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Policy Exam 1

John Hengesh

What is the professor's name? John Hengesh
Reverse Innovation vs. Reverse Engineering Reverse innovation is when a company takes features out of a product to drive down the cost to build. Reverse engineering is when a company takes apart a competitor's product to learn (a) how to build it and (b) what it costs to make.
What does R&D stand for? Research & Development
Who are the highest paid in the company besides the officers? R&D
What are the 3 different sections on the exam? Multiple choice, True/False, Short Answer
Define Strategic Management. Goal-directed actions to gain and sustain competitive advantage. Not a zero-sum game. Requires trade-offs for strategic positioning.
The 4 Stakeholders. 1. Customers 2. Shareholders 3. Employees 4. Suppliers
The 4 Building Blocks of Competitive Advantage. 1. Efficiency 2. Quality 3. Customer Responsiveness 4. Innovation
Porter's 5 Forces. 1. Threat of Entrants 2. Supplier Power 3. Buyer Power 4. Threat of Substitution 3. Existing Competition Among Existing Competitors
What are the 2 steps of strategies? 1. Emerging 2. ?
What are switching costs? ?
What are the 3 Generic Business Strategies? 1. Cost-Leadership 2. Differentiation 3. Integration
What are the upsides and downsides of Cost-Leadership? ?
What are the upsides and downsides of Differentiation? ?
3 Levels of Strategy. 1. Corporate Strategy 2. Business Strategy 3. Functional Strategy
What does Corporate Level Strategy focus on? The big picture, where to compete.
What does Business Level Strategy focus on? How to compete.
What does Functional Level Strategy focus on? How to implement.
What is the major benefit of Reverse Engineering? It allows you to spend less money on R&D.
What are the 3 steps in the Strategic Management Process? 1. Strategic Planning 2. Scenario Planning 3. Strategy as Planned Emergence
When do acquisitions fail? 75% of the time. The main reason for this failure is the difference in culture.
Why do an acquisition? To take a mouth out of the trough. Also, can drive down manufacturing costs when trying to enter into a new market.
What is a key characteristic of a good leader? ?
What do Strategic Managers do to be successful? Consider quantitative and qualitative performance dimensions...
What is CAGR and what % does it need to be each year? Compound Annual Growth Rate. Needs to be at 20%
What is NI and what % does it need to be? Net Income. Needs to be 5% and is not expected to grow.
What is the Gross Margin equation? Selling Price - Variable Costs / Selling Price = Gross Margin
What % is a healthy Gross Margin? 30-40%
What is the G&A expense and what % should it be? General & Administrative. Should be 5-7% of revenue.
What % should Expenses be of total revenue? 13-29% of revenue
What is the S&M expense and what % should it be? Sales & Marketing. Should be 3-7% of revenue.
What % should R&D expense be? 5-15% of revenue.
What are the two major numbers that CEOs need to worry about? CAGR and NI.
What are 3 departments under G&A? Accounting & Finance, Legal, Human Resources
What does balance scorecard do? Offers multiple internal & external metrics. Allows you to consider both financial and strategic perspectives. (Customer perspectives, future processes to create value, internal core competencies, shareholder perspective)
How can a company avoid failure? Differentiate, drive down CTB, enter a new market, rebrand, implement marketing plan, become acquired by successful company
What are some barriers that competitors face when entering a new market? PESTEL: Political, Economic, Sociocultural, Technological, Environmental, Legal.
When is a company likely to endure? When it is able to maintain sustained competitive advantage through giving attention to the 4 building blocks. It must create economic value, have accounting profitability, and create shareholder value.
What is the Industry Life Cycle Model? 1. Introduction 2. Growth 3. Maturity 4. Decline
Complementary Product vs. Complementary Asset. A complementary product is one that is paired well with another, encouraging people to purchase both, such as a case for an iPhone. A complementary asset is one that allows you to compete better, such as a patent.
What is the role of the general manager of a business unit? ?
What is EOL and describe it. End of Life. The product is killed, completely finished.
What is EONS and describe it. End of New Sale. A date is set where no more new products will be available for purchase.
What is competitive advantage? Superior performance relative to competitors.
What Strategy is NOT (2) (1) Raking in every penny the firm can get (2) Operational Effectiveness
What is ERP? Enterprise Resource Planning. Software that allows a company keep track of all activities.
What is Six Sigma? A program that insures quality.
What is AFI? Analyze (Getting started), Formulate (business and corporate strategy), Implement (organizational design and corporate governance). AFI is a strategy framework.
What does a company's Vision address? What to ultimately accomplish.
What does a company's Mission address? What the firm is about.
What do a company's Values address? How to accomplish goals.
What is forming strategic intent? Staking out a desired leadership position in the long term that far exceeds a company's current situation.
What do Customer-Oriented Missions do? Define the firm in terms of solutions for customers.
What do Product-Oriented Missions do? Define the firm in terms of products or services.
What are values? Ethical standards and norms that govern behavior.
What is the SCP? The Structure-Conduct Performance.
What are the 4 elements of the SCP? Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly.
In the Porter's 5 forces model, which force is in the center? Competition among existing competitors.
Industry Dynamics (3). 1. Industry growth rates are highly variable. 2. Structures change. 3. Industry Convergence.
2 Types of of Strategic Groups. Mapping Groups and Mobility Barriers.
What are Core Competencies? Unique strengths deep inside a firm that differentiate a firm and can drive competitive advantage.
Tangible vs. Intangible Resources Tangible resources are visible and have physical attributes, while intangible ones do not. Competitive Advantage is more likely to occur from intangible resources, such as a patent.
What is Resource Heterogeneity? Bundles of resources and capabilities differ across firms.
What is Resource Immobility? Resources tend to be "sticky" and don't move easily.
What do Primary Activities do? Add value directly in transforming inputs into outputs.
What to Support Activities do? Indirectly add value by providing support to primary activities.
What are Dynamic Strategic Activity Systems? A network of interconnected activities in the firm that evolve over time due to external environment changes.
4 Steps to Protecting a Competitive Advantage. 1. Better Expectations of Future Values 2. Path Dependence 3. Causal Ambiguity 4. Social Complexity
What is VRIO? Valuable, Rare, Costly to Imitate, Organized to Capture Value. All in regards to resources, capabilities, and firms.
In the Economic Value equation, what is V? Value, or the consumer's maximum willingness to pay.
In the Economic Value equation, what is C? Cost, or the dollar amount to make the good or service.
In the Economic Value equation, what is P? Price, or the dollar amount at which the good or service is offered.
V - C = ? Economic Value Created.
V - P = ? Consumer Surplus.
P - C = ? The firm's profit.
What is the Triple Bottom Line? Financial, Social, and Ecological Considerations. AKA People, Planet, and Profits. Integrative approach for sustainable strategy.
What 4 questions are answered by Business-Level Strategy? Who? What? Why? How?
What are the 2 factors that Strategic Position is based upon? 1. Value Creation 2. Cost
What are the 4 value drivers? 1. Product features 2. Customer Service 3. Customization 4. Complements
What are the 4 cost drivers? 1. Cost of inputs 2. Economies of Scale 3. Learning Curve Effect 4. Experience Curve Effect
What are the 4 Value/Cost drivers of Integration? 1. Quality 2. Economies of Scale 3. Innovation 4. Structure, Culture, and Routines
What is innovation? The commercialization of invention.
Incremental vs. Radical Innovation. Steady improvement of a product or service vs. Novel methods or materials serving new markets.
Architectural vs. Disruptive Innovation Reconfiguration of known components to create new markets vs. Novel technologies serving existing markets.
What is the Long Tail? 80% of sales come from 20% of the products (Pareto Principle)
What happens in hyper competition? No single strategy sustains competitive advantage. Radical innovation shifts to incremental.
What is an AOP? An annual operating plan. Very important to us. Done in October and approved by the board in December.
What is M&A? Merger & Acquisition
What is the Razor-Blade Business Model? Sell a relatively cheap piece of equipment with expensive parts to maintain.
What is the Subscription Business Model? Offer free or low price product, then charge monthly payments for maintenance of service.
What are the 3 major Future industries? Health Care, Green Economy, Web 2.0
What is the Average Corporate Tax %? 35%
What is CTB? Cost to Build.
What is COGS? Cost of Goods Sold.
What is IPR? Intellectual Property Rights. (patents, trademarks, copyrights)
Samsung Article Takeaways. 1. Commoditization of the cell phone, drop in price 2. Product line expansion is a strategy, but there is a lot of work that comes with it. 3. Phones use subscription strategy.
What is the top line of the Income Statement? Revenue
What is the second line of the Income Statement? COGS/CTB
What is "below the line" on the Income Statement? Gross Margin, Expenses
What is CSR? Corporate Social Responsibility
What does the principle of Scale imply? You don't have to be huge to be successful. You can be an entrepreneur on a small scale.
There is no ______ without ______. Mission, Margin
What does a company release when going public? IPO (Initial Public Offering)
What are Expectations? Guidance for projected earnings in the future. Based on forecasts.
What % variance should you shoot for in forecasting? Less that 10%
What is the one certainty about a forecast? It's always wrong.
What are Back Logs? Orders from your customers.
What is Coopetition? When companies work together on a product for mutual benefit.
What is the FTC? Federal Trade Commission
What is the FCC? Federal Communication Commission
What is a RIF? Reduction in Force
What is a another word for leverage? Debt.
What is a normal premium % for an acquisition? 35%
Ford Article Takeaways Production introduction with Ford releasing first aluminum pick up truck, innovation throughout company, make the hard decisions on RIFs.
Facebook-What's App Article Takeways. Monetization: how revenue is generated, M&A, taking another mouth out of the trough, more effectively reaching a different part of the globe.
What is a Leap Frog? When a company enters with a better product than your company at a comparable price.
What is the average life of a business? 5 years.
What is PE? Price Earnings: the price of your stock vs. earnings per share. You want this to be a 3:1 ratio.
What is a CompStore? A comparable store.
Caterpillar Article Takeaways GAAP vs. Pro Forma: GAAP is run by normal accounting principals, while Pro Forma allows you to exclude a one time event. Buybacks increase earnings per share.
What should the sales revenue per employee be in a normal company? How about a tech company? $100k, $200k
What does "focus" mean in regards to cost-leadership and differentiation? Just means picking out a market niche.
What is T&E? Traveling and Expenses.
What is ROR? Return on Revenue.
What is ROI? Return on Investment?
What is bad about being Leap Frogged? Revenue line goes down and your expenses go up.
Pizza Article Takeaways Pizza is a fragmented market, scale is a big issue, bigger pizza companies can afford to have the online order systems,
Coke Article Takeaways Home Coke maker, 4 building blocks, timing is everything.
GM Article Takeaways End of New Sale followed by End of life, North America sales are good, international struggling, closing in Australia.
How long do CEOs have to prove themselves? 4 quarters or 1 year.
What does the Law of Large Numbers suggest? When you get to billions of dollars in revenue, you have to adjust your CAGR goal to a lower number, possibly single digits.
What does restructuring mean in a company? Layoffs, RIF
3 Components of a severance situation. 1. The company should pay you 2 weeks for your first year, then 1 week for every year after that. 2. You should be given health insurance for 6 months to a year. 3. You should be offered education to retrain.
What is Passive Resistance/Social Loafing? When an employee acts hung-ho about making improvements and then doesn't get the job done.
What is a PIP? Performance Improvement Plan
Microsoft Article Takeaways. New CEO, has to make an EOL decision or innovate, coopetition at a huge level, google agreed to sell a part of Motorola.
3 Phases of a New Product. Alpha Phase: only inside the firm, Beta Phase: go out to your first customers, explain that there will be problems with the product at this point. 3. Product Release: when the product can be now sold by everyone in the company.
What is ASP? Adaptive Strategic Planning
What is impaired good will? Paying too much for an acquisition.
Internal Analysis. Assess what 3 things? Assess market, company, and competition.
What is usually cut during tough times? Training. BAD IDEA.
Created by: 1406714156



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