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86 Cards in this Set

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What is strategic management about?
Understanding how firms create, capture, and sustain
competitive advantage
How does a company sustain competitive advantage?
When a firm implements a value-creating strategy of which
other companies are unable to duplicate the benefits or
find it too costly to imitate
What are two important things needed to be developed in order to sustain competitive advantage?
Resources and Capabilities
What are Core Competencies?
resources and capabilities that serve as a source of competitive advantage for a firm over its rivals.
What does strategy link together?
A firm (goals & values, resources & capabilities, structure & systems) and the industry enviornment (competitors, customers, and suppliers)
Define strategy in your own words.
The determination of the basic long-term goals and objectives of an enterprise
List 4 elements of Strategy.
1) Long-term objectives
2) Understanding of competitive enviornment
3) Apprasial of resources and capabilites
4) Effective implementation
List a few operational goals
Customer focus
More Rapid new product development
Raise manufacturing quality
Reduce costs
Gain access to critical knowledge through strategic alliances
Benchmarking
Maintain proprietary technology
How does Southwest Airlines set itselft apart from competition?
Lower price, shorter routes, fun and friendly corporate culture, one aircraft
What does Strategy require? (3 things)
1) Discipline
2) Communication
3) Leadership
What are 4 benefits of implementing a strategy?
1) Neutralize any threats we face
2) Utilize available opportunities
3) Capitalize on our strengths
4) Avoid or improve upon current weaknesses
What is the main goal of having a strategy?
To maximize economic return
How does a firm achieve Superior Economic Performance?
Sustainable Competitive Advantage (SCA)
How is SCA achieved?
By using a value-creating strategy that cannot be (easily) duplicated
What are 3 factors needed to be thought when creating a strategy?
1) The value we create for our customer
2) How we appropriate some of the value in the form of higher prices
3) Cost incurred in creating value
What are 2 Conceptual traps managers fall into?
1) Accounting Cost vs. Opportunity Cost
2) Market share is not competitive advantage
What's the difference between Corporate Strategy and Business Strategy?
Corporate Strategy deals with industry attractiveness (asking what business should we be in)

Business Strategy deals with competitive advantage (asking how should we compete)
What is a main issue when trying to maximize shareholder wealth?
Balancing the shareholder’s expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management nowadays.
Who are Stakeholders?
The individuals and groups who can affect, and are affected by, the strategic outcomes achieved and who have enforceable claims on a firm’s performance
What is Wal-mart's Strategic Position? (3 things)
1) Everyday low prices
2) Nationally branded products
3) Rural areas/small town living
What were Wal-Mart's Resources and Capabilites?
Technology investments for Low Cost/ Efficient Operations (RFID, point of scale scanning, etc.)

Vendor Relationships (Scan-and-pay, economies of scale)

Culture (no frills management)
What were a few of Wal-Mart's threats?
Backlash from small towns/communities because of "bigness," Squash little man

Limits to Growth

Employment (lowest paid, employee law-suits)
What was the main issue in the Wal-Mart case? Explain.
Growth. Oversea problems, vendor relationships do not transfer easily. Future success relies on transfer of knowledge, culture, and fit.
What is an efficient market?
A market is efficient when prices reflect information instantaneously and one in which extra-ordinary profit opportunities are thus rapidly dissipated by the action of profit-seeking individuals in the market
individuals in the market.
How do you outperform the stock market? (2 things)
1) Luck, or
2) Asymmetric information
What is a key criterion when focusing on an industry's boundaries?
Substitutability
What are Porters Five Forces?
1) Rivalry
2) Bargaining Power of Suppliers
3) Bargaining Power of Buyers
4) Threat of New Entrants
5) Threat of Substitution
What was the major problem with RTE cereal?
Problem with high price, spend back strategy and changes in
industry’s barriers to entry stimulated demand for private
label cereals
Who are the Big 3 cereal companies?
General Mills, Kellogg, and Post
What were some of the barriers of entry in the RTE industry?
Capital Requirements
Economies of Scale
Product Differentation
Channels of Distribution
Retaliation
What is Rivalry based on?
Prices wars. Not advertising because advertising can expand or enhance the level of product differentiation in the industry for the benefit for all firms
What is the difference between Static Analysis and Dynamic Analysis?
Static Analysis explains current rivalries and profitability

Dynamic Analysis explains where the industry is headed in the future.
What could be a Sixth Force to Porter's 5 forces?
Complements
How does a firm determine their Key Success Factors?
1) Understand what CUSTOMERS want and how to survive COMPETITION
2) Do an analysis of demand and competition (Who are my customers, What drives competition, etc.)
What are the internal factors of the SWOT analysis? External?
Strengths and Weaknesses make up internal factors, and Opportunities and Threats make up external factors
What is multi-point competition?
Occurs when firms compete against each other simultaneously in several product or geographic markets.
What are the advantages of a First Mover?
Economies of Scale
Experience or Learning Curve Effects
Brand Equity
“Network Externalities”
Disadvantages of a First Mover?
High risk
High development costs
High demand uncertainty
What are the advantages of Second Mover?
-Reduction in demand uncertainty
-Market research to improve satisfying customer needs
-Learn from the first mover’s successes and shortcomings
-Gaining time for R&D to develop a superior product
How can a second mover capitalize off of a first mover's mistakes?
-Technology (react and change to perfect)
-Adhere to a change in consumer tastes
What is the value of game theory to management?
Useful in explaining past competitive behavior—
Weak in predicting future competitive behavior
What are the 4 factors in a Competitor Analysis? What do they collectively do?
1) Strategy (How is the firm competing)
2) Objectives (What are competitors current goals, how will they change)
3) Assumptions (Competitors view on industry)
4) Resources and Capabilities (Competitors key strengths and weaknesses?)

These factors all determine our PERDICTION (What are the competitors strategy changes and how will they react to ours?)
Is the Cola industry attractive? Why?
Yes,
1) Selling concentrate requires little capital;
2) It produces superb returns;
3) It demands minimal reinvestment
4) It spills an ocean of cash.
What is a main challenge in the Cola Wars case?
Threat of substitutes (changes on customers’ preferences/taste)
What does the Resource and Capabilites Matrix highlight?
1) Exploit key Strengths
2) Managing key Weaknesses
What was the main problem of Montague?
Creating a brand image recongizable by consumers
What is a resource?
Concrete assets owned by the firm
What are Capabilities?
What they CAN (know to) do with those resources!
What are three types of resources?
Intanigible (brand names, copyrights, etc.)
Tangibles (assets, etc.)
Human Resources (Individual Skills)
How do we use resources to create Competitive advantage? (3 things)
1) Efficiency
2) Scope Expansion
3) Innovation and Growth
What is the VRIO test?
Valuable
Rare
difficult to Imitate
Organization
What are organizational capabilities?
A “firm’s capacity to deploy certain resources for a desired end result”
What is a problem with Outsourcing?
Can have the Unintended Consequence of damaging the firm’s potential to evaluate continuously its key assumptions, learn, and create new capabilities and core competencies.
What are 3 steps in linking resources and capabilities to SCA?
1) Establishing Competitive Advantage (Scarcity)
2) Sustainability of Competitive Advantage (Replicability?)
3) Appropriating the returns of CA (Property Rights, Bargaining Power)
What are the two forms of competitive advantage?
Differentiation and Cost advantage
What is a Business-level Strategy?
Commitments and actions designed to provide value to customers and gain a competitive advantage
Does Market Share generate CA?
Does not alway guarantee success (profit). However, scale economies with high exit cost can make market share a CA
How can corporate culture be a CA?
An organization’s culture creates value because it allows that organization to strike deals with its suppliers, customers, and employees that are not available to other firms. Thus, culture is an organizational asset
Can corporate culture be SCA?
Yes, it is an intantigible asset and often the only SCA a firm has because it is so difficult to imitate.
Name a few Drivers of Cost advantage.
Economies of scale (specialization of labor)
Economies of learning (improved organization)
Production Techniques
Production Design
Input Cost (location advant.)
Capacity Utilization (ratio of fixed to variable costs)
Organizational efficiency
How do you create cost advantage?
TQM- total quality management
Just-in-time Inventory
(Think Wal-Mart)
What are some disadvantages to Cost advantage?
Changing Production Technology
Changing Customer Preference
Increasing Supplier Power
Explain Differentiation Advantage.
When a firm is able to obtain from its differentiation a PRICE PREMIUM in the market which exceeds the cost of providing differentiation
Opportunites of Differentiation is divided into what two categories?
Characteristics of the Buyer (Segmentation)
Characteristics of the Product
When do you use differentiation?
To achieve:

Quality
Service
Brand Image & Reputation
Packaging
Can distribution be a SCA?
Yes, can also provide value to the customer.
What is the difference between Strategy and Finance?
Finance: Payoffs are determined exogenously or by chance

Strategy: Our actions affect the payoffs we are likely to experience
What is corporate-level strategy?
A plan taken to gain a competitive advantage through the selection and management of a MIX of businesses competing in several industries or product markets. (Publicis)
To add value corporate-level strategy should:
Perform one or more of the value creation functions at a lower cost,

or in a way which supports a differentiation advantage
List corporate-level strategies.
Diversification
Vertical Integration
Other options
What is Vertical Integration?
The number of stages in a product’s or service’s value chain that a particular firm engages in
What is forward integration? Backward?
Forward integration: When Coca-Cola began buying its previously franchised independent bottlers.

Backward integration: When Home Box Office began producing its own movies for screening on the HBO Cable Channel.
Why vertically integrate?
Market Share
Efficiency
What is the BCG matrix consisit of?
Stars, Question marks, Cash cows, Dogs. Measures industry growth rate to relative market share. Would like to be in the stars and cash cows region.
What are the 3 Essential Tests?
1) Attractiveness Test
2) The Cost-of-Entry Test (cost of entry must not capitalize future profits)
3) The Better-off Test (synergy)

4) Option Value?
How can a bidder for an acquistion do well?
Luck
Asymmetric Information
Synergies

However, The most optimistic bidder usually over-estimates the true value of the firm.
What are the two viewpoints in why people buy Starbucks coffee?
High Quality Coffee

Experience
What was the main problems in the Starbucks case?
Starbucks needs to keep up with the rapid growth of the company bystrategically addressing:
1. Their Limited Supply: Inbound Logistics
2. Leveraging On‐Site & Brand Retail Locations: Marketing
3. The Real Estate Plateau: Marketing
4. Equity & Debt Financing: Infrastructure
What technique was used for the Starbucks case?
Value Chain Analysis
What are three key features of an organizational structure?
Division of Task
Span of Control
Delegation
What are two different types of hiearchys?
Self organizing team (10 interactions)

Bureaucratic hiearchy (4 interactions, top down approach)
What is Corporate Governance?
The relationship among stakeholders that is used to determine and control the strategic direction and performance of organizations
What are Agency Costs?
The sum of incentive costs, monitoring costs, enforcement costs, and individual financial losses incurred by principals
What are the instutions of capitalism? (8 things)
1. Takeovers (the market for corporate control)
2. Recruitment of executives from outside the firm
3. Monitoring by boards of directors
4. Executive compensation heavily weighted toward stock options
5. Monitoring by institutional investors
6. Debt (minimize free cash flow): E.g., LBOs
7. Separate chairperson and CEO
8. Internal control of multidivisional as a “miniature capital market”
What was the major problem in the Publicis case?
How to integrate Digitas with Publicis. Question if synergies work.

Also, VivaKi showed potential but no results.
What technique was used in the Publicis case?
The 3 essential test