WCOB 3016 1st EditionExam # 1 Study Guide Chapters 1-4Chapter 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 returnso 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 visiono Strategic Actions Strategic Formulation Strategic Implementationo 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 Landscapeo Global Economy: one in which goods, services, people, skills and ideas move freely across geographic borders Huge, long term growth outside US – China and Indiao Rapid Technological change Technology Diffusion: the speed at which new technologies become available and are usedo 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 Industryo Prices were controlled by Federal Trade Commission (until 19702) and all prices were the same This meant that airlines competed with differentiationo 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 airlineo 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 supportit 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 Returnso 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 Environmento Study the EXTERNAL ENVIRONMENT, especially the industry environment- An Attractive Industryo Locate an industry with high potential for above average returns- Strategy Formulationo Identify the strategy called for by the attractive industry to earn above average returns- Assets and Skillso Develop or acquire assets and skills needed to implement the strategy- Strategy Implementationo Use the firm’s strengths to implement the strategy- Superior Returnso Above average returns Five Forces Model- An industry’s profitability results from interaction among:o Supplierso Buyerso Competitive rivalry among firmso Product substituteso 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 returnso Capabilities evolve over time and must be managed dynamically in pursuit of above average returnso Differences in firm’s performances are due primarily to their uniqueness rather than structural characteristicso Resources and capabilities are: Valuable Rare Costly to imitate No substitutableo 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 Missiono 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 missiono Types Capital Market - Public shareholders and lenders Product Market- Customers, suppliers, community and unions Organizational- EmployeesChapter 2: The External Environment- Components of External Environmento Scanning: identifying early signals of environmental changes and trendso Monitoring: detecting meaning through observationso 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 Americao Immigration Act of 1986: first amnesty provisiono Current Population Mix 13% Black 18% Hispanic 3% Asian 62% White 4% Misc.- Economico National Debt = $18 trillion + Budget Control Act of 1974: baseline concepto Fight over carbon based energy vs. green energy Cost of energy is major competitive issue Coal, fracking, nuclear = carbon based Wind, solar, water = greeno Quantitative Easing: buys debt, converts to cash, gives back to wall street Results from inflationo 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/Legalo Regulations Federal, state, local EPA Department of Labor Department of Justice Department of Treasury- IRS- Socioculturalo Identifiable Communities: race,