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Strategic Management
long term efficient & effective planning, organizing, leading and controlling designed to achieve the mission & goals of an organization.
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Mission Statement
the fundamental purpose that sets a firm apart from other firm's & identifies the scope of its operation in product & market terms is defined as the company mission
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External environment
- Economic
- Social
- Technological
- Demographic
- Political/Legal
- Entry Barriers
- Supplier Power
- Buyer Power
- Substitite Availability
- Competitive Rivalry
- Complementors
- Competitors
- Creditors
- Customers
- Labor
- Suppliers
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What do we do with the results of an external environmental analysis?
Determine the organzations opportunites and threats
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Why does a firm need to study it's internal environment?
To evaluate its strengths and weaknesses within it's organizational structure
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What are resources?
- asssets of a company both tangible and intangible
- i.e. capital, lean production, brand image, etc.
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What are capabilities?
a company's skills at coordinating its resources & putting them to productive use
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What are the criteria used to determine if capabilities are core competencies?
- Valuable
- Costly to imitate
- Nonsubstitutable
- Rare
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What do we do with the results of an internal market analysis?
Determine the firm's strengths and weaknesses
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When does a firm attain a sustainable competitive advantage?
When its efficiency, quality, innovation and responsiveness to customers is best in the industry
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What are the four functional level strategies of a firm?
- Cost leadership
- Differentiation
- Focused cost leadership
- Focused differentation
- Integrated cost/leadership differentiation
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Cost Leadership
- an integrated set of actions designed to produce goods at lowest cost to BROAD market segments.
- ex. WalMart
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Differentiation
an integrated set of actions designed to create goods that are distinct (or perceived so) to BROAD market segments
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Focused cost leadership
- set of actions designed to produce goods at lowest costs to NARROW market segments
- i.e. IKEA
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Focused differentiation
- set of actions designed to create goods that are distinct (or perceived so) at lowest cost to NARROW market segments
- i.e. Ferrari, Rolex
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Focused cost/leadership differentiation
- set of actions designed to produce distinct goods (or perceived so) at lowest cost to NARROW market segments
- i.e. McDonald's, Southwest
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Competitive Risk of Cost Leadership
- Technological innovation can wipe out cost advantage
- Cost leaders can lose track of the prerequisite needs of customers, suppliers & buyers
- Imitation
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Competitive Risk of Differentiation
- Cannibalization
- Learning can erase the differentiation
- Counterfeiting
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Competitive Risk of 'Focused Strategies'
- All assocaited with cost leadership and differentation
- Competitors focus more on narrow market segments
- Focused targets can become the interest of nonfocused companies
- Narrow market may become the whole
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Competitive Risks of Integrated Cost Leadership/Differentiation
- All associated with low cost, differentiation & focused strategies
- You must achieve and keep a low cost and differentiated product or you can be stuck in the middle
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Strategies in Fragmented Industries
- Chaining
- Franchising
- Horizontal Merger
- Using IT & the Internet
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Stages in Industry Life Cycle
- Embryonic
- Growth
- Shakeout
- Mature
- Decline
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Stages in Product Life Cycle
- Intro
- Growth
- Maturity
- Decline
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Stages in Product Adoption Cycle
- Innovators
- Early adopters
- Early Majority
- Late Majority
- Laggards
- Nonadopters
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Reasons for slow growth in embryonic markets
- First products -lower quality
- Undeveloped channels of distribution
- Lack of complementary products
- High product cost
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Reasons for growth (mass markets) phase
- Technology makes product easier to use (increase value to customer)
- Complementary products are developed
- Cost & prices fall and demand risks
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Strategies to Manage Rivalry
- Price signaling: vigorous response to price changes
- Price leadership: a dominant firm chooses a price and the rest follow with no collusion
- Nonprice competition: real and defacto
- product differentiation
- product development
- market development
- product proliferation
- capacity control
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