notes_MGMT101_summary of the book

Underestimating the challenges of integrating aspects

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Underestimating the challenges of integrating aspects of the value chain e.v.3. Miscalculating sources of revenues and profit pools f. Industry Life Cycles chart on 183 – introduction, growth, maturity, and decline over the life of an industry. Many industries have many life cycles (like a cosine function or something) f.i. Strategies in the introduction stage – f.i.1. Few players, not well-defined market segments, low growth, operating losses, need for cash to finance f.i.2. First mover is good to establish name and set-up the “standard” f.i.3. Being a late mover can be good too bc you can learn from competitors mistakes f.ii. Strategies in Growth Stage f.ii.1. Strong inc in sales, competitors attracted, focus is to build customer preferences, brand recognition, and differentiated products f.ii.2. Repeat customers are key in this stage f.iii. Strategies in maturity f.iii.1. Industry demand slows, direct competition ensues as firms drop,
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f.iii.2. Advantages in manufacturing efficiencies become more important in addition to advertising bc no new people are buying so you must compete over existing demand f.iii.3. Firms change customer mentality to skip over phases of the life cycle f.iii.3.a. Reverse positioning - strip away product attributes while adding new ones f.iii.3.b. Breakaway positioning – escape category and enter new one which redefines competition f.iv. Strategies in the decline stage f.iv.1. Sales and profits down, occurs bc of technology usually (typewriters), many competitors liquidate intensifying price competition, decisions become dependent on rivals f.iv.2. Maintaining – stay and hope competitors leave f.iv.3. Harvesting – wring out as much profit as possible by cutting down to only primary and support activities f.iv.4. Exiting the market – f.iv.5. Consolidation – buy the remaining top firms f.v. Turnaround strategy – reversing a firm’s decline usually in maturity or declining stage f.v.1. Asset and cost strategy – sell unproductive assets, increase receivables collection, outsourcing f.v.2. Selective product and market pruning – eliminate product lines that are losing and invest in those that are profiting f.v.3. Piecemeal productivity improvements – improving business processes by reengineering them, benchmarking specific processes against the industry, etc 6. Lecture 5 – Corporate Strategy a. Related diversification – leveraging core competencies and sharing activities (economies of scale) a.i. Core competencies – something your firm is particularly good at. The following increase their value a.i.1. It must enhance the competitive advantage a.i.2. Businesses in the corporation must be similar in one material way a.i.3. The core competencies must be difficult to imitate for find substitutes for a.ii. Sharing activities – common factory facilities, distribution channels, and sales forces. There are two payoffs a.ii.1. Deriving cost savings through sharing activities a.ii.2. Larger revenue and differentiation b. Related diversification – market power logic b.i. Pooled negotiating power b.ii. Vertical integration – b.ii.1.
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