BCOR 2304 Final Review Exam 2025

Strategy - -a set of goal-oriented actions a firm takes to gain and sustain superior performance relative to competitors Strategic management - -combines analysis, formulation, and implementation in finding competitive advantage Mastry= view organization as a whole Competitive parity - -two or more firms perform at the same level Strategic positioning - -position in industry that allows firms to provide value to customers, while controlling costs Mission - -reason for existence, what an organization does Vision - -statement of some desired future state Values - -a statement of key values that an organization is committed to AFI strategy framework - -1) Analyze: vision, mission, and values 2)formulate: corporate strategy, business strategy, or functional strategy 3)implement: structure, culture, and control; corporate governance and business ethics What AFI does - --explains and predicts differences in firm performance -helps managers create and implement a strategy that can result in superior performance and competitive advantage Top-down strategic planning - -a rational, data-driven strategy process though which top management attempts to program future success Scenario planning - -strategy planning activity which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses Black swan events - -incidents that describe highly improbably but high-impact events Intended strategy - -the outcome of a rational and structured top-down strategic plan Emergent strategy - -any unplanned strategic initiative bubbling up from the bottom of the organization -adapting the strategy/original plan to changing market conditions -ex//: Nyquil, Sybase BCOR 2304 BCOR 2304 Realized Strategy - -combination of intended and emergent External Environment - -purpose: identify opportunities and threats External analysis: opportunities and threats Environment matters: manufacturing, services, and transportation sector PESTEL framework - -Political, Economic, Sociocultural, Technological, Ecological, Legal Political - -lobbying, public relations, litigation Ex//: airbnb, Affordable Care Act affects insurance companies Economic - -growth rates, levels of employment, interest rates, price stability, and current exchange rates Ex//: home depot/ mortgage crisis Sociocultural - -demographic (age, gender, etc), cultural norms Ex//: care homes; movement towards eco friendly cars Technological - -product and process innovation, application of knowledge Ex//: apple iphone, Teflon Ecological - -natural environment; running out of trees and being environmentally friendly affects paper companies Ex//: tesla, BP Legal - -laws, court decisions, mandates Ex//: EU vs Apple, Amazon, Google, FB Porter's Five forces framework - -1) risk of entry by potential competitors/ barriers to entry 2) rivalry among established companies (competition) 3)bargaining power of buyers 4)bargaining power of suppliers 5)substitutes Porter's Five Forces- Key assumption - --analyzing industries NOT FIRMS -from the point of view of existing firms in the industry -snapshot in time -stronger each force is, the more limits there are to earn profits within the industry BCOR 2304 BCOR 2304 1) risk of entry by potential competitors (companies that have capabilities to compete in industry not currently in) - -Barriers to new entrants: -economies of scale -brand loyalty -absolute cost advantage (relative to new entrants) -competitive threat is HIGH in the partyware industry but LOW in the airplane manufacturing industry -if competition is HIGH, barriers to entry are LOW 2) Rivalry among established companies - -struggle between companies in the same industry to gain market share Ex//: Pepsi and Coke in the carbonated drink industry 3) bargaining power of buyers (end-users or intermediaries) - -buyers are powerful when: -buyers are dominant, larger, and few in number -buyers purchase in larger quantities, leverage for price reductions -industry is dependent on the buyers -switching costs for buyers are low, able to play off supplying companies against each other -buyers can purchase from several supplying companies at once (amazon) -buyers can threaten to enter industry themselves, able to produce products themselves, threat of entry can be used as a tactic to drive prices down Buyer power examples - -high buyer power: -chicken farming industry is dominated by Tyson (have high power to buy because there are the only two suppliers and they are able to bargain) Low buyer power: -airplane industry has several airlines but only two manufacturers (airlines don't have a lot of power as buyers to negotiate for lower prices) 4) bargaining power of suppliers - -more powerful when: -products supplied are vital to industry, few substitutes -the industry is not an important customer to the supplier -switching costs for companies are high -suppliers can threaten to enter their customers' industry themselves Bargaining power of suppliers examples - -low supplier power: -commodities that go into other industries such as paper High supplier power: -De Beers in the diamond retailing industry (they have 90% market share) 5) substitute products - -products from different industries that can satisfy similar customer needs BCOR 2304 BCOR 2304 Susbtitutes - --incumbent firms have advantages over new firms including: size, cost, quality -the intensity of rivalry among competitors is determined by: -competitive industry structure -industry growth -strategic commitments -exit barriers Strategic position - -a firm's strategic profile based on the difference between value creation and cost (V-C)-- economic value Network effects - -the value of a product or service for an individual user increases with the number of total users Switching costs - -costs of moving from one supplier to another Capital requirements - -the price of the entry ticket into a new industry Tangible resources - -resources that have physical attributes and are visible -labor, capital, land, buildings Intangible resources - -resources that do not have physical attributes and are invisible -knowledge, brand equity, reputation, and IP Resource-based view - -a model that sees certain types of resources as key to superior firm performance Resource-based view: 2 critical assumptions - -1)resource heterogeneity: assumption that a firm is a bundle of resources and capabilities that differ across firms 2) resource immobility: assumption that a firm has resources that tend to be "sticky" and that do not move easily from firm to firm Capabiltites - -capacity to deploy tangible resources that have been integrated to achieve desired end state Core competencies - -activities that a firm performs especially well compared to competitors- valuable, rare, inimitable, organized to capture value VRIO framework defintion - -a theoretical framework that explains and predicts firm level competitive advantage; firm must have an effective organizational structure and coordinating systems VRIO - --Valuable (helps firm exploit an external opportunity or offset a threat) BCOR 2304 BCOR 2304 -Rare (unique) -Imitate (costly to imitate or substitute) -Organized to capture the value of the resource **a firm can gain and sustain competitive advantage if it has resources that satisfy all of the VRIO criteria Ex//: southwest airlines -cannot be replicated because it has created ambiguity through strategic fit -shortest turnaround time at gates and cutting costs Ways to increase the cost of imitation - --better expectations of future resource value -path dependence -legally protected (IP) -social complexity -ambiguous cause Isolating mechanisms - -barriers to imitation that prevent rivals from competing away advantage Core rigidity - -a former core competency that turned into a liability because the firm failed to hone, refine, and upgrade the competency as the environment changed Walmart cost-leader business strategy - --everything is mutually connected and mutually reinforcing -low cost leader: -invest heavily in operating systems (procurement/logistics) -cost-effective management sytems -no money spent on ads -employees don't have specialized training (no $ spent) -don't invest in marketing/sales, etc -invest in relationships with suppliers -capture value Obtaining cost advantage (cost-leadership strategy) - -determine and control cost drivers and reconfigure value chain as needed (emphasize operations and scale) Re-engineering the value chain - -1) how can an activitiy be performed different or eliminated? 2) how might partnerships with firms lower costs? 3) how can activities be reorded Risk of cost leadership strategy - --competitors may learn how to imitate value chain -process technology innovations may eliminate cost advantage -focusing on efficiency may blind firm to changes in customer preferences BCOR 2304 BCOR 2304 Differentiation Strategy- Key Criteria - --value provided by unique features and performance -superior quality -high customer service -prestige or exclusivity -rapid innovation Differentiation Strategy- Requirements - --develop new systems and processes -shape perceptions through advertising -quality focus - R&D capabilites - maximize human resources contribution through low turnover and high motivation Creating value with differentiation - -1) lowering buyers' subsequent costs (reliability of Lexus cars) 2) raising buyer's value (technology of Mercedes and BMW) Sustaining differentiation: creating barriers by perception of uniqueness and creating switching costs through differentiation Risks of differentiation strategy - --customers may decide that cost of uniqueness is too great Ex//: "feature creep"- excessive ongoing addition of new features in a product -competitors may learn to imitate value chain or counterfeit products -the means of uniqueness may no longer be valued by customers By: cultural or economic shift or invention of substitute of product technology Apple Differentiation Strategy - --emphasize marketing to increase perceived brand value -procurement: smaller batches but higher quality -de-emphasize procurement (quantity) -emphasize HR by training employees -pay them more to focus on customer service Focused strategy - -a firm's core competencies may be best suited to serving a particular segment of the industry -specialize in a few areas of the value chain or a specific geographic market -may lack resources to compete in broader market -large firms may overlook small niches and sometimes used to "sneak" into industries Risks of focused strategy - --firms may be out-focused by innovative competitors -large competitors may enter niche market -preferences of niche customers may change and become similar to those of broad market -lack of economies of scale and bargaining power BCOR 2304 BCOR 2304 The Value Creation Frontier - -indicates there are trade-offs between low costs and differentiation Assumption 1: failure to make operational commitments: firms that try to do both fail to become master at doing either one Assumption 2: customers become confused over the price-quality mix Integrated strategy - --substantial process technology superiority Ex//: toyota's hybrid engines -focus on specific customer value perceptions while lower costs on other areas Ex//: Lexus- reliability, Volvo- Safety -economies of scale- sharing resources, minimizing waste -leveraging brand equity across market segments Ex//: toyota managing the Customer Life Cycle Innovation drives competitive advantage