question
What does good strategy lead to?
answer
long run profits
- its deeper than just creating new products, raising revenue, cutting costs
- its deeper than just creating new products, raising revenue, cutting costs
question
Why is strategy hard?
answer
To have a good strategy you need to understand tradeoffs (ie. compromises), context, and your competitors/consumers
question
Challenges of recognizing trade-offs
answer
firms have limited resources (ie. capital, management attention) so they can't do everything well and some things interfere with each other so you have to choose what is best to do (ie. not doing something that is profitable so you can do a better job in something that is more profitable)
- you don't have a clear strategy if you don't know what to say no to
- you don't have a clear strategy if you don't know what to say no to
question
Do firms directly control revenues or costs?
answer
no but they do the operational decisions that can affect revenue or costs
question
What is reading the context in strategy decision making?
answer
need to look at the economic context of the firm itself (ie. Who are the buyers, competitors and suppliers and what do they care about? • What is the firm's cost structure? • What legal and regulatory constraints does the firm face? • What is the firm's reputation, location, technology, brand, intellectual property) to ultimately see what the tradeoffs of the strategy will be
- firms can't just copy each others strategy because it depends on strategy
- firms can't just copy each others strategy because it depends on strategy
question
Competitors and consumers in strategic management
answer
everyone responds to incentives but knowing what incentivizes people is hard
- need to understand what moves consumers and competitors though it you want to succeed
- need to understand what moves consumers and competitors though it you want to succeed
question
what is the main goal of firms?
answer
aiming to maximize profits
question
is profit maximization a strategy?
answer
no because profits are the eventual goal but you need to make decisions that will lead to long-term profitability (ie. what inputs to get, processes to use, products to make, customers to serve, prices to charge)
question
what helps us understand/analyze underlying decisions
answer
economics
question
profit function
answer
profit = total revenue - total cost
profit = (revenue/unit - cost/unit) * unit sales
profit = (price-average cost)* quantity
profit = (revenue/unit - cost/unit) * unit sales
profit = (price-average cost)* quantity
question
how can profits increase?
answer
if the price increases, average cost decreases, quantity increases
- important: need to understand that demands and costs are interlinked do increasing the quantity because there is more demands means that costs will go up too
- important: need to understand that demands and costs are interlinked do increasing the quantity because there is more demands means that costs will go up too
question
what is value creation?
answer
the consumer surplus (ie. difference in the price consumers are willing to pay compared to the price of the product itself)
- it must provide benefits to the end user to create value
- it must provide benefits to the end user to create value
question
starbucks value creation example (good and bad case scenerios)
answer
bad case: the costs of making recyclable cups goes up but there is little increase in demand for it so firm cant increase price or profits as much
good case: costs goes up a little but benefits of having recyclable cups is a lot based on demand so the prices and profits can increase a lot
good case: costs goes up a little but benefits of having recyclable cups is a lot based on demand so the prices and profits can increase a lot
question
does value creation ensure value caputre?
answer
no! value creation is providing benefits to the end user but capturing this requires changes in price so you can actually turn the value into profit
question
what is considered efficient?
answer
what will maximize the profit for the firm and its shareholders
question
how can you improve your negotiating position?
answer
by improving your outside option; lowering the added value of another player
question
what does added value encompass
answer
perfect competition (no profits made here), monopoly, oligopoly
question
value vs added value
answer
value: car manufacturers make good cars
added value: the manufacturers are making something unique or there is scarcity in the makret-place and other firms couldn't satisfy the prodution gap
added value: the manufacturers are making something unique or there is scarcity in the makret-place and other firms couldn't satisfy the prodution gap
question
added value formula
answer
difference between the value created with you and without you
- you should earn at least your outside option and no more than your added value
- you should earn at least your outside option and no more than your added value
question
added value of coalitions
answer
their added value is greater than the two companies individual values combined because having both around makes each firm a lot less important but having the merger is very important as the only other option is the outside option
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
