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J402 Midterm

Vocab for the J402 midterm that I don't want to take

Strategy Defines attractive markets/customers/segments in which the company can provide superior customer value with a sustainable competitive advantage, leading to superior company performance and shareholder value
Components of strategy Attractive customers/markets/segments, customer value, sustainable competitive advantage, superior company performance and shareholder value
Attractive customers/markets/segments Customers can be segmented demographically, behaviorally, psychographically, by lifestyle, and by benefits. Markets mean geographic segmenting in this class. Segments refers to degree of vertical integration or product segments within an industry
Customer value Can be tangible (low cost, functionality, convenience) or intangible (confidence, feeling of safety, enjoyment)
Sustainable competitive advantage A combination of assets and capabilities that create/deliver customer value, including lower costs, that are not easily matched by competitors. Can result from assets and/or capabilities.
Why is strategy important It helps a company determine how they compete differently, helping them set themselves apart and develop a market position that is not crowded with competitors
Why is SCA significant to strategy It keeps other companies from being able to copy your strategy
Low-cost mass market strategy (low-cost providor) e.g. WalMart and Southwest--appealing to a large number of people on the basis of low prices
Low-cost focused strategy Not many companies are here because low profit margins make growth hard. Issues with economies of scale: high fixed costs can be problematic when your output/customer base is small. Possibly local businesses or some fashion stores like Claire's
Differentiated mass-market strategy (broad differentiation) e.g. Apple, Johnson + Johnson, etc. Many companies here will eventually move to low-cost mass market as other companies offer similar products at lower prices, causing differentiation to lose value--known as the cost-experience curve
Differentiated focused strategy Offering customized products to a market niche, e.g. Lululemon. Companies here will often move to differentiated mass market in order to grow.
Mass market v. focused Focused companies will generally have 0-25% market share; mass market will generally have 33-100%
Why strategy changes Changing market conditions, advancing technology, unexpected moves by competitors, shifting buyer needs, emerging market opportunities, new ideas for improving the strategy
How often strategy changes Usually an incremental evolution as management fine-tunes/adjusts. However, sometimes major changes are necessary, such as when a strategy is failing or there is a major industry change.
Sustainability An advantage is sustainable if it persists despite the best efforts of competitors to match or surpass this advantage. It gives buyers a lasting reason to prefer a company's products.
Profit formula Determines a cost structure that will lead to acceptable profits given pricing tied to Customer Value Proposition. Includes cost structure, sources of revenue generation, pricing structure, and means for generating profits Expressed as Price - Cost.
Deliberate strategy actions Proactive elements of a strategy that are planned and realized as planned
Emergent strategy actions Elements of a strategy that emerge as changing conditions warrant (could be caused by competitor actions, customer requirements, technological developments, the political climate, etc.)
Realized strategy A combination of deliberate and emergent strategy
Strategy-making and executing process 1. Developing a strategic vision/mission statement/core values 2. Setting objectives 3. Crafting a strategy 4. Executing the strategy 5. Monitoring developments/evaluating/adjusting 6. Repeat
Steps/levels of strategy creation Overall corporate strategy, business strategy, functional area strategies, operating strategies
Vision Describes management's aspirations for the company's FUTURE and the course/direction charted to achieve these aspirations
Mission Describes the scope and purpose of the PRESENT business
Values Beliefs, traits, and behavioral norms that company personnel are expected to display while conducting company business and pursuing the mission/vision
Objectives Performance targets/results that management wants to achieve (can be financial or strategic)
Balanced Scorecard A method for linking performance objectives to strategic objectives--gives employees guidelines about how their jobs are linked to the organization's objectives
PESTEL Political, economic, sociocultural, technological, environmental, and legal/regulatory factors
Political factors Tax policy, fiscal policy, tariffs, the political climate, and the strength of institutions such as the federal banking system.
Economic factors The general economic climate as well as specific factors like interest rates, exchange rates, inflation rates, etc.
Sociocultural factors Societal values/attitudes/cultural influences that impact demand, as well as demographic factors. An example is the trend toward healthier foods
Technological factors Technological change/developments that have broad-reaching impacts on society, e.g. genetic engineering, solar energy, and nanotechnology. Can start new industries and disrupt old ones.
Environmental factors Short-term weather and long-term climate change and associated factors like water shortages
Legal/regulatory factors Consumer laws, labor laws, anti-trust laws, OSHA regulations, etc. Some are industry-specific and some impact all businesses.
What makes a macro factor strategically significant? It is important enough to have a bearing on the decisions the company ultimately makes about its long-term direction, objectives, strategy, and business model
Five Forces A framework for analyzing competitive pressures that can be grouped into five sources: *rivalry among competing sellers,* firms offering substitutes, potential new entrants, supplier power, and buyer power
Rivalry among competing sellers is high when Demand is growing slowly, switching costs are low, products are commodities/weakly differentiated, firms have excess production capacity/inventory, firms have high fixed costs or storage costs, competitors are numerous and equal in size/strength
Competitive pressures from potential entrants are low when Incumbents have cost advantages due to economies of scale/experience/etc, customers have brand loyalty, patents are in place, capital requirements are high, there are network effects, legal policies are restrictive, there is limited access to distribution
Competitive pressures from substitutes are stronger when Good substitutes are available and attractively priced, and they have comparable or better features, and buyers have low switching costs
Suppliers have stronger bargaining power when Their products are differentiated or scarce, there are high switching costs, buyers outnumber sellers, buyers cannot self-manufacture, supplier's products don't make up a large portion of the buyer's purchases
Buyers have stronger bargaining power when Buyer demand is weak, products are standardized, switching costs are low, buyers are large and few in number compared to sellers, buyers could integrate backward, buyers are well-informed and can postpone purchases
Steps to use the Five Forces to determine the nature and strength of competitive pressures within an industry 1. For each of the forces, ID the parties involved + the factors that cause pressures 2. Evaluate the strength of pressures from each of the forces 3. Determine whether the collective impact is conducive to earning profits in the industry
Key success factors Competitive factors that most affect industry members' ability to thrive in the marketplace. On what basis do buyers choose between brands? What resources + capabilities must a company have? What shortcomings will put them at a significant disadvantage?
Tools for customer segmentation/analysis Most desirable are behavioral, psychographic, and lifestyle characteristics and benefits sought. Demographics can be more practical/necessary.
Product selection attributes Factors that drive consumers to choose one brand/product/service over another
What kind of customer segmentation is most valuable Proprietary customer segmentation
Created by: ejrasmus



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