Strategic Management

105 flashcards by MentisLibrary

How firms choose where to compete and how to win: five forces and industry structure, the resource-based view and VRIO, generic and blue ocean strategies, diversification and mergers, global strategy, disruption, and the scorecards and structures that execute it.

What separates a good strategy from a bad one, in Richard Rumelt's account?
A good strategy has a kernel: an honest diagnosis of the challenge, a guiding policy for dealing with it, and a coherent set of actions that carry the policy out. Bad strategy is goals, slogans and financial targets with no diagnosis.
Name the three levels of strategy in a large firm.
Corporate strategy (which businesses to be in), business strategy (how to win in each one), and functional strategy (how marketing, operations and finance support the business strategy).
Mission versus vision statement
A mission says what the organisation does now and for whom; a vision describes the future state it is trying to reach.
What is emergent strategy?
Strategy that forms as a pattern in a stream of decisions, rather than from a plan. Realised strategy is the deliberate part that survived plus the emergent part that was never intended.
What are Mintzberg's five Ps of strategy?
Plan (an intended course of action), ploy (a manoeuvre to outwit a rival), pattern (consistency in behaviour over time), position (where the firm sits in its environment), and perspective (the firm's ingrained way of doing things).
According to Porter, why is operational effectiveness not strategy?
Operational effectiveness means performing similar activities better than rivals, which is copyable and drives everyone to the same frontier. Strategy means performing different activities, or the same activities differently, and defending that with trade-offs.
What is a strategic trade-off, and why is it necessary?
A deliberate decision not to do something, so that the activities you do choose reinforce each other. Without trade-offs any rival can add your differentiating feature to their own offer and neutralise it.
How is economic value creation defined in the value-based view?
Value created equals the customer's willingness to pay minus the supplier's opportunity cost. It is split into consumer surplus (willingness to pay minus price) and firm margin (price minus cost).
What is competitive advantage?
A firm has a competitive advantage when it creates more economic value than the marginal competitor in its market, usually visible as persistently higher return on invested capital than the industry average.
What makes a competitive advantage sustainable?
Isolating mechanisms that stop rivals from imitating or substituting it: causal ambiguity, path dependence, patents and regulation, switching costs, network effects, and assets that cannot be bought on any market.
What is strategic intent?
An ambition out of proportion to current resources, held stable over years, that sets the direction for how capabilities are built. It works by creating a productive gap between aspiration and means.
Name Porter's five forces.
Threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitutes, and rivalry among existing competitors.
What determines the threat of new entrants?
The height of entry barriers and the expected retaliation. Barriers include supply-side scale economies, demand-side network effects, switching costs, capital requirements, incumbency advantages independent of size, access to distribution, and restrictive regulation.
When is supplier bargaining power high?
When the supplier group is more concentrated than the industry it sells to, when its product is differentiated or carries switching costs, when there is no substitute for what it supplies, when it can credibly integrate forward, and when the industry is not an important customer for it.
When is buyer bargaining power high?
When buyers are few or purchase in large volumes, when the product is undifferentiated, when switching costs are low, when buyers earn low margins and are price sensitive, when the product is a large share of their cost, and when they can credibly integrate backwards.
What counts as a substitute in five forces analysis?
A different product or service that meets the same underlying need, from outside the industry. Substitutes cap the price the industry can charge, and the threat is high when the substitute offers an attractive price-performance trade-off with low switching cost.
What makes rivalry among existing competitors intense?
Many roughly equal competitors, slow industry growth, high fixed costs or perishable capacity, low differentiation and switching costs, high exit barriers, and rivals with conflicting goals. Price competition is the most destructive form because it transfers profit straight to buyers.
What is the value net, and what sixth force does it add?
A map of the players around a firm: customers, suppliers, competitors and complementors. A complementor is a player whose product makes yours more valuable to the customer, and it is the force the original five omit.
What does PESTEL analyse?
The macro environment: Political, Economic, Social, Technological, Environmental and Legal factors that shape every firm in an industry.
What is a strategic group?
A set of firms within an industry following similar strategies along key dimensions such as price, breadth of line, distribution channel and vertical integration. Mobility barriers make it costly to move from one group to another.
What are the stages of the industry life cycle, and what does each imply?
Introduction (low volume, product experimentation, high uncertainty), growth (rapid adoption, capacity building, standards settle), maturity (share battles, cost focus, consolidation) and decline (overcapacity, exit or niche harvesting).
What is scenario planning, and what problem does it solve?
Constructing a small number of internally consistent, plausible futures around the critical uncertainties, then testing strategies against all of them. It replaces a single forecast with a set of stress tests.
What are the main limitations of five forces analysis?
It is a snapshot of a stable, well-defined industry. It underweights complements, ignores the pace of change, assumes industry boundaries are clear, and says nothing about why firms within the same industry differ.
What is the resource-based view of the firm?
The view that persistent performance differences come from firm-specific resources and capabilities that are heterogeneous across firms and imperfectly mobile, rather than from industry position.
What are the four questions of the VRIO framework?
Is the resource Valuable, Rare, costly to Imitate, and is the firm Organised to capture the value? Failing them in order gives competitive disadvantage, parity, temporary advantage, and finally sustained advantage.
What are the three tests of a core competence?
It provides potential access to a wide variety of markets, it makes a significant contribution to the perceived customer benefit of the end product, and it is difficult for competitors to imitate.
What are dynamic capabilities?
The firm's capacity to sense opportunities and threats, seize them by committing resources and business models, and transform the organisation by reconfiguring assets as the environment shifts.
What are the primary and support activities of the value chain?
Primary: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support: firm infrastructure, human resource management, technology development, and procurement.
What is causal ambiguity, and why does it protect an advantage?
When neither the firm nor its rivals can specify exactly which resources and routines produce the superior result, imitation becomes trial and error at high cost.
What is path dependence in a firm's resource position?
Some resources can only be accumulated over time through a specific history of investment, so a rival who starts today cannot buy the same stock at any price.