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Vestal Mgt Test 1

A good strategy consists of: (3 Steps) 1. Analysis - Diagnosis of the competitive advantage. 2. Formulation - Guiding policy to address the competitive challenge 3. Implementation - Set of coherent actions to implement the firm's guiding policy
What is Competitive Advantage? Superior performance relative to other competitors in the same industry or the industry average.
What is Sustainable Competitive Advantage? Outperforming over a prolonged period.
What two factors determine a firm's performance? 1. Industry Effects - Firm performance attributed to the industry structure in which a firm competes. 2. Firm effects - Firm performance attributed to the actions managers take.
What is Strategic Leadership? The behaviors and styles of executives that influence others to achieve the organization's vision and mission.
Vision vs. Mission Vision - Aspiration of the firm that lays the foundation for its mission - "to" is a common word. Mission - What an organization does, including products, services, and which markets - "by" is a common word.
Product-Oriented Vision Statements: Defines a business in terms of a good or service. Tend to force managers to take a myopic view of the business landscape.
Customer-Oriented Vision Statements: Defines a business in terms of providing solutions to customer needs and are more flexible.
What is Top-Down Strategic Planning? Rational, top-down process aiding in programming for future success. Centralized strategic intelligence and decision-making.
What is Scenario Planning? When managers envision different what-if scenarios to anticipate plausible futures.
Top-down and Bottom-up Strategy: Top-down and scenario planning are too regimented and confining. Strategies can be planned or it can emerge from the bottom up.
What are the six factors of the PESTEL analysis? Political Environment, Economic Factors, Sociocultural Factors, Technological Factors, Ecological Factors, Legal Environment
How does the POLITICAL environment affect the PESTEL model? Processes/actions of the government can influence the decisions and behaviors of firms.
How do ECONOMIC factors affect the PESTEL model? Some economic factors that affect a firm's strategy are: Growth Rates, interest rates, levels of employment, price stability, and exchange rates.
How do SOCIOCULTURAL factors affect the PESTEL model? Industries must capture cultures, norms, and values for society; are dynamic and differ across groups. Demographic trends captures population characteristics related to age, gender, ethnicity, religion, etc.
How do TECHNOLOGICAL factors affect the PESTEL model? Industries capture the application of knowledge to create new processes and products. Innovations in process technology and technology revolution help shape a business.
How do ECOLOGICAL factors affect the PESTEL model? Broad environmental issues, such as the natural environment, global warming, and sustainable economic growth.
How does the LEGAL environment affect the PESTEL model? Laws, mandates, regulations, and court decisions all have a direct bearing on a firm's profit potential.
List Porter's Five Forces: Threat of New Entrants, Bargaining Power of Buyers, Bargaining Power of Suppliers, Threat of Substitute Products or Services, Rivalry Among Existing Competitors
Explain the threat of new entrants. Entry barriers are the risk that potential competitors will enter an industry. With new entrants, profit potential is depressed for incumbent firms.
Explain the power of suppliers. Powerful suppliers can demand higher prices for their inputs and can capture part (sometimes a LARGE part) of the economic value created. Signs of strong suppliers include: Concentrated industry, limited substitutes, differentiated products, etc.
Explain the power of buyers. Powerful buyers can demand a lower price or higher product quality. Powerful buyers can reduce industry profit potential: through price discounts or through increased quality/better service.
Explain the threat of substitutes. This threat derives from products/services fulfilling the needs of current customers OUTSIDE the industry. Power of substitutes is high when: There is an attractive trade-off or when the buyer's switching cost is low.
Explain the rivalry among competitors. The intensity of rivalry among existing competitors is determined largely by the following factors: Competitive industry structure, industry growth, strategic commitments, and exit barriers.
Key points to remember in Netflix case: Product oriented.. Original target market were customers who just purchased DVD players.. Top-down and bottom-up strategic planning.. Adapting to market led to growth (subscriptions, VOD, etc.).. Methods implemented (subscriptions, rating systems)
Key points to remember on Cola Wars case: Four major participants and their roles: Concentrate producers, bottlers, retail channels, and suppliers.. All the forces in the PESTEL model are low, allowing the industry to be very profitable.
What is a Competitive Disadvantage? When a firm underperforms its rivals or the industry average.
What is Competitive Parity? When two or more firms perform at the same level.
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