WCOB 3016 1st Edition Exam 1 Study Guide Chapters 1 4 Chapter 1 Strategic Management and Strategic Competitiveness Strategic Management Process the full set of commitments decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns o Strategic Inputs External Environment where in the world you are EX Businesses in Texas have a different environment than businesses in California Internal Environment environment within the business Mission how you implement your vision o Strategic Actions Strategic Formulation Strategic Implementation o Strategic Outcomes Above Average Returns returns in excess of what an investor expects to earn from other investments with a similar amount of risk Competitive Global Landscape o Global Economy one in which goods services people skills and ideas move freely across geographic borders Huge long term growth outside US China and India o Rapid Technological change Technology Diffusion the speed at which new technologies become available and are used o Information Age Information technology has dramatically changed with the emerging of social media sites cell phones computers artificial intelligence etc o Knowledge Intensity concentration of knowledge through a few funnels aka websites Airline Industry o Prices were controlled by Federal Trade Commission until 19702 and all prices were the same This meant that airlines competed with differentiation o Southwest Airlines Emerged as being a cost driven and customer oriented airline Had on time and low fair reputation while also having happy hour on the weekends They had one aircraft Boeing 737 Since they were only in Texas at first they only had to ask Texas gov permission to change prices etc Having difficulty becoming an international airline o Airbus VS Boeing Airbus came out with different plane models to compete against Boeing Airbus 480 was created and was so heavy that only 5 airports can support it Dreamliner was created and had better technology computer technology drives the airplane All of this technology made the airplane lighter The I O Model of Above Average Returns o IO Model Industrial Organization dictates the decisions that the company makes The industry external environment in which a firm competes has a stronger influence on the firm s performance than do the choices managers make inside their organizations Industry properties Economies of scale Barriers to market entry Diversification Product differentiation Degree of Concentration of firms in the industry Model External Environment o Study the EXTERNAL ENVIRONMENT especially the industry environment An Attractive Industry o Locate an industry with high potential for above average returns Strategy Formulation o Identify the strategy called for by the attractive industry to earn above average returns Assets and Skills o Develop or acquire assets and skills needed to implement the strategy Strategy Implementation o Use the firm s strengths to implement the strategy Superior Returns o Above average returns Five Forces Model An industry s profitability results from interaction among o Suppliers o Buyers o Competitive rivalry among firms o Product substitutes o Potential entrants to the industry Resource Based Model of Above Average Returns assumes that each organization is a collection of unique resources and capabilities that provide the basis for its strategy and that is the primary source of its returns o Capabilities evolve over time and must be managed dynamically in pursuit of above average returns o Differences in firm s performances are due primarily to their uniqueness rather than structural characteristics o Resources and capabilities are Valuable Rare Costly to imitate No substitutable o Model Resources Identify the firm s resources Study its strengths and weaknesses compared with competitors Capability Determine the firm s capabilities Competitive Advantage Determine the potential of the firm s resources and capabilities in terms of a competitive advantage NEVER PERMANENT An Attractive Industry Locate an attractive industry Strategy Formulation Select a strategy that best allows the firm to utilize its resources and capabilities relative to opportunities in the external environment Superior Returns Vision and Mission o Vision a picture of what the firm wants to be and what it wants to ultimately achieve This reflects the firm s values and aspirations Internal focus To achieve what you want your company needs core competencies To get this look at the internal focus o Mission specifies the businesses in which the film intends to compete and the customers it intends to serve External focus how do you want to market Stakeholders the individuals groups and organizations who can affect the firm s vision and mission o Types Capital Market Public shareholders and lenders Product Market Customers suppliers community and unions Organizational Employees Chapter 2 The External Environment Components of External Environment o Scanning identifying early signals of environmental changes and trends o Monitoring detecting meaning through observations o Forecasting developing predictions of outcomes Demographic population size age structure ethnic mix income distribution etc o Immigration Act of 1965 revised immigration from favoring Europe to Africa Asia and South America o Immigration Act of 1986 first amnesty provision o Current Population Mix 13 Black 18 Hispanic 3 Asian 62 White 4 Misc Economic o National Debt 18 trillion Budget Control Act of 1974 baseline concept o Fight over carbon based energy vs green energy Cost of energy is major competitive issue Coal fracking nuclear carbon based Wind solar water green o Quantitative Easing buys debt converts to cash gives back to wall street Results from inflation o Minimum wage 2006 5 15 hr 2007 2008 7 25 Teen unemployment from 15 to 23 by 2009 Minority employment peaked at 9 to 16 Black teens 39 6 o Taxes and State Job Growth No income tax states 4 9 Income tax states 2 6 Political Legal o Regulations Federal state local EPA Department of Labor Department of Justice Department of Treasury IRS Sociocultural o Identifiable Communities race religion sexual orientation gender etc o Gay issues o Women issues o Changing middle class Less opportunity for upward mobility Biggest driver Technological o Disruptors iPhones smartphones etc o Software o Internet o New workforce skills Global o Marketplace China India etc o International agreements o Trade