Exam 1

Question 1

Five forces model of competition

Answer 1

1. Threat of substitutes (would a customer switch over a 20% difference)
2. Bargaining power of customers (differentiation? Brand loyalty?)
3. Threat of new entrants (how much capital to enter and compete in the industry?)
4. Bargaining power of suppliers (can the company control the supplier costs?)
5. Rivalry among competing firms

Question 2

SWOT analysis

Answer 2

Strengths weaknesses opportunities threats

Question 3

Strategic management

Answer 3

The art and science of formulating, implementing, and evaluating decisions that enable an organization to achieve its objectives

(What should we do? How will we do it? How did we do it?)

Question 4

Three levels of strategy

Answer 4

Corporate
Business
Functional

Question 5

Corporate

Answer 5

Overall direction of a firms various lines of business

Question 6

Business

Answer 6

Emphasizes the competitive position of a firm’s products in specific industries

Question 7

Functional

Answer 7

Approached by various parts of the firm to achieve corporate and business strategies

Ex. R&D development of new products

Question 8

Business model

Answer 8

Addresses “how do we make money in this business?”

It is the strategy capable of delivering good bottom-line results

Question 9

Resource based view: VRIO Framework

Answer 9

If a firm has resources that are:
Valuable
Rare
costly to Intimidate
the firm is Organized to exploit these resources

Then the firm can expect to enjoy a sustained competitive advantage

Question 10

What does internal analytics tell us

Answer 10

What are the firms strengths

What are the firms weaknesses

Question 11

What does external analytics to us

Answer 11

Opportunities and threats

Question 12

Key success factors (KSF)

Answer 12

Consists of the major determinants for success

Rarely are there more than 5-6 factors that are truly key to the future and competitive success of industry members

Question 13

Competitive advantage

Answer 13

Becoming an industry’s low cost provider thereby aiming for a cost based competitive advantage over rivals

Question 14

porters five forces model

Answer 14

The underlying premise of this model is that competition is not your only competitor. Instead, the competition in an industry is an aggregate composite of the following competitive pressures operating in five areas of the overall market:

• Competitive pressures associated with jockeying for buyer patronage
• Competitive pressures associated with the threat of new entrants into the market
• Competitive pressures from substitute products (or sources therein)
• Competitive pressures from suppliers’ power over the prices of inputs
• Competitive pressures from buyers’ bargaining power on the selling prices

In sum, the stronger the forces of competition, the harder it becomes for industry members to earn attractive profits.

Question 15

Insulation Strategies

Answer 15

Firms can take strategic actions to minimize the threat of all five competitive forces; these are corporate-level strategies and are only plausible in certain circumstances

Question 16

Insulation from high rivalry

Answer 16

High rivalry in an industry can sometimes be offset through:

• horizontal integration
• joint ventures
• strategic alliance

Question 17

horizontal integration

Answer 17

one company either acquires or merges with a competitor

Question 18

joint ventures

Answer 18

the focal company and other company form an agreement whereby the two companies share resources for a common goal and form a third party entity

Question 19

strategic alliance

Answer 19

similar to a joint venture without a third party company

Question 20

Insulation from Threat of New Entrants

Answer 20

The threat of new entrants can sometimes be neutralized by:

• temporarily reducing prices
• Increasing advertising
• using patents and copyrights
• litigation

Question 21

Insulation from Threat from Substitute Products

Answer 21

The threat from substitute products can often be reduced through:
- product differentiation

Question 22

Insulation from Supplier Power

Answer 22

Insulation strategies for handling high supplier power often involve:
- backward integration

Question 23

backward integration

Answer 23

that is becoming your own supplier.

Question 24

Insulation from Buyer Power

Answer 24

Many firms try to reduce buyer power through

product differentiation and less often through forward integration

Question 25

product differentiation

Answer 25

many specialty producers of bottled water have successfully differentiated through the addition of flavors, sweeteners, vitamins, electrolytes, minerals, and packaging

Question 26

forward integration

Answer 26

Forward differentiation involves becoming involved with, or owning the distribution channels. The Apple and Nike stores are examples of forward integration

Question 27

Interpreting Strategic Group Maps

Answer 27

Gaps in the strategic map might indicate business opportunities

Question 28

6 key success factors

Answer 28

1. Technology
2. Manufacturing
3. Distribution
4. Marketing
5. Skills
6. Information analysis and dissemination

Question 29

Value chain

Answer 29

Activities that a company performs internally

Question 30

Value chain contains two types of activities

Answer 30

Primary activities - where most of the value for customers is created

Support activities - that facilitate performance of the primary activities

Question 31

What do you do if something in the value chain is broken

Answer 31

Fix it or outsource it