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Strategic Mgmt Exam1
| Term | Definition |
|---|---|
| Company's strategy | The set of actions that its managers take to outperform the company's competitors and achieve superior profitability |
| 3 key elements of a good strategy | Analysis, Formulation, Implementation |
| Analysis | Looking at what the present situation is, this includes business environment and industry conditions, firm's financial and competitive capabilities, and taking an internal and external analysis |
| Formulation | Asking where do we want to go from here. This includes creating a vision for the firm's future direction |
| Implementation | Analyzing how we are going to get there. This includes crafting an action plan and doing it |
| ______ strategy focuses on where to compete (Corporate or Business) | Corporate Strategy |
| _______ strategy focuses on how to compete (Corporate or Business) | Business Strategy |
| 3 key elements of corporate strategy | Product, industry, and location |
| Who are responsible for the corporate strategy? | CEO and TMT (Top Management Team) |
| Business Strategy | Focuses on how to compete and how we can create value for the customer |
| Who are responsible for the business strategy? | General managers |
| Competitive Advantage | Provides buyers with superior value compared to rival sellers or offers buyers the same value as its rivals but at a lower cost to the firm |
| Sustainable Competitive Advantage | The basis for its advantage persists despite the best efforts of competitors to match or surpass its advantage |
| Business model | Sets forth the logic for how its strategy will create value for customers, while at the same time generates revenue sufficient to cover costs and realize a profit |
| The 7 Popular Business Models | Razor-razorblade, subscription, pay as you go, freemium, wholesale, agency, bundling |
| Razor-razorblade | Pay for replacements |
| Subscription | Pay for access (Examples: Netflix, Hulu, etc.) |
| Pay as you go | Pay for what you consume (Example: Utilities) |
| Freemium | Pay for extra features/add-ons (Examples: Spotify premium, in-app purchases)(It is free but if you want more features you have to pay) |
| Wholesale | Products sold at a discount (Example: Sams Club or Costco) |
| Agency | Products sold on commission (Example: Sales, Real Estate, eBay |
| Bundling | More than one product sold at a discount (Example: BOGO) |
| Good ______ + Good _______ = Good _________ | Strategy, Execution, Management |
| VRIN Test | Asks if a resource is Valuable, Rare, Inimitable, and Non-Substituable |
| SWOT analysis | A tool for sizing up a company's strengths, weaknesses, its market opportunities, and the external threats to its future well-being |
| Core competence | A proficiently performed internal activity that is central to a firm's strategy and competitiveness |
| Value chain | Identifies the primary activities and related support activities that create customer value |
| Value chain analysis | Facilitates a comparison, activity-by-activity, of how effectively and efficiently a firm delivers value to its customers, relative to its competitors |
| How many stages are in the strategy-making, strategy-executing process? | 5 |
| What are the 5 stages of the strategy-making, strategy executing process? | 1. Develop a strategic vision, mission, and core values 2. Set objectives 3. Craft a strategy to achieve the objectives and the company vision 4. Execute the strategy 5. Monitor developments, evaluate performance, and initiate corrective adjustments |
| Strategic Vision | Describes management's aspirations for the company's future and the course and direction charted to achieve them |
| Mission Statement | Describes the firm's current business and purpose |
| Core Values | The beliefs, traits, and behavioral norms that the firm's personnel are expected to display in conducting the firm's business and pursuing its strategic vision and mission |
| Macro-environment | Encompasses the broad environmental context in which a company's industry is situated that includes strategically relevant components over which the firm has no direct control |
| PESTEL analysis components | Political, Economic, Social, Technological, Environmental, and Legal |
| Firm performance is determined by two factors: | Industry and firm effects |
| Industry effects | Economic structure of the industry |
| Firm effects | Actions strategic leaders take |
| Industry analysis | A method to identify an industry's potential |
| What is Porter's Five Forces Model? | This model illustrates the profit potential of different industries and how to position the firm to gain and sustain competitive advantage |
| Step 1 of Porter's Five Forces Model | For each of the five forces, identify the different parties involved, along with the specific factors that bring about competitive pressures |
| Step 2 of Porter's Five Forces Model | Evaluate how strong the pressures stemming from each of the five forces are (strong, moderate, or weak |
| Step 3 of Porter's Five Forces Model | Determine whether the five forces, overall, are supportive of high industry profitability |
| 5 forces of Porter's Five Forces Model | Threat of entry, power of suppliers, power of buyers (customers), threat of substitutes, and competition from competitors |
| Threat of entry | |
| Power of suppliers | Pressures that industry suppliers put on an industry's profit potential |
| For power of suppliers, it lowers industry profit potential if: | Suppliers demand higher prices for their inputs and suppliers reduce quality |
| Power of buyers (customers) | Pressure customers put on an industry |
| For power of buyers, it lowers industry profit potential if: | Buyers obtain price discounts (reduces revenue) and buyers demand higher quality/service (raises production costs) |
| Threat of Substitutes | Meet the same basic customer need |
| Competition from Competitors | The intensity with which companies in the same industry jockey for market share and profitability |
| The intensity of rivalry among competitors is largely determined by: | Competitive industry structure, industry growth, strategic commitment, and exit barriers |
| Competitive industry structure | Elements and features common to all industries (# and size of competitors, firm's degree of pricing power, type of product or service, and height of entry barriers) |
| 4 main competitive industry structures | Perfect competition, monopolistic competition, oligopoly, and monopoly |
| Industry growth | Affects intensity of competition among competitors |
| For industry growth, during periods of high growth, consumer demand ______ and price competition among firms _______ (rises or decreases) | rises, decreases |
| For industry growth, during periods of negative growth, competition is _______ and rivals can only gain at the _________ | fierce, expense of one another |
| Strategic commitments | Firm actions that are costly, long-term oriented, and difficult to reverse |
| Exit barriers | Obstacles that determine how easily a firm can leave that industry (mainly economic and social factors) |
| Are industry structures stable or dynamic? | Dynamic |
Created by:
alizanzig