MGMT 434 Chapter 1 **Indicates class notes Strategic competiveness- is achieved when a firm successfully formulates an implements a value

- creating strategy. Strategy- is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage. A firm has a competitive advantage when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate. Above-average returns- are returns in excess of what an investor expects to earn from other investments with a similar amount of risk. Risk- is an investor¶s uncertainty about the economic gains or losses that will result from a particular investment. Average returns- returns equal to those an investor expects to earn from other investments with a similar amount of risk. The Strategic Management Process- is the full set of commitments, decisions, and actions required for a firm to achieve strategic competiveness and earn above average returns. Hypercompetition- is a term often used to capture the realities of the competitive landscape. A Global Economy is one in which goods, services, people, skills, an ideas move freely across geographic borders. Globalization- the increasing economic interdependence among countries and their organizations as reflected in the flow of goods and services, financial capital, and knowledge across country borders. Technology Diffusion is the speed at which new technologies become available and are used. Disruptive Technologies- techs that destroy the value of an existing tech and create new markets Strategic Flexibility- is a set of capabilities used to respond to various demands and opportunities existing in a dynamic and uncertain competitive environment.

Industrial Organizational Model- the industry in which a company chooses to compete has a stronger influence on performance than do the choices managers make inside the org. Firm¶s performance is determined by economies of scale, barriers to market entry, diversification, product differentiation, and the degree of concentration of firms in the industry. The Resource-Based Model assumes that each organization is a collection of unique resources and capabilities suggests that the strategy the firm chooses should allow it to use it competitive advantages in an attractive industry. The Uniqueness of its resources and capabilities is the basis of a firm¶s strategy and its ability to earn above-average returns. Resources are inputs into a firm¶s production process, such as capital equipment, the skills of individual employees, patents, finances, and talented managers. 3 categories physical, human, and organizational capital A Capability is the capacity for a set of resources to perform a task or an activity in an integrative manner. Core Competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals. Stakeholders are affected by a firm¶s performance. The individuals and groups who can affect the firm¶s vision and mission, are affected by the strategic outcomes achieved, and have enforceable claims on the firm¶s performance.

and unions Organizational Stakeholders. what it wants to ultimately achieve Mission.are people located in different parts of the firm using the strategic management process to help the firm reach its vision and mission. capabilities. w/ this info firm develops its vision and mission 2.customers. strategic management process?.employees Strategic Leaders. and actions required for a firm to achieve strategic competitiveness and earn above average returns.a picture of what the firm wants to be and. decisions. host communities. What does the resource-based model suggest a firm should do to earn above-average returns? This suggests that a firm¶s unique resources and capabilities are critical link to strategic competitiveness . 4.** 1.refers to the complex set of ideologies.shareholders and lenders Product Market Stakeholders.specifies the businesses in which the firm intends to compete and the customers it intends to serve. (Business needs to Put Their money where their mouth is and do what they are saying they need to do) Capital Market Stakeholders. and core values that are shared throughout the firm and that influence how the firm conducts business.entails the total profits earned in an industry at all points along the value chain **SBU Strategic business units. Global economy 2. What are the characteristics of the current competitive landscape? What two factors are the primary divers of this landscape? 1. and core competencies. Identifying then competing successfully in an profitable industry or segment of an industry.when it implements a strategy competitors are unable to duplicate or find too costly to try to imitate above-average returns. Technologies ( technology diffusion and disruptive technologies) According to the I/O model. suppliers. What are strategic competitiveness is when a firm successfully formulates and implements a value-creating strategy Strategy.is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.are returns in excess of what an investor expects to earn from other investments w/ a similar amount of risk. Profit Pool. symbols. what should a firm do to earn above-average returns? 3. Competitive advantage. Organizational Culture.the full set of commitments.Shareholders.individuals and groups who have invested capital in a firm in the expectation of earning a positive return on their investments Vision. First step in the process is to analyze its external environment and internal organization to determine its resources.

employees 7.is how companies gather and interpret information about their competitors Opportunity is a condition in the general environment that if exploited effectively.identifying early signals of environmental changes and trends Monitoring. 8. Components of the External Environmental Analysis y y y y Scanning. political/legal. global.strength weakness opportunities threats*** A Threat is a condition in the general environment that may hinder a company¶s efforts to achieve strategic competiveness. helps the firm reach their vision and mission What are the elements of the strategic management process? How are they interrelated? **Two problems with marlbo becoming altria and acquiring new companies.detecting meaning through ongoing observations of env changes and trends Forecasting. sociocultural. Chapter 2 . #1 is that they would not be paying dividens to stockholders.developing projections of anticipated outcomes based on monitored changes and trends Assessing.the set of factors that directly influences a firm and its competitive actions and responses the threat of new entrants. customers. How would you describe the work of strategic leaders? CEO top level managers. What are vision and mission? What is their value for the strategic management process? Vision.picture of what the firm wants to be and ultimately what it wants to achieve Mission. Capital Market. and the intensity of rivalry among competitors.6.shareholders and lenders (venture capitalists) 2. Good for us but not for our comptetors** The Industry Environment. technological. #2 the stock was watered down with new companies like kraft. **SWOT.consumers. Product Market. suppliers. helps a company achieve strategic competitiveness. and physical.determining the timing and importance of env changes and trends for firms¶ strategies and their mgmt. What are stakeholders? How do the three primary stakeholder groups influence organizations? 1. **Interest rates are vey low. the power of suppliers. Competitor Analysis. 7 environmental segments: demographic. the power of buyers.business or business in which the firm wants to compete and the customers it intends to serve **Mission comes from the Vision Rational approach firms use to achieve strategic competiveness and earn above-average returns. economic. Organizational. unions 3.is composed of dimensions in the broader society that influence an industry and the firms within it. communities. the threat of product substitutes. General Environment. Porters five forces of competition model   .

Class Notes: If you can go to graduate school ASAP. Rare capabilities ± capabilities that few. products. Tangible resources. Chapter 3 Global mind set.are assets that are rooted deeply in the firm¶s history and have accumulated over time. understand and manage an internal organization in ways that are not dependent on the assumptions of a single country. Technological Segment. competitors possess . Sociocultural Segment.is a group of firms producing products that are close substitutes. and critical cultural and institutional characteristics of global markets Physical Environment Segment. Relatively difficult for competitors to analyze and imitate. important international political events.allow the firm to exploit opportunities or neutralize threats in its external environment. age structure. resources. and income distribution. assumptions.includes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs.refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes. Value capabilities. Intangible resources. ethnic mix.Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products Rivalry among competing firms Demographic Segment. and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies. Useful data and information combine to form Competitor Intelligence: the set of data and info the firm gathers to better understand and better anticipate competitors¶ objectives. geographic distribution.is concerned with a population¶s size.refers to the nature and direction of the economy in which a firm competes or may compete. Global Segment.Includes relevant new global markets.the ability to analyze. Economic Environment. and materials. Industry. Political/legal segment. or context Value. strategies.measured by a product¶s performance characteristics and by its attributes for which customers are willing to pay.is a set of firms emphasizing similar strategic dimensions to use a similar strategy. culture. Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks.is the arena in which organizations and interest groups compete for attention. Complementors are companies or networks of companies that sell complementary goods or services that are compatible with the focal firm¶s good or service. processes. existing markets that are changing. and capabilities.is concerned with a society¶s attitudes and cultural values. A Strategic Group.are assets that can be observed and quantified. if any.

the ongoing set of competitive actions and competitive response that occur among firms as they maneuver for an advantageous market position Competitive Behavior.the set of competitive actions and responses the firm takes to build takes to build or defend its competitive advantages and to improve its markets position. Primary activities are involved w/ a products physical creation.make product based on quality. Assets that can be easily bought or sold are known as liquid assets !! do not grow if demand is not consistent!! Must meet the demand not more or less ASSESTS= DEBTS #1 correlate is size of the company Capital gains is a way to make money not taxed the rich get richer Vertically integration is buying and selling to yourself Differentiation. and its service after the sale. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Value Chain Anaysis.must show that your product is better but also must persuade that the quality is worth it/beneficial Price is opposite of differentiation- Chapter 5 Competitive rivalry. Why is it important for a firm to study and understand the external environment (EE)? . its sale and distribution to buyers.capabilities that other firms cannot easily develop Nonsubstitutabe capabilities do not have strategic equivalents.provide the assistance necessary for the primary activities to take place.A resource in you business should provide more wealth to us than the cost PORTERS 5 FORCES Support activities. Product diversification (PD): primary Chapter1 Chapter 2 1. Qualitative. Outsourcing.is the purchase of value-creating activity from an external supplier Small business is 500 people Liquidity = helps short term divides assets by liabilities. Liquidity is characterized by a high level of trading activity.Costly-to-imitate capabilities.

refers to the nature and direction of the economy in which a firm competes or may compete.Identifying early signals of potential changes in the general environment Monitoring. Demographic Segment. What are the differences between the general environment and the industry environment? Why are these differences important? General environment is composed of dimensions in the BROADER society that influence an industry and the firms within it. Relates to 5 forces model Better overall understand external environment as we began do dissect it. SWOT. Technological Segment.is the arena in which organizations and interest groups compete for attention. Sociocultural Segment.EE influences firms as they seek strategic competitiveness and the earning of above-average returns. geographic distribution. EE creates both opportunities and threats.Includes relevant new global markets.The external environment affects a firm¶s strategic actions. important international political events. Flaw of unemployment rate **ppl not looking for jobs Political/legal segment. Global Segment. What are the seven segments of the general environment? Explain the differences among them. Indexing. age structure.refers to potential and actual changes in the physical environment and business practices that are intended to positively respond to and deal with those changes.includes the institutions and activities involved with creating new knowledge and translating that knowledge into new outputs. Economic Environment. existing markets that are changing. 2. Chapter 3 1. and critical cultural and institutional characteristics of global markets Physical Environment Segment.analysts observe envior changes to see if an important trend is emerging Forecasting.Strength Weakness Opportunity Threat SMFA.set of factors that directly influences a firm and its competitive actions and responses. resources. processes. products. Why is it important for a firm to study and understand its internal organization? .determining timing and significance of the effects of envior changes and trends that have been identified They want to learn about their SWOT of their industry and emerging changes and trends 4. ethnic mix.feasible projections of what might happen and how quickly Assessing.is concerned with a society¶s attitudes and cultural values. and income distribution.What is the external environmental analysis process (four steps)? What does the firm want to learn when using this process? Scanning. and materials. and a voice in overseeing the body of laws and regulations guiding interactions among nations as well as between firms and various local governmental agencies.is concerned with a population¶s size.Scanning Monitoring Forecasting Assessing 3. Industry environment.

Understanding its internal org is critical. Costly-to-Imitate: historical. Physical. Innovation. 2. Rare 3. carrying. What are capabilities?. 5. Are tangible resources linked more closely to the creation of competitive advantages than are intangible resources. Organizational. Capabilities often evolve and develop over time. Non-substitutable: no strategic equivalent Why is it important for firms to use these criteria in developing capabilities? Only when ALL of these are used are above average returns achievable and a sustainable competitive advantage created.assets that can be observed and quantified. managerial capabilities. Financial. ambiguous cause. . Why is it important for decision makers to understand these differences? It is important to know the value of each as they are both necessary for the success of the company however intangible benefits are a superior source of core competencies. 4. social complexity 4. knowledge. deploying and protecting resources. Complexity and intra organizational conflicts. or is the reverse true? Why The more intangible a resource is. Human. Managers face Uncertainty. the more sustainable will be the competitive advantage that is based on it.This is important for firms and specifically managers because they are the ones that make decisions involving the firm¶s assets. trust between managers and employees. Valuable 2. and exchanging info and knowledge through the firm¶s human capital.achieving a specific task or set of tasks How do firms create capabilities? ± based on developing. this takes judgment. Technological Intangible resources. What is value? Why is it critical for a firm to create value? How does it do so? Value is measured by a product¶s performance characteristics and by its attributes for which customers are willing to pay. Reputational. organizational routines. What are the four criteria used to determine which of a firm¶s capabilities are core competencies are? 1. capabilities and core competencies. A manager might identify capabilities as core competencies that do not create competitive advantage.difficult to analyze and imitate. Building worth to something Firms that hold the competitive advantage offer value to customers that is SUPERIOR to the value competitors provide Creating value is critical because it is the source of above-average returns for a firm Firms create value by innovatively bundling and leveraging their resources and capabilities 3. ± identifying developing. What are the differences between tangible and intangible resources? Tangible resources.

Broken down into primary and support activates What does the firm gain when is successfully uses this tool? Above average returns 7. What are the differences among the cost leadership. (sell standardized goods or services w/ competitive levels of differentiation) RISK-#1 If competitors¶ innovations find a way to allow them to produce at a lower cost #2 Too much focus on having the lowest cost. relative to that of competitors. what and how? Why is this relationship important? Customers are the foundation of successful BLS. hence the firm determines #1 who will be served? #2 what needs those target customers have #3 how those needs will be satisfied This relationship is important because of Global competition. What is the business level strategy (BLS)? The business level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies 2. differentiation. and core competencies. focused differentiation and integrated cost leadership/differentiation business-level strategies Cost leadership (Broad Target) . 8. What is the relationship between a firm¶s customers and its business-level strategy in terms of who. Example walmart customers say there aren¶t enough sales people or ppl at the register aka walmart is super cheap by cut all corners possible . What is value chain analysis? Allows the firm to understand the parts of its operations that create value and those that do not. Chapter 4 1. This is important bc firms earn above-average returns only when the value it creates is greater than the costs incurred to create that value. increases interdependency. mitigate risks. they should never be taken for granted. and reduce their capital investments. What is outsourcing? Is the purchase of value-creating activity from an external supplier Why do firms outsource? Increase their flexibility. Why is it vital that managers have a clear understanding of their firm¶s strengths and weakness? Once these are understood it will lead to a better selection of a business-level strategy that will help reach firm¶s vision and mission. global economy.6. Will outsourcing¶s importance grow as we progress in the twenty-first century? If so why? Yes. They must acquire those resources and build the capabilities and competencies needed. How do firms identify internal strengths and weaknesses? By identifying resources. there are many attractive options for customers **my words** ** basically if a firm doesn¶t have the right strategy they will lose their customers in no time** 3. more efficient for companies as they realize this. The customer must be taken into consideration when selecting a BLS. capabilities. focused cost leadership and.set of actions taken to produce goods or services with features that are acceptable to customers at the LOWEST COST.

#2 If imitation by rivals causes customers to perceive that competitors offer essentially the same good or service.Differentiation (Broad Target). #3 needs of narrow segment may become more industry-wide over time (shift away from focus) Ritz camera. (target customers for whom value is created where firm¶s products differ from competitors. #2 firms must simultaneously reduce cost incurred by production while increasing differentiation. Tattoo removal. product line professional painters.unique products for customers who value differentiated features more than they value low cost RISK. Product Innovation is hugebenefits customer and sponsoring company.#1 it is difficult to product inexpensive products w/ differentiation at a low cost. and information resources.increases the flexibilities of human. Cut costs 3. but at a lower price aka KNOCK OFF BRANDS.Same as there broad counterparts with 3 additional risks #1 competitor may be able to more narrowly defined competitive segment ³outfocus´ #2 Company competing on an industry wide basis may decide to incorporate that market segment and it is worthy of competitive pursuit.defined above . **Zara** FMS. objective is to efficiently produce products w/ some differentiated features. Buyer -Youths or senior citizens. . PARTICUALR INDUSTRY SEGMENT OR NICHE to the exclusion of others. physical.total quality management emphasizes an organizations commitment to the customer and to improvement of every process through the use of data-driven problem-solving approaches based on the empowerment of employee teams.went could not shift away from selling cameras Focused Differentiation (Narrow Target). Increase customer satisfaction 2.simultaneously pursue low cost and differentiation. Information Networks improve product quality and delivery speed. **Harley Davidson** **Sony** 1. Differentiated products and a competitive cost. geographic northern Italy Focus Strategies succeed when effectively serve a segment whose unique needs are so specialized broad-based competitors choose not to serve that segment. Focused Cost Leadership (Narrow Target) ± below IKEA Set of actions take to produce goods or services that serve the needs of a particular competitive segment.#1 price differential between the differentiator¶s product and cost leader¶s product is too large.flexible manufacturing system. Reduce the amount of time required to introduce innovative products to the marketplace RISKS. Examples. These companies adapt quickly to new technologies and rapid changes in their external environment. TQM. UPS all right turns. RISKS. plastic surgery. rolex Integrated Cost Leadership/ Differentiation.set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them.

offering similar products. Competitor Analysis is the first step the firm takes to be able to predict the extent and nature of its rivalry w/ each competitor. and ability affect the firm¶s competitive behavior? . Competitive rivalry is the ongoing set of competitive actions and competitive responses that occur among firms as they maneuver for an advantageous market position. How do awareness. Competitive behavior is the set of competitive actions and responses the firm takes to build or defend its competitive advantages and to improve its market position. competitive behavior. motivation. and targeting similar customers are competitors. What are the specific risks associated with using each business-level strategy? Already answered in number 3 Chapter 5 1. AKA when firms produce similar products and compete for the same customers. Firms w/ high market commonality and highly similar resources are ³clearly direct and mutually acknowledge competitors´ These to concepts are building blocks because they are needed to understand competitors and further to predict competitor¶s behavior 3. the competitive rivalry is likely to be high. Competitive dynamics is ALL competitive behavior that is the total set of actions and responses taken by all firms competing within a market 2. and competitive dynamics defined in the chapter? Firms operating in the same market. Resource similarity is the extent to which the firm¶s tangible and intangible resources are comparable to a competitor¶s in terms of both type and amount. Firms w/ similar types and amounts of resources will have similar strengths and weaknesses and use similar strategies. How can each one of the business-level strategies be used to position the firm relative to the five forces of competition in a way that helps the firm earn above-average returns? Read in Chapter for now Threat of new entrants Rivalry among competing firms Threat of substitute products Bargaining power of suppliers Bargaining power of buyers 5. Who are competitors? How are competitive rivalry. What is market commonality? What is resource similarity? What does it mean to say that these concepts are the building blocks for competitor analysis? Market commonality is the number of markets w/ which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.4.

What competitive dynamics can be expected among firms competing in slow-cycle markets? In fast-cycle markets? In standard-cycle markets? Slow-cycle markets. Positive reputation may be a source of above-average returns. (must allocate funds for product innovation and dev. Competitors w/ high market dependence will respond strongly to attacks threatening their market position. This may be the most critical component in satisfying the customer. 6.Awareness is a prerequisite to any competitive action or response taken by a firm. 5. Market Dependence denotes the extent to which a firm¶s revenue or profits are derived from a particular market.a positive corporate reputation is of strategic value. 4. Firm will not be able to compete if they do not have these three These three affect the firm¶s competitive behavior because they are the actions and responses the firm takes to improve its market position. What factors affect the likelihood a firm will initiate a competitive response to the action taken by a competitor? A firm is likely to respond to a competitor action when 1 the action leads to better use of competitor capabilities to gain or produce stronger competitive advantages or an improvement in its market position 2 the action damages the firm¶s ability to use its capabilities to create or maintain an advantage 3 firm¶s market position becomes less defensible Types of competitive action in response: Reputation. Firm must be able to attack a competitor or respond to its actions. What factors affect the likelihood a firm will take a competitive action? A First-mover is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position.*Disney** . Organizational size. Ability relates to each firm¶s resources and the flexibility they provide. Motivation concerns the firm¶s INCENTIVE to take action or to respond to a competitor¶s attack. It refers to the extent to which competitors recognize the degree of their mutual inter-dependence that results from market commonality and resource similarity. advertising and r&d) First mover may get loyalty of customers and market share will become difficult for competitors Second mover responds to first mover typically through IMITATION Late mover respond significant amount of time after first and second. Larger firms are likely to initiate a strategic action. relates to perceived gains and losses.competitive advantages are sustainable over long periods of time. Quality exists when the firm¶s goods or services meet or exceed customers¶ expectations.smaller firm can launch a competitive action quickly as they are flexible.

increasing managerial compensation 4. vertical integration. and distribution linkages Related Linked (mixed related and unrelated). business restructuring. tax laws. How do firms create value when using a related diversification strategy? . What are the different levels of diversification firms can pursue by using different corporate-level strategies? Low Levels Single Business. This is important because a CLS helps companies select new strategic positions ± positions that are expected to increase the firm¶s value 2. but only when the firm is able to continuously upgrade the quality of its capabilities.between 70% and 95% of revenue comes from single business Moderate to High Levels Related Constrained. low performance.less than 70% or revenue comes from the dominant business (all businesses share product. Competitive advantages are partially sustainable. What are the three reasons firms choose to diversify their operations?(pg 161) Value-Creating Diversification Economies of scope (related diversification). consistently provide the same positive experience for customers. Gain customer loyalty through brand names. risk reduction for firm.95% or more of revenue comes from a single business Dominant Business. transferring core competencies.Less than 70% of revenue comes from dominant business. there are only LIMITED links between business Very High Levels (Conglomerates) Unrelated. 3. uncertain future cash flows. sharing activates. Reverse engineering and tech diffusion facilitate rapid imitation. Competitive advantages are NOT sustainable. there are NO common links between businesses. Chapter 6 When a company is to DIVERSIFY itself this means to ³diversify´ their operations from a single business competing in a single market into several product markets and several businesses. technological. financial economies Value-Neutral Diversification Antitrust regulation.less than 70% of revenue comes from the dominant business. tangible and intangible resources Value-Reducing Diversification Diversifying managerial employment risk.level strategy and why is it important? Corporate-level strategy specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets. What is corporate.Fast-cycle markets. 1. internal capital allocation. Time and Speed are important.Imitation is RAPID and inexpensive. Standard-cycle markets competitive advantages are partially shielded from imitation and imitation is moderately costly.

What motives might encourage a manager to over-diversify their firm? Desire for increased compensation and reduced managerial risk ( execs may diversify a firm in order to diversify their own employment risk. as long as profitability does not suffer Also executive compensation increases with the diversification of a firm (greatly) . Market Power. rare. Further selling the restructured companies¶ assets in the external market 6. and non substitutable influence a firm¶s ability to create value through diversification. Efficiently allocating resources and capital 2. difficult to imitate. Restructuring a target firm¶s assets and placing them under rigorous financial controls.Low performance.By using: Economies of Scope are cost savings that the firms creates by successfully sharing some of its resources and capabilities or transferring one or more corporate level core competencies that were developed in one of its business to another of its businesses Transferring Corporate level core competencies ±they come with intangible benefits. pursuit of synergy and reduction of risk for the firm Synergy exits when businesses value is greater when they work together opposed to when they work independently The degree which resources are valuable. What are the two ways to obtain financial economies when using an unrelated diversification strategy? Financial economies are cost saving realized through improved allocations of financial resources based on investments inside or outside the firm 1. What incentives and resources encourage diversification? Incentives to diversify External ± antitrust regulation and tax laws Internal.produces its own input or its own source of output distribution 5. TANGIBLE AND INTANGIBLE resources encourage diversification 7. uncertain future cash flows.exist when a firm is able to sell its products above or below the price point of its competitor and support its primary and support activities Blocking competitors through Multipoint competition Vertical integration.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.