BADM

mission statement + vision= strategic plan

why the company exists- context for desisions - no time frame - external and internal use

what leaders what the firm to be - guides development of strategy - inspiring new reality - time period - primarily internal use

how to beat present and potential compeitiors - lists actions providing profit - changes with analysis, customer experience - internal use only

affect and are affected by strategic outcomes achieved and who have enforceable claims on performance

are enforced by the stakeholder's ability to withold essential participation

shareholders and lenders who expect the firm to preserve and enhance the wealth they have entrusted to it - returns should be commensurate with the degree of risk to the shareholder

customers, suppliers, host communities, union officials

A product market stakeholder - demand reliable products at low prices

A product market stakeholder - seek loyal customers willing to pay highest sustainable prices for goods and services

A product market stakeholder - want companies willing to be long-term employes and providers of tax revenues while minimizing demands on public support services

A product market stakeholder - want secure jobs and desirable working conditions

employes - expect a dynamic, stimulating and rewarding work environment - are satisfied by a company that is growing and actively developing their skills

Two issues affect the extent of stakeholder involvement in the firm

Evaluating Firm Performance

6 elements of the General Environment

little ability to predict this, even less to control, vary across industries

sometimes called the task or industry environment
porter's five forces model
Competitors, customers, suppliers

a group of firms producing products that are close substitutes - influence one another 0 includes a rich mix of competitive strategies that companies use in pursuing strategic competitiveness and above average returns

Threat of new entrants
baragaining power of suppliers
threat of substitute products and services
bargaining power of suppliers
rivalry among existing firms

profits of established firms in the industry may be eroded by new competitors

_______ in an industry reduces the threat of new entrants : economies of scale, product differentitation, capital requirements, switching costs, access to distribution channels, cost disadvantages independent of scale, government policy, expected retaliation

threaten an industry - force down prices - bargain for higher quality or more services - play competitors against each other

A buyer group is powerful when(6)

suppliers can exert power by threatening to raise prices or reduce the quality of purchased goods and services

A supplier group can be powerful when(6)

increases when buyers face switching costs, substitute product's price is lower, substitute products quality and perfomance are equal or greater
differentiated industry products that are valued by customers reduce this threat

price competition, advertising battles, product introductions, increased customer service or warranties

Industry rivalry increases when

low entry barriers
suppliers and buyers have strong positions
strong threat from substitute products
intense rivalry among competitors

high entry barriers, suppliers and buyers have weak positions, few threats from substitute products, moderate rivalry among competitiors, high profit potential

two unassailable assumptions in industry analysis

cluster of firms that share similar strategies

internal competition between ___ ___ ___ is greater than between firms outside that strategic group

There is more ____ in the performance of firms withing strategic groups

are intended to create differences between the firm's position relative to those of its rivals

the firm competes in many customer segments

the firm selects a segment or group of segments in the industry and tailors its strategy to serving them at the exclusion of others

an integrated set of actions taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors with features that are acceptable to customers

cost leadership strategy is characterized by

building efficient scale facilities ,tightly controlling production costs and overhead, minimizing costs of sales, R&D and service, building efficient manufacturing facilities, monitoring costs of activities provided by outsiders, simplifiying production processes

competitive risks of cost leadership strategy

an integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them

firms may differentiate along

firms achieve and sustain differentiation and above average profits when

requires integration with all parts of a firm's value chain

an important aspect of differentiation is

uniqueness that is not valuable, too much differentiation, too high a premium, differentiation that is easily imitated, dilution of brand identification, perceptions of differentiation may vary between buyers and sellers

price differential between competitors, differentiation ceases to provide value, experience narrows customer's perceived vaisks of dilues, counterfeit goods replicate

an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment

particular buyer group, different segment of a product line, different geographic makets

lg firms overlook sm niches, lack of resources to compete in broader market, able to serve a narrow market segment more effectively than larger industry, allows the firm to direct its resources to certain value chain activities

stages of the industry life cycle

the study of why some firms outperform others

strategy objective is to maximize shareholder wealth

objectives that are used as surrogates for eventual wealth or the fulfillment of a mission

defines beneficiary group and maximizes wealth for total group

focused on the future

focused on factors and conditions influencing a firm's profitability within an industry

focused on predicting the dynamics of competitors actions responses and inentions

a condidtion in the general environment that if exploited helps a company achieve strategic competitiveness

a condition in the general environment that may hinder a company;s efforts to achieve strategic competitiveness

marginal improvements in efficiency that a firm experiences as it incrementally increases its size

one time costs customers incur when the buy from a different supplier, new equip, retraining employees, psychic costs

stocking or shelf space, price breaks, cooperative advertising allowances

proprietary product technology, favorable access to rm, desirable locations

licensing and permit requirements, deregulation of industries

responses by existing competitors may depend on a firm's present stake in the industry

t/f demographic, economic, political/legal, sociocultural, techonological, and global are the six elements comprising the industry environment
True False

t/f the five forces model is a firm level analytical model
True False

t/f switching costs, access to distribution channels, economies of scale, large numbers of competing firms, and slow industry growth are some of the entry barriers that may affect the threat of new entrants to an industry
True False

t/f suppliers are powerful when no satifactory substitutes are available, the selling industry is relatively more concentrated and swithcing costs are high
True False

t/f an attractive industry is one that is characterized by high entry barriers, suppliers and buyers with strong bargaining power, low threats from substitute products, and low rivalry among firms
True False

typically, fast industry growth increases an industry's rivalry
True False

the aging of the population, changes in ethnic composition and effects of the baby boom are

a goup of firms producing products that are close substitutes

belief by customers that a product is unique

which of the following is NOT an entry barrier to an industry?
expected competitor retaliation
economies of scale
customer product loyalty
bargaining power of suppliers

The threat of new entrants is increased if

______ are powerful when they offer credible threat of forward integration

upper limits on the prices a firm can charge are impacted by

vision statements are used to create a better understanding of the organization's overall purpose and direction. Vision statements

Industry A is characterized by high fixed costs while Industry B has low fixed costs which industry would have a lower threat of new entrants? Higher degree of rivalry?

If you believed in a pure five forces model of above average returns which of the following things is least important? industry analysis, competitor analysis, analysis of general environment, analysis of resources, capabilities, and core competencies

If an industry has high exit barriers and high entrance barriers returns to the industry should be

t/f firms implementing cost leadership strategies often sell no-frills standardized goods or services to the industry's most typical customers
True False

support activities in the value chain are generic across business strategies
True False

t/f A differentiator's product price is typically less than that of a cost leader
True False

t/f a risk of the differentiation strategy is that the firm's means of differentiation may eventually not provide value to the customer
True False

t/f McDonald's brand recognition is a fundamental source of differentiation, while the rigorous standardization of processes allows it to lower costs. Thust McDonald's is a classic example of the focused differentiation strategy
True False

a company using a narrow scope in its business strategy is limiting the

providing products with features acceptable to customers at the lowest competitive price

a firm successfully implementing a differentiationg strategy would expect

In the ___ stage of the industry life cycle, the emphasis on proitionduct design is very high, the intensity of competition is low and the market growth rate is low

There is an emphasis on product variety prices are declining rapidly, and although the firm may be making a profit, cash flows may be negative

In the ____ stage of the industry life cycle, there are many segments competition is very intense, and the emphasis on process design is high

a market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage

as markets mature

t/f firms can earn above average returns even if they do not develop or sustain a competitive advantage
True False

T/F the sustainability of a competitivie advantage depends upon the imitability of the core competence, the availability of substitutues for the core competence, and the rate of core competence obsolesence.
True False

The bargaining power of suppliers is enhanced under
the following market condition

High product differentiation is generally accompanied
by

An analysis of the economic segment of the external environment does NOT include
A. interest rates.
B. international trade.
C. the strength of the U.S. dollar.
D. the move toward a contingent work force.

If an industry has high exit barriers and
high entrance barriers, returns to the industry should be

The value of a
company in the market is a result of

Which of the following is a risk (or pitfall) of cost
leadership?
A. cost cutting may lead to the loss of desirable features
B. attempts to stay ahead of the competition may lead to unacceptable quality
C. cost differences increase as the market matures
D. producers are more able to withstand increases in suppliers' cost