MGT 415 (CH. 4,5,6,7)

One important indicator of how well a company's present strategy is working is

It has more core competencies than close rivals

Its strategy is built around at least two of the industry's key success factors

The company is achieving ts financial and strategic objectives and whether it is an above-average industry performer

It is subject to weaker competitive forces and pressures than close rivals (a good sign) or stronger competitive forces and pressures (a bad sign)

It is customarily a first-mover in introducing new or improved products (a good sign) or a late-mover (a bad sign)

What are the firm's most competitively important resources and capabilities?

Resources & capabilites

Determinants of its competitiveness and ability to succeed in marketplace

What a firm's strategy depends on to develop sustainable competitive advatage over its rivals

A company's resources and capabilities represent:

The firm's net working capital and related determinants for measuring operating performance and capabilities

The firm's competitive assets, which are considered big determinants of its competitiveness and ability to succeed in the marketplace.

Whether the firm has the industry's most efficient value chain

Management's source of funding of new strategic initiatives

All of these.

The four tests of a resource's competitive power are often referred to as:

The SCIR test, which asks if a resource is sustainable, competitive, internalized, and reproducible.

The competitive advantage sustainable method test

The reliability resources simulation

The VRIN test, which asks if a resource is valuable, rare, inimitable, and non-substitutable.

The organizational capability metric analysis.

How is the company able to seize market opportunities and nullify external threats?

SWOT Analysis

Interal strenghts (basis for strategy)

Internal weaknesses (deficient capabilities)

Market opportunities (strategic objectives)

External threats (strategic defenses)

SWOT analysis is a simple but powerful tool for:

Gauging whether a company has a cost-competitive value chain

Sizing up a company's resources and capabilities, strengths and deficiencies, its market opportunities, and the external threats to its future well-being.

Evaluating whether a company is in the most appropriate strategic group.

Determining a company's competitive strength vis-à-vis close rivals.

Identifying the market segments in which a company is strongly positioned and weakly positioned.

A company's competitive strength scores pinpoint its strengths and weaknesses against rivals and:

Suggest the company use its strengths to exploit its own competitive liabilities

Point directly to the kinds of offensive/defensive actions it can use to exploit its competitive strengths and reduce its competitive liabilities

Point directly to the company to use its weaknesses as offensive moves to challenge rivals' weaknesses

Suggest receptivity for astute companies to drive their operating practices if the strength scores are very low

Point directly to accepting the competitive strength scores on face value

Is the firm competitively stronger or weaker than key rivals?

How does firm rank relative to competitors on each of the important factors that determine market success?

Does firm have a net competitive advantage or disadvantage versus major competitors?

What strategic ises and problems merit front-burner managerial attention?("Should We" Issues)

Expand rapidly or cautiously into foreign markets

Reposition the firm to move to a different strategic group

Counter increasing buyer interest in substitute products

Expand of the firm's product line

Correct the firm's competitive deficiencies by acquiring a rival firm with the missing strengths

A company's value chain identifies:

The steps it goes through to convert its net income into value for shareholders

The primary activities and related support activities it performs in creating customer value

The series of steps it takes to get a product from the raw materials stage into the hands of end users

The activities it performs in transforming its competencies into distinctive competencies

The competencies and competitive capabilities that underpin its efforts to create value for customers and shareholders

A company's competitive strength scores pinpoint its strengths and weaknesses against rivals and:

Suggest the company use its strengths to exploit its own competitive liabilities

Point directly to the kinds of offensive/defensive actions it can use to exploit its competitive strengths and reduce its competitive liabilities

Point directly to the company to use its weaknesses as offensive moves to challenge rivals' weaknesses

Suggest receptivity for astute companies to drive their operating practices if the strength scores are very low

Point directly to accepting the competitive strength scores on face value.

What strategic issues and problems merit front- burner managerial attention? ("How To" Issues)

How to meet challenges of new foreign competitors

How to combat the price discounting of rivals

How to both reduce high costs and prepare for price reductions

How to sustain growth as buyer demand slows

How to adapt to the changing demographics of the firm's customer base

Identifying the strategic issues and problems that merit front-burner managerial attention:

Is accomplished solely by analyzing the company's internal working environment

Helps set management's agenda for taking actions to improve the company's performance and business outlook

Is done solely by evaluating the company's own internal situation—its resources and competitive position—to help come up with a "worry list" of "how to…," "whether to…," and "what to do about…"

Is done solely as a basis for drawing conclusions about whether to stick with a company's present strategy or to modify it.

None of these.

While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another involves:

Whether a company can build a brand name and an image that buyers trust.

Whether a company's target market is broad or narrow and whether the company is pursuing a competitive advantage linked to low costs or differentiation.

Whether a company can achieve lower costs than rivals and whether the company is pursuing the industry's sales and market share leader role.

Finding effective and efficient ways to strengthen the company's competitive assets and to reduce its competitive liabilities.

Getting in the best strategic group and establishing a dominating role.

The generic types of competitive strategies include: :

Market share growth provider, sales revenue leader strategy, and market share retention strategy.

Offensive strategies, defensive strategies and counter maneuvers strategies.

Low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused differentiation strategies.

Low-cost/low-price strategies, high-quality/high-price strategies, and medium quality/medium price strategies.

Price leader strategies, price follower strategies, technology leader strategies, and first-mover strategies.

A low-cost leader translates its low-cost advantage over rivals into superior profit performance by:

Cutting its price to levels significantly below the prices of rivals.

Either using its lower-cost edge to under-price competitors and attract price-sensitive buyers in great enough numbers to increase total profits or maintain the present price, and using the lower-cost edge to earn a higher profit margin on each unit sold, thereby raising total profits and overall return on investment.

Going all out to use its cost advantage to capture a dominant share of the market.

Spending heavily on advertising to promote its cost advantage and the fact that it charges the lowest prices in the industry it can, and then using this reputation for low prices to build very strong customer loyalty, gain repeat sales year after year, and earn sustained profits over the long term.

Out-producing rivals and thus having more units available to sell.

Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on whether: ?

Many buyers view the product's differentiating features as having value.

Most buyers have similar needs and use the product in the same ways.

Most buyers accept the customer value proposition as unique and the product can command a higher price or produce sufficiently bigger unit sales to cover the added costs of achieving the differentiation.

Buyer switching costs are low and customer loyalty to any one brand is low.

Buyers are prone to shop the market for sellers having the best price.

The chief difference between a broad differentiation strategy and a focused differentiation is:

The size of the buyer group that a company is trying to appeal to.

The degree of bargaining power that buyers have.

Whether the product is strongly differentiated or weakly differentiated from rivals.

The type of value chain being used to achieve a differentiation-based competitive advantage.

The number of upscale attributes incorporated into the product offering.

A firm pursuing a best-cost provider strategy:

Seeks to be the low-cost provider in the largest and fastest growing (or best) market segment.

Tries to have the best cost (as compared to rivals) for each activity in the industry's value chain.

Tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.

Seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).

Seeks to achieve the best costs by using the best operating practices and incorporating the best features and attributes.

Which one of the following generic types of competitive strategy is typically the "best" strategy for a company to employ?

A low-cost leadership strategy

A focused low-cost differentiation leadership provider strategy

A broad and narrow differentiation strategy

A best-cost provider strategy

One that is customized to fit the macro-environment, industry and competitive conditions, and the company's own resources and competitive capabilities

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MGT 415 (CH. 4,5,6,7)

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