WCOB 3016: TEST 1
59 Cards in this Set
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Strategic Mgmt Process
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Strategic Inputs: external environment, internal environment, strategic intent/vision & mission
Strategic Actions: strategic formulation, strategic implementation
Strategic Outcomes
Above Avg Returns
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competitive global landscape
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Global Economy: huge, long-term growth outside U.S. - China & India (global economy)
Rapid Technological Change - technology diffusion & disruption, information age, knowledge intensity
Industry boundaries blurring
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disruptive technologies
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tech that destroys value of an existing technology & creates new markets
-many times rep radical or breakthrough innovation (i.e. iPhone)
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hypercompetition
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continuous series of multiple short term initiatives that replace current products with new products before a competitor can do so
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Airline Industry
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Highly regulated until 1970s: costly "hub" systems; enormous marketing budgets, pensions & other fixed costs; various aircraft to serve certain markets
Southwest Airlines: point to point sys; cost-driven/customer oriented; one aircraft - Boeing 737
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Recent Changes in Airline Industry
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Expansion of SW into nat'l carrier - using lower-cost peripheral airfields
Evolution of regional carriers to serve as feeders to "legacy" airlines
Development of other low cost carriers (i.e. Jet Blue)
Merger w/ AirTran
Sig change in SW customer profile
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Airbus vs. Boeing
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Boeingn used carbon fiber in Dreamliner to reduce amt. of fuel (most expensive cost)
Primary strat w/ airlines is more people, over more miles w/ less payroll (i.e. one pilot)
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2 models of strategic decision making
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I/O Model (EXTERNAL)
Resource-Based Model (INTERNAL)
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I/O Model of Above-Average Returns
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the industry/external environment has stronger influence on firm's performance THAN choices managers make inside their org.'s
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industry properties include:
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1. economies of scale
2. barriers to market entry
3. diversification
4. product differentiation
5. degree of concentration of firms in the industry
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6 I/O Model Factors
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external environment
attractive industry
strategy formulation
assets & skills
strategy implementation
superior returns
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5 Forces Model of Competition
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industry's profitability results from interaction among:
suppliers
buyers
rivalry among firms
product substitutes
potential entrants to industry
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Resource-based model of above-average returns
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Each org is a collection of unique resources & capabilities, basis for strategy & source returns
Capabilities evolve & must have dynamic mgnt
Diff in firms' performance is unique resources & capabilities rather than structural characteristics of the industry
Firms acquire diff resource…
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4 Criteria of resources & capabilities
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valuable
rare
costly to imitate
non-substitutable
*Creates Core Competencies --> CA
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5 Steps of Resource-Based Model
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Resources
Capability
Competitive Advantage
Attractive Industry
Strategy Formulation & Implementation
= ABOVE-AVERAGE RETURNs
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strategic vision/intent
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internal focus
develop org
focus on performance criteria
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strategic mission
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external focus
how the firm will go to market
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stakeholders
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capital market stakeholders (shareholders, lenders)
product market stakeholders (customers, suppliers, community & unions)
organizational stakeholders (employees)
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3 parts of the external environment
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General
Industry
Competitor
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general environment
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dimensions in the broader society that influence industry & firms w/in it
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6 factors of the general environment
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Economic: int rates, energy costs, currency, etc
Sociocultural: work force, local practices, etc
Global: WTO, China, Eur, S Amer, etc
Technological: internet, mobile devices, etc
Political/legal: gov reg, elections, trade policy, etc
Demographic: pop size, age, geo distribution, etc
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industry environment
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set of factors that directly influences a firm & its competitive actions & response
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5 factors of the Industry Environment
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threat new entrants
power of suppliers
power of buyers
product substitutes
intensity of rivalry
*5 forces model
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SWOT Analysis
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external environmental analysis
Strengths
Weaknesses
Opportunities
Threats
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competitor intelligence
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the ethical gathering of needed info & data about competitors' obj.'s, strategies, assumptions, & capabilities
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competitor analysis
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Future obj.'s: what drives them
Current strat: what they're doing & can do
Assumptions: what they believe about themself & industry
Capabilities: what they may be able to do
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industry
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a group of firms producing a similar product (close substitutes)
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industry environment
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set of factors directly influencing a firm & its competitive actions & competitive responses
*5 Forces Model
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Industry analysis
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5 forces model
*SW Airlines example
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5 forces model
*SW Airlines example
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low entry barriers
suppliers & buyers have strong positions
strong threats from substitute products
intense rivalry among competitors
= LOW PROFIT POTENTIAL
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Interpreting industry analyses: Attractive Industry
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high entry barriers
suppliers & buyers have weak positions
few threats from substitute products
moderate rivalry among competitors
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External & Internal Analyses
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External environment: what the firm MIGHT DO (opportunities & threats - Chapt 2)
Internal environment: what the firm CAN DO (unique resources, capabilities, & CCs - Chapt 3)
= Sustainable CA
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What is critical to maintaining CA?
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internal analysis
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Sustainability of a CA is a function of:
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rate of core competence obsolescence bc environmental changes
availability of substitutes for the core competence
imitability of the core competence
*NO CA LASTS FOREVER
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Components of Internal Analysis
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Conditions affecting managerial decisions about Resources, Capabilities, & Core Competencies
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Uncertainty
Complexity
Intraorganizational Conflicts
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Resources
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Uncertainty
Complexity
Intraorganizational Conflicts
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Capabilities
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activities that a firm performs exceptionally well relative to rivals
emerge over time through complex interactions among tangible & intangible resources
add unique value to firm's goods/services
stem from employees
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Core Competencies
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Built from:
4 Criteria of Sustainable CA
Value Chain Analysis
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4 Criteria of Sustainable Competitive Advantage
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Valuable (i.e. sust initiatives)
Rare (i.e. specialized software)
Costly to Imitate (i.e. SW Airlines)
Non-substitutable Capabilities (Coca-Cola formula)
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4 Criteria of Sustainable Competitive Advantage
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helps select value-creating competencies that should be maintained, upgraded, or developed & those that should be outsources
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value chain activities
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Primary activities: SCMT, operations, distribution marketing & sales, service
Support activities: finance, HRM, mgmt ISYS
= CUSTOMER VALUE
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Business Level Strategy
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an integrated & coordinated set of commitments & actions the firm uses to gain a CA by exploiting core competencies in specific mkt products
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Core Competencies Definition
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resources & superior capabilities that are sources of CA over a firm's rivals
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Core Competencies --> Strategy --> Business-level Strategy
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...
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Key issues in business-level strategy (CUSTOMERS)
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Who?
What are their needs?
How can the firm's CCs satisfy?
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Market Segmentation
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determining the customers to serve
customers: consumer markets, industrial markets
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Mkt segmentation: 6 factors of consumer markets
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demographic
socioeconomic
geographic
psychological
consumption
perceptual
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Mkt segmentation: 5 industrial markets
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end-use segments
product segments
geographic segments
common buying factor segments
customer size segments
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2 Types of potential CA
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*Performing activities differently (cheaper process)
lower overall costs than rivals
*Performing different (valuable) activities
possess capability to diff firm's product/service & command premium price
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5 Business-Level Strategies
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Cost leadership
Differentiation
Focused cost leadership
Focused differentiation
Integrated cost leadership/differentiation
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Cost Leadership Strategy
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standardized products for typical customers
low cost products w/ competitive levels of differentiation
focus on efficiency to keep costs lower than competitors
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Risks of Cost Leadership Strategy
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loss of CA to newer tech
failure to detect changes in customers' needs
ability of competitors to imitate your CA through their own unique strategic actions
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Differentiation Strategy
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products have diff, valued featured; sold at premium price
diff the products along as many dimensions as possible
less product similarity helps insulate co. from competition w/ rivals
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Risks of Differentiation Strategy
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customers decide diff b/w differentiated product & cost leader's product are not worth higher price
can't differentiate a product to create value that customers will pay a premium price
competitors offer similar products at lower cost
inexpensive "knockoffs" become available
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Focus Strategy
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integrated set of actions taken to produce goods/services that serve needs of a particular competitive segment
serves needs of specific customer segment of industry segment
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Specific Industry Segments
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ØTo meet specific market needs, you can use focused cost leadership or focused differentiation
ØBUT, firms must have the core competencies needed to provide more value to the specific market segment than can competitors serving the ENTIRE industry
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Risks of Focus Strategy
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competitor focuses on an even more narrow market segment
industry-wide competitors decide to focus on specific customer segments
diff b/w needs of specific mkt segment & those of rest of industry narrow
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Integrated Cost Leadership/Differentiation Strategy
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provide low cost products w/ valued differentiated features
use primary & support activities to produce differentiated products at low costs
RISK = can't produce sufficient low cost or differentiation - suck in middle
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WCOB 3016: TEST 1