question
The defining goal of strategic mgmt
answer
Gaining and sustaining competitive advantage
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3 traditional frameworks to measure and assess firm performance (the standard performance dimensions)
answer
1. accounting profitability
2. shareholder value creation
3. economic value creation
2. shareholder value creation
3. economic value creation
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business-level strategy
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the set of goal-directed actions a firm takes to gain and sustain competitive advantage
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standard managerial practice
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using accounting data (financial data and ratios from income stmt and balance sheets) to assess competitive advantage and firm performance
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competitive advantage
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superior performance relative to the other competitors in the same industry or to the industry average
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Strategic leaders must be able to:
answer
1. assess firm performance accurately
2. compare/benchmark their firms performance to other competitors in the same industry or against the industry average
2. compare/benchmark their firms performance to other competitors in the same industry or against the industry average
question
profitability ratios most commonly used in strategic mgmt
answer
-return on invested capital (ROIC) (most commonly used)
-return on equity (ROE)
-return on assets (ROA)
-return on revenue (ROR)
-return on equity (ROE)
-return on assets (ROA)
-return on revenue (ROR)
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ROIC
answer
most common
ROIC= net profits/ invested capital
good indicator of firm profitability
measures how effectively a company uses total invested capital
ROIC= net profits/ invested capital
good indicator of firm profitability
measures how effectively a company uses total invested capital
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Invested capital (IC)
answer
The amount of money raised by a company by issuing securities to equity shareholders and debt to bondholders
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if a firms ROIC is greater then the cost of capital....
answer
it generates value
BUT if its less it destroys value
BUT if its less it destroys value
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the cost of capital
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a firms cost of financing operations from:
equity through issuing stock and debt through issuing bonds
equity through issuing stock and debt through issuing bonds
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ROR
answer
how much revenue is converted into profits
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can break ROR into 3 additional financial ratios:
answer
-COGS / revenue
-R & D /revenue
-SG &A / revenue
-R & D /revenue
-SG &A / revenue
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COGS/ revenue
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indicates how efficiently a company can produce a good
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research and development/revenue
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indicates how much of revenue is invested to research and development
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selling general and administrative/ revenue
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How much of revenue is invested in selling general and administrative (S G & A) expenses
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ROIC is broken down into
answer
-return on revenue
-working capital turnover
-working capital turnover
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working capital turnover
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a measure of how effectively capital is being used to generate revenue
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working capital turnover is broken down into other financial ratios like
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-working cap/ revenue
-plant property and equipment (PPE)/Revenue
-Long tern assets/revenue
-plant property and equipment (PPE)/Revenue
-Long tern assets/revenue
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Working capital/revenue
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indicates how much of its working capital the firm has tied up in its operations
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PPE / Revenue
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indicates how much of a firm's revenues are dedicated to PPE
( keep in mind PPE are critical assets to a firm's operations but cant be liquidated easily)
( keep in mind PPE are critical assets to a firm's operations but cant be liquidated easily)
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Long term assets/revenue
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How much of each dollar in revenues is tied up in long-term assets
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intangible assets
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-don't have physical attributes
-intellectual property (patents, copy rights and trademarks) , goodwill and brand value
-intellectual property (patents, copy rights and trademarks) , goodwill and brand value
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Limitations of accounting data
answer
1) Historical and backward-looking
2) Does not consider off-balance sheet items
3) Focuses mainly on tangible assets which are no longer the most important
2) Does not consider off-balance sheet items
3) Focuses mainly on tangible assets which are no longer the most important
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shareholders
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-individuals or organizations that own one or more shares of stock in a public company
-the legal owners of public companies
-the legal owners of public companies
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From shareholders perspective, what measure of competitive advantage matters most?
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the return on risk capital
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Risk capital
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Money shareholders pay in exchange for an equity share, money that they cant recover if the firm goes bankrupt
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investors are primarly interested in
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total return to shareholders
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total return to shareholders
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-the return on risk capital
-includes stock price appreciation plus dividends received
(stock price appreciation is the diff in the purchase price and the selling price)
-includes stock price appreciation plus dividends received
(stock price appreciation is the diff in the purchase price and the selling price)
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Efficient Market Hypothesis
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The idea that all available info about a firms past, current state and expected future performance is embedded in the market price of a the firms stock
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Market Cap(italization)
answer
-the total dollar market value of a company's total outstanding shares at any given point in time
market cap= # of outstanding shares x share price
-useful metric to assess comp advantage
market cap= # of outstanding shares x share price
-useful metric to assess comp advantage
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Limitations of Shareholder Value Creation
answer
-Stock prices can be highly volatile, making it difficult to assess firm performance in the short term.
-Overall macroeconomic factors (economic growth or contraction, the unemployment rate, and interest and exchange rates) have a direct effect on stock prices.
-Stock prices frequently reflect the psychological mood of investors, which can at times be irrational.
-Overall macroeconomic factors (economic growth or contraction, the unemployment rate, and interest and exchange rates) have a direct effect on stock prices.
-Stock prices frequently reflect the psychological mood of investors, which can at times be irrational.
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economic value created
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the difference between a buyers willingness to pay for a product or service and the firms total cost to produce
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reservation price
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Max price a customer is willing to pay for a good
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Value
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-The dollar amount (v) a consumer attaches to a good or service
-A consumers willingness to pay based off the perceived benefits the good or service provides to them
-A consumers willingness to pay based off the perceived benefits the good or service provides to them
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producer surplus
answer
-another term for profit
-Diff between price charged (p) and the cost to produce (c) (aka P-C)
-Diff between price charged (p) and the cost to produce (c) (aka P-C)
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consumer surplus
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Difference between the highest price a consumer is willing to pay and the actual price they pay
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the economic value creation framework shows that strategy is about
answer
Creating as much economic value as possible
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opportunity cost
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the value of the best alternative use of the resources employed
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Limitations of Economic Value Creation
answer
- Determining consumer value of a good isnt simple, it changes based on income, preference, time and other factors
- To measure firm-level competitive advantage, we must estimate the economic value created for all products and services offered by the firm
- To measure firm-level competitive advantage, we must estimate the economic value created for all products and services offered by the firm
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Balanced Scorecard
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a framework to help managers achieve their strategic objectives more effectively
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4 key questions of the balanced scorecard
answer
1. How do customers view us?
2. How do shareholders view us?
3. How do we create value?
4. What core competencies do we need?
2. How do shareholders view us?
3. How do we create value?
4. What core competencies do we need?
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Advantages of Balanced Scorecard
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- Helps to communicate and link the strategic vision in terms of measurable operational goals
- Design and plan business processes
- Implement feedback and organizational learning to modify and adapt strategic goals
- Design and plan business processes
- Implement feedback and organizational learning to modify and adapt strategic goals
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Disadvantages of the balanced scorecard
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-Focused on strategy implementation not strategic formulation
-Limited guidance about which metrics to use and how to handle setbacks if they occur
-Only as useful as the managers apply it
-Strategy must be translated into measurable objectives
-Limited guidance about which metrics to use and how to handle setbacks if they occur
-Only as useful as the managers apply it
-Strategy must be translated into measurable objectives
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Triple Bottom Line
answer
-3 dimensions: economic social and ecological
-3 dimensions can also be called the 3 Ps, profits, people and planet
-fundamental to a sustainable strategy
-3 dimensions can also be called the 3 Ps, profits, people and planet
-fundamental to a sustainable strategy
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Profits/economic dimension
answer
The necessity of businesses to be profitable to survive
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People/social dimension
answer
emphasizes the people aspect
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Planet/ecological dimension
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emphasizes the relationship between business and the natural environment
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Stakeholder Theory
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ethical theory stating that social responsibility is paying attention to the interest of every affected stakeholder in every aspect of a firm's operation
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Business model
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-translates strategy into action
-details the firms competitive tactics and initiatives
-details the firms competitive tactics and initiatives
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The why what who and how of business models framework
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-why does the business model create value?
-what activities needs to be performed
-who are the main stakeholders performing the activities?
-how are the offerings to the customers created?
-what activities needs to be performed
-who are the main stakeholders performing the activities?
-how are the offerings to the customers created?
question
Popular business model ex:
answer
-razor-razor-blades
-subscription
-pay-as-you-go
-freemium
-wholesale
-agency
-bundling
-subscription
-pay-as-you-go
-freemium
-wholesale
-agency
-bundling
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razor-razor blades
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initial product is sold at a loss or given away for free to drive demand for complementary goods
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subscription model
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Users pay for access to a product or service whether they use the product or service during the payment term or not
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pay-as-you-go
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users pay for only the services they consume
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Freemium
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offers users a basic service for free and then charges a premium for upgrades or advanced features
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Ultra-low cost
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A model in which basic service is provided at a low cost and extra items are sold at a premium.
very similar to freemium
very similar to freemium
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wholesale
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traditional model in retail
for ex: book publishers sell books to retailers at a fixed price then retailers set their own price for sale
for ex: book publishers sell books to retailers at a fixed price then retailers set their own price for sale
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agency model
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Producer relies on an agent or retailer to sell the product. at a predetermined percentage commission
Producer may also control the retail price.
Producer may also control the retail price.
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bundling
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sells products or services for which demand is negatively correlated at a discount
demand for 2 products is negatively correlated if a user values one product more than another
demand for 2 products is negatively correlated if a user values one product more than another
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Dynamic Nature of Business Models
answer
-Business Models can be combined, evolve and disrupted
-Businesses must respond to disruption & adapt
-Legal conflicts can arise
-Businesses must respond to disruption & adapt
-Legal conflicts can arise
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combination
answer
combine razor-razor blade model and subscription model
ex: Verizon frequently provides a basic cell phone at no charge or significantly subsidize a high end smartphone when u sign up for a 2 year wireless service plan
ex: Verizon frequently provides a basic cell phone at no charge or significantly subsidize a high end smartphone when u sign up for a 2 year wireless service plan
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evolution
answer
-freemium business model is an evolutionary variation on the razor-razor blade model, the base product is free and the producer finds other ways to monetize the usage
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disruption
answer
when introducing the agency model, we mentioned apple and book publishing and you are aware of how severely amazon disrupted the traditional wholesale model for publishers
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How to Measure and Assess Competitive Advantage
answer
-Relative to a benchmark
-By measuring accounting profit, shareholder value, or economic value
-The balanced scorecard approach
-The triple bottom line
-By measuring accounting profit, shareholder value, or economic value
-The balanced scorecard approach
-The triple bottom line
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Strategic leaders should keep in mind these things regarding comp advantage and firm performance
answer
-no best strategy exists (only better ones)
-the goal of strategic mgmt is to integrate and align each business function and obtain superior performance at the business unit and corporate levels
-both quantitative and qualitative performance dimensions matter
-Business model is critical to comp advantage
-the goal of strategic mgmt is to integrate and align each business function and obtain superior performance at the business unit and corporate levels
-both quantitative and qualitative performance dimensions matter
-Business model is critical to comp advantage
question
competitive advantage is best measured by criteria that best reflect
answer
overall business unit performance rather than the performance of specific departments
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a firms external environment
answer
-consists of all the factors that can affect its potential to gain and sustain a competitive advantage
-strategic leaders have little direct influence over this
-ex: macroeconomic factors (interest or currency exchange rates)
-strategic leaders have little direct influence over this
-ex: macroeconomic factors (interest or currency exchange rates)
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The PESTEL model
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-groups the factors in the firms general environment into 6 segments
-straightforward way to analyze the impt external factors and trends that affect a firm
-straightforward way to analyze the impt external factors and trends that affect a firm
question
6 PESTEL segments
answer
Political
Economic
Sociocultural
Technological
Ecological
Legal
Economic
Sociocultural
Technological
Ecological
Legal
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political factors
answer
result from the processes and actions of government bodies that can influence the decisions and behavior of firms
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non market strategy
answer
-Firms try to influence the political realm by perusing this strategy
-They do this through lobbying, public relations, contributions and litigation
-They do this through lobbying, public relations, contributions and litigation
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Economic Factors
answer
-these factors are usually macroeconomic affecting economy wide phenomena
-ex: growth rates, employment levels, interest rates, price stability (inflation and deflation) and currency exchange rates
-ex: growth rates, employment levels, interest rates, price stability (inflation and deflation) and currency exchange rates
question
overall economic growth rate
answer
-A measure of the change in the amt of goods and services produced by a economy
- Real growth rate adjusts for inflation
- Real growth rate adjusts for inflation
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real interest rate
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the amount that creditors are paid for use of their money and the amount that debtors pay for that use, adjusted for inflation
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price stability
answer
-the lack of change in price levels of goods and services
-is rare
-is rare
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inflation
answer
when theres too much money in a economy so prices rise and deflation is opposite obv
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currency exchange rate
answer
determines how many dollars one must pay for a unit of foreign currency
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sociocultural factors
answer
Capture a society's cultures, norms, and values
Demographic trends are also important sociocultural factors (capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class)
Demographic trends are also important sociocultural factors (capture population characteristics related to age, gender, family size, ethnicity, sexual orientation, religion, and socioeconomic class)
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technological factors
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capture the application of knowledge to create new processes and products
-major innovations in process technology ex: lean manufacturing, 6 sigma quality and biotechnology
-major innovations in process technology ex: lean manufacturing, 6 sigma quality and biotechnology
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ecological factors
answer
involve broad environmental issues such as the natural environment, global warming, and sustainable economic growth
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Legal Factors
answer
-The official outcomes of laws, mandates, regulations, and court decisions
- This can have a direct bearing on a firm's profit potential.
- This can have a direct bearing on a firm's profit potential.
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Firm performance is determined primarily by two factors
answer
industry and firm effects
-industry effects: the structure of the firms industry
-firm effects: the actions strategic leaders take
-industry effects: the structure of the firms industry
-firm effects: the actions strategic leaders take
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industry
answer
a group of companies that face more or less the same set of suppliers and buyers
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Industry Analysis
answer
-provides a rigorous basis not only to identify an industry's profit potential (the level of profitability that can be expected for the average firm) but also to derive implications for one firms strategic position within an industry
question
strategic position
answer
a firms ability to create value for the customers (v) while containing the cost to do so (C)
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Five Forces Model
answer
Developed by Michael Porter that helps strategic leaders understand the profit potential of different industries and how they can position their respective firms to gain and sustain comp advantage
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2 insights based off the 5 forces
answer
1. competition is viewed more broadly in the five forces model
2. profit potential is a function of the five competitive forces
2. profit potential is a function of the five competitive forces
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Relationship between the 5 forces and industry profit potential
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the stronger the 5 forces, the lower the industrys prof potential and vice versa
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porters 5 forces
answer
1. threat of entry
2. power of suppliers
3. power of buyers
4. threat of substitutes
5. rivalry among existing competitors
2. power of suppliers
3. power of buyers
4. threat of substitutes
5. rivalry among existing competitors
question
threat of new entry
answer
- the risk that potential competitors will enter an industry
-this reduces industrys profit potential bc it increases spending among incumbent firms
-this reduces industrys profit potential bc it increases spending among incumbent firms
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entry barriers
answer
advantages for existing firms, obstacles that determine how easily a firm can enter an industry
question
examples of entry barriers
answer
-economies of scale
-network effects and customer switching costs
-capital requirements
-advantages independent of size
-gov policy
-credible threat of retaliation
-network effects and customer switching costs
-capital requirements
-advantages independent of size
-gov policy
-credible threat of retaliation
question
economies of scale
answer
-decrease in cost per unit as output increase
Firms with large output can:
-spread fixed costs over more units
-use better technology and have a more specialized division of labor
-demand better terms from their suppliers
Firms with large output can:
-spread fixed costs over more units
-use better technology and have a more specialized division of labor
-demand better terms from their suppliers
question
network effects
answer
The positive effect that one user of a product or service has on the value of that product or service for other users
question
positive externality
answer
when network effects are present, the value of the product or service increases with the number of users
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switching costs
answer
costs incurred by moving from one supplier to another
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capital requirements
answer
describe the price of the entry ticket into a new industry
question
the power of suppliers
answer
Bargaining power of suppliers captures pressures that industry suppliers can exert on an industry's profit potential
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the power of suppliers can reduce a firms ability to obtain superior performance for 2 reasons
answer
1. Suppliers can raise the cost of production and demand higher prices for their inputs
2. Suppliers can reduce the quality of the input factor or service level delivered
3. Suppliers can reduce the industrys profit potential by capturing part of the economic value created
2. Suppliers can reduce the quality of the input factor or service level delivered
3. Suppliers can reduce the industrys profit potential by capturing part of the economic value created
question
the power of buyers is high when
answer
-There are a few buyers and each buyer purchases large quantities
-The industry's products are standardized or undifferentiated
-Buyers face low or no switching costs
-Buyers can credibly threaten to backwardly integrate into the industry
-The industry's products are standardized or undifferentiated
-Buyers face low or no switching costs
-Buyers can credibly threaten to backwardly integrate into the industry
question
the threat of substitutes is high when
answer
-The substitute offers an attractive price-performance trade-off.
-The buyer's cost of switching to the substitute is low
-The buyer's cost of switching to the substitute is low
question
the intensity of rivalry among existing competitors is determined largely by the following factors
answer
1. competitive industry structure
2. industry growth
3. strategic commitments
4. exit barriers
2. industry growth
3. strategic commitments
4. exit barriers
question
the competitive industry structure
answer
elements and features common to all industries
ex : number and size of competitors, degree of pricing power, type of prod or service, the height of entry barriers
ex : number and size of competitors, degree of pricing power, type of prod or service, the height of entry barriers
question
4 main comp industry structures are
answer
1. perf competition
2. monopolistic competition
3. oligopoly
4.monopoly
2. monopolistic competition
3. oligopoly
4.monopoly
question
perfection competitive industry
answer
-Many small firms
-commodity product
-ease of entry
-little to no ability for each firm to raise its prices
-commodity product
-ease of entry
-little to no ability for each firm to raise its prices
question
monopolistic competition
answer
-Has many firms
-Has a differentiated product
-Some obstacles to entry
-Can raise prices for a relatively unique product while retaining customers
-Has a differentiated product
-Some obstacles to entry
-Can raise prices for a relatively unique product while retaining customers
question
oligopolistic industry
answer
-consolidated with few large firms
-differentiated products
-high entry barriers
-some degree of pricing power
-differentiated products
-high entry barriers
-some degree of pricing power
question
Monopoly
answer
an indiustry is a monopoly when there is only one, often large firm supplying the market
question
How industry growth affects intensity of rivalry among competitors
answer
in periods of high growth, consumer demand rises and price competition among firms frequently decreases
question
strategic commitments
answer
firm actions that are costly, long-term oriented, and difficult to reverse
question
exit barriers
answer
obstacles that determine how easily a firm can leave an industry
question
complement
answer
a product, service, or competency that adds value to the original product offering when the two are used in tandem
can be considered a sixth force
can be considered a sixth force
question
complementor
answer
a company is a complementor to your company if customers value your product or service offering more when they are able to combine it with the other companys product or service
question
co-opetition
answer
cooperation by competitors to acheive a strategic objective
question
entry choices
answer
who, what, when , where and how
1. Who are the players?
2. What type of entry?
3. When to enter?
4. Where to enter?
5. How to enter?
1. Who are the players?
2. What type of entry?
3. When to enter?
4. Where to enter?
5. How to enter?
question
industry convergence
answer
a process whereby formerly unrelated industries begin to satisfy the same customer need
question
strategic group
answer
-the set of companies that pursue a similar strategy within a specific industry
-competitive rivalry is strongest between firms within the same strategic group
-some strategic groups are more profitable then others
-competitive rivalry is strongest between firms within the same strategic group
-some strategic groups are more profitable then others
question
strategic group model
answer
model that clusters different firms into groups based on a few key strategic dimensions
question
Both external environment and the 5 competitive forces affects strategic groups ....?
answer
differently
question
mobility barriers
answer
restrict movement between groups
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steps to follow when applying Porters five forces model
answer
1. Define the industry
2. Determine driving forces
3. Identify key players and categorize them
4. Asses industry structure
2. Determine driving forces
3. Identify key players and categorize them
4. Asses industry structure
question
core competencies
answer
-unique strengths that are embedded deep within a firm
-Critical for competitive advantage
-Critical for competitive advantage
question
Resources
answer
-any assets that a firm can draw on when crafting and executing a strategy
-ex: cash, buildings, machinery, or intellectual property
-ex: cash, buildings, machinery, or intellectual property
question
Capabilities
answer
organizational and managerial skills necessary to use diverse resources strategically
question
activities
answer
distinct and fine-grained business processes that enable firms to add incremental value by transforming inputs into goods and services
question
Resource-based view
answer
-Helps to identify core competencies
-2 assumptions of this view are :
1. resource heterogeneity
2. resource immobility
-2 assumptions of this view are :
1. resource heterogeneity
2. resource immobility
question
Tangible vs Intangible Resources
answer
tangible: have physical attributes and thus are visible
intangible: don't have phys attributes and are invisible
intangible: don't have phys attributes and are invisible
question
resource heterogeneity
answer
-assumption in the resource-based view
-Says that a firm is a unique bundle of resources, competencies, and capabilities that differ across firms
-Says that a firm is a unique bundle of resources, competencies, and capabilities that differ across firms
question
resource immobility
answer
-assumption in the resource-based view
-says that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm
-says that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm
question
VRIO Framework
answer
-for a resource to be the basis of a competitive advantage it must be :
-Valuable
-Rare, and costly to
-Imitate. and the firm itself must be
-Organized to capture the value of the resource
-Valuable
-Rare, and costly to
-Imitate. and the firm itself must be
-Organized to capture the value of the resource
question
valuable resource
answer
a resource that enables the firm to exploit an external opportunity or offset an external threat
question
a resource is rare if
answer
the # of firms that possess it is less than the # of firms it would require to reach a state of perfect competition
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A resource is costly to imitate if
answer
Firms that don't have it are unable to develop or buy the resource at a reasonable price
question
organized to capture value
answer
the charecteristic of having in place an effective organizational structure, processes, and systems to fully exploit the competitive potential of the firms resources, capabilities and competencies
question
Isolating Mechanisms
answer
prevent rivals from competing away the advantage a firm may enjoy
question
isolating mechanisms include:
answer
1. Better expectations of future resource value
2. path dependence
3. casual ambiguity
4. social complexity
5. Intellectual property (IP) protection
2. path dependence
3. casual ambiguity
4. social complexity
5. Intellectual property (IP) protection
question
path dependence
answer
A process in which the options one faces in a current situation are limited by decisions made in the past
question
casual ambiguity
answer
The cause and effect of a phenomenon are not readily apparent
question
social complexity
answer
When different social and business systems interact with one another
question
intellectual property (IP) protection
answer
a critical intangible resource that can also help sustain a competitive advance
question
5 major forms of IP (intellectual) protection
answer
1. patents
2. designs
3. copyrights
4. trademarks
5. trade secrets
2. designs
3. copyrights
4. trademarks
5. trade secrets
question
core rigidity
answer
a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed
question
dynamic capabilities
answer
a firm's ability to create, deploy, modify, reconfigure, upgrade, or leverage resources
question
dynamic capabilities perspective
answer
Competitive advantage is the outflow of a firm's capacity to modify and leverage its resource base in a way to gain and sustain competitive advantage in a constantly changing environment
question
resource stocks
answer
the firm's current level of intangible resources
question
resource flows
answer
the firm's level of investments to maintain or build a resource
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Value Chain
answer
describes the internal activities a firm engages in when transforming inputs into outputs
question
primary activities
answer
Activities that directly add value as the firm transforms inputs into outputs from raw materials through production phases to sales and marketing and finally customer service
question
examples of primary activities
answer
-supply chain management
-operations
-distribution
-marketing
-sales and after-sales service
-operations
-distribution
-marketing
-sales and after-sales service
question
support activities
answer
other activities that add value indirectly
question
examples of support activities
answer
-Research and development (R&D)
-Information Systems
-Human Resources
-Accounting and Finance
-Firm infrastructure including processes, policies, and procedures
-Information Systems
-Human Resources
-Accounting and Finance
-Firm infrastructure including processes, policies, and procedures
question
strategic activity system
answer
The conceptualization of a firm as a network of interconnected activities
question
SWOT analysis
answer
-Internal analysis of the company's strength and weaknesses and...
-External analysis of opportunities and threats
-External analysis of opportunities and threats
question
SWOT stands for
answer
strengths, weaknesses, opportunities, threats
question
strategic trade-offs
answer
-Choices between a cost or value position
-These choices are necessary because higher value creation tends to generate higher cost.
-These choices are necessary because higher value creation tends to generate higher cost.
question
differentiation strategy
answer
Create higher value for customers than the value then competitors, by delivering products or services with unique features while keeping costs at the same or similar levels, allowing the firm to charge higher prices to its customers
question
cost leadership strategy
answer
Create the same or similar value for customers by delivering products or services at a lower cost than competitors, enabling the firm to offer lower prices to its customers
question
generic strategies
answer
-strategies that can be used by any organization
-ex: differentiation and cost-leadership
-ex: differentiation and cost-leadership
question
scope of competition
answer
The choice between perusing a specific, narrow part of the market or the broader market
question
Focused cost leadership and focused differentiation are diff then generic cost leadership and differentiation because...?
answer
the competitive scope is narrower
question
economies of scope
answer
-The savings that come from producing 2 (or more) outputs rather than producing each output on their own bc they use the same resources and technology
-ex: Marriott has courtyard (for business ppl) and Fairfield (for families)
-ex: Marriott has courtyard (for business ppl) and Fairfield (for families)
question
minimum efficient scale (MES)
answer
The lowest quantity of goods produced needed to be cost competitive
question
diseconomies of scale
answer
increases in cost as output increases
question
Blue Ocean Strategy
answer
-Business-level strategy that combines differentiation and cost-leadership
-Uses value innovation to reconcile the trade-offs in those 2 distinct strategic positions
-Uses value innovation to reconcile the trade-offs in those 2 distinct strategic positions
question
value innovation
answer
aligning innovation with total perceived consumer benefits, price and cost
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value curve
answer
-horizontal connection of the points of each value on the strategy canvas
-Helps strategic leaders determine courses of action
-Helps strategic leaders determine courses of action
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to formulate an appropriate business-level strategy managers must answer...
answer
-who are the customers we serve?
-what customer needs, wishes and desires will we satisfy?
-why do we want to satisfy them?
-how will we satisfy them?
-what customer needs, wishes and desires will we satisfy?
-why do we want to satisfy them?
-how will we satisfy them?
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