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What is a business strategy?
The competitive moves and business approaches that managers are employing to grow the business, attract and please customers, compete successfully, conduct operations, and acheive the targeted levels of organizational performance.
Why does a company’s strategy evolve over time? Explain your answer.
- Competitive Activities
- External "Intervations" (e.g. Lawsuits)
- Performance "Gaps" (e.g. Sales)
- Evolving Customer preferences/changes in technology
- Emerging market opportunities
What is a “sustainable competitive advantage”? Why is it important? How is it developed?
Sustainable competitive advantage is when an attractive number of buyers prefer its product/services over those of rivals and when the basis for this preference can be maintained over time.
What are the four ways that a company can develop a competitive advantage?
- Being the industry's low-cost provider
- Incorporate differentiating features
- Focusing on a narrow market niche
- Developing expertise and resource strengths
What is a business model? What is the difference between a corporate strategy and a business model?
Business model states, how do we make money in this business. Puts the numbers to strategy. The strategy answers "How are we going to get there."
Discuss the three questions that can be used to test the merits of one strategy versus another to distinguish a winning strategy.
- How well does strategy fit the firm's situation?
- Does the strategy lead to a sustainable competitive advantage?
- Does the strategy boost firm performance based on the business model?
Define ethical behavior. Explain why perceptions of what is and is not ethical differ from individual to individual.
Is the view of what is morally "good" and "right" behavior in a particular setting.
What is “social responsibility”? Give an example of a socially responsible company.
Applies to business concerns a company's duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.
Does everyone agree of what is and what is not ethical? Why or why not?
No. People tend to have different point of views. Ammoral, immoral and moral.
Discuss the three different views of ethical behavior and be able to give an example of each.
- Utiliatarion View - If it is good for you, good for the company, and good for the customer, you should do it.
- Individual Rights - Is it fundamentally right to do this to others.
- Justice View - Is it fair and impartial to everyone involved and/or affected?
Discuss what managers can do to promote ethical behaviors in an organization.
- Develop and communicate a corporate code of ethics.
- Hire ethical managers.
- Evaluate and promote employees on ethical performance
- Provide employee training and role-playing on ethics in the workplace.
- Encourage whistle blowing and ensure that whistleblowers are kept anonymous.
Discuss the 8-step strategy process.
- Develop a strategic vision
- Conduct a "SWOT" Analysis
- Set Company Objectives
- Craft and overall Corporate Strategy to Allocate Resources among SBU's
- Craft Business-Level Strategies for each SBU within the company
- Forecast Sales and Profits
- Implement Strategis
- Monitor, Review, and Revise as necessary.
What are “strategic inflection points”?
- Sometimes an order-of-magnitude change occurs in a company's environment that 1) Dramatically alters its future prospects. 2)Mandates radical revision of is strategic course.
- Ex: Deregulation of the airline industry
- Growth in the use of the internet as a retial outlet.
What is a vision statement and what should it convey?
- Describes the route a company intends to take in developing and strengthing its business.
- Should clearly convey a company's long term direction, rather than hide it in foggy language.
How is the mission statement different from the vision statement?
Mission statement say much more about the enterprise's present business scope and purpose - "who we are, what we do, and why we are here."
What are the payoffs of a clear vision statement?
- It crystallizes senior executives own views about the firm's long-term direction.
- It reduces the risk of rudderless decision making.
- It is a tool for winning support
- Provides a beacon for lower-level managers in forming departmental missions.
- Helps an organization prepare for the future.
What is the purpose of setting objectives?
- Converts mission into specific performance targets.
- Creates yardsticks to track performance.
Discuss the “SMART” method of setting objectives.
- Realistic with a Timetable
What are “stretch” objectives?
- Perform at its full potential, delivering the best possible results.
- Push firm to be more inventive.
- Exhibit more urgency to improve its business position.
- Be intentional and focused in its actions.
What are the five Board of Director responsibilities?
- Help set corporate direction and overall mission
- Hire and fire CEO and top management.
- Monitor and help supervise top management.
- Review and approve the use of resources
- Take care of shareholders interests.
What is a “SWOT” analysis?
Strengths, Weaknesses, Opportunities, and Threats.
Discuss some of the sociocultural trends going on in America.
- Declining Mass Market
- Changing household composition
- Changing pace of life
- Expanding seniors market
- Growing health consciousness
Discuss Porter’s Five Forces analysis for determining industry attractiveness.
- Potential entrants
- Other Stakeholders
In Porter’s Five Forces analysis, what causes competitive rivalry to be stronger? Weaker?
- Number of competitors
- Rate of industy growth
- Consumer switching costs
- Amount of fixed costs
- Diversity of rivals.
What are industry “key success factors”, and why are they important in the SWOT analysis?
- "WO Strategies"
- Improvements in product quality
- Changes/ Improvements in service
- Changes/ Improvements in distribution on operations.
What is the difference between a “core competency”, “distinctive competency” and a “key success factor”?
- Core Competency - Collection of competencies that the corporation does well. EX: Apple R&D and new product development.
- Distinctive Competency - When a core competency is superior to those of the competition.
- Key Success Factors - Factors that can significantly affect the overall competitve positions of companies within a particular industry.
Give examples of company resource strengths (the “S” in the SWOT analysis!).
- A skill, specialized expertise
- Valuable physical assets
- Valuable human assets and intellectual capital
- Valuable organizational assets
- Valuable intangible assets
- Competitively valuable alliances.
How do you determine the competitive power and sustainability of a company’s strength?
- Is the reource strength hard to copy?
- Is the resource strength durable - does it have staying power?
- Is the resource really competitively superior?
- Can the resource strength be trumped by the different resource strengths and competitive capabilities of rivals?
Give examples of company resource weaknesses.
- 1) Inferior or unproven skills, expertise, or intellectual capital.
- 2) Lack of important physical, organiztional, or intangible assets
- 3) Missing capabilities in key success areas.
How should companies identify their most relevant market opportunities?
- 1) Those that match up well with the company's financial and organizational resource capabilities.
- 2) Those that offer the best growth and profitability
- 3) Present and most potential for competitive advantage.
How should the SWOT analysis be used (e.g., what are the three highest priority actions that should come from the SWOT analysis)?
- 1) Correct the improtant weaknesses (those related to industy "key success factors")
- 2) Match a company's distinctive competencies to market opportunities.
- 3)Defend against critical external threats.
What are SBU’s (strategic business units)?
Are independent units of that company that are given primary responsibility and authority for strategice management of their own areas. I.E. Product Lines: Coke, Diet Coke, Cherry Coke
What is corporate portfolio analysis?
- Portfolio analysis allows companies to determine which of the following strategies should be used for each product line/ business unit.
- Growth- Maintenance/stability - Retrenchment/divestment/Sell-out
What are the limitations of the BCG Growth-Share matrix tool?
- Too Simplistic
- It assumes that market growth rate is uncontrollable
- It provides little guidance on specific management strategies.
What does strategy development have to do with resource allocation?
Company’s craft an overall corporate strategy to allocate resources among SBU’s. Should the corporation’s strategy be one of growth, stability, or retrenchment.
Discuss the differences between financial objectives and strategic objectives, and why we need both?
Financial Objectives outcomes focused on improving financial performance, while strategic objectives focus o improving competitive vitality and future business positions.
What is a “balanced scorecard”? Discuss the importance of using a balanced scorecard for measuring company performance?
Placing balanced emphasis on achieving both strategic and financial objectives.
What are the key indications of how well a strategy is working?
- Is the firm meeting financial objectives and is it an above-average industry performer.
- Trend in stock market price and stockholder value.
- Trend in sales and market share.
- Acquiring and/or retaining customers
- Overall financial strength and credit rating.
- Image and reputation with customers.
Discuss the steps in a basic financial analysis?
- 1. Scrutinize historical income statements and balance sheets.
- 2. Calculate changes that occur in individual categories from year to year, as well as the cumulative total change.
- 3. Determine the changes as a percentage as well as an absolute amount.
- 4. Adjust for inflation (especially if it is a significant factor).
- 5. Benchmark against key competitors and the industry as a whole.
What is “bench marking”?
Is a tool that allows a company to compare its performance to other companies within the same industry on key performance indications.
Discuss the five basic competitive strategies and give an example of each.
- A low-cost provider strategy.
- A broad differentiation strategy
- A focused (or market niche) strategy based on differentiation.
- A focused (or market niche) strategy based on low costs.
- A best cost provider strategy.
What are the keys to being a successful low-cost provider?
Company managers must scrutinize each cost-creating activity and determine what factors cause costs to be high or low.
When does a low-cost provider strategy work best?
- Price competition among rivals’ sellers is vigorous.
- The products of rivals’ sellers are essentially identical and supplies are readily available from any of several eager sellers.
- There are few ways to achieve product differentiation that have value to buyers.
- Most buyers use the product in the same ways.
- Buyers incur low costs in switching their purchases from one seller to another.
- Buyers are large and have significant power to begin down prices.
- Industry newcomers use introductory low prices to attract buyers and build a customer base.
When does a different strategy work best?
- Buyer needs and uses of the product are diverse.
- There are many ways to differentiate the product or service and many buyers perceive these differences as having value.
- Few rival firms are following a similar differentiation approach.
- Technological change is fast-paced and competition revolves around rapidly evolving product features.
Discussed when a focused strategy might be attractive?
- The target market niche is big enough to be profitable and offers good growth potential.
- Industry leaders do not sec that having a presence in the niche is crucial to their own success.
- It is costly or difficult for multi segment competitions to put capabilities in place to meet the specialized needs of buyers.
- The industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its resource strengths and capabilities.
- Few, if any, other rivals’ are attempting to specialize in the same target segment.
When does a best value (or “best cost”) strategy works best?
Works best in markets where product differentiation is the norm and attractively large numbers of value-conscious buyers can be induced to purchase midrange products rather than the cheap basic products of low-cost producers or the expensive products of top-of-the-line differentiators.
What is the big risk of the best value strategy?
The big risk is getting squeezed between the strategies of firms using low-cost and high-end differentiation strategies.