MGT 415 EXAM 1, Top Questions and answers, VERIFIED.

MGT 415 EXAM 1, Top Questions and answers, VERIFIED. strategy - -an action plan for outperforming competitors and achieving superior profitability 3 tests for determining winning strategy - -the fit test, the competitive advantage test, the performance test the fit test - -how well does the strategy fit the company's situation? the competitive advantage test - -can the strategy help the company achieve a sustainable competitive advantage? the performance test - -is the strategy producing good company performance? 2 kinds of indicators tell us the strength of the strategy: competitive strength and market standing & profitability and financial strength vision statement - -describes management's aspirations for the future and delineates the company's strategic course and long term direction mission statement - -ideally should (1) identify the company's products/services, (2) specify the buyer needs that it seeks to satisfy and the customer groups or markets it serves, and (3) gives the company its own identity difference between mission & vision statement - -strategic vision portrays a company's aspirations for its future whereas the mission describes its purpose and its present business business model - -the plan implemented by a company to generate revenue and make a profit from operations. it includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs. strategic objectives - -an organization's performance targets the specific results management wants to achieve relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects financial objectives - -relates to the financial performance targets management has established for the organization to achieve balanced scorecard - -widely used term for combing the use of both strategic and financial objectives, tracking their achievements and giving management a more complete and balanced view of how well and organization is performing strategic intent - -exhibited when a company relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving the objective business strategy - -strategy at the single business level, concerning how to improve the performance or gain a competitive advantage in a particular line of business Porter's 5 forces - -competition from rival sellers competition from potential new entrants to the industry competition from producers of the substitute product supplier bargaining power customer bargaining power Porter's 5 forces: competition from rival sellers - -*Strongest* Rivalry: -increases when buyer demand is slowly growing or declining -increases as it becomes less costly for for buyer to switch brands -increases as products of rivals become less strongly differentiated -more intense when there's excess supply or unused production capacity -intensifies as the number of competitors increases and they become more equal in size and capability -increases as diversity of competitors increases -stronger when high exit barriers keep unprofitable firms from leaving Porter's 5 forces: competition from potential new entrants to the industry - -bring new production capacity, the desire to establish a secured place in the market and substantial resource seriousness depends on (1) expected reaction of incumbent firms to new entry and (2) known entry barriers strong brand preferences and high degrees of customer loyalty strong network effects in customer demand difficulties of building a network of distributors or dealers and securing adequate space on retail shelves restrictive government policies Porter's 5 forces: competition from producers of the substitute product - -companies in one industry are vulnerable to competitive pressures from actions of companies in a closely adjoining industry whether competitive pressures are strong, weak, or moderate depend on: (1) whether substitutes are readily available and attractively priced, (2) whether buyers view the substitutes as being comparable or better in terms of quality, performance and other relative alternatives, (3) whether the costs the buyers incur in switching to the substitute are high or low Porter's 5 forces: supplier bargaining power - -whether the suppliers of the industry represents a weak or strong competitive force depends on the degree to which suppliers have sufficient bargaining power to influence the terms and conditions of supply in their favor variety of factors determine the strength of suppliers bargaining power: -whether demand for supplier product is high and they are short in supply -whether suppliers provide a differentiated input that enhances the performances of the industry's product -whether it is difficult or costly for industry members to switch their purchases from one supplier to another -whether the supplier industry is dominated by a few large companies and whether it is more concentrated that the industry it sells to Porter's 5 forces: customer bargaining power - -whether buyers are able to exert strong competitive pressures on industry members depends on (1) the degree to which buyers have bargaining power, (2) the extent to which buyers are price sensitive facts determining the strength of buyer power: -buyer power increase when buyer demand is weak in relation to industry supply -buyer power increase