Term
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Definition
| The full set of commitments, decisions, & actions required for a firm to achieve strategic competiveness & earn above average returns. |
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Definition
| an integrated & coordinated set of commitments & actions designed to exploit core competencies. |
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Term
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Definition
| when a firm implements a strategy, competitors are unable to duplicate or find too costly to imitate. |
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Term
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Definition
| returns in excess of what an investor expects to earn from the other investments with similar risk |
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Term
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Definition
| an investors uncertainty about economic gains or losses that will result from an investment |
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Term
| Ways to Measure Returns on Investments: |
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Definition
1)Return on Assets
2)Return on Equity
3)Return on Sales
4)Stock Market Returns
5)Speed or Amount of Growth |
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Term
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Definition
| returns equal to those an investor expects to earn from investments with similar risk |
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Term
| Where Average Returns are Found: |
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Definition
1)Firms without a competitive advantage
2)Firms that are not in an attractive industry (current example: mortgage industry |
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Term
| 2 Primary Factors Impacting Competitive Landscape |
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Definition
1)Globalization
2)Technological Change |
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Term
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Definition
1.Domestic Stage: market potential is limited to home production country with all marketing and production done at home
2.International Stage: exports begin and increase and the company adopts a multi-domestic approach with the marketing of products in several countries individually
3.Multinational Stage: company has production and marketing facilities in several countries
4.Global (Stateless) Stage: international dimension transcends any single country |
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Term
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Definition
1. Outsourcing (global sourcing)
2. Exporting – countertrade (barter of goods for goods)
3. Licensing – when a company makes resources available to another company
4. Direct Investing |
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Term
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Definition
a) Greenfield venture (establish a foreign subsidiary from scratch)
b) Partnership/Joint Venture (when a company shares cost with another company to build manufacturing plant or develop a product) etc.
c) Wholly owned subsidiary |
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Term
| Multinational Corporation (MNC) |
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Definition
1. Ethnocentric (favors home country market)
2. Polycentric (favors markets of host countries)
3. Geocentric (favors no specific country) |
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Term
| 2 Models that Firms Use to Increase Competitive Advantage |
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Definition
1) I/O (Industrial Organization) Model of Above Average Returns
2) Resource Based Model of Above Average Returns |
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Term
| Four Underlying Assumptions of I/O Model |
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Definition
1. The external environment imposes constraints and pressures that determine strategies
2. Firms in the same industry control similar resources and pursue similar strategies
3. Resource differences between companies are short lived
4. Decision makers are rational and committed |
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Term
| Core Assumption of I/O Model |
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Definition
| Firms external environment has more influence on the choice of strategies than do the company resource, capabilities, and core competencies |
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Term
| Resource Based Model of Above Average Returns |
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Definition
| suggest firms unique resources, capabilities, and core competencies have more of an influence on selecting strategy than does the external environment |
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Term
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Definition
| inputs into the firms production process |
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Term
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Definition
| capacity for a set of resources to perform a task in a an integrative manner |
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Definition
| capabilities that serve as a source of competitive advantage |
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Term
| Underlying Assumptions of Resources, capabilities, and core competencies |
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Definition
1. Firms acquire different resources and develop unique capabilities base on how they are combined and used
2. Resources and capabilities are not highly mobile across companies
3. Differences in resources and capabilities are the basis of competitive advantage |
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Term
| - Conditions for Resources and Capabilities to become a Source of Competitive Advantage |
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Definition
1) Valuable – when they allow a company to take advantage of opportunities or neutralize threats from the external environment
2) Rare – owned or possessed by very few companies
3) Costly to imitate – cost too much to duplicate for other companies
4) Non Substitutable – no other equivalents |
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Term
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Definition
| picture of what the company wants to be and what it wants to accomplish |
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Term
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Definition
| specifies the business or businesses in which the firm intends to compete and customers it intends to serve |
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Term
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Definition
| people and groups who are affected by the firms performance and who have claims on its performance |
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Term
| Capital Market Stakeholders: |
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Definition
| lenders, shareholders, banks, etc. |
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Term
| Product Market Stakeholders: |
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Definition
| customers, suppliers, unions, host communities, and local, state, and federal government |
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Term
| Organizational Stakeholders: |
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Definition
| managers, workers, employers |
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Term
| 3 Areas the Influence Strategic Management |
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Definition
1) Strategic Leaders – different people located in different parts of the firm specifically in “line” areas
2) Organizational Culture
3) Profit Pool – total earnings in the entire industry (not just one company) |
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Term
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Definition
| comprised of dimensions in a broader society that influence an industry and the firms in it. |
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Term
| Segments (General Environment) |
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Definition
1. Demographic: population, age, ethnic composistion, geographic distribution, etc.
2. Economic: direction and velocity of the economy
3. Political/ Legal: government actions at the local, state, and federal levels
4. Sociocultural: represents society’s attitudes, values, and customs
5. Technological: concerned with the creation of new knowledge and the transfer of that knowledge
6. Global: represents global resource and product markets, international and political events, etc. |
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Term
| Analysis (General Environment): |
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Definition
1. Opportunities
2. Threats |
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Term
| Activities Used to Analyze the General Environment |
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Definition
1. Scanning: looking for opportunities or threats
2. Monitoring: trying to detect meaning through ongoing observations of the general environment
3. Forecasting: developing feasible projections of what might happen, how quickly it might happen
4. Assessing: attempting to determining the timing and significance of general environment events |
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Term
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Definition
| Compared to the general environment, the industry has a more direct effect on the environment |
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Term
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Definition
| helps a company determine its position in an industry, where it can take advantage of opportunities and buffer itself from threats |
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Term
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Definition
1. Threat of New Entrants
2. Bargaining Power of Suppliers
3. Bargaining Power of Buyers:
4. Threat of substitute products
5. Intensity of Rivalry Among Competitors: |
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Term
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Definition
a) Barriers to Entry:
b) Expected Retalitaion: price wars, huge advertizing campaigns |
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Term
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Definition
a) Barriers to Entry:
b) Expected Retalitaion: price wars, huge advertizing campaigns |
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Term
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Definition
1. Economies of Scale: as the quantity of a product is produced, the cost of manufacturing each unit declines
2. Product Differentiation
3. Capital Requirements
4. Switching Cost: a one-time cost customers incur when they buy from a new supplier or a new manufacturer
5. Access to Distribution Channels:
6. Cost Disadvantages Independent of Scale: desirable locations, government subsidies, and product technologies
7. Government Policy: licensing and permit requirements by government agencies often becomes a barrier |
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Term
| Bargaining Power of Suppliers: |
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Definition
| increasing price and reducing quality are potential means used by suppliers to exert control over an industry |
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Term
| Suppliers are powerful when one or more of the following is present: |
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Definition
a) The resource is dominated by a few large companies
b) When satisfactory substitute products can not be found
c) When the suppliers goods are critical to the buyers market place success
d) When the effectiveness of the suppliers products have created high switching cost |
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Term
| Suppliers are powerful when one or more of the following is present: |
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Definition
a) The resource is dominated by a few large companies
b) When satisfactory substitute products can not be found
c) When the suppliers goods are critical to the buyers market place success
d) When the effectiveness of the suppliers products have created high switching cost |
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Term
| Bargaining Power of Buyers: |
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Definition
| buyers attempt to bargain for lower prices, higher quality, and greater levels of customer service |
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Term
| Customers are powerful when 1 or more of the following are present: |
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Definition
a) Purchase a large portion of the firms products
b) When the sales of product being purchased account for the significant portion of the sellers annual revenue
c) When the switching cost are small |
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Term
| Threat of substitute products: |
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Definition
| Goods or services from outside the industry that perform similar to products from the same industry |
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Term
| Intensity of Rivalry Among Competitors: |
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Definition
| the rivalry intensifies when the firm is challenged by the competitor, or when a company recognizes an opportunity to improve its market position |
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Term
| 3 factors that affect rivalry among competitors |
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Definition
a) Numerous or equally balanced competitors
b) Slow industry growth
c) High fixed cost or high storage cost |
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Term
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Definition
| a collection of firms in the same industry that follow similar strategies |
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Term
| Competitive Environment Analysis: |
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Definition
| gathering and interpreting information about the competition |
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Term
| Insight of Competitive Environment Analysis |
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Definition
1. Future Objectives: what drives the competition?
2. Current Strategy:
3. Assumptions: what the competitor believes exist in the industry
4. Strengths and Weaknesses |
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Term
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Definition
| the set of data, information, and knowledge that allows a company to better understand its competitors thereby predicting their strategic and tactical actions. |
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Term
| Two Acceptable Practices for gaining competitor intelligence |
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Definition
a) From publicly available information: court records, financial reports, annual reports
b) Attending trade fairs |
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Term
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Definition
| Is cost paid and benefits received by customers (the source of above average returns) |
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Term
| 3 conditions that affect decision making about resources, capabilities, and core competencies |
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Definition
1) Uncertainty
2) complexity
3) intra-organization conflicts |
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Term
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Definition
| anything the organization uses, or has to make or sell the goods or services, typically resources alone do not produce competitive advantage. they can aid competitive advantage when they are uniquely bundled. |
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Definition
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Term
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Definition
1) Financial resource
2) Organizational resources - planning and control systems and the formal organizational structure
3) Physical - sophistication of the plant and distance from natural resources
4) Technological resources - production and information technology, patents trademarks and copyrights |
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Definition
1) human resources
2) innovative resources - ideas and scientific capabilities
3) reputational resources - customer loyalty |
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Term
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Definition
| the capacity for a set of resources to perform a task or activity in an integrated manner |
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Term
| Functional areas and needed capabilities: |
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Definition
distribution
human resources
MIS
Marketing
Management
Manufacturing
R&D (marketing & manufacturing - line;business and financial & human resources - staff) |
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Term
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Definition
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Term
| criteria of sustainable competitive advantage |
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Definition
1) valuable capabilities - allow companies to exploit opportunities and to neutralize threats
2) rare capabilities - when few if any competitors posses these capabilities
3) costly to imitate capabilities - capabilities that other firms cannot easily develop
4) non-substitutable capabilities - capabilities that do not have strategic equivalent |
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Term
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Definition
| allows companies to understand the parts of its operation that create value and those that do not (companies can only earn above average returns only when the value it creates is greater than the cost incurred to create value) |
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Term
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Definition
| involved with the products creation, sale, distribution, and service to buyers |
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Term
| value creating activities |
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Definition
1. Inbound logistics - warehousing, inventory control and material control
2. Operations - the use of production technology and its maintenance
3. Outbound logistics - involves the collection storage and distribution of products
4. Marketing and sales
5. Service - installation, repair and training rated as either superior equivalent or inferior to the competition |
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Term
| Support Activities (staff activities) |
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Definition
1. Procurement - the purchasing of inputs and or resources
2. Technological development - activities that improve production technology
3. HRM - human resource management - recruiting hiring training and evaluating employees
4. Firm/company/organization structure - planning financing accounting legal support and government relations |
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Term
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Definition
| occurs when a company focuses on its core competencies and contracts with outside vendors non-core activities |
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Term
| From a value chain perspective - outsourcing |
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Definition
| the purchase of a value creating activity from an external supplier |
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Term
| 3 advantages of outsourcing |
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Definition
1)Increased flexibility
2)Mitigates risk
3)Reduces capital investments |
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Term
| 4. High performing organization realize that strategic competitiveness and above average returns result only when: |
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Definition
| core competencies (Identified by analyzing the internal environment) are matched with opportunities (identified by analyzing the external environment) |
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