BUAD 497 Midterm 1

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1. 3 Elements of 1. Diagnosis of competitive strategy through 13. Complement Product, service, or competency that adds
a good analysis of firms internal and external value to the original product offering when
strategy environ. the two are used in tandem
2. Guiding Policy to address competitive
14. core - unique strengths that are embedded deep
challenge accomplished through strategy
competencies within a firm
formulation
- allow firm to differentiate products and
3. Coherent actions to implement firm's
services from those of its rivals
guiding policy accomplished through
- develop through interplay of resources and
implementation.
capabilities
2. 4 questions 1. How do customers view us
15. core rigidity firm relies too long on competency without
of Balance 2. How do we create value?
honing, refining, and upgrading as the
Scorecard 3. What core competencies do we need?
environment changes
4. How do shareholders view us
16. Corporate where to compete in terms of industry,
3. Accounting use financial data and ratios derived from
Strategy markets, and geography
Profitability publicly available accounting data such as
income statements and balance sheets to: 17. Customer- allow companies to adapt because they
- Accurately assess firm performance oriented focus on how to best solve a problem for
- compare and benchmark firm performance vision consumers.

4. Activities distinct and fine grained business processes 18. dynamic firm's ability to create, deploy, modify,
such as order taking, the physical delivery of capabilities reconfigure, upgrade, or leverage its
products, or invoicing customers resources over time in its quest for
competitive advantage
5. Balanced Assess past performance, identify areas for
Scorecard improvement, and position the company for 19. Economic difference between a buyer's willingness to
Approach future growth Value pay for a product or service and the firm's
allows Creation total cost to produce it.
managers to: - amount of total perceived consumer
benefits equals the maximum willingness to
6. Balance - is a framework to help managers achieve
pay, the reservation price
Scorecard their strategic objectives more effectively
- harnesses multiple internal and external 20. Emergent describes any unplanned strategic initiative
performance metrics in order to balance Strategy bubbling up from the bottom of the
both financial and strategic goals. organization.

7. Black Swan High Impact of highly improbable event. 21. External customers, suppliers, alliance partners,
Events Demonstrate that managerial actions can Stakeholders creditors, unions, communities, government
affect the economic well-being of large at various levels, and the media.
numbers of people around the globe. 22. Firm effects attribute performance to actions managers
8. Business How firm intends to make money take. Managers' actions tend to be more
Model - stipulates how the firm conducts its important in determining firm performance
business with its buyers, suppliers, and than forces exerted on firm by its external
partners environment

9. Business how to compete: cost leadership, 23. Five major patents, designs, copyrights, trademarks,
Strategy differentiation, or value innovation forms of IP trade secrets
protection
10. Capabilities organizational and managerial skills
necessary to orchestrate a diverse set of 24. Functional How to implement chosen business strategy
resources and to deploy them strategically Strategy

11. Common Return on Invested Capital (ROIC), Return on 25. Game Theory Attempts to predict strategic behaviors by
Profitability Equity (ROE), Return on Assets (ROA), Return assuming that the moves and reactions of
Ratios on Revenue (ROR) competitors can be anticipated.

12. Competitive A firm that achieves superior performance

Advantage relative to competitors in the same industry
or the industry average
26. The greater greater a firm's economic contribution 38. People (Triple social dimension emphasizes people aspect
the Bottom Line)
difference
39. PESTEL Straightforward way to scan, monitor, and
between
Model evaluate the important external factors and
value and
trends that may impinge on a firm:
cost, the
Political
27. Imitate firms that do not produce the resource are Economic
(costly to unable to develop and buy the resource at a Sociocultural
imitate) reasonable price Technological
Environmental
28. Industry Method to identify an industry's profit
Legal
Analysis potential and derive implications for a firms
strategic position within an industry 40. Planet (Triple ecological dimension emphasizes
Bottom Line) relationship between business and natural
29. Industry Formerly unrelated industries begin to fulfill
environment
Convergence the same consumer need
41. Planned Organizational structure and systems allow
30. Industry The underlying economic structure of the
Emergence bottom-up strategic initiatives to emerge
effects industry including elements such as entry
and be evaluated and coordinated by top
and exit barriers, number and size of
management
companies, and types of products and
services offered 42. Popular - razor- razorblades
Business - Subscription
31. Internal stockholders, employees, and board
Models - Pay as you go
Stakeholders members
- Freemium
32. Level-5 Level 1: Highly Capable Individual - Wholesale
Leadership 2. Contributing Team Member - Agency
Pyramid 3. Competent Manager - Bundling
4. Effective Leader
43. Porter's 5 1. Threat of Entry
5. Executive
Forces 2. Bargaining Power of Buyers
33. Limitations of - Determining the value of a good in the 3. Threat of Substitute
Economic eyes of the consumer is difficult 4. Bargaining Power of Suppliers
Value - value of good changes for consumer 5. Rivalry among Existing Competitors
Creation based on preferences, income, time, and
44. Product- Constrain ability to adapt because it defines
other factors
oriented the business as the good or service
- must estimate economic value created for
vision produced.
all products and services created by the firm
45. Profits (Triple Economic dimension captures necessity for
34. Limitations of - Forward Looking
Bottom Line) business to survive
Shareholder - Stock prices could be volatile
Value - Overall macroeconomic factors all have 46. Rare only one or few firms possess the resource
Creation direct bearing on stock prices
47. Resource- - Sees resources as key to superior
- Stock prices frequently reflect
based view performance
psychological mood of investors, which can
- Assumes resource heterogeneity and
be irrational
immobility
35. Limits of - data is historically backwards looking
48. Resource bundles of resources , capabilities, and
accounting - doesn't include off the balance sheet items
heterogeneity competencies differ across firms.
profitability - Focuses mainly on tangible assets
49. Resource Resources tend to be "sticky" and don't
36. Network positive effect that one user of a product or
immobility move easily from firm to firm.
Effects service has on the value of that product or
service for other users. 50. Resources any assets, such as cash, buildings,
machinery, or intellectual property that a
37. Organized to effective organizational structure and
firm can draw on when crafting and
capture the coordinating systems
executing a strategy
value of
resources
51. Return on (Net Profits/Invested Capital). If firm's ROIC 61. Strategic A standalone division of a larger
Invested is greater than cost of capital, it generates Business conglomerate, with its own profit-and-loss
Capital value. Units (SBUs) responsibility
(ROIC)
62. Strategic Set of companies that pursue a similar
52. risk capital money shareholders provide in return for an Group strategy within a similar industry in their quest
equity share (cannot be recovered if firm for competitive advantage
goes bankrupt)
63. Strategic 1. Competitive Rivalry is strongest between
53. Scenario Top-management envisions different what-if Group firms within the same strategic group
Planning scenarios to anticipate plausible futures in Mapping 2. External Environment affects strategic
order to derive strategic responses. Takes suggests: groups differently
place at corporate and business levels of 3. The five competitive forces affect strategic
strategy groups differently
4. Some strategic groups are more profitable
54. Shareholder - Investors primarily concerned with total
than others
Value return to shareholders, which is return on
Creation their risk capital 64. Strategic Any activity a firm pursues to explore and
Initiative develop new products and processes, new
55. Shortcomings Leaders tend to avoid planning for
markets, or new ventures. Can bubble up
of Scenario pessimistic scenarios. Responses to all events
through: autonomous actions, serendipity, and
Planning can't be planned as the future is unknown.
resource-allocation process
56. Shortcomings 1. Unclear strategy process and lines of
65. Strategic integrative management field that combines
of Strategy communication can lead to employee
Management analysis, formulation, and implementation in
as Planned confusion
the quest for competitive advantage
Emergence 2. Any ideas that bubble up may not be
worth pursuing 66. Strategic relates to firm's ability to create value for
3. May lack clear process of how to evaluate Position customers (V) while maintaining costs to do
emergent strategy, leading to missed so (C)
opportunities, employee frustration , and
67. Strategy A set of goal-directed actions a firm takes to
lower morale
gain and sustain superior performance
57. Shortcomings 1. Rests on assumptions that we can predict relative to competitors
of Top-Down the future from the past.
68. Stronger the Lower the industry's profit potential
Strategic 2. Formulation of strategy is separate from
5 Forces
Planning implementation
3. Simply cannot know the future 69. Sustainable Firm that is able to outperform its competitors
Competitive or the industry average over a prolonged
58. Stakeholder Five step process for managers to recognize
Advantage period of time
Impact stakeholders' claims. Must focus on power,
Analysis legitimacy, and urgency. 70. Three - Accounting Profitability, Shareholder value
1. Who are our stakeholders? traditional creation, Economic value creation
2. What are their interests and claims frameworks
3. What opps. and threats do they present to measure
4. What economic, legal, ethical, and firm
philanthropic responsibilities do we have to performance
our stakeholders. 71. Top-Down executives attempt to program future success.
5. What should we do to effectively address Strategic Strategic intelligence and decision-making
the stakeholder concerns Planning responsibilities are concentrated in office of
59. Stakeholder Integrative approach to managing a diverse CEO.
Strategy set of stakeholders effectively in order to 72. Triple Economic(Profits), Social(People),
gain and sustain a competitive advantage. Bottom Line Ecological(Planet)
60. Steps to 1. Define relevant industry 73. Upper- Executives interpret situations throughout the
apply Five 2. Identify the key players in each of the five echelons lens of their unique perspectives, shaped by
Forces model forces and attempt to group them into Theory personal circumstances, values, and
different categories experiences. Favors idea that strong
3. Identify the underlying drivers of each leadership is result of both innate abilities and
force learning
4. Assess the overall industry structure
74. Valuable resource that enables the firm to exploit an external opportunity or offset an
external threat
75. Value chain 1. Understand Markets
2. Vision & Strategy
3. Operations
4. Production
5. Market and Sell
6. Service and Support
76. value chain describes the internal activities of a firm engages in when transforming inputs
into outputs
77. Value Chain Support Activities - R&D
- Information Systems
- Human Resources
- Accounting and Finance
- Firm Infrastructure
78. Vision Captures an organization's aspiration and spells out what it ultimately wants to
accomplish
79. VRIO Framework 1. Valuable
2. Rare
3. Costly to Imitate
4. Organized to capture value
- A firm can gain and sustain a competitive advantage only when it has resources
that satisfy all of the VRIO criteria
80. What happens between firms during periods of Price competition decreases
high industry growth?
81. What is NOT strategy 1. Grandiose Statements
2. Failure to face a competitive challenge
3. Operational effectiveness, competitive benchmarking, or other tactical tools
82. When does a consolidated industry turns into a When restrictive government policies are introduced into the industry.
fragmented industry?
83. When strategizing for competitive advantage, 1. Strategic Planning
managers rely on: 2. Scenario Planning
3. Strategy as planned emergence