MBA Final Exam QUESTION AND CORRECT ANSWER

MBA Final Exam QUESTION AND CORRECT ANSWER strategy - CORRECT ANSWER-where should we compete and how? integrated set of choices that positions the business in its industry so as to generate superior financial returns over time, Strong strategy is consistent, aligns with intended business model and positioning, How a business performs in its environment compared to competitors purpose and goal of strategy - CORRECT ANSWER-create a competitive advantage, determines where to engage with the competition and choice of business model Goal: superior performance, substantial positive return, above average profitability, above average return on equity Five Stages of the Strategic Management Process - CORRECT ANSWER-Analysis - understand unique competitive strengths, how to create value Formulation - vison, mission, goals, objectives, strategic approach Implementation - allocate resources, organizational structure, employees, activities to engage in Evaluation - think and respond based on results and analysis Performance - success or failure of strategy Five Questions to Define strategy - CORRECT ANSWER-Why are firms different How are competitive differences sustained? What is special about strategic decisions What is the nature of strategy in multi-divisional firm? How is strategic effectiveness measured? Competitive Advantage - CORRECT ANSWER-specialized approach to create value to meet market expectations Strategic Decision Making - CORRECT ANSWER-non-routine, affect entire organizational functions, commitment of resources needed, difficult to reverse, making a clear choice among alternatives, easily identified as failure or success Clear Choice - what will it do and not do Resources and capabilities that set a company apart Long term vision Company business model External Analysis - CORRECT ANSWER-industries and competitors, how it is evolving, growing and the importance Internal Analysis - CORRECT ANSWER-value chain and competitive advantage Resource Based Analysis - CORRECT ANSWER-Sustainable competitive advantage Strategy vs Tactics - CORRECT ANSWER-Strategy - long term plan, affects entire company, difficult to change, fundamental to everything you do Tactics - how to get there, day to day activities how does strategy change over time - CORRECT ANSWER-Technology, big data, rapid communication, Globalization Ease of access to finance and markets 24/7 pace of work Rapid change and evolving conditions how is strategy effectiveness measured - CORRECT ANSWER-Financial performance metrics Qualitative assessments Stakeholder goals (internal and external) SWOT Analysis - CORRECT ANSWER-Strenghth Weakness Opportunity Threat Porters Five Forces - Industry Analysis - CORRECT ANSWER-Evaluates structural factors focusing on how they influence industry profitability Threat of New Entrants - increases competition, captures market share (most important in terms of profitability), capital requirements, economies of scale, absolute cost advantages, access to inputs, access to distribution channels, need for product differentiation, switching costs, expected retaliation, government regulation Bargaining power of buyers - free to direct their purchases elsewhere, buyer concentration, buyer volume, switching costs of buyers, buyer information, threat of backward integration, availability of substitutes Threat of Substitutes - relative price/performance of substitutes, switching costs of buyers, buyer propensity to substitute Bargaining power of suppliers - raise prices by offering a unique product, supplier concentration, importance of volume to supplier, switching costs of suppliers, differentiation of inputs required, presence of substitute inputs, cost of input relative to total costs, threat of forward integration Competitive Rivalry: industry growth rate, fixed costs as percentage of total costs, overcapacity in industry, low product differentiation, low switching costs, informational complexity, numerous or equally balanced competition, high strategic stakes, exit barriers Commodity - CORRECT ANSWER-cant differentiate, banana Vertical Integration - CORRECT ANSWER-taking over more activities in their supply chain Triple Bottom Line - CORRECT ANSWER-economic, social, environmental Stakeholders of a company - CORRECT ANSWER-Internal - employees, managers, board of directors, stockholders External - suppliers, customers, governments, creditors, interest groups Financial performance measures - CORRECT ANSWER-ROE, revenue growth, common stock returns, market capitalization Dupont Analysis - CORRECT ANSWER-calculates ROE based on profitability, asset productivity, financial leverage Trend Analysis - CORRECT ANSWER-financial statements over several years, strategy results in financial statements and financial statements reveal strategy Need for Coordination and Coherence - CORRECT ANSWER-Many departments and functions Many levels from executives to workers Employees desire work to be meaningful Different perspectives on company and market Differences in opinion throughout organization Many ways to approach the market Strategy Planning Hierarchy - CORRECT ANSWER-o Bottom: activities and routines o Objectives o Strategic plan o Mission o Vision (Top) o Principles and values Vision - CORRECT ANSWER-what we want the company to become, future oriented, short, memorable, future focused, directional, specific, relevant and purpose driven, values-based, challenging, unique and memorable, inspiring Mission - CORRECT ANSWER-how the company competes, short, simple, company specific, actionable, measurable Principles - CORRECT ANSWER-moral/ethical foundations of the company business activities Strategic Direction - CORRECT ANSWER-understand the competitive environment, company position, how to profit in this position Operational Effectiveness - CORRECT ANSWER-performing these activities better and faster than competitors Strategic Positioning - CORRECT ANSWER-achieve competitive advantage by preserving what is distinctive about the company o Strategy is the creating of a unique and valuable position involving a different set of activities o Strategy requires trade offs o Strategy involves creating "fit" among company activities Variety Based Positioning - CORRECT ANSWER-based on the choice of product variety rather than consumer segments Needs Based Positioning - CORRECT ANSWER-serving needs of a particular group of customers Access Based Positioning - CORRECT ANSWER-segmenting customers who are accessible in different ways Twitter in Retweet Article - CORRECT ANSWER-Jack Dorsey founded Twitter, stopped growing as a company, quarterly revenue dropped, ten years of old social media platform, stock price was cut in half, new ways to generate attractiveness added 240- character limit What are the two extremes in terms of range of markets? - CORRECT ANSWER-o Perfect Competition: all firms identical, no competitive advantage, zero profit o Monopoly: all the profits, one firm dominates, all competitive advantage What is the best predictor of potential company profitability? - CORRECT ANSWERROE, profitability varies across industries What does Industry Analysis help us determine? - CORRECT ANSWER-Industry Attractiveness (Profit Potential) Key Success Factors Driving Forces Defining an Industry - CORRECT ANSWER-Narrow Boundaries: use similar inputs and produce similar outputs Broader Boundaries: acknowledge wider competitive substitutes, different KSFs and industry dynamics, often a more realistic competitive set Use NAICS Code Classifications Herfindahl Index - HHI - CORRECT ANSWER-calculating concentration ratios, determine if it is an attractive industry and what the key success factors are Keys Success Factors - CORRECT ANSWER-4-6 factors, what each company must make strategic investments in to succeed in the industry, measure by comparing across competitors, used in strategic maps Parable of Yahoo Article - CORRECT ANSWER-• Yahoo is no longer an independent company due to failure • Started in 1994 as peoples first encounter with the internet • Peak success in 2012 • Verizon acquired the company • Problems: lack of focus determining what area to specialize , deal making in passing up many good opportunities, founders too attached to their product to make the right strategic decision • Message: vision and mission align the organization, what we are about as a company • Economies of Scale: low unit costs from producing on a large scale • Competitive advantage = market share The Five Competitive Forces that Shape Strategy Article - CORRECT ANSWER-• Helps a company understand its industry and find a position where they can be more profitable and less vulnerable to competitors • Five competitive forces: what influences profitability in your industry and competition o Threat of Entry: affects prices and costs o Power of Suppliers: suppliers have power when more concentrated than the industry it sells to, no substitutes, threaten to forward integration o Power of Buyers: have power when few buyers for single vendor, undifferentiated products, produce product themselves by backward integration, price sensitive when product cost is low o Threat of Substitutes: high means industry profitability suffers o Rivalry: price discounting, new products, advertising campaigns, service improvements, greatest rivalry when many competitors, slow growth, high exit barriers, firms not familiar with one another What are the two types of internal analysis and the differences between them? - CORRECT ANSWER-SWOT: what a company is, static snapshot, strategic planning exercise, easy to use and understand, identify alignment/misalignment, overall direction, strategic competitive comparison Cons: laundry list of items, descriptions can over-simplify, definitions vary over time, unclear if strengths are relevant to KSFs, static view at only one point in time Value Chain: what a company does, dynamic view, set of activities to form successful business system, create patterns of behaviors, Support vs Primary Activities - CORRECT ANSWER-Support: people performing their job, Finance, Legal, HR, R&D, Procurement Primary: activities make the products, inputs, operations, distribution, marketing and sales, service Internal Value Chain Dimensions - CORRECT ANSWER-Activities in every cell, both primary and secondary activities, identify specific activities not general categories, identify how coordination across value chain supports and amplifies activities, identify how connections with suppliers and customers create value External Value Chain Dimensions - CORRECT ANSWER-o Suppliers: what unique suppliers are working with, what unique relationship are you creating o Firm: what unique internal activities make you distinctive, what unique relationship are you creating o Customers: what unique customers are you working with Conducting Value Chain Analysis - CORRECT ANSWER-o Identify value chain activities: different from competitors activities, potential to create strategic differences o Evaluate value creation characteristics and costs, executional and structural drivers o Identify improvements to capture greater value Value Chain Activity Drivers - CORRECT ANSWER-Executional drivers: execution of business activities involving people systems routines culture coordination, work force involvement, total quality management, plant layout, capacity utilization, routines and coordination, culture Structural drivers: strategic choices made about structure of the business and economic logic scale and scope, experience curve, complexity of products and services, technology utilization, capital intensity Blue Ocean Strategy Article - CORRECT ANSWER-• How to create uncontested market space and make the competition irrelevant • Red Ocean: represent all the industries in existence today (market space) • Blue Ocean: denote all industries not in existence today (unknown market space), new profit and growth opportunities • Industries continue to evolve and new industries are made due to technological advances, globalization trends, commoditization of products, price wars, shrinking profit margins • 8 Principles of Blue Ocean Strategy o Reconstruct market boundaries o Focus on big picture, not the numbers o Reach beyond existing demand o Get the strategic sequence right o Overcome key organizational hurdles o Build execution into strategy o Align values, profit, people o Renew blue oceans