose a threat. Some European imports are leaders in contemporary design.Relatively large established firms are also diversifying into the home furnishings industry via acquisition.
Customers can switch easily among high and low-priced furniture and other discretionary expenditures, posingincreased competition.Rivalry is highly intense.
Incredible amount of market share to be gained.No clear industry leader.
Low bargaining power of suppliers.
Intense competition because of low switching costs.Products are easy imitated.High buyer bargaining power.High threat of entry.
With net profit after tax being between 4 and 5%, the industry is attractive. There is a lot of room for growth anda very large customer base. Any company that can get figure out how to get a solid grasp in part of the marketwill do well.What do firms need to know about their competitors?Firms need to know:
What drives the competitor, as shown by its future objectives.
What the competitor is doing and can do, shown by its current strategy.
What the competitor believes about the industry as shown by its assumptions.
What their capabilities are, as shown by its strengths and weaknesses.What legal and ethical intelligence gathering techniques can be used to obtain this information?
 A competitive analysis based on the above statements can be used to legally and ethically gather competitor information.Two legal and ethical ways to gather information are:1. Publicly available information2. Attend trade fairs and shows
Plasco is a $3 billion U.S.-based manufacturer of flexible plastic products like trash cans, reheatable andfreezable food containers, and a broad range of other plastic storage containers designed for home and officeuse. Historically, Plasco has been the category killer for most of its products and has devoted tremendousresources to new product development on an ongoing basis-this research intensity has allowed the company torelease, on average, a new product every day over the past five years. Despite its past strength and high brand

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