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Competitive Advantage
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CH 6 MGMT
Vocab
| Question | Answer |
|---|---|
| Resources | The assets, capabilities, processes, info, and knowledge that an organization uses to improve its effectiveness and efficiency, create and sustain competitive advantage, and fulfill a need or solve a problem |
| Competitive Advantage | Providing greater value for customers than competitors can. |
| Sustainable Competitive Advantage | A competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate. Four conditions must be met to have sustainab. compet adv: rare, valuable, imperfectly imitable,& non-substitutable |
| Valuable Resources | Resources that allow companies to improve efficiency and effectiveness |
| Rare Resources | Resources that are not controlled or possessed by many competing firms |
| Imperfectly Imitable Resources | Resources that are impossible or extremely costly or difficult for other firms to duplicate. |
| Non substitutable Resources | Resources that produce value or competitive advantage and have no equivalent substitutes or replacements. |
| Three steps of strategy making process: | 1) assess the need for strategic change 2) conduct a situational analysis 3) choose a strategic alternative |
| Competitive Inertia | A reluctance to change strategies or competitive practices that have been successful in the past |
| Strategic dissonance | a discrepency between a companys intended strategy and the strategic actions managers take when implementing that strategy. Not the same thing as failure of a strategy to produce the results that it's supposed to. |
| Situational Analysis | Can help managers determine the need for strategic change. |
| Assess need for strategic change | (AKA SWOT ANALYSIS)Company should determine whether it needs to change its strategy to sustain a competitive advantage |
| Distinctive competence: | What a company can make, do, or perform better than its competitors |
| Core capabilities: | The internal decision-making routines, problem solvig processes, and organizational cultures that determine how efficiently inputs can be turned into outputs |
| Strategic Group | a group of companies within an industry that top managers choose to compare, evaluate, and benchmark strategic threats and opportunities. |
| Core firms | Central companies in a strategic group |
| Secondary firms | The firms in a strategic group that follow strategies related to but somewhat different from those of the core firms |
| Choosing strategic alternatives | After detrmining the need for strategic change and conducting a situational analysis, it is the last step in the strategy making process. It will help the company create or maintain a sustainable competitive advantage. |
| Strategic Reference points | The strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage. Managers choose between two basic alternative strategies: Choose risk avoiding, risk seeking strat |
| Corporate level strategy | the overall organizational strategy that addresses the question " What business or businesses are we in or should be in" |
| Diversification | A strategy for reducing risk by owning a variety of items (stocks, or in the case of a corporation, types of business) so that the failure of one stock or business does not doom the entire portfolio |
| Portfolio strategy | A corporate level strategy that minimizes risk by diversifying investment among various businesses or product lines. |
| Acquisition | The purchase of a company by another company |
| Unrelated diversification | Creating or acquiring companies in completely unrelated businesses |
| BCG Matrix | A portfolio strategy, developed by the Boston Consulting Group, that categorizes a corporations businesses by growth rate and relative market share and helps managers decide how to invest corporate funds |
| Star | A company with a large share of a fast growing market |
| Question Mark | a company with a small share of a fast growing market |
| Cash Cow | A company with a large share of a slow growing market |
| Dog | A company with a small share of a slow growing market |
| Related Diversification | Creating or acquiring companies that share similar products, manufacturing, marketing, technology, or cultures. |
| Grand Strategy | A broad corporate-level srategic plan used to achieve strategic goals and guide the strategic alternatives that managers of individual businesses or subunits may use. Three kinds: growth, stability, and retrenchment/recovery |
| Growth Strategy | Type of grand strategy. Purpose is to increase profits, revenues, market share, or the number of places in which the company does business. |
| Stability strategy | Type of grand strategy. Purpose is to continue doing what the company has been doing, just doing it better. |
| Retrenchment Strategy | Type of grand strategy. Purpose is to turn around very poor company performance by shrinking the size or scope of the business or, if a company is in multiple businesses, by closing or shutting down different lines of the business. |
| Recovery | The strategic actions taken after retrenchment to return to a growth strategy. |
| Industry Level strategy: | A corporate strategy that addresses the question "How should we compete in this industry?" |
| Character of the Rivalry | A measure of the intensity of competitive behavior between companies in an industry. |
| Five Industry Forces | Type of industry level strategy. They determine an industry's overall attractiveness and potential for long term profitability. Include character of rivalry, threat of new entrants, threat of substitute prod/serv, bargaining power of supplier & buyers |
| Threat of new entrants | Measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in the industry |
| Threat of substitute products or services | Measure of the ease with which customers can find substitutes for an industry's products or services |
| Bargaining power of suppliers | A measure of the influence that suppliers of parts, materials and services to firms in an industry have on the prices of these inputs |
| Bargaining power of buyers | A measure of the influence that customers have on a firm's prices. |
| Cost leadership | The positioing strategy of producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product or service at the lowest price in the industry. Positioning strategy. |
| Differentiation: | The positioning strategy of providing a product or service that is sufficiently different from competitors offerings so that customers are willing to pay a premium price for it. Positioning strategy. |
| Focus Strategy | The positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment. Positioning strategy. |
| Defenders | Firms that adopt an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high quality products and services to a well defined set of customers. Type of adaptive strategy. |
| Types of Adaptive strategies | 1) Defending 2) prospecting 3) Analyzing 4) Reacting |
| Prospectors: | Firms that adopt an adaptive strategy that seeks fast growth by searching for new market opportuities, encouraging risk taking, and being the first to bring innovative new products to market. |
| Types of positioning strategies | 1) Cost leadership 2) Differentiation 3) Focus |
| Analyzers | Firms that adopt an adaptive strategy that seeks to mimize risk and maximize profits by following or imitating the proven successes of prospectors |
| Reactors | Firms that take an adaptive strategy of not following a consistent strateg, but instead reacting to changes in the external environment after they occur |
| Firm Level Strategy | A corporate strategy that addresses the question "How should we compete against a particular firm" |
| Direct Competition | The rivalry between two companies that offer similar products and services, acknowledge each other as rivals, and react to each other's strategic actions |
| Market commonality | Degree to which two companies have overlapping products, services or customers in multiple markets |
| Resource similarity | The extent to which a competitor has similar accounts and kinds of resources |
| Strategic moves of direct competition | Attack Response |
| Attack | A competitive move designed to reduce a rival's market share or profits |
| Response | A competitive countermove, prompted by a rival's attack, to defend or improve a company's market share or profit |
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bargjr