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Questions and Answers
What are the components of a Mission Statement?
What are the components of a Mission Statement?
What are the elements of a business level strategy?
What are the elements of a business level strategy?
What are the types of corporate level strategy?
What are the types of corporate level strategy?
What are the benefits of outsourcing?
What are the benefits of outsourcing?
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Horizontal integration involves expanding operations forward or backward into an industry, while vertical integration involves acquiring or merging with competitors.
Horizontal integration involves expanding operations forward or backward into an industry, while vertical integration involves acquiring or merging with competitors.
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What are the key differences between related and unrelated diversification?
What are the key differences between related and unrelated diversification?
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What are the major ways to improve profitability through diversification?
What are the major ways to improve profitability through diversification?
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Which of these is NOT a way that strategic alliances can create value?
Which of these is NOT a way that strategic alliances can create value?
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What are the key considerations when determining whether to pursue internal development, strategic alliances, or mergers and acquisitions?
What are the key considerations when determining whether to pursue internal development, strategic alliances, or mergers and acquisitions?
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Global standardization strategy is best suited for circumstances where there is a strong need for cost reduction and minimal demand for local responsiveness.
Global standardization strategy is best suited for circumstances where there is a strong need for cost reduction and minimal demand for local responsiveness.
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Which strategic alliance approach is most suitable when a company needs access to local partners' knowledge, shared development costs, and benefits from reduced development risks?
Which strategic alliance approach is most suitable when a company needs access to local partners' knowledge, shared development costs, and benefits from reduced development risks?
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Study Notes
Strategic Management
- Perfect competition is a hypothetical market structure used for comparison. It has many competitors with identical products.
- Strategic management is a process including mission, vision, values, and goals aimed at achieving competitive advantage.
- Mission describes a company's purpose. A vision articulates desired achievements. Values define employee conduct. Goals articulate a clear, measurable desired future state.
- Strategic positions can be traditional product/low-cost or other variations.
- Objectives should be Smart (Specific, Measurable, Achievable, Relevant, Time-bound).
- External analysis identifies opportunities and threats (e.g., interest rates, demographics, social trends). Internal analysis evaluates company resources, capabilities, and competencies (e.g., human resources, technology).
- Strategic implementation details how strategies are carried out and involves actions at various levels.
- Feedback loops provide information on strategic goals and competitive advantage.
- Corporate-level managers oversee entire organization strategy, aiming for profitability and growth.
- Business-level managers translate intent into actions for individual businesses or sections.
- Functional-level managers create functional strategies to meet strategic objectives.
- Competencies provide above-average profitability compared to industry peers.
- Sustainable advantage maintains above-average profitability for several years.
- Competitive parity occurs when firms have offerings with no preference.
- Competitive disadvantage has negative firm offering reputation, costs, or other disfavorable factors.
- Competitive advantage is when a company performs better than competitors.
- Economic performance is used as a measure of competitive advantage (e.g. ROA, ROS, ROE and returns in excess of cost of capital.
- Intended strategies result from the strategic management process.
- Emergent strategies develop from unplanned shifts or serendipity.
- External environment evaluation discovers threats and opportunities and analyzes competition for better decision making.
Competitive Advantage
- Measuring competitive advantage needs to consider economic performance indicators.
- Competitive forces such as rivalry among existing competitors, threats of new entrants, threat of substitutes, and the bargaining power of suppliers and buyers impact business profitability.
Industry Analysis
- PESTLE Analysis: a framework for understanding the external environment surrounding a company's operations, including political, economic, social, technological, legal, and environmental factors.
- Porter's Five Forces: a framework for analyzing the competitive intensity and therefore attractiveness of an industry.
Internal Analysis
- Distinctive Competencies: Unique strengths and capabilities that create a competitive edge.
- Resources: Tangible (e.g. physical assets) and Intangible (e.g. brand reputation, employee skills) assets of a company.
- Capabilities: Company's skills at putting resources to productive use.
Competitive Dynamics
- No-action responses occur when strategies are not changed. This is common if response to another firm would weaken the firm's performance.
- Change responses are actions taken internally to change and adapt.
Business-Level Strategies
- Cost leadership involves generating economic value by having lower costs than competitors.
- Product differentiation creates economic value by offering products preferred over others.
Product Differentiation
- Creating a superior product is usually a significant advantage in the marketplace.
- This differentiates the product from other similar products in the market and thus allows a firm to cater to a wider array of consumers and market needs.
Exploiting Industry Opportunities
- Fragmented industries have small companies and low barriers to entry.
- Emerging industries have first-mover advantages and higher barriers to entry, increasing the likelihood of product differentiation/success.
- Mature industries have established competitors targeting niche markets, creating high barriers to entry.
- Declining industries have decreasing demand, usually with several firms exiting or consolidating.
Strategic Alliances
- Strategic alliances are cooperative efforts among organizations that combine their resources and capabilities for some shared goal.
Corporate-Level Strategies
- Globalization strategies use consistent products and services across markets.
- Localization strategies adapt products to local preferences.
- International strategies are middle ground strategies between Global and Local strategies, and focus on some standardization.
Vertical Integration
- Vertical integration is when a company expands further up or down the value chain.
- The value of a firm, often, is dependent on vertical integration
- Vertical integration has benefits and challenges- including risks.
Horizontal Integration
- Horizontal integration occurs when companies combine through mergers or acquisitions. This can generate advantages in cost, revenue, or scale.
Diversification
- Diversification is when a firm expands into new product and/or markets.
- Businesses can diversify with different levels of risk.
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Description
Explore key concepts in Strategic Management, including perfect competition, mission, vision, and values. Understand the objectives and analyses crucial for effective strategy implementation and achieving competitive advantage. This quiz will test your knowledge on strategic frameworks and their applications.
