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Market inf luences on business st rat egies

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What is t he import ance of st rat egic planning t hat should be f ollowed by t he companies?

1. U n i f i c a t i o n o f o rg a n i z a t i o n a l a n d o p e ra t i o n a l d e cisions 2 . G o a l -o ri e n t a t i o n t o wa rd t h e d e s i re d c o mp a n y a c h i e ve me n t s 3 . D i re c t f o c u s o n p l a n n i n g f o r f l e xi b l e re s p o n s e s f ornew

di e ve le oma p me n t s n eo ta e tch re a t i rk on f t i oa n s e s f o r e va l b 5 . Th e u o ve ra l l c o mp a n y f o c u s o n t h e vi
4 . Th sion 1. D e f i n e t h e f i rm’s vi s i o n a n d mi s s i o n s t a t e me n t s 2.Setthegoalsofthe f i rm e f i n e t h e o b j e c t i ve s o the 4 . D e c i d e wh a t t o me a s u re a n d t a k e a b a s e l i n e me a s u re me n t 5 . S t ra t e g i c a n a l ys i s 6 . C re a t e t h e s t ra t e g i c plan

What are the steps in strategic management?

Note
What are the 2 paths f or achieving organiz ational goals?

Th e re a re 3 o rg a n iz a tio n a l mis s io n p h ilo s o p h ie s wh ich a re : 1. Bu ild mis s io ns 2 . Ho ld mis s io ns 3. Ha rve s t mis s io n s

1. Cost leadership 2.
Financial object ives f or a f irm are t he improvement of t he overall f inancial out come of a f irm’s st rat egy.

Note Note Note

No n- f inancial o bje ct ive s f o r a f irm are t he impro ve me nt o f t he o ve rall abilit y o f t he f irm t o co mpe t e in t he marke t in t he lo ng run.

Critical success factors can be defined as the organiz ation’s measures of success to determine the achievement of strategic objectives.

Market inf luences on business st rat egies
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Note

Th e r e a r e 4 ca te g o r i e s fo r cr i ti ca l s u cce s s fa cto r s fo r a n o r g a n i z a ti o n : 1 . Fi n a n ci a l m e a s u r e s o f s u cce s s 2 . In te r n a l b u s i n e s s p r o ce s s m e a s u r e s o f s u cce s s 3. Cu s to m e r m e a s u r e s o f s u cce s s 4 . Le a r n i n g a n d i n n o va ti o n m e a s u r e s o f s u cce s s

Market inf luences on business st rat egies
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Note Note Note Note
What is the importance of the Strategic (SWOT) analysis?

Exa m p l e s o n th e fi n a n ci a l m e a s u r e s o f s u cce s s : 1.Salesorearningsg r o wth 2 . Di vi d e n d g r o wth 3. G r o wth i n th e m a r ke t va l u e o f th e o r g a n i z a ti o n ’s s to ck 4 . Cr e d i t r a ti ngs

Exa m p l e s o n th e i n te r n a l b u s i n e s s p r o ce s s m e a s u r e s o f s u cce s s : 1 . Q u a l i ty m e a s ures 2 . Cycl e ti m e co m p u ta ti ons 3. Y i e lds 4 . Re d u cti o n i n wa s te

Exa mp le s o n th e cu s to me r me a s u re s o f s u cce s s : 1. Ma rke t s h a re d a ta 2 . Cu s to me r s a tis fa ctio n d a ta 3. Re g a rd in g Bra n d re co g n itio n in fo rma tio n Exa mp le s o n th e le a rn in g a n d in n o va tio n me a s u re s o f s u cce s s : 1. Mo ra le a n d co rp o ra te cu ltu re 2 . In n o va tio n in n e w p ro d u cts a n d me th o d s 3. Ed u ca tio n a n d tra in in g
As m a n a g e r s r e vi e w th e s e fa cto r s , th e o r g a n i z a ti o n b u i l d s cl a r i ty r e g a r d i n g : 1 . Th e m i s s ion 2 . Co n s e n s u s a s to th e s tr a te g y 3. Cr i ti ca l s u cce s s fa cto r s 4 . Th e i m p a ct o f i n te r n a l a n d e xte r n a l fa cto r s o n th e b u siness
1. C re a t i n g a s e t o f s t e p s t o a c h i e ve t h e o b j e c t i ve s o f t h e f i rm wh i l e s t a yi n g i n l i n e wi t h t h e f i rm’s vi s i o n a n d mi s s ion. 2 . P ro vi d i n g a n e n vi ro n me n t a n d mo d e l u n d e r wh i c h t h e g o a l s a n d p ro f i t a b i l i t y o f t h e f i rm c a n b e a c h i e ve d . 3 . Fo c u s i n g o n t h e wa ys t h e c o mp a n y wi l l : A. C o n d u c t b u s i n e s s o p e ra t i o ns B . R e s p o n d t o c o mp e t i t i ve mo ve me n t s a n d o t h e r i ssues C . Ac h i e ve /ma i n t a i n c o mp e t i t i ve a d va ntage

What does the strategic plan of a company f ocus on?

Note

Strategic plans vary based on segments.

P ro f i t a b ility 3 .co m /cards /20 36 6 9 5 What are t he charact erist ics of t he segment of an organiz at ion af f ect ing st rat egic planning? 1. G ro wt h p o t e n t i a l a s i n d i c a t e d b y i n d u s t ry ma t u ri t y a n d re g u l a t o ry c o n s t ra i n t s 2 . L e ve l s o f ri s k 6 . M a n a g e me n t t a l . D i s c re t i o n a ry c a s h flow 4 . C o n t ri b u t i o n ma rg i n s 5 .cram .Market inf luences on business st rat egies Study this s e t o nline at: http://www.

C ri s i s s i t u a tion 4 . Do th e g o a l s o f th e fi r m co n ti n u e to b e a l i g n e d wi th th e m i s s i o n s ta te m e n t a n d cu r r e n t s tr a te g y? 2 .Market inf luences on business st rat egies Study this s e t o nline at: http://www. Is th e fi r m a b l e to b e p r o fi ta b l e u n d e r th e cu r r e n t s tr a te g y? Note Note Note Note Th e s e l e c t e d s t ra t e g i c p l a n o f t h e f i rm mu s t b e f l e xi b l e t o a d a p t t o c h a n g e s i n a re a s s u c h a s : 1. R e g u l a t o ry l a ws 5 . Business level 3. Q uantity demanded can be defined as the quantity of a good (or service) individuals are willing and able to purchase at any given price. all else equal. Te c h n o l ogy 2 . Corporate level 2. O perating What is contingency planning? What are t he quest ions t hat a f irm should use in evaluat ing it s pract ice? It is t he development of alt ernat ive plans in t he event t hat adopt ed plans don’t work. all else being equal. Demand Curve illustrates the maximum quantity of a good. Functional level 4. C u s t o me r p re f e re The f irm must have a strategic plan in order to maintain competitive advantage in the market.co m /cards /20 36 6 9 5 What are the levels within the organization that the strategic plan should be implemented through? 1. .cram . Ha s th e fi r m b e e n a b l e to a tta i n o r m a i n ta i n co m p e ti ti ve a d va n ta g e ? 3. 1 . consumers are willing and able to purchase at any given price. C o mp e t i tion 3 .

cram .Market inf luences on business st rat egies Study this s e t o nline at: http://www. .co m /cards /20 36 6 9 5 Note A change in quant it y de mande d is a change in t he amo unt o f a go o d de mande d re s ult ing s o le ly f ro m a change in price .

If t he price of a complement ary good decrease. t he demand f or t he original good will increase.C hangesin co nu su me rr Ta I ns3 cto c re o n me eme s a n d p re f e ns ce Note Note What is the fundamental law of supply? If t he price of a subst it ut e good increase. C h a n g e s i n cs ofn Eu xp tions 6 . 1.cram . C h a n g e s i n t h e p ri c e o f t h e R e l a t e d g o o d s (s u b s t i t u tesor c o mp l i me nts) 4. The f undamental law of supply states that “The price and quantity supplied are positively related”. C h a n g e s i n we a lth 2 .Market inf luences on business st rat egies Study this s e t o nline at: http://www. it causes a shift in the demand curve. t he demand f or t he original good will increase. . Note T he supply curve illust rat es t he maximum quant it y o f go o d sellers are willing and able t o pro duce at any price level. T he fundamental law of demand states that the price of a product (or service) and the quantity demanded of that product (or service) are inversely related.Changesin os ru a me p ror d ce t cta 5 . Substitution effect 2. Income 1. C h a n g e s i n t h e N u mb e r o f b u ye rs s e rve d b y t h e ma .co m /cards /20 36 6 9 5 Note What is the fundamental law of demand? What are t he reasons beyond t he inverse relat ionship bet ween t he quant it y demanded and t he price? What are t he f act ors t hat lead t o t he shif t of t he demand curve ot her t han t he price? A change in demand is a change in the amount of a good demanded resulting from a change in something other than the price of the good.

Market inf luences on business st rat egies Study this s e t o nline at: http://www. Ch a n g e s i n th e p r i ce o r d e m a n d fo r O th e r g oods 4 . A change in the quantity supplied is a change in the amount producers are willing and able to produce resulting solely from a change in price. all e ls e be ing e qual. it causes a shift in the supply curve. Note T he price elast icit y o f demand is t he percent age change in quant it y demanded divided by t he percent age change in price. . 1 . A change in supply is a change in the amount of a good supplied resulting from a change in something other than the price of the good. all else being equal. Ch a n g e s i n p r o d u cti o n Co s ts 3. Elasticity is a measure of how sensitive the demand f or or supply of a product is to a change in price. Ch a n g e s i n S u b s i d i e s o r ta xe s 5 . T he market ’s equilibrium price and o ut put (quant it y) is t he po int where t he supply and demand curves int ersect . Ch a n g e s i n p r o d u cti o n Te ch n ology Note Note What is the elasticity of demand and supply? Marke t s upply is t he t o t al amo unt o f a go o d all pro duce rs are willing and able t o pro duce at e ach and e ve ry price .cram . Ch a n g e s i n th e p r i ce Exp e cta ti o n s o f th e s u p p l yi n g fi r m 2 .co m /cards /20 36 6 9 5 Note Note Note What are t he f act ors t hat lead t o t he shif t of t he supply curve? Q uantity supplied is the amount of a good that producers are willing and able to produce at any given price.

Negat ive price elast icit y of demand ref lect s t he downward sloping demand curve.Market inf luences on business st rat egies Study this s e t o nline at: http://www.cram .0 .co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note The price elast icit y of demand is usually negat ive. Point method 2. Midpoint method T he point met hod measures t he price elast icit y of demand at a part icular point on t he demand curve. T here are 2 methods for measuring the price elasticity of demand: 1. Demand f or a good is price inelastic if the absolute price elasticity of demand is less than 1. T he midpoint met hod measures t he price elast icit y of demand bet ween any t wo point s on t he demand curve.

If th e time p e rio d is lo n g e r. .cram . i f t h e p ro d u c t c a n b e s t o re d a n d d o e s n ’t h a ve t o b e b o u g h t t o d a y t h i s ma y re s u l t i n h i g h e l a s t i c i t y o f s u p p l y.Market inf luences on business st rat egies Study this s e t o nline at: http://www. th e p ro d u ct d e ma n d will b e mo re e la s tic b e ca u s e mo re ch o ice s a re a va ila b le . Demand is price elast ic if t he absolut e price elast icit y of demand is great er t han 1.0 Demand is unit elastic if the percentage change in the quantity demanded caused by a price change equals the percentage change in price 1. If s u b s titu te s a re a va ila b le . Note Cro s s e la s ticity o f d e ma n d (o r s u p p ly) is th e p e rce n ta g e ch a n g e in th e q u a n tity d e ma n d e d (o r s u p p lie d ) o f o n e g o o d ca u s e d b y th e p rice ch a n g e o f a n o th e r g o o d . demand is perf ectly inelastic. Th e t i me i t t a k e s t o p ro d u c e a n d s u p p l y t h e g o o d wi l l a f f e c t t h e p ri c e e l a s t i c i t y o f s u p p l y. 2 .0 Demand is unit elast ic if t he absolut e price elast icit y of demand is equal t o exact ly 1. Fo r e xa mp l e . th e p ro d u ct d e ma n d will b e mo re e la s tic. S t o ri n g t h e p ro d u c t b y c u s t o me rs wi l l a f f e c t t h e p ri c e e l a s t i c i t y o f s u p p l y. 2 .co m /cards /20 36 6 9 5 Note Note Note Note What are the f actors af f ecting price elasticity of demand? If price inelasticity is zero. Note What are the f actors af f ecting the price elasticity of supply? 1. l o n g e r p ro d u c t i o n t i me l e a d s t o l o we r p ri c e e l a s t i c i t y.

cram .Market inf luences on business st rat egies Study this s e t o nline at: http://www. If the coefficient is zero.co m /cards /20 36 6 9 5 Note Note Note What is the income elasticity of demand? Subst it ut e go o ds mean t hat if t he price o f pro duct “A” go es up. the goods are unrelated. I t measures t he percent age change in quant it y demanded f or a product f or a given percent age change in income. Price ceiling is a price that is established below the equilibrium price. t he demand f o r pro duct “B” go es up (Po sit ive co ef f icient ). . Compliment goods mean that an increase in the price of product “A” results in a decrease in quantity demanded for product “B” (Negative Coefficient). which causes shortages to develop (price can’t go above this amount). Note Note Note Note A normal good is a product whose demand is posit ively relat ed t o income. An inf erior good is a product whose demand is negat ively relat ed t o income.

g. Economic prof it = Tot al Revenue – Tot al economic cost s . which caus e s s urplus e s t o de ve lo p (Price can’t go be lo w an amo unt ). Implicit Cost Explicit cost s are document ed out of pocket expenses (e. Opport unit y cost is t he value of t he next best alt ernat ive f oregone (or not chosen). T here are 2 t ypes of cost s: 1.co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note Price f lo o r is a minimum price s e t abo ve t he e quilibrium price .cram . Economic cost s are account ing (explicit ) cost s plus opport unit y (implicit ) cost s. Account ing cost s measure t he explicit cost s of operat ing a business (Not consider opport unit y cost s). mat erials & ut ilit ies). Explicit Cost s 2. Implicit cost s are opport unit y cost s of input s supplied by t he owners. wages.Market inf luences on business st rat egies Study this s e t o nline at: http://www.

co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note Account ing prof it = T ot al Revenue – T ot al Account ing cost s Accounting prof it > Economic prof it (which takes into consideration the opportunity costs) The inputs used f or production in the long run are variable. . Average product (AP) equals t he t ot al product divided by t he quant it y of an input .unit incre as e in t he quant it y o f an input e mplo ye d. In the long run all costs are variable T ot al product (T P) equals t he t ot al amount of out put (Q) produced Marginal pro duct (MP) e quals t he change in t o t al pro duct re s ult ing f ro m a o ne . output increases but at a diminishing rate. T he law of diminishing returns states that when more and more units of an input are combined with a fixed amount of other inputs.Market inf luences on business st rat egies Study this s e t o nline at: http://www.cram .

t hey are independent o f t he level o f pro duct io n Variable costs are dependent upon the level of production Average Fixed Cost (AFC) = TFC/Q Average variable cost (AVC) = TVC/Q Average Total Cost (ATC) = TC/Q TC = FC + VC Marginal cost (incremental cost) is the change in total cost. resulting f rom a one-unit increase in quantity.Market inf luences on business st rat egies Study this s e t o nline at: http://www. . Fixed co st s do n’t change during t he pro duct io n perio d.cram .co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note T he classif icat io n o f co st s t o f ixed and variable is in t he sho rt -run o nly because in t he lo ng run all co st s are variable.

co m /cards /20 36 6 9 5 Note Note Note Note Note Note What are the f actors enabling economies of scale? Marginal cost depends solely on variable costs. Mas s pro duct io n is no rmally mo re e f f icie nt Diseconomies of scale are increases in average costs of operations resulting from problems in managing large-scale enterprises.Market inf luences on business st rat egies Study this s e t o nline at: http://www. Fixed costs don’t influence marginal costs MC and TC are directly proportional T he sho rt -run supply curve is t he marginal co st (MC) curve abo ve t he minimum po int o f it s average variable co st (AVC) curve. Oppo rt unit y f o r s pe cializ at io n 2.cram . 1. Economies of scale are reduct ions in unit cost s result ing f rom increased siz e of operat ions. Note . Ut iliz at io n o f advance d t e chno lo gy 3.

Difficulty of supervising and managing a large bureaucracy (inefficient performance of the management function). Ho mo g e n o u s p ro d u cts 3.cram . Note Note Note What are t he at t ribut es of perf ect compet it ive market ? Under a perfectly competitive market.Market inf luences on business st rat egies Study this s e t o nline at: http://www.co m /cards /20 36 6 9 5 What are the f actors causing diseconomies of scale? 1. Note Note Note In a pe rfe ctly co m pe titive m arke t a pro fit m axim iz ing firm will co ntinue adding units to pro ductio n until the co s t o f pro ducing o ne m o re unit is gre ate r than the re ve nue that unit will ge ne rate (P=MR=MC). Under a perfectly competitive market. strategic plans may include maintaining the market share and responsiveness of the sales price to market conditions. In t he perf ect co mpet it ive market t he f irm sho uld co nt inue t o pro duce as lo ng as price is great er t han t he variable co st s I n t he perf ect compet it ive market t he f irm is a price t aker not a price set t er like at t he Monopolist ic market . no individual firm can shift the market supply sufficiently to make a good more scarce or abundant. A la rg e n u mb e r o f s u p p lie rs a n d cu s to me rs a ctin g in d e p e n d e n tly 2 . 1. No b a rrie rs to e n try b e ca u s e firms e xe rt n o in flu e n ce o ve r th e ma rke t o r p rice . no individual f irm can inf luence t he market price of it s product . Under a perf ect ly compet it ive market . Bottlenecks and costs of transporting materials 2.

Exte n s i ve a l l o ca ti o n o f r e s o u r ce s to a d ve r ti s i n g . Fe w b a r r i e r s to e n tr y 3. p ro d u ce wh e re MR = MC) Under t he monopolist ic compet it ion t he f irm earns an economic prof it Because there are free barriers to entry under monopolistic competition. m a r ke ti n g . La r g e q u a n ti ti e s 3. Re s p o n s i ve n e s s to co n s u m e r wi s h e s . Note Note Note Note T here is lit t le market cont rol by each f irm in t he monopolist ic compet it ion market st ruct ure. in the long run. Ma i n ta i n i n g th e m a r ke t s hare 2 . S i g n i fi ca n t n o n -p r i ce co m p e ti ti o n i n th e m a r ke t ( e . Un d e r th e mo n o p o lis tic co mp e titio n th e firm ma ximiz e s p ro fits b y p ro d u cin g th e le ve l o f o u tp u t th a t e q u a te s MR a n d MC (i.e .co m /cards /20 36 6 9 5 What are t he advant ages of t he perf ect ly compet it ive market ? 1 .. P l a n fo r e n h a n ce d p r o d u ct d i ffe r e n ti a ti o n 3. n e w co m p e ti to r s e n te r a n d d r i ve th e p r i ce d o wn . In cr e a s e i n demand Note What are t he assumpt ions and market condit ions f or Monopolist ic compet it ion market st ruct ure? Un d e r m o n o p o l i s ti c co m p e ti ti o n s tr a te g i c p l a n s m a y i n cl u d e : 1 . Lo w p r i ce s 2 .Market inf luences on business st rat egies Study this s e t o nline at: http://www.g . 4 .. p r o d u ct r e s e a r ch 1 . Nu m e r o u s fi r m s wi th d i ffe r e n ti a te d p r o d u cts 2 . If a b n o r m a l p r o fi ts e xi s t.cram . monopolistically competitive firms will earn z ero profits . Th e a b i l i ty o f fi r m s to e xe r t s o m e i n fl u e n ce o ve r th e p r i ce andmar ke t 4 .

co m /cards /20 36 6 9 5 Note Unde r and o ligo po ly. and call fo r the pro pe r am o unt o f adve rtis ing and ways to pro pe rly adapt to price change s o r re quire d change s in pro ductio n vo lum e .Market inf luences on business st rat egies Study this s e t o nline at: http://www. s trate gic plans fo cus o n m arke t s hare .cram .

Stro n g ly in te rd e p e n d e n t firms (p rice s te n d to b e fixe d ) Note Note Note Note What are t he assumpt ions and market charact erist ics of Monopoly? O ligopolists face a kinked demand curve because firms match price cuts of competitors but ignore price increases. .Market inf luences on business st rat egies Study this s e t o nline at: http://www.co m /cards /20 36 6 9 5 Note What are t he assumpt ions and market condit ions under t he Oligopoly market st ruct ure? An O ligopoly is a market structure in which few sellers dominate the sales of a product and entry of new sellers is difficult or impossible 1. Fa irly s ig n ifica n t b a rrie rs to e n try (e . T he ability of the firm to set output and prices 4. No substitute products . Significant barriers to market entry 3. Re la tive ly fe w firms with d iffe re n tia te d p ro d u cts 2 . h ig h ca p ita l re q u ire d ) 3. strategic plans will likely ignore market share and focus on profitability from production levels that maximiz e profits.g .cram . A single firm with a unique product 2. the firm will operate best when marginal revenue equals marginal cost (MR=MC) Under Monopoly. Monopoly represent s t he concent rat ion of supply in t he hands of a single f irm 1. Regardless of the model that represents the industry.

Market inf luences on business st rat egies Study this s e t o nline at: http://www.cram .co m /cards /20 36 6 9 5 Note Under t he Monopoly market st ruct ure t he f irm’s demand curve is t he same as t he indust ry’s demand curve .

OPEC).cram . Boycot t s are organiz ed group ref usals t o conduct market t ransact ions wit h a t arget group T here are 2 t ypes of input s: 1.co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note Under t he Monopoly market st ruct ure t he f irm is a price set t er In a Mo n o p o l y. Th e like ly e ffe ct o f a ca rte l is to in cre a s e p rice a n d re d u ce o u tp u t b e lo w th e s o cia lly e fficie n t le ve l.e . Quant it y produced by a monopolist is below t he socially ef f icient level Ca rte ls a re g ro u p s o f firms a ctin g to g e th e r to co o rd in a te o u tp u t d e cis io n s a n d co n tro l p rice s a s if th e y we re a s in g le mo n o p o ly (i. . Complement ary input s 2.Market inf luences on business st rat egies Study this s e t o nline at: http://www. th e fi r m wi l l m a xi m i z e p r o fi ts wh e r e m a r g i n a l r e ve nueequals m a r g i n a l co s t. h o we ve r .. th e m o n o p o l i s t’s p r i ce wi l l b e h i g h e r th a n m a r g i n a l r e ve n u e [( MR=MC a n d P > MR ( a n d MC) ]. Subst it ut e Derived demand is the demand f or f actors of production.

Market inf luences on business st rat egies Study this s e t o nline at: http://www.cram . A Monopsony occurs when t here is only one employer in t he market Firms desiring to achieve competitive advantage must focus on the needs and preferences of the buyers. T he result of t he value chain is t he reduced cost or t he improved innovat ion. O nce the firm is aware of how its product is perceived. If t he marginal product of an input increases. Managers must determine the flow of activities undertaken by the organiz ation to produce a service or product and critique the value added to the customer by each link in the value chain. and then either meet or exceed their expectations. Value Chain analysis is a strategic tool that assists a firm in determining how important its perceived value –by the buyers.co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note If t he demand f or a f irm’s out put increases. t he demand f or t he input s used t o produce t hat out put will also increase. value chain analysis is invaluable in assessing the ability of the firm to attain competitive advantage. .is with respect to the market the firm operates in. t he demand f or t hat input will also increase.

d e ve l o p m e nt o f the te c hno l o g y us e d . fi na nc e . t h e va l u e s t a rt s wi t h t h e s u p p l i e rs wh o p ro vi d e t h e ra w ma t e ri a l s f o r t h e p ro d u c t i o n p ro c e s s . a n d t h e n e n d s wi t h t h e d i s p o s a l a n d T here are 3 forms of the value chain analysis: 1. a d ve rt i s i n g t h e p ro d u c t . c o n t i n u e s wi t h t h e f i rm a n d i t s s t ra t e g i c p l a n . Ofte n th e g re a te s t va lu e a n d co mp e titive a d va n ta g e s te ms fro m th e in fo rma tio n o b ta in e d fro m th e ve rtica l lin ka g e a n a lys is b e ca u s e th e a ctivitie s th a t cre a te th e mo s t a n d le a s t a mo u n t o f va lu e ca n b e d e te rmin e d . t h e d e l i ve ry o f t h e p ro d u c t s t h ro u g h d i s t ri b u t i o n c h a n n e l s . J o h n S h a n k a n d V. G o vi n d a ra j a n t o o k a l o o k a t t h e va l u e c h a i n i n a n d e ve n b ro a d e r s e n s e t h a n M i c h a e l P o rt e r. a n d s e rvi c i n g t h e p ro d u c t a f t e r i t i s s o l d ). Vertical linkage analysis An a lyz in g th e ve rtica l lin ka g e o f th e firm me a n s u n d e rs ta n d in g th e a ctivitie s o f th e s u p p lie rs a n d b u ye rs o f th e p ro d u ct a n d d e te rmin in g wh e re th e va lu e ca n b e cre a te d e xte rn a l to th e firm’s o p e ra tio n s .) . I n t h i s vi e w. s tr a te g i c p l a nni ng .Market inf luences on business st rat egies Study this s e t o nline at: http://www. Th e y i n d i c a t e d t h a t t h e f i rm i t s e l f i s a p a rt o f t h e o ve ra l l va l u e c h a i n o f t h e i n d u s t ry. c o n t i n u e s f u rt h e r wi t h t h e va l u e c re a t e d b y t h e c u s t o me rs . According to Porter..co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note T he one who has f irst suggest ed t he idea of t he Value Chain is called Michael Port er at 1985. h a n d l i n g t h e ra w ma t e ri als. Support activities P ri ma ry Ac t i vi t i e s a re t h o s e t h a t a re i n vo l ve d wi t h t h e d i re c t ma n u f a c t u re o f p ro d u c t s .g . Sup p o r t Ac ti vi ti e s a r e tho s e a c ti vi ti e s tha t a r e p e r fo r m e d b y the s up p o r t s ta ff o f a n o r g a ni z a ti o n ( e . there are 2 major categories of business value activities exist which are: 1. e tc .cram . Primary activities 2. m a na g e m e nt o f e m p l o ye e s . t a k i n g o rd e rs f o r t h e p ro d u c t . .the ma n u f a c t u ri n g p ro c e s s . Internal differentiation analysis 3.g . p ur c ha s i ng o f the m a te r i a l s a nd s up p l i e s . a n d t h e s u p p o rt o f t h e p ro d u c t t h a t e xi s t s a f t e r t h e s a l e i s ma d e (e . Internal costs analysis 2. a c c o unti ng .

g . T he r e a r e 3 typ e s o f s tr a te g i c fr a m e wo r ks tha t ha ve p r o ve n to b e us e ful fo r the va l ue c ha i n a na l ys i s whi c h are: 1. Id e n ti fy o p p o r tu n i ti e s fo r r e d u ce d co s t In s o m e ca s e s th e va l u e th a t e a ch s te p i n th e va l u e ch a i n p r o d u ce n o t o n l y b e n e fi ts th e s p e ci fi c a cti vi ty i n th e ch a i n b u t a l s o b e n e fi ts o th e r a cti vi ti e s ( e . Id e n ti fy co m p e ti ti ve a d va n ta g e b . preparing. and delivering a good or service Cost drivers represent f actors that increase total cost Ident if icat io n o f co st drivers assist t he o rganizat io n in det ermining t ho se areas in which it has a co mpet it ive advant age. Organiz at ions might also ident if y t hose areas in which out sourcing is valuable Th e l a s t s te p i n th e va l u e ch a i n a n a l ys i s i s to s tu d y th e co s t d r i ve r s a s s o ci a te d wi th e a ch a cti vi ty i n th e va l u e ch a i n fr o m a s p e ci fi c p e r s p e cti ve : a .cram .co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note Note Va lu e Ch a in a n a lys is co n s is ts o f 3 s te p s wh ich a re : 1. Id e n tify va lu e a ctivitie s 2 . Id e n ti fy o p p o r tu n i ti e s fo r a d d e d va l u e c. Ind us tr y s tr uc tur e a na l ys i s 2 . De ve lo p a co mp e titive a d va n ta g e b y re d u cin g co s t o r a d d in g va lu e Value activities are generally those processes that are involved with designing. Cu s to m e r s e r vi ce m i g h t n o t o n l y b e n e fi t th e fi r m b y cr e a ti n g l o ya l ty fr o m i ts cu s to m e r s b u t ca n a l s o i n fl u e n ce th e p r o d u ct d e s i g n i n th e fu tu r e ) . In d e n tify co s t d rive rs a s s o cia te d with e a ch a ctivity 3. manufacturing.Market inf luences on business st rat egies Study this s e t o nline at: http://www. C o r e c o m p e te nc i e s a na l ys i s .

B a rri e rs t o ma rk e t e n t ry 2 .) wh i c h a re : 1. Firms use SWOT analysis t o assist in developing t heir appropriat e st rat egic plans SWO T analysis consists of 2 factors that influence the firm’s strategy which are: 1. In cr e a s e d p e r ce i ve d cu s to m e r va l u e 3. C a p i t a l i mp ro ve me n t s 6 . ca n a l a r g e a m o u n t o f m a r ke ts b e a cce s s e d?) Al o n g wi t h h i s “f i ve f o rc e s ” t h a t i mp a c t t h e p ro f i t s a n d c o mp e t i t i ve e n vi ro n me n t o f a n i n d u s t ry P o rt e r i n d i c a t e d f o u r ma j o r f a c t o rs t h a t i mp a c t g l o b a l c o mp e t i t i ve a d va n t a g e (t o b e c o n s i d e re d a l o n g wi t h t h e ri s k s o f t h e p o l i t i c a l e n vi ro n me n t o f t h e n a t i o n . I n n o va t i o n o f p ro d u c t l ines 2 . C o re c o mp e t e n cies 4 . C o mp e t e n c e o f ma n a g e me n t 3 . External factors (O pportunities and T hreats) Th e y a re s o u rc e s o f s t re n g t h s a n d we a k n e s s wh i c h i n c lude: 1. i n f l a t i o n ra t e s . Re d u ce th e th r e a t th a t co m p e ti to r s m a y co p y th e p r o d u ct 2 .e .cram . Q u a l i ty p h ys i ca l r e s o u r ce s 3. P r o vi d e l e ve r a g e ( i . Internal factors (Strengths and Weaknesses) 2. i mp a c t t h e c o mp e t i t i ve e n vi ro n me n t o f a f i rm a n d a l s o i n f l u e n c i n g t h e b u s i n e s s s t ra t e g y wh i c h a re : 1. C o n d i t i o n s o f t h e f a c t o rs o f p ro d u ction Whe n d e te r m i ni ng the e ffe c ts o f the m a r ke t o n b us i ne s s s tr a te g y. s o c i a l va l u e s . M a rk e t c o mp e t i t i ve ness Co r e co m p e te n ci e s ca n b e cr e a te d wh e n th e fi r m h a s a s o l i d fo u n d a ti o n i n th e fo l l o wi n g : 1 . Exce l l e n t e m p l o ye e s 2 . I n f l u e n c e o f h i g h -l e ve l ma n a g e rs 5 . S u p e r i o r te ch n o logy 4 . Ab i l i ty to i n te g r a te a l l th o s e fa cto r s a p p r o p r i a te l y A co m p e te n cy i s d e e m e d a co r e co m p e te n cy i f i t h a s th e a b i l i ty to : 1 . c u rre n c y f l u c t u a t i o n s .co m /cards /20 36 6 9 5 Note Note Note Note Note Note Note What are t he int ernal f act ors t he inf luence t he st rat egy of t he f irm? M i c h a e l P o rt e r wo rk i n 19 8 0 a n d 19 8 5 i d e n t i f i e d f i ve f o rc e sthat i n f l u e n c e p ro f i t a b i l i t y o f t h e f i rm a n d t h u s .Market inf luences on business st rat egies Study this s e t o nline at: http://www. e t c . L e a d e rs h i p i n re s e a rc h a n d d e ve l o p . a l o o k a t the o ve r a l l m a c r o -e nvi r o nm e nt i n whi c h the fi r m o p e r a te s i s e s s e nti a l b e c a us e i t c a n s i g ni fi c a ntl y a s s i s t the c o m p a ny i n d e ve l o p i ng a nd c ho o s i ng the b e s t s tr a te g y to m e e t i ts goals. t a x re g u l a t i o n s .

Match the price of rivals Differentiation leadership advantage may be used by the firm in one of two ways: 1. Reput at ion of supplier and demand f or it s goods Wh e n firms d e s ire to a ch ie ve co mp e titive a d va n ta g e with re s p e ct to p ro d u cts . Allia n ce s o f riva l firms a n d s u p p lie rs 1. Te c h n o l o g i c a l a d va n c e s a n d e xi s t i n g t e c h n ology 5 . Co s t le a d e rs h ip a d va n ta g e 2 . Bu ye r’s lo w co s t o f s witch in g p ro d u cts 4 . D e mo g ra p h i c s o f t h e p o p u l ation 4 . Diffe re n tia tio n a d va n ta g e Note Note Note Cost leadership advantage may be used by the firm in one of two ways: 1. E c o n o mi e s o f s cale Note What are t he f act ors t hat impact market compet it iveness? What are t he f act ors t hat lead t o st rengt hening t he bargaining power of cust omers? 1.Supplierac cess 3 . Hig h n u mb e r o f a lte rn a te s u p p lie rs What are t he f act ors t hat lead t o st rengt hening t he bargaining power of t he supplier? 1. Increase price . Ava ila b ility o f in fo rma tio n 3. Ab ility o f riva l firms to re s p o n d to ch a nge 2 .Regulationsandl a ws 3 . Th e e c o n o my 2. H i g h u p -f ro n t c a p i t a l re q u i re me n t s 4 . La rg e vo lu me o f a firm’s b u s in e s s (h ig h b u ye r co n ce n tra tio n ) 2 . Firm is unable t o change suppliers 2.co m /cards /20 36 6 9 5 What are t he ext ernal f act ors t he inf luence t he st rat egy of t he f irm? Th e y a re s o u rc e s o f o p p o rt u n i t i e s i n t h e ma rk e t a n d t h re a t s t o t h e f i rm’s a b i l i t y t o c o n t i n u e wi t h i t s s t ra t e g i c p l a n a n dinclude: 1. Ad ve rtis in g o f riva l firms 3. P re -e xi s t i n g c u s t o me r p re f e re n c e s a n d l o ya l t i e s 5 . th e re a re two b a s ic fo rms o f a d va n ta g e th a t th e y will ch o o s e fro m: 1. R&D o f riva l firms 4 .Market inf luences on business st rat egies Study this s e t o nline at: http://www. Build market share 2. Build market share 2.cram . G o ve rn me n t re g u l a tion 2. S o c i a l va l Typ e s o f b a rri e rs t o ma rk e t e n t ry: 1.

P r o d u ct a p p e a l s to d i ffe r e n t p e o p l e fo r d i ffe r e n t reasons 3. . Fo c u s /N i c h e s t ra t e gies 5 . Build customer brand loyalty 3. Buye rs have large am o unts o f bargaining po we r 2. C o o p e ra t i ve /s t ra t e g i c a l l i Note What are the dif f erentiation strategies that a f irm may use? C o s t l e a d e rs h i p s t ra t e g i e s f ailif: 1. M e rg e r a n d Ac q u i s i tion 6 .co m /cards /20 36 6 9 5 Note What are the types of Competitive strategies? 1. a quality pro duct at a re as o nable price ) Under t he best cost st rat egy t he overall lowest cost in indust ry is not an opt ion. D i f f e re n t i a t i o n s t ra t egies 3 .cram . Fi rms o ve rl o o k t h e f a c t t h a t c o n s u me rs ma y d e s i re i mp ro ve me n t s t o t h e p ro d u c t o r ma y n o t c a re a n ymo re a b o u t t h e e xi s t e n ceof l o we r p ri c e i n t h e d e s i re d p ro d uct 1. Fi r m s wh o a r e co m p e ti n g i n th e m a r ke t ch o o s e d i ffe r e n t fe a tu r e s wi th wh i ch to d i ffe r e n ti a te th e i r p r o D i f f e re n t i a t i o n s t ra t e g i e s failif: 1. Perception is often greater than reality Note Note Note Note Di ffe r e n ti a ti o n s tr a te g i e s wo r k we l l wh e n : 1 . .e . Fi rms c h o o s e t o d i f f e re n t i a t e i n a n a re a wi t h o u t p ro p e rl y a s s e s s i n g t h e re q u i re me n t s o f t h e c o n s u me r f o r d e s i re d f e a t u re s 2 . Fi rms f o c u s t o o mu c h o n t h e wro n g a re a a n d e n d u p c re a t i n ga p ro d u c t wh o s e va l u e d o e s n ’t e xc e e d t h e h i g h e r p ri c e t h a t mu stbe c h a rg e d f o r t h e f e a t u re The be s t co s t s trate gy co m bine s the co s t le ade rs hip s trate gy with the diffe re ntiatio n s trate gy to give cus to m e rs highe r value fo r the ir purchas e price (i. Cu s to m e r s a r e a b l e to s e e va l u e i n a p r o d u ct 2 . The re is he avy co m pe titio n 1. Fi rms f o c u s t o o mu c h o n c u t t i n g c o s t s a n d o ve rl o o k t e c h n o l o g i c a l a d va nces 2 . Create/Promote a unique feature in the product 2. Buye rs are able to s witch be twe e n co m pe titive pro ducts witho ut incurring s ignificant co s t 3.Market inf luences on business st rat egies Study this s e t o nline at: http://www. B e s t c o s t s t ra t e gies 4 . C o s t l e a d e rs h i p s t ra t e gies 2 .

. To o b t a i n t e c h n o l o g i c a l k n o wl e d g e o f o t h e rs t h a t t h e y d o n ’t c u rre n t l y h a ve 3 . To e xp a nd 5 . To o b ta i n i n fo r m a ti o n a s a g r o u p th a t th e y co u l d n ’t o b ta i n i n d i vi d u a l l y What leads t o t he success of t he cooperat ive/st rat egic alliances st rat egies? 1.cram . Wh e n co m p a n i e s d e s i r e to a ch i e ve s u ch th i n g s a s e co n o m i e s o f s ca l e ( i n m a r ke ti n g o r p r o d u cti o n ) 2 . Partne rs do no t take the info rm atio n the y re ce ive and be gin to co m pe te he avily with e ach o the r.Market inf luences on business st rat egies Study this s e t o nline at: http://www. Note Note What are t he reasons beyond t he merger or acquisit ion of any f irm t o anot her? Fo c u s /N i c h e s t ra t e g i e s wo rk we l l i n t h o s e c ases: 1. t h e y wi l l a t t e mp t t o e n t e r t h e ma rk e t a s c o mp e t i t o rs a n d t a k e a wa y s o me o f t h e s a l e s o f t h e f i rm.co m /cards /20 36 6 9 5 Note Note What are the Focus/Niche strategies? Best cost st rat egies work well when generic product s are not accept able t o t he varied needs of t he buyers Best cost st rat egies lose when it f ails t o at t ain t he proper middle ground in t he market place Fi r m s wi th co s t l e a d e r s h i p o r d i ffe r e n ti a ti o n s tr a te g i e s m a y ch o o s e to fo cu s th e i r ch o s e n s tr a te g y o n a s e l e ct s m a l l g r o u p o f co n s u m e r s o r a n i ch e wh e r e co n s u m e r s h a ve s p e ci a l i z e d n e e d s a n d p r e fe r e n ce s . P ro vi d e d t h e n i c h e h a s a l a rg e e n o u g h d e ma n d t o c re a t e a p ro f i t forthef i rm 2 . P re f e re n c e s c h a n g e o r t h e s t a n d a rd p ro d u c t s h a ve s i g n i f icantly 1. To c o mb i n e R & D a c t i vi t i e s f o r e f f i c i e n c y a n d e f f e c t i ve n e s s 4 . r a th e r th a n h a vi n g to a d d r e s s th e n e e d s a n d p r e fe r e n ce s o f a b r o a d r a n g e o f co n s u m e r s . To o b t a i n o p p o rt u n i t i e s f o r c o s t re d u c t i o n s t h a t t h e y c o u l d n ’t o t h e rwi s e o b t a i n 2 . To s h a r e th e co s t o f o b ta i n i n g i n fo r m a ti o n o n i n n o va ti o n s i n te ch n o l o g y 3. Individual partne rs are able to wo rk as a te am to ward a co m m o n go al 2. P ro vi d e d t h a t f e w f i rms a re f o c u s i n g i n a n a re a wh e re o t h e rs c a n ’t Fo c u s /N i c h e s t ra t e g i e s f a i l i n t h o s e c ases: 1. Wh e n o t h e r f i rms s e e t h a t t h e n i c h e h a s b e e n s u c c e s s f ulfor t h o s e s e rvi n g i t . P ro vi d e d t h e f i rm h a s p ro p e r re s o u rc e s t o a d e q u a t e l y s e rve t h e needsofthenicheg ro u p 3 . 2 . l i k e l y re d u c i n gthe f i rm’s p ro f i t s a n d i t s c o mp e t i t i ve a d va n t age. To c o ve r a re a s o f ma rk e t d e ma n d t h a t t h e y a re n o t c u rre ntly s e rvi ng What are t he reasons t hat might lead t o t he f ormat ion of st rat egic or cooperat ive alliances? 1 .

. Note Note Note Arrange t he supply chain management st ages f ro m t he least so phist icat ed t o t he mo st so phist icat ed. Reducing the firm’s flexibility with respect to suppliers and distribution channels and force the firm to be too focused on one industry or too committed to one supplier or distribution channel.Sou rc e 1. In te g ra te d e n te rp ris e 4 . Th e fu n d a me n ta ls 2 . P l an 2. Th e S u p p l y c h a i n o p e ra t i o n s mo d e l “S C O R ” a s s i s t s a f i rm i n ma p p i n g o u t i t s t ru e s u p p l y c h a i n a n d t h e n c o n f i g u ri n g i t t o b estfit t h e n e e d s o f t h e f i rm a n d c o n s i s t s o f f o u r k e y ma n a g e me n t p ro c e s s e s (C o re a c t i vi t i e s o f S C O R ): 1.fu n ctio n a l te a ms 3. als o the s e he lps in m inim iz ing the co s ts all alo ng the s upply chain.functio nal te am s s tage o f the s upply chain m anage m e nt. and it is ve ry co nce rne d abo ut cus to m e r s e rvice .Market inf luences on business st rat egies Study this s e t o nline at: http://www. In te g ra te d s u p p ly ch a in ma n a g e me n t is a co lla b o ra tive e ffo rt b e twe e n b u ye rs a n d s e lle rs th a t le t th e m b e e n a b le to re a s o n a b ly p re d ict th e e xp e cte d d e ma n d o f co n s u me rs fo r a p ro d u ct a n d th e n p la n a cco rd in g ly fo r s u p p lyin g th a t d e ma n d The go al o f the ISCM is to be tte r unde rs tand the ne e ds and pre fe re nce s o f cus to m e rs and cultivate the re latio ns hip with the m .co m /cards /20 36 6 9 5 Note What are t he disadvant ages of vert ical int egrat ion compet it ive st rat egy? Ve rtica l in te g ra tio n is a s tra te g y in wh ich th e firm s e e ks to co n tro l th e va lu e ch a in o n th e s u p p ly e n d a n d o n th e d e ma n d e n d with in th e s a me in d u s try via in te g ra tio n o f th e s e p ro ce s s e s to th e firm’s o p e ra tio n s . t he main bus ine s s is s ue it is co nce rne d wit h is t he co s t o f qualit y In the cro s s . the m ain bus ine s s is s ue the firm is co nce rne d with is unre liable o rde r fulfillm e nt.cram . Exte n d e d s u p p ly ch a in Note Note In t he f undame nt als s t age o f t he s upply chain manage me nt . Cro s s .

Lo ca ti on 4 . wh i ch a l l wo r ks to g e th e r wi th cr o s s -fu n cti o n a l p u r p o s e s to wa r d s th e m a i n b u s i n e s s i s s u e o f th e co s t o f In t he e xt e nde d s upply chain o f t he s upply chain manage me nt . I mp ro ve d s e rvi c e t i me s 6 .Market inf luences on business st rat egies Study this s e t o nline at: http://www. In the supply chain communities stage of the supply chain management. t he main bus ine s s is s ue o f t his s t age is s lo w. S t ra t e g i c s h i p me n t c o n s o l i d ation 7. E s t a b l i s h a n i n f o rma t i o n a n d c o mmu n i c a t i o n n e t wo rk f o rISCM 6 . R e d u c e d c o s t i n i n ve n t o ry ma n a g e me n t 2 .cram . R e d u c e d c o s t i n p a c k a ging What are the general steps in implementing ISCM? 1. Tra n s l a t e t h e I S C M s t ra t e g y i n t o a c Note Note Note T he supply chain of a firm must be both responsive to the changing needs of customers and allow the firm to do so in an efficient manner.co m /cards /20 36 6 9 5 Note Note Note What are t he benef it s of implement ing t he supply chain management ? In th e i n te g r a te d e n te r p r i s e s ta g e o f th e s u p p l y ch a i n m a n a g e m e n t. C re a t e a n o p t i mu m o rg a n i z a t i o n a l s t ru c t u re f o rISCM 5 . D e ve l o p a vi s i o n f o r t h e I SCM 3 . m a n a g e m e n t wi l l m o ve a wa y fr o m simple co n s o l i d a ti o n o f i ts o p e r a ti o n s to a n i n te r n a l l y-i n te g r a te d s u p p l y ch a i n . D e ve l o p a s t ra t e g y f o r t h e I SCM 4 .Produ cti o n 2 . As s e s s t h e o p p o rt u n i t i e s i n t h e s u p p l y chain 2 . In ve n to r y 3. Tr a n s p o r ta ti o n . pro f it able gro wt h. Supply chain drivers are drivers t hat det ermine t he supply chain perf ormance S u p p l y ch a i n d r i ve r s i n cl u d e : 1. R e d u c e d c o s t s i n wa re h o u sing 3 . E n h a n c e d re ve n ues 5 . O p t i mi z a t i o n o f t h e d i s t ri b u t i o n n e t wo rk a n d f a c i l i t y l o cations 4 . networks play a large role and the main business issue facing the firm is creating networks of preferred suppliers 1.

co m /cards /20 36 6 9 5 .cram .Market inf luences on business st rat egies Study this s e t o nline at: http://www.

co m /cards /20 36 6 9 5 Note S t e p s t o a l i g n t h e s u p p l y c h a i n a n d t h e b u s i n e s s s t ra t e g y a re : 1. I d e n t i f y t h e c o re c o mp e t e n c i e s o f t h e f i rm a n d h o w t h e f i rm wi l l u s e t h e s e t o b e s t s e rve i t s c u s t o me rs 3 .cram . c re a t e va l u e a l o n g t h e s u p p l y c h a i n t o a c h i e ve t h e p l a n n e d g o a ls.Market inf luences on business st rat egies Study this s e t o nline at: http://www. . Af t e r t h e c o mp a n y h a s c h o s e n h o w i t wi l l b e s t s e rve i t s c u s t o me rs . U n d e rs t a n d t h e ma rk e t s t h e f i rm o p e ra t e s i n a n d t h e c u s t o me rs i t s e rvi c e s 2 .