Strategy
explains why the company matters in the market place by specifying an approach to creating superior value for customers and determining how capabilities and resources will be utilized to deliver the desired value to customers.
business model
set forth how its strategy and operating approaches will create value for customers, while at the same time generate ample revenues to cover costs and realize a profit. two elements 1) customer value proposition 2) its profit formula .
a low cost provider strategy
can produce a durable competitive edge when rivals find it hard to match the low -cost leader's approach to driving costs out of business. Ex. Walmart and southwest
a broad differentiation strategy
seeking differentiate the company's product or service from rivals in ways that will appeal to a broad spectrum of buyers. EX. Johnson & John(product reliability)Apple(innovative products)
a focused low-cost strategy
concentrating on a narrow buyer segment and out competing rivals by having lower costs than rivals and being about to niche members at lower price. Ex. private label manufacturers use low cost to offer to supermarket buyers than by producers.
a focused differentiation strategy
concentrating on a narrow buyer segment(Market niche) and out competing rivals by offering niche members customized attributes. EX. Louis Vuitton and Rolex
a best cost provider strategy
giving customers more value for the money by satisfying buyers expectations on key quality/features/performance/service.
sustainable competitive advantage
attractively large number of buyers develop a durable preference for its products and services over the offering of competitors , despite the effort of competitors to overcome or erode its advantage.
evolving nature of company's strategy
1) proactive moves to improve the company's financial performance and secure a competitive edge 2) adaptive reactions to unanticipated developments and fresh market conditions.
emergent strategy
is a combination of deliberate planned elements and unplanned , emergent elements. Some components of a company's deliberate strategy will fail in the marketplace and become abandoned strategy elements.
which of the following statements about a company's strategy is true?
strategy at its essence is about competing differently- doing what rival firms do not do or cannot do.
A company's business model sets forth how its strategy and operating approaches
will create value for customers and realize a profit
which of the following is not related to actions and approaches that comprise a company's strategy?
providing shareholders that the company's business model is visible.
In answering the question " how well does the strategy fit the company's situation" management must have deliberate plans for addressing such issues as
changing market conditions, development of internal capabilities and competencies, and allocation of financial resources.
which of the following is not an element of a company's business strategy?
adhering to abandoned strategy elements.
which of the following is not of the most frequently used strategic approaches to building competitive advantage?
sticking with an outdated business model
the heart and soul of any strategy
is the actions and moves to gain a competitive edge over rivals in the marketplace.
Strategies that yield sustainable competitive advantage are important because
these enable company to attract sufficiently large numbers of buyers who have a lasting preference for its products or service over those offered by rivals, despite the efforts of competitors to offset that appeal and overcome the company's advantage.
a company achieves sustainable competitive advantage when
an attractively large number of buyers develop a durable preference for its products or services over the offerings of competitors, despite the efforts of competitors to overcome or erode its advantage.
a strategy that distinguishes a company from its rivals and provides a sustainable competitive advantage
is a company's most reliable ticket to above-average profitability
approaches to achieving a sustainable competitive advantage include which of the following?
1) developing unmatched resource strengths and competitive capabilities 2) focusing on a narrow market niche within an industry 3) strategies supportive of creating a differentiation-based advantage 4) strategies supportive of creating a cost-based advant
company strategies evolve because
of chancing circumstances and ongoing management efforts to improve the strategy.
it is normal for a company's strategy to end up
blending deliberate actions to improve the company's competitiveness and financial performance and unplanned reactions to changing circumstances and fresh market conditions.
which of the following statements about a company's realized strategy is true?
a company's realized strategy is typically a blend of deliberate/planned initiatives and emergent/unplanned reactive strategy elements.
A company's buiness model ?
1) specifies a customer value of propostion 2) develop a profit formula
a viable business model?
set forth how both strategy and operating approaches will create value for customers, and simultaneously generate ample revenues to cover costs to realize a profit.
which of the following statements concerning producing good company performance is incorrect?
existing strategies should never be scrutinized if they are working well, new initiatives that don't seem to match a company's internal and external situation should always be retained as a contingency
a winning strategy is one that
makes the company a market leader, is ethically and socially responsible, and maximizes profits.
nothing affects a company's ultimate success or failure more fundamentally then
how well its management team charts direction, develop effective strategic moves, and pursues daily operating excellence
which of the following questions ought to be used to distinguish a winning strategy from a mediocre or losing strategy ?
is the strategy well matched to the company's situation, helping the company achieve a sustainable competitive advantage and resulting in better company performance?
1)Developing a strategic vision
that charts the company's long-term direction, a company's future business scope (" where are we going")
mission statement
describes the company's business and a set of core values to guide the pursuit of the strategic vision and mission. Its the present business and purpose("who are we ", " what we do","why are we here")
2)setting objectives
for measuring the company's performance and tracking its progress in moving in the intended long-term direction. Well-stated objectives are quantifiable, measurable, deadline for achievement
3)crafting a strategy
for advancing the company along the path to management's envisioned future and achieving its performance objectives.
4)Implementing and executing the chosen strategy
efficently
5) evaluating and analyzing the external environment and the company's internal situation and performance
to identify corrective adjustments that are needed in the company's long-term direction,objectives, strategy , or approach to strategy execution
Strategy formulation , strategy exection process
5 stages process
strategic inflection points
company reaches a strategic inflection point , management has tough decision to make about the company's direction because abandoning an established course carries considerable risk.
strategic plan
maps out where a company is headed, establishes strategic and financial targets and outlines the competitive moves and approaches to be used in achieving the desire business result
strategic vision
describes " where we are going" the course and direction management has charted and the company's future product customer- market- technology focus.
well communicated strategic vision
1) it crysallizes senior executives own view about firm's long term direction 2) it reduces the risk of rudderless decision making by management at all levels 3) it is a tool for winning the support of employees to help make the vision a reality 4) it pro
financial objectives
relate to the financial performance targets management has established for the organization to achieve. Ex: revenue growth , profitability and return on investment
strategic objective
are related to a company's marketing standing and competitive vitality
balanced scorecard
is a widely used method for combining the use of both strategic and financial objectives, tracing their achievement and giving management a more complete and balanced view of how well an organization is performing.
corporate strategy
orchestrated by the CEO and other senior executives and establishes an overall game plan for managing a set of business in a diversified , multi-business company. How to capture cross- business synergies, what business to hold or divest.
business strategy
is primarily concerned with strengthening the company;s market position and building competitive advantage in a single business company or a single business unit of a diversified multi-business corporation
Functional-area strategies
concern the actions related to particular functions or processes within a business.
Operating strategies
concern the relatively narrow strategic initiatives and approaches for managing key operating units. (plants, distribution centers , geographic units) and specific operating activities such as materials purchasing or internet sales.
Managing strategy execution process include the following principal aspect
1) staffing the organization to provide needed skills and expertise. 2) allocating ample resources to activities critical to good strategy execution . 3) ensuring that policies and procedures facilitate rather than impede effective execution. 4) installin
which of the following is not an integral part of the managerial process of crafting and executing strategy ?
A) Developing a strategic vision.
B) Choosing a strategic intent.
C) Setting objectives and crafting a strategy to achieve them.
D) Evaluating pe
B. choosing a strategic intent
a company's strategic plan consist of ?
management's vision mapping out where a company is headed, the company;s financial and strategic objectives, and management;s strategy to achieve the objectives and move the company along the chosen strategic path.
A strategic vision for a company
describes " where we are going" by delineating the course and direction management has charted for the company's future product-customer-market-technology focus.
The difference between a company's mission statement and the concept of a strategic vision is that
a mission statement typically concerns an enterprise;s present business scope and purpose " Who we are" , " what we do", and "why are we here" . Whereas the focus of a product-customer-market-technology focus will be.
Efficiently worded strategic vision statement?
graphic , directional, focused , flexible, feasible, desirable, easy to communicate
common shortcoming of company vision statements?
Vague or incomplete , not-forward-looking , too board, bland or uninspiring, not distinctive , too reliant on superlatives
A company's objective
a convert the strategic into specific performance targets - well stated objectives are quantifiable, measurable, contain deadline for achievement.
Establishing and achieving strategic objectives merits very high priority on management's agenda because
strategic outcomes are leading indicators of a company's future financial performance and business prospects.
A balanced scoreboard for measuring company performance
entails setting both financial and strategic objectives from dominating the pursuit of financial objectives
company's objectives
need to be broken down into performance targets for each of its separate businesses product line, functional departments, and individual work units.
The task of crafting a strategy is
a job for a company's whole management team- senior executive plus the managers of business units, operating divisions, functional departments, manufacturing plants, and sales districts,
strategy making is
more of a collaborative group effort that involves managers and key employees throughout the company.
The strategy- making hierarchy in a single business company consists of
business strategy, functional area strategies, and operating strategies.
functional strategies?
add detail to the overall business strategy and specify what resources and organizational capabilities are needed to put the business strategy into action.
operating strategies concern
the relative narrow strategic initiatives and approaches for managing key operating units(plants, distribution center, geographic units) and specific operating activities ( the management of specific brands, supply chain - related activities and website s
management is obligated to monitor new external developments, evaluate the company's progress and make corrective adjustments in order to
decide whether to continue or change the company's strategic vision, objectives, strategy and or strategy execution methods
Accounting scandals that led to investigations of such well-known companies as AOL Time Warner, Global Crossing, Enron, Qwest Communications, and WorldCom resulted in the conviction of a number of corporate executives and the passage of the Sarbanes-Oxley
Oversee the company's financial accounting and financial reporting practices.
Every corporation should have a strong, independent board of directors that
is well informed about the company's performance
,guides and judges the CEO and other top executives
,certifies to shareholders that the CEO is doing what the board expects,is intensely involved in debating the pros and cons of key decisions and actions.
Which one of the following is not among the chief duties/responsibilities of a company's board of directors insofar as the strategy-making, strategy-executing process is concerned?
Directing senior executives as to what the company's long-term direction, objectives, business model, and strategy should be and, further, closely supervising senior executives in their efforts to implement and execute the strategy.
Boards of directors have a duty to shareholders to play a vigilant role in overseeing management's handling of a company's strategy formulation, strategy execution process.
A company's board is obligated to (1) ensure that the company issues accurate financial reports and has adequate financial controls, (2) critically appraise and ultimately approve strategic action plans, (3) evaluate the strategic leadership skills of the
The company's facets includes
1) the competitive conditions in the industry in which the company operates (external environment 2) its resources and organizational capabilities (internal environment)
Company's external environment
includes industry and competitive environment and broader macro-environment, ecological considerations, and technological factors
2 levels of company's external environment
the broad outer ring macro-environment and immediate inner ring industry and competitive environment.
macro-environment
encompasses all the relevant factors making up the broad environmental context in which a company operates .
PESTEL analysis
Political factors, economic conditions in the firm's general environment, socio-cultural forces , technological factors, environmental forces, legal regulatory factors.
Political factors
political procedures and process, its the extend in which govt intervenes . EX. tax policy, fiscal policy, tariff, political climate
Economic conditons
general econominc climate . Ex. Interest rate, exchange rates , inflation rates , unemployment rate. Also stocks and bonds
sociocultural forces
include societal values, lifestyle that impact business, and demographic factors such as population size , growth rate.
Technological factors
changes and development in technologu
environmental forces
ecological and environmental forces : weather , climate change, water storage.
legal and regulatory factors
regulations and laws companies must comply . Ex. consumer laws, labor laws, antitrust law , OSHA
1) Economic charactistics
market size and growth rate , scope of competitve rivalry , demand- supply conditons, market segmentation , pace of technological change
2) Industry's competitive forces (5 forces)
1) competitive pressures stemming from buyer bargaining power 2) "" coming from companies in other industries to win buyers over to substitute products 3)"" stemming from suppliers bargaining power 4) "" associated with the threat of new entrants into the
driving forces
are the major underlying causes of change in industry and competitive conditions.
driving forces has three steps
1) identifying what the driving foruces are 2) assessing whether the drivers of change are , individually or collectively acting to make the industry more or less attractive 3) determining what strategy changes are needed to preapre for the impact of the
Strategic group mapping
best technique for displaying the different market or competitive positions that rival firms occupy in the industry.
strategic group
is a cluster of industry rivals that have similar competitive approaches and market position.
Key success factors
technology related, manufacturing related,distribution related, marketing related, skill and ability related, others.
Which of the following is not one of the questions that needs to be answered in thinking strategically about a company's external environment?
A)What kinds of competitive forces are industry members facing, and how strong is each force?
B)What market positions do industry rivals occupy�who is strongly/weakly positioned and who is not?
C)What are the strategically relevant factors in the company'
In identifying a company's broader macro-environment , the following have strategic significance?
general economic conditions, societal values and cultural norms, political and legal/regulatory factors, technological factors, and ecological considerations.
Which of the following is not a relevant factor in conducting a PESTEL analysis?
**A) how often sellers alter their prices, how sensitive buyers are to price differences among sellers, whether the item being purchased is a good or a service, and whether buyers buy frequently or infrequently.
B) interest rates, exchange rates, unemploy
Competitive pressures stemming from substitute products are weaker when _____
substitutes are higher-priced, buyers don't believe substitute products have equal or better features, and buyers' cost of switching to substitutes are relatively high
Which of the following is not a factor in determining whether the suppliers to an industry are a source of strong, moderate, or weak competitive pressures?
A) Whether certain needed inputs are in short supply.
B) Whether it is difficult or costly for industry members to switch their purchases from one supplier to another or to switch to attractive substitute inputs.
C) Whether the item being supplied is a st
Which of the following is not a reason that industry rivals are often motivated to enter into strategic partnerships with key suppliers?
A) To enhance the quality of parts and components being supplied and/or to reduce defect rates.
B) To speed the availability of next-generation components.
**C) To reduce the bargaining power they face from buyers of their products.
D) To squeeze out impo
competitive pressures associated with the threat of new entrants grow stronger when ?
industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence, when current industry members are unable or unwilling to strongly contest the entry of newcomers, and w
which of the following conditions generally raise the barriers to entering an industry?
high capital requirements, difficulties in building a network of distributor-retailers and securing adequate space on retailers shelves and the likelihood that industry incumbents will strongly contest the efforts of new entrants to gain a market foothold
which of the following is not among the factors that determine whether competitive rivalry among industry members is strong, moderate, or weak?
A) Whether buyer demand for the product is growing rapidly or slowly.
B) Whether customers' costs to switch brands is low or high.
C) How active industry rivals are in initiating fresh competitive moves and in using the various weapons of competition to i
The rivalry among competing sellers in an industry intensifies
as the number of rivals increases and as they become more equal in size and competitive capability .
factors that cause the rivalry among competing sellers to be weak include
rapid growth in buyer demand, buyer costs to switch brands are high and so many industry rivals that any one company's actions have little impact on the businesses of its rivals.
as a rule, the stronger the collective impact of the five competitive forces ,?
the lower the combined profitability of industry participants and the more " competitively unattractive" is the industry environment.
the task of driving forces analysis is to
1) identifying what the driving forces are 2) assessing whether the drivers of change are individually or collectively acting to make the industry more or less attractive 3) determining what strategy changes are needed to prepare for the impact of the dri
Which of the following is not among the most common types of driving forces?
A) Product innovation, marketing innovation, and increasing globalization of the industry.
B) Changes in the long-term industry growth rate, changes in who buys the product and how they use it, and growing buyer preferences for differentiated products.
**
the procedure for constructing a strategic group map involves
identifying the competitive characteristics that differentiate firm's market positions and competitive approaches, plotting the firm's on a two-variable or two- dimensional map, drawing circles around those firms occupying about the same strategy space, m
trying to determine what strategic moves rivals are likely to make next ___?
entails each rival's situation, understanding the thinking of their managers and evaluating the relative merits of their strategic options.
an industry's key success factors
concern the particular attributes, competencies, competitive capabilities,and intangible assets with the greatest impact on future success in the industry.
Which of the following is not a good example of a marketing-related key success factor?
A) A well-known and well-respected brand name.
B) Breadth of product line and product selection.
**C) Product innovation capabilities.
D) Clever advertising.
E) Courteous, personalized customer service.
Which of the following is not an important factor for company managers to consider in drawing conclusions about whether the industry presents an attractive opportunity?
A) Whether powerful competitive forces are squeezing industry profitability to subpar levels and whether competition appears destined to grow stronger or weaker.
B) The industry's growth potential.
C) Whether industry profitability will be affected favora
what market positions do industry rivals occupy - who is stronly positined and who is not?
strategic group mapping is valuable tool for understanding the similarities and differences inherent in the market positions of rival companies.
resource and capability analysis
is a powerful tool for sizing up a company's competitive assets and determining if the assets can support a sustainable competitive advantage over market rivals . Two steps: 1) identify the company's resources and capabilities, 2) examine them more closel
resource
is a competitive asset that is owned or controlled by a company
capability
is the capability of a company to competently perform some internal activity. they are developed and enabled through the deployment of a company's resources.
Tangible resources
physical resource(manufacturing plants and equipment, distribution facilities, real estate , natural resource deposits), financial resources(cash &equivalents marketable securities, companies rating), Technological assets ( patents, copyright, production
Intangible resources
Human assets and intellectual capital, brand, image and reputational assets, relationships(Alliances or joint ventures), company culture(norms of behavior, business principles.
VRIn test for sustainable competitive advantage
ask if a resource or capability is (Value, rare, inimitable, and nonsubstituable)
core competence
is a proficiently performed internal activity that is central to a company's strategy and competitiveness
distinctive competence
a core competence that is performed with a very high level of proficiency
dynamic capability
is the ability to modify, deepen, reconfigure the company's existing resources and capabilities in response to its changing environment or market opportunities .
SWOT Analysis
is a simple but powerful tool for sizing up a company's internal strengths and competitive deficiences, its market opportunities and the external threats to its future well-being
Important part of SWOT
1) drawing conclusions from SWOT listing and the company's overall situtation 2) translating these conclusions into strategic actions to better match the company's strategy to its strengths and market opportunities, correcting problematic weaknesses and d
value chain
identifies the primary activities that create customer value and related support activities.
Benchmarking
entails comparing how different companies perform various value chain activities and using techniques to improve cost and effectiveness of a company's own internal activities
evaluating a company's resources and capabilites and competitve strength relative to its rivals using VRIN test does not include developing answers to which of the following questions
how good is the company's competitively valuable?
which of the following groups of characteristics is least likely to represent valuable company resources or competitve capabilities
larger workforce, longer time in business, lower profit margin , smaller capital investment spend than rivals
which of the following statements about market opportunity is correct?
depending on the prevailing circumstance, a company's opportnites can be plentiful or scarce and can range from wildly attractive to unsuitable
a company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals
nearly always relegated to a trailing position in the industry
a core competence
is a capability that passes the " competitive valuable" test
a distinctive competence
is a more important competitive asset than a core competence, is a competitively valuable capability that is performed with a very high level of proficiency, resides people and in a company's intellectual capital and not in its assets on the balance sheet
the industry or market opportunites that are most relevant to a company and those that its strategy should aim at capturing include
opportunities that are well-matched to the company's competitive capabilites and resouce strengths, opportunities that the company has the financial resouces to purse, opportunities that offer important avenues of growth, opportunities where the company h
which of the following analytical tools are particularity useful for determining whether a company's prices and costs are competitive?
value chain and benchmarking
a company's value chain consist of
the collection of activites it performs in the course of designing, producing, marketing, delivering, and supporting its product and service.
benchmarking
entails comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activites
A company's cost competitiveness is largely a function of ____
how efficiently it manages its internally performed value chain activities and the costs in the value chains of its suppliers and forward channel allies.
Strategic actions to reduce the costs of internally performed value chain activities and improve a company's cost competitiveness _________
can aim at lowering costs (1) in the suppliers' part of the industry value chain, (2) in a company's own internally performed activities, and/or (3) in the forward channel portion of the value chain.
Strategic actions to eliminate an internal cost disadvantage include _
Implementing the use of best practices,
trying to eliminate some cost-producing activities by revamping the value chain,outsourcing high-cost activities to vendors capable of performing the activity more cheaply,investing in productivity-enhancing, cost-s
The options for attacking the high costs of items purchased from suppliers does not include which one of the following?
Raising prices to customers (so as to cover the high costs)
Identifying the strategic issues that company managers need to address __
Involves using the results of both industry and competitive analysis and evaluations of the company's internal situation using the VRIN tests
,is facilitated by analysis of the company's cost structure and customer value proposition relative to its rivals
cost drivers
labor productivity and compensation costs, economies of scale, learning and experience, capacity utilization, input costs, production technology and design, communication systems and information technology, bargaining power, outsouring or veritical integr
differentation stategies
is to offer unique product or service attributes that a wide range of buyers find appealing and worth paying for
uniqueness driver
is a value chain activity or factor that can have a stron effect on customer value and creating differentitaion
uniqueness driver value chain
input quality, innovation and technolgy, product featuress design and performance, production R& D, coninuous quality improvement, employee skills, training, experience, marketing and brand building, customer service
5 basic competitive strategies
1) over low cost 2) broad differentation 3) focused low-cost 4) focused differentation 5) best cost provider
A company's competitive strategy deals with
the specifics of management's game plan for competing successfully.
The biggest factors that distinguish one competitive strategy from another are _______________
choosing between (1) a market target that is either broad or narrow, and (2) whether the company should pursue a competitive advantage linked to lower costs or product differentiation.
The five generic types of competitive strategies include _______________
low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider.
A low-cost provider's basis for competitive advantage is _
meaningfully lower overall costs than competitors.
Striving to be the industry's low-cost provider and achieving lower costs than rivals entails
eliminating or curbing nonessential activities.,doing a better job than rivals in performing essential activities.
A competitive strategy of striving to be the low-cost provider is particularly attractive when _
a company pays particular attention to cost drivers such as number of products in the product line, capacity utilization, production technology and design, and labor productivity and compensation costs.
Successful differentiation allows a firm to
gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products), command a premium price for its product and/or increase unit sales (because additional buyers are won
Examples of uniqueness drivers do not include _
a)product features, design, and performance.
B) production R&D.
C) customer service.
D) continuous quality improvement.
**E) eliminating low value-added activities and work steps.
A broad differentiation strategy __
is an attractive competitive approach whenever buyers' needs and preferences are too diverse to be satisfied by a product that is essentially identical from seller to seller,can produce sustainable competitive advantage if the differentiating features pos
he most appealing approaches to broad differentiation __
involve features or attributes that have considerable buyer appeal and are hard or expensive for rivals to duplicate.
What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is _
their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
A focused low-cost strategy _
nvolves serving buyers in the target market niche at a lower cost and a lower price than rival competitors.
A focused differentiation strategy aims at securing competitive advantage by _______________
offering carefully designed products or services to appeal to the unique preferences and needs of a narrow, well-defined group of buyers.
A firm pursuing a best-cost provider strategy __
seeks to offer more value-adding features than the industry's low-cost providers and lower prices than those pursuing differentiation.
Which of the following are distinguishing features of a best-cost provider strategy?
A competitive advantage based on more value for the money.
For a best-cost provider strategy to be successful, a company must have _______________
a superior value chain configuration and unmatched efficiency in managing essential value chain activities.
A company's biggest vulnerability in employing a best-cost provider strategy is _______________
not having the needed efficiencies in managing value chain activities to add differentiating features without significantly increasing costs.