Chapter 5
What is strategic management?
The ability to respond effectively in challenging environments
What is strategy?
The plans and steps taken to achieve firm goals
VRIO Model
value: does this resource/capability provide value?
rareness: is it controlled by a smaller amount of firms?
Imitability: Can it be imitated by others?
organization: are we using it efficiently and effectively?
Five Forces Model
new entrants
- switching costs: if high = low threat (memberships)
- capital requirement: if high = low threat
- economies of scale: If other firms have large productions = low threat
- Cost disadvantage independent of scale: if patents or trademarks are in place = low threat
- distribution channels: if most channels are controlled = low threat
substitutes:
- are the products being sold undifferentiated?
Rivalry
- undifferentiated products = rivalry exists = price competition
- number of sellers and equally balanced: if the number of sellers is large and equally balanced = high rivalry
- high exit barriers: specialized equipment = high rivalry since forced in industry
bargaining of supplier
- critical inputs = high power
- number of sellers low = high power
bargaining of buyer
- low switching costs = high power
- undifferentiated products = high power
- importance of incumbent is low = high power
corporate-level strategy
focuses on business and how expanded and diverse it is
economies of scope: to gain lower production costs from producing diverse products
types
- related: uber and UberEats since related specialties
- unrelated: Amazon buying whole foods since not similar
- Vertical integration: apple opened its own retail stores after moving up the supply chain
means
- internal development: Microsoft making Xbox
- merger and acquisition: J&J acquiring Neutrogena
- strategic alliance: non-equity, equity, and joint ventures
business-level strategy
to compete in the market
cost leadership
- economies of scale
- learning curve economies
- low-cost access to factors of production
product differentiation
focus on specific consumers