Mid-term Study Guide

Module 1: What is strategy?

Strategic management:
A plan the firm undertakes to achieve its goals.
FOrumulated by decision makers w.in the firm, but evolves once it is
implememted.
Undertakes by individuals w.in the firm on behalf of
owners. Respnsible to represent an important levl of analysis of strat
decision making.
Utilization of resources by the firm. They can take many
forms and are the building blocks of success. How effective a firm can
transform raw materials into finished products.
Focused on improving the firms performance. Measured as
profitability or social welfare. (Primary goal)
Related to firms external environment. (Opps & Threats)
Concept of competitive advantage
Primary goal of firms strat and results when the firms
performance is consistently better than the rivals it competes against
in its industry
The firms strat is the action to attain a sustainable
competitive advantage.
Strategic trade-offs?
Core idea notion of strat trade-offs which occure because
a specific action that a firm may choose is compatible with other
strategic actions.
Arise for 3 reasons:
Firm is known for producing a certain quality of
product or service thus its reputation may become harmed if it
chooses to deliver a different kind of product.
Activities creat inflexibility because people, systems
and assest that the company relies upon for its products lock the
company in a specific path.
Companies can not be all things to all people. Limits
what a company can offer.
Strategy by Analogy
Strategic inflection point occurs when a firm faces major
changes in its competitive environment. Firm strat must be altered.
Chess, war, and sports.
Module 2: External Analysis
What is an industry?
Group of firms with similar product offerings that compete
for similar buyers. Competitors with compete for resources customers
and suppliers
Porters Five Forces Analysis
Threat of Sub products from different industries that may
attract customers.

Power of Buyers depends on the relative bargaining

leverage of buyers to the industry.
Power of Suppliers depends on the relative bargaining
leverage of suppliers to the industry
Threat of New Entrants depends on existing barriers and
reactions from competitors
Internal Rivalry Most powerful force. Occurs when
competitors sees a threat or act on an opportunity
Firms Macro-environment (Institutional environment)
Formal & Informal Rules of the game
F: Laws and regulations
IF: Norms and behaviors
Components:
Political, Economic, Social, and Technology.
Module 3: Internal Analysis
What is a:
Resource: Tangible resources, Intangible resources, Human
resources
Its not just having them, but how they are
deployed/combined.
Capabilities: what a firm does. Capacity for deploying
resources to pursue its goals and tend to reside w/in various functional
areas.
Will more likely result in a sustainable competitive
advantage, because they are difficult to copy.
Competency: interaction of multiple resources and
capabilities that span the value chain. Fundamental to firms strat and
performance.
Value Chain:
Attempt to tie internal charistics of a firm to its ability to
attain a comp advantage.
Module 4 & 5: Business-level Strategy
Porters Generic Strategies
Cost-based strategic advantage
Attempt to provide similar products of competiors but
lower cost.
Occurs when firm can lower its costs w/o affecting
willingness to pay.
Sell at same price, but make higher margin.
Sell at lower price, but gain market share
Works best for standardized products
Industry Life Cycle
Introduction Phase -> Growth Phase -> Maturity
Phase -> Decline
Differentiation-based strategic advantage

Attempt to provide unique product at a premium price for

consumers.
Occurs when firm increases willingness to pay w/o incr
costs.
Firms pricing product above lvl of delivered costs, thus
higher profit
Maintaining its profit advantage through brand loyalty
Works best when: mkts when needs and products are
diverse, tech change is fast paced, & customer segments will tolerate
price premium
Doesnt work when customers dont value a feature, or
they chage an excessive price.
Value and what is its relationship to competitive advantage?
Value = Willingness to pay Total cost
Cost based decr total costs, keep willingness to pay
Diff based keep total costs, incr willingness to pay.
Cost and differentiation based strategies:
Basis for success
What should a firm focus on>
When does each work best?
What are the pitfalls of each?
How do firms figure out specific ways to optimize each?
Module 6 & 7: Coporate strategies
What is diversification?
How can firms change their scope?
Related vs unrelated diversification
Vertical integration
Why do it? Why not?
Mergers and acquiristions:
Outcomes?
Differences?
When do they succeed and fail?
Alliances and Joint Ventures
What are they?
What are the differences?
Module 8: Global Strategy
Why operate outside your home country?
Different ways firms enter new countries
Advantages/disadvantages
Multi-domestic vs Global industries/strategies
Advantages/disadvantages of each
Relate to standardization and adaptation
Globalized vs semi-globalized