midterm cheat sheet - human decision makers process...

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Unformatted text preview: human decision makers process information and reach decisions th evidence that these of buyers/suppliers, closeness of substitutes to an industry’ s process ry, bargaining power beliefs are wrong continuing to commitgov’ t regulationwhen the project is failing age, switching costs, resources even oblems, even though the analogy may not be valid ecline cost economies or brand loyalty -Risk capital – capital that cannot be recovered if a company fails/goes bankrupt ivalry is low b/c companies can get new customers rather than steal share from other companies e. Inefficientto imagine go bankrupt. outcome is companies h 0. Brands have brand loyalty and cost economies, high barriers to entry. -Maximizing shareholder value is the ultimate goal of profit generating companies conflicting courses of action decreases. es, international comp. rivalry iatives, determined whetherrates. initiatives succeeded or failed, and evaluate their initiative against them y exchange rates, inflation those -Return on invested capital – net income after tax/capital, capital = stockholders equity + debt to creditors -Companies can grow profits by selling in markets that are growing rapidly, by gaining market share from rivals, increasing the amount it sells to existing customers, expanding overseas, or diversifying profitability into new lines of business -Strategic planning process: 1) select corporate mission and major goals, 2) analyze competitive environment to identify opportunities and threats, 3) identify internal strengths and weaknesses, 4) select strategies that build on strength, correct weaknesses, 5) implement -External analysis should look at industry environment, country environment, and socioeconomic or macroenvironment -SWOT analyses – comparison of Strengths, Weaknesses, Opportunities, and Threats -distinct competencies arise from 2 sources: resources and capabilities (skills in coordinating resources and putting them to productive use.) -3 factors of profitability: value customers place on product, price charged, cost of creating product -utility minus cost = value created -primary activities in value chain- R&D, production, marketing and sales, customer service. -support activities in value chain- logistics, human resources, information systems, company infrastructure -4 factors of competitive advantage- efficiency (outputs/inputs), quality, innovation, and customer responsiveness -durability of competitive advantage based on 3 factors: barriers to imitation, capability of competitors (tough to respond to competition if it requires a break in prior commitment), industry dynamism (dynamic industries have high rate of innovation so advantage is likely to be transitory. -3 reasons for failure- inertia (tough to change strategy/structure in changing conditions), prior strategic commitments, icarus paradox (become specialized and inner directed/lose sight of market realities) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------flexible production technology- reduce setup times for complex equipment, increase use of individual machines through better scheduling, improve QC at all states of manufacturing process -customer defection rates- % of customers who defect every year to competitors Self-managing teams- members coordinate own activities and make own hiring, training, work, and reward decisions. Members rotate positions, fill in for absences, empowers employees, and eliminates supervisors creating flatter hierarchy, lowering cost structure. -5 reasons for innovation failure- demand is uncertain, technology not adapted to customer needs such as poor design or poor quality, poor positioning strategy (marketing mix), not enough demand, slow to get products to market -need tight integration between R&D, production, and marketing to reduce innovation failure. -heavy weight project manager—high status, power, authority. Dedicated to single project, helps different functions work together -5 thins needed for cross functional teams to have success: heavyweight project manager, 1 member from each function, physically located in same location, clear plan/goals/incentives, incorporate lessons from past successes and failures. -reduced response time to customers requires: 1)marketing that can quickly communicate customer requests to production, 2)production quickly can adjust schedules in response to unanticipated demand, 3)IT systems that can help marketing and production --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to create successful business model need to know: customer needs, customer groups (market segmentation), and distinctive competencies -generic business level strategies: 1) cost leadership (compete on cost), 2) focused cost leadership (competes against cost leader at no disadvantage and produces custom built products that are tough to achieve economies of scale for 1 or 2 market segments), 3) differentiation (compete on differentiation, charge premium prices), 4) focused differentiator (makes distinctive products for 1 or 2 market segments, tries to better meet needs of a segment than the leading differentiator) -broad differentiators- differentiate products and lower cost structure simultaneously -strategic groups- set of companies that produce a similar business model -fragmented industry- large # of small + medium firms, low barriers to entry -horizontal merger- merger of regional store chains to form a national company -demand for products in embryonic industries limited for 5 reasons: poor quality of initial products, customer unfamiliarity with products, poorly developed distribution channels, lack of complementary products, high production costs -innovators and early adopters part of embryonic stage, early and late majorities part of growth stage, laggards join at mature stage -factors that accelerate demand- relative advantage of satisfying needs, compatibility, complexity, trialability, observability -embryonic strategies: sharebuilding strategy (develop stable/distinct competitive advantage to attract new customers) -growth strategies: growth strategy (maintain relative competitive position, try to expand within market), market concentration (for companies in weak competitive position, to to specialize/ adopt focus business model to reduce investment needs) -shakeout strategies: share-increasing (attract customers from weak firms exiting the market), harvest (for firms leaving market, extract investment as much as possible) -maturity strategies: hold and maintain (develop distinct competency so can remain market leader) -3 ways to deter rivals from entering mature industry- product proliferation (cater to all market segments), price cutting, and maintain excess capacity -strategies for managing rivalry in mature industry- price signaling (tit-for-tat, do exactly as competitors do), price leadership (1 company sets price that maximizes profitability), capacity control (price war due to low demand and excess capacity), non price competition -types of nonprice competition: market penetration (huge advertising costs deter new entrants), product development (new or improved products to replace old), market development (new segments for a product), product proliferation -benefits of tech standards: compatibility w/complements, reduce confusion among customers, reduce production costs, reduce risk of complements -to succeed in format war: need network effects, adequate supply of complements, leverage killer apps, license the format, cooperate with competitors -razor and blade strategy- price product low to increase demand, price complements high for profitability -First mover advantages- exploit network effects, brand loyalty, scale economies, create switching costs -first move disadvantages- bear pioneering costs, mistakes competition learns from, cater to innovators and early adopters not mass market, invest in inferior or obsolete technology -new potential technology should have stand alone product division to ensure best chance of success -chance of technological paradigm shift increases when established technology reaches natural limit, and research turns to potential alternatives -4 factors affecting national environments- factor endowments(of production), local demand conditions, competitiveness of related industries, intensity of rivalry -global strategies- global standardization (cost reductions via scale/location economies, best when no local responsiveness needed), localization (customize product to meet local tastes, best when cost pressure is low, unique products command premium prices), transantional (low costs and differentiated products b/w geographic markets, flow skills b/w subsidiaries), international (low cost pressures and low local responsiveness. For selling product of universal need with no significant competitors, i.e. have trademark) -choices of entry- exporting (no development costs, scale economies), licensing (no risk of development, no scale economies, cant manage strategically, can lose proprietary know-how), franchising (no development cost, tighter control than licensing, cant monitor QC), joint ventures (benefit from partners knowledge, share costs/risks, risk proprietary info, lack of control), wholly owned subsidiary (tight control over decisions, reduce risk of losing proprietary technology, realize scale and location economies, costly and high risk) -horizontal integration- acquiring/merging with industry competitors to achieve competitive advantages that arise from large size and operations -benefits of HI- lowers cost structure (economies of scale, reduce duplicate resources), increased product differentiation (product bundling, and cross selling), replicate business model in new market segments, reduce industry rivalry, increased bargaining power -problems w/HI- different corporate cultures, overestimating benefits and underestimating problems, gov’t regulations (FTC) -vertical integration- expands operations backward into an industry that produces inputs for a firms product, or forward into an industry that uses, distributes, or sells firms product. -VI increases product differentiation, lowers costs, or reduces industry rivalry when it facilitates investments in specialized assets, protects product quality, and results in improved scheduling -Holdup- being taken advantage of by a trading partner after the investment of specialized assets has been made -problems with VI: increasing cost structure (relying on overpriced inhouse suppliers as opposed to independent suppliers), technological change, demand unpredictability -hostage taking- garauntee that a partner will keep its side of the bargain; mutually dependent -credible commitment- believable promise to support development of a long-term relationship b/w companies. -parallel sourcing policies- long term contracts with at least 2 suppliers for the same component. Protects buyers from uncooperative partners -benefits of outsourcing- lower cost structure, increase product differentiation, focus on distinctive competencies -risk of outsourcing- holdup or loss of information. -related diversification- establishing a division in a new industry that is related to a firms existing divisions by some form of linkage between value chain functions of the existing divisions and the new divisions. -unrelated diversification- increase profitability though use of general organizational competencies to increase performance of all firms business units -internal new venturing- transferring resources to and creating a new business unit in a new industry. -pitfalls of new ventures- market entry on too small of scale, poor commercialization of new-venture product(ignores needs of customers), and poot corporate mgt of new venture ...
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This note was uploaded on 01/25/2011 for the course MGT 4195 taught by Professor Aksha during the Spring '10 term at Georgia Institute of Technology.

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