1. general external (Industry) environment
    • SW+OT
    • demographic segment
    • economic segment
    • political-legal segment
    • physical segment
    • sociological segment
    • technological segment
    • global segment
  2. demographic segment
    • population size
    • age structure
    • geographic distribution
    • ethnic mix
    • income distribution
  3. economic segment
    • the nature and direction of the economy in which the firm competes or may compete
    • ex:cutting interest rates due to economy decline

    • interest and inflation rates
    • budget and trade deficits or surpluses
    • personal and businesss savings rates
    • gross domestic product
  4. political-legal segment
    the arena in which organizations and interest groups compete for attentionm resources, and a voice in overseeing the body of laws and regulations guiding the interactions among nations

    • anti-trust laws
    • taxation laws
    • labor training laws
    • education philosophies and policies
    • deregulation philosophies
  5. physical segment
  6. socio-cultural segment
    is concerned with society's attitudes and cultural values

    • women in work force
    • workforce diversity
    • environment concerns
    • shifts in work and career preferences
    • shifts in preferences regarding product and service characteristics
  7. technological segment
    the institutions ad activities involved with creating new knowledge and translating that knowledge into new outputs, products, processes, and material

    • product innovations
    • applications of knowledge
    • new communication technologies
    • focus of private and government-supported R&D expenditures
  8. global segment
    includes relevent new global markets, existing markets that are changing important international political events, and critical cultural and institutional characteristics of global market

    • important political events
    • critical global markets
    • newly industrialized countries
    • different cultural and institutional attributes
  9. Industry Analysis- Porter's 5 Forces
    • tells us ONLY if an INDUSTRY has the potential for profits
    • NOT if a particular firm is OR can be profitable!

    • 1. Treat of potenatial entrants
    • 2. Bargaining power of supplier
    • 3. Bargaining power of buyers
    • 4. Threats of substitutes
    • 5. Rivalry
  10. Threat of potential entrants
    • economies of scale
    • product differentiation
    • capital requirements
    • switching cost
    • access distribution channels
    • other cost disadvantages
    • government regulations
    • expected retaliation
  11. Bargaining power of supplier
    • is greater when
    • -supplier group is concentrated
    • -product is unique
    • -purchaser is unimportant
    • -supplier has critical good
    • -threat of forward integration by the supplier
    • -purchaser cannot backward integrate
  12. Bargaining power of buyers
    • is greater when
    • -buyer group is concentrated
    • -the purchased product are standardized
    • -no switching cost
    • -buyer can backward integrate
    • -purchase is not critical to customer's product
  13. Threats of substitutes
    -are indirect competitors

    -substitutes put price cap on the price of the industry's product
  14. Rivalry
    • can be based on
    • -price (on standardized products), these companies need to keep their cost down
    • -marketing (advertising battles)
    • -product innovation
    • -features
  15. Internal environment and analysis
    • looking for competitive advantages: search for resources that can be the source of a competitive advantage
    • ex: intelligence, supply, reputation, trademark
    • SW+ot

    • -value chain
    • -resource based view
  16. value chain
    • *everything the firm does to get from raw material to product
    • *different activities in the firm that fit together

    • quality control- quality can go up or down anywhere in the line
    • 1. inbound logistics- raw materials, inventory control, warehouse facilities
    • 2. operations- manufacturing, packaging
    • 3. outbound logistics- storing finished goods, distribution
    • 4. marketing and sales- advertising, promotion, selection of distribution channels
    • 5. service- sell your product, installation, repair, customized adjustment
    • customer receives product
  17. value chain supporting activities
    this is where you find your competitive advantage

    • those who create/deliver the product
    • -procurement
    • -technological development
    • -HR mgmt
    • -infrastructure: accountant, lawyer, CEO
  18. Resource Based View of firm
    unique bundle of firm resources

    • -Resources:
    • tangible assets- physical and financial assets
    • intangible assets- knowledge, reputation, license
    • ex: Walmart's IT

    • -Organization's Capabilities: integrated sets of resources
    • Outstanding customer service- HR + technical knowledge, social skills, commitment & loyalty of workers, organizational culture, info system for accounts
  19. RBV's VRINO framework
    does the firm have a core competency?

    • core competency must be
    • -Valuable: decreases cost or increases revenue
    • -Rare
    • -Inimitable: impossible or costly to imitate
    • -Non-substitutable: no strategic equivalents exists
    • -Organizational skill and support- organization must recognize and support its competitive advantage
  20. parity
    -created by a common resources

    -lack of common resource like a phone creates disadvantage
  21. forward integration
    -a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products

    -a supplier company like Intel making their own computers

    - when a farmer sells his/her crops at the local market rather than to a distribution center
  22. backward integration
    -A form of vertical integration that involves the purchase of suppliers in order to reduce dependency

    -if a bakery business bought a wheat farm in order to reduce the risk associated with the dependency on flour

    you can do this by making your own spaghetti instead of going to olive garden
  23. vertical integration
    When a company expands its business into areas that are at different points of the same production path (cutting out the middleman to get product)

    dell sells directly to the consumer
  24. Business Level Strategy
    • Cost Leader
    • Integrated
    • Differentiator
    • Focus

    • the competition for customers
    • build your BLS on what you are good at doing (VRINO)
    • Look at your internal environment

    • BLS must fit
    • who - are your customers
    • what - needs do we satisfy
    • how- what core competencies do we use
  25. BLS- Cost Leader
    -economies of scale facilities

    -cost savings based on experience

    -Control of production costs & overhead

    -Minimize costs of sales, R&D & service: commoditize products w/no differentiation

    -Monitor costs of suppliers- bargain on price

  26. BLS- Integrated
    -Automated and Flexible manufacturing systems

    • -Exploit the profit pool concept (some segments or activities are more profitable)
    • (eg: sell the basic product cheaply;sell add-ons for premium prices)

    • -IT: linking suppliers & customers to manuf.
    • superior IT- you can beat it
  27. BLS- Differentiator
    • Superior IT- the purpose of IT here is to figure out customers fads
    • Promote and protect firm image, reputation- pay more for the brand
    • Attract & retain talented / creative people
    • Product R&D
    • Flexible & responsive manuf. changes
    • Personal relationships with key customers
  28. BLS- Focus
    a niche market

    • cons
    • *competitors out focuses the focus strategy
    • *competitors may imitate- if its a really good idea, someone will copy it
    • *customer base eventually becomes similar to overall market
  29. Competitor Analysis
    • market commonality- firms share the came target market for more than one product
    • these companies do not compete in financially dangerous areas
    • ex: PepsiCo and Coke

    Resource Similarity
  30. Drivers of Competitive Behavior
    • awareness: what they are doing
    • motivation: reason to respond, you think you can get a chunk of the industry
    • ability: sufficient resources to respond, need money
  31. Competitive Actions
    • Strategic: big actions, difficult to implement, harder to reverse
    • major acquisitions, merger, divestment

    • Tactical: small actions, easier to reverse, smaller firms might get together to compete w/big companies strategic actions
    • radio, price cuts
  32. First movers
    pioneers in product, market, technology, services or pricing

    • *above average profits until competitors respond
    • *gain customers loyalty
    • *advantage depends upon difficulty of imitation
  33. Second Mover
    *frequently imitate first movers

    *needs capabilities to imitate

    *avoids risks associated w/first movers- they don't spend much on advertising

    *fast movers can also capture some early customers and develop brand loyalty
  34. Likelihood of attack
    initiating competitive action

    • • First mover incentives
    • • Organizational size- big firms more likely
    • • Product quality
  35. Likelihood of response
    • -Type of action- bigger than tactical
    • - Actor's reputation- more likely if reputation is good
    • - Dependence on the market- one market companies more likely
    • -Competitor resource- do you have the ability, might have to respond with different advertising campaign
  36. Advantages of cost leader BLS
    -Discourage price wars of rivalry

    -Protects firms from powerful buyers

    -Withstand supplier price changes: you can absorb price change better than everyone else

    -Lessens competition from substitutes

    -In commodity items where price is the only issue, the low cost leader always wins

    -Creates a barrier to entry
  37. Disadvantages of Cost Leadership BLS
    -innovations may allow competitors to imitate

    -May be easily imitated; in mature markets, competitors may have similar economies of scale/scope

    -Cutting costs may result in unhappy customers.
  38. Advantages of differentiation BLS
    1. Changes rivalry- rivalry based on innovation, marketing

    2.Customers willing to pay price premium

    3. Can pass supplier costs onto customers OR can absorb (have higher margins)

    4. Creates a barrier to entry (increases brand loyalty)

    5. Substitutes are less appealing: product and service price isn't as important
  39. Disadvantages of Differentiation BLS
    “uniqueness” may not be valued

    price premium is too high for some people


  40. Intensity of Rivalry
    high when

    • -many or equally balanced competitors = instability
    • -slow industry growth
    • -high fixed or storage cost
    • -lack of differentiation (no switching costs)
    • -high strategic stakes
    • -mfg capacity increases in large increments
    • -high exit barriers
  41. Product Complements
    Other products and services that affect the value/need for the industry’s output

    eg., computers & printers
  42. Strategic Groups
    a subset of firms w/ similar strategies

    identify mobility barriers

    identify direct and indirect competitors
  43. Image Upload 2
    Growth- Huge R&D investment, try to be what everyone wants to be

    maturity- rivalry gets intense

    right before maturity- a shakeout when weaker companies leave
  44. strategic management process
    analysis- SWOT

    decision- what industry should we compete in?

    action- How do we set up the firm to implement our plan?
  45. the basis of organizational success?
    Industrial Organizational Model

    Resource Based View
  46. Strategy FORMULATION
    creating the plan

    analyzing the environment

    selecting the strategy

    making it happen

    organizing the firm

    assigning responsibilities

    evaluating, controlling
  48. CEO's job- setting a direction
    Vision: (long-term goal) inspiring: the destination

    • Mission: the purpose, the basis of competition, and
    • the competitive advantage

    • strategic objectives: (immediate goals) operationalize
    • the mission statement
  49. Stakeholders
    Product market- customers, suppliers, host communities, unions

    Capital market- shareholders, lender

    Organizational- employees, managers
  50. Resource based view (RBV) assumptions
    -core competencies create profits

    -firms each have unique resources & capabilities

    -strategies should be based on the firm's resources & capabilities

    • Identify Resources
    • Determine capabilities
    • Determine competitive advantages
    • Locate attractive industry
    • strategy formulation and implementation
    • superior returns

  51. I/O Model
    the industry the firm competes in has stronger influence than manager's decisions

    external environment determines profit potential

    firms within the same industry have similar resources and pursue similar strategies

    • -Study the External Environment
    • -Locate the attractive industry
    • -Strategy formulation
    • -develop assets and skills
    • -strategy implementation
    • -superior returns
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