What Are The Steps in Strategic Management?

Market inf luences on business st rat egies
Study this s e t o nline at: http://www.cram .co m /cards /20 36 6 9 5
What is t he import ance of st rat egic planning t hat should be f ollowed by t he companies?
1. U n i f i c a t i o n o f o rg a n i z a t i o n a l a n d o p e ra t i o n a l d e cisions 2 . G o a l -o ri e n t a t i o n t o wa rd t h e d e s i re d c o mp a n y a c h i e ve me n t s 3 . D i re c t f o c u s o n p l a n n i n g f o r f l e xi b l e re s p o n s e s f ornew
di e ve le oma p me n t s n eo ta e tch re a t i rk on f t i oa n s e s f o r e va l b 5 . Th e u o ve ra l l c o mp a n y f o c u s o n t h e vi
4 . Th sion 1. D e f i n e t h e f i rms vi s i o n a n d mi s s i o n s t a t e me n t s 2.Setthegoalsofthe f i rm e f i n e t h e o b j e c t i ve s o the 4 . D e c i d e wh a t t o me a s u re a n d t a k e a b a s e l i n e me a s u re me n t 5 . S t ra t e g i c a n a l ys i s 6 . C re a t e t h e s t ra t e g i c plan
What are the steps in strategic management?
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What are the 2 paths f or achieving organiz ational goals?
Th e re a re 3 o rg a n iz a tio n a l mis s io n p h ilo s o p h ie s wh ich a re : 1. Bu ild mis s io ns 2 . Ho ld mis s io ns 3. Ha rve s t mis s io n s
1. Cost leadership 2.
Financial object ives f or a f irm are t he improvement of t he overall f inancial out come of a f irms st rat egy.
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No n- f inancial o bje ct ive s f o r a f irm are t he impro ve me nt o f t he o ve rall abilit y o f t he f irm t o co mpe t e in t he marke t in t he lo ng run.
Critical success factors can be defined as the organiz ations measures of success to determine the achievement of strategic objectives.

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Th e r e a r e 4 ca te g o r i e s fo r cr i ti ca l s u cce s s fa cto r s fo r a n o r g a n i z a ti o n : 1 . Fi n a n ci a l m e a s u r e s o f s u cce s s 2 . In te r n a l b u s i n e s s p r o ce s s m e a s u r e s o f s u cce s s 3. Cu s to m e r m e a s u r e s o f s u cce s s 4 . Le a r n i n g a n d i n n o va ti o n m e a s u r e s o f s u cce s s

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What is the importance of the Strategic (SWOT) analysis?
Exa m p l e s o n th e fi n a n ci a l m e a s u r e s o f s u cce s s : 1.Salesorearningsg r o wth 2 . Di vi d e n d g r o wth 3. G r o wth i n th e m a r ke t va l u e o f th e o r g a n i z a ti o n s s to ck 4 . Cr e d i t r a ti ngs
Exa m p l e s o n th e i n te r n a l b u s i n e s s p r o ce s s m e a s u r e s o f s u cce s s : 1 . Q u a l i ty m e a s ures 2 . Cycl e ti m e co m p u ta ti ons 3. Y i e lds 4 . Re d u cti o n i n wa s te
Exa mp le s o n th e cu s to me r me a s u re s o f s u cce s s : 1. Ma rke t s h a re d a ta 2 . Cu s to me r s a tis fa ctio n d a ta 3. Re g a rd in g Bra n d re co g n itio n in fo rma tio n Exa mp le s o n th e le a rn in g a n d in n o va tio n me a s u re s o f s u cce s s : 1. Mo ra le a n d co rp o ra te cu ltu re 2 . In n o va tio n in n e w p ro d u cts a n d me th o d s 3. Ed u ca tio n a n d tra in in g
As m a n a g e r s r e vi e w th e s e fa cto r s , th e o r g a n i z a ti o n b u i l d s cl a r i ty r e g a r d i n g : 1 . Th e m i s s ion 2 . Co n s e n s u s a s to th e s tr a te g y 3. Cr i ti ca l s u cce s s fa cto r s 4 . Th e i m p a ct o f i n te r n a l a n d e xte r n a l fa cto r s o n th e b u siness
1. C re a t i n g a s e t o f s t e p s t o a c h i e ve t h e o b j e c t i ve s o f t h e f i rm wh i l e s t a yi n g i n l i n e wi t h t h e f i rms vi s i o n a n d mi s s ion. 2 . P ro vi d i n g a n e n vi ro n me n t a n d mo d e l u n d e r wh i c h t h e g o a l s a n d p ro f i t a b i l i t y o f t h e f i rm c a n b e a c h i e ve d . 3 . Fo c u s i n g o n t h e wa ys t h e c o mp a n y wi l l : A. C o n d u c t b u s i n e s s o p e ra t i o ns B . R e s p o n d t o c o mp e t i t i ve mo ve me n t s a n d o t h e r i ssues C . Ac h i e ve /ma i n t a i n c o mp e t i t i ve a d va ntage
What does the strategic plan of a company f ocus on?
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Strategic plans vary based on segments.

What are t he charact erist ics of t he segment of an organiz at ion af f ect ing st rat egic planning?
1. G ro wt h p o t e n t i a l a s i n d i c a t e d b y i n d u s t ry ma t u ri t y a n d re g u l a t o ry c o n s t ra i n t s 2 . P ro f i t a b ility 3 . D i s c re t i o n a ry c a s h flow 4 . C o n t ri b u t i o n ma rg i n s 5 . L e ve l s o f ri s k 6 . M a n a g e me n t t a l

What are the levels within the organization that the strategic plan should be implemented through?
1. Corporate level 2. Business level 3. Functional level 4. O perating
What is contingency planning?

What are t he quest ions t hat a f irm should use in evaluat ing it s pract ice?
It is t he development of alt ernat ive plans in t he event t hat adopt ed plans dont work.
1 . Do th e g o a l s o f th e fi r m co n ti n u e to b e a l i g n e d wi th th e m i s s i o n s ta te m e n t a n d cu r r e n t s tr a te g y? 2 . Ha s th e fi r m b e e n a b l e to a tta i n o r m a i n ta i n co m p e ti ti ve a d va n ta g e ? 3. Is th e fi r m a b l e to b e p r o fi ta b l e u n d e r th e cu r r e n t s tr a te g y?
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Th e s e l e c t e d s t ra t e g i c p l a n o f t h e f i rm mu s t b e f l e xi b l e t o a d a p t t o c h a n g e s i n a re a s s u c h a s : 1. Te c h n o l ogy 2 . C o mp e t i tion 3 . C ri s i s s i t u a tion 4 . R e g u l a t o ry l a ws 5 . C u s t o me r p re f e re
The f irm must have a strategic plan in order to maintain competitive advantage in the market.
Demand Curve illustrates the maximum quantity of a good, consumers are willing and able to purchase at any given price, all else equal.
Q uantity demanded can be defined as the quantity of a good (or service) individuals are willing and able to purchase at any given price, all else being equal.

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A change in quant it y de mande d is a change in t he amo unt o f a go o d de mande d re s ult ing s o le ly f ro m a change in price .

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What is the fundamental law of demand?
What are t he reasons beyond t he inverse relat ionship bet ween t he quant it y demanded and t he price? What are t he f act ors t hat lead t o t he shif t of t he demand curve ot her t han t he price?
A change in demand is a change in the amount of a good demanded resulting from a change in something other than the price of the good; it causes a shift in the demand curve.
T he fundamental law of demand states that the price of a product (or service) and the quantity demanded of that product (or service) are inversely related.
1. Substitution effect 2. Income

1. C h a n g e s i n we a lth 2 . C h a n g e s i n t h e p ri c e o f t h e R e l a t e d g o o d s (s u b s t i t u tesor c o mp l i me nts) 4.Changesin os ru a me p ror d ce t cta 5 . C h a n g e s i n cs ofn Eu xp tions 6 . C h a n g e s i n t h e N u mb e r o f b u ye rs s e rve d b y t h e ma
.C hangesin co nu su me rr Ta I ns3 cto c re o n me eme s a n d p re f e ns ce
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What is the fundamental law of supply?
If t he price of a subst it ut e good increase, t he demand f or t he original good will increase. If t he price of a complement ary good decrease, t he demand f or t he original good will increase.
The f undamental law of supply states that The price and quantity supplied are positively related.
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T he supply curve illust rat es t he maximum quant it y o f go o d sellers are willing and able t o pro duce at any price level.

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What are t he f act ors t hat lead t o t he shif t of t he supply curve?
Q uantity supplied is the amount of a good that producers are willing and able to produce at any given price, all else being equal.
A change in the quantity supplied is a change in the amount producers are willing and able to produce resulting solely from a change in price.
A change in supply is a change in the amount of a good supplied resulting from a change in something other than the price of the good; it causes a shift in the supply curve.
1 . Ch a n g e s i n th e p r i ce Exp e cta ti o n s o f th e s u p p l yi n g fi r m 2 . Ch a n g e s i n p r o d u cti o n Co s ts 3. Ch a n g e s i n th e p r i ce o r d e m a n d fo r O th e r g oods 4 . Ch a n g e s i n S u b s i d i e s o r ta xe s 5 . Ch a n g e s i n p r o d u cti o n Te ch n ology
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What is the elasticity of demand and supply?
Marke t s upply is t he t o t al amo unt o f a go o d all pro duce rs are willing and able t o pro duce at e ach and e ve ry price , all e ls e be ing e qual.
T he market s equilibrium price and o ut put (quant it y) is t he po int where t he supply and demand curves int ersect .
Elasticity is a measure of how sensitive the demand f or or supply of a product is to a change in price.
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T he price elast icit y o f demand is t he percent age change in quant it y demanded divided by t he percent age change in price.

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The price elast icit y of demand is usually negat ive.
Negat ive price elast icit y of demand ref lect s t he downward sloping demand curve.
T here are 2 methods for measuring the price elasticity of demand: 1. Point method 2. Midpoint method
T he point met hod measures t he price elast icit y of demand at a part icular point on t he demand curve.
T he midpoint met hod measures t he price elast icit y of demand bet ween any t wo point s on t he demand curve.
Demand f or a good is price inelastic if the absolute price elasticity of demand is less than 1.0

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What are the f actors af f ecting price elasticity of demand?
If price inelasticity is zero, demand is perf ectly inelastic.

Demand is price elast ic if t he absolut e price elast icit y of demand is great er t han 1.0 Demand is unit elast ic if t he absolut e price elast icit y of demand is equal t o exact ly 1.0
Demand is unit elastic if the percentage change in the quantity demanded caused by a price change equals the percentage change in price
1. If s u b s titu te s a re a va ila b le , th e p ro d u ct d e ma n d will b e mo re e la s tic. 2 . If th e time p e rio d is lo n g e r, th e p ro d u ct d e ma n d will b e mo re e la s tic b e ca u s e mo re ch o ice s a re a va ila b le .
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What are the f actors af f ecting the price elasticity of supply?
1. S t o ri n g t h e p ro d u c t b y c u s t o me rs wi l l a f f e c t t h e p ri c e e l a s t i c i t y o f s u p p l y; i f t h e p ro d u c t c a n b e s t o re d a n d d o e s n t h a ve t o b e b o u g h t t o d a y t h i s ma y re s u l t i n h i g h e l a s t i c i t y o f s u p p l y. 2 . Th e t i me i t t a k e s t o p ro d u c e a n d s u p p l y t h e g o o d wi l l a f f e c t t h e p ri c e e l a s t i c i t y o f s u p p l y. Fo r e xa mp l e , l o n g e r p ro d u c t i o n t i me l e a d s t o l o we r p ri c e e l a s t i c i t y.
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Cro s s e la s ticity o f d e ma n d (o r s u p p ly) is th e p e rce n ta g e ch a n g e in th e q u a n tity d e ma n d e d (o r s u p p lie d ) o f o n e g o o d ca u s e d b y th e p rice ch a n g e o f a n o th e r g o o d .

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What is the income elasticity of demand?
Subst it ut e go o ds mean t hat if t he price o f pro duct A go es up, t he demand f o r pro duct B go es up (Po sit ive co ef f icient ).
Compliment goods mean that an increase in the price of product A results in a decrease in quantity demanded for product B (Negative Coefficient).
If the coefficient is zero, the goods are unrelated.

I t measures t he percent age change in quant it y demanded f or a product f or a given percent age change in income.
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A normal good is a product whose demand is posit ively relat ed t o income.
An inf erior good is a product whose demand is negat ively relat ed t o income.
Price ceiling is a price that is established below the equilibrium price, which causes shortages to develop (price cant go above this amount).

Price f lo o r is a minimum price s e t abo ve t he e quilibrium price , which caus e s s urplus e s t o de ve lo p (Price cant go be lo w an amo unt ).
T here are 2 t ypes of cost s: 1. Explicit Cost s 2. Implicit Cost Explicit cost s are document ed out of pocket expenses (e.g. wages, mat erials & ut ilit ies).
Implicit cost s are opport unit y cost s of input s supplied by t he owners.
Opport unit y cost is t he value of t he next best alt ernat ive f oregone (or not chosen).
Account ing cost s measure t he explicit cost s of operat ing a business (Not consider opport unit y cost s).
Economic cost s are account ing (explicit ) cost s plus opport unit y (implicit ) cost s.
Economic prof it = Tot al Revenue Tot al economic cost s

Account ing prof it = T ot al Revenue T ot al Account ing cost s

Accounting prof it > Economic prof it (which takes into consideration the opportunity costs)
The inputs used f or production in the long run are variable.
In the long run all costs are variable

T ot al product (T P) equals t he t ot al amount of out put (Q) produced
Marginal pro duct (MP) e quals t he change in t o t al pro duct re s ult ing f ro m a o ne - unit incre as e in t he quant it y o f an input e mplo ye d.
Average product (AP) equals t he t ot al product divided by t he quant it y of an input .
T he law of diminishing returns states that when more and more units of an input are combined with a fixed amount of other inputs, output increases but at a diminishing rate.

T he classif icat io n o f co st s t o f ixed and variable is in t he sho rt -run o nly because in t he lo ng run all co st s are variable.
Fixed co st s do nt change during t he pro duct io n perio d; t hey are independent o f t he level o f pro duct io n
Variable costs are dependent upon the level of production
Average Fixed Cost (AFC) = TFC/Q Average variable cost (AVC) = TVC/Q Average Total Cost (ATC) = TC/Q
TC = FC + VC
Marginal cost (incremental cost) is the change in total cost, resulting f rom a one-unit increase in quantity.

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What are the f actors enabling economies of scale?
Marginal cost depends solely on variable costs. Fixed costs dont influence marginal costs MC and TC are directly proportional
T he sho rt -run supply curve is t he marginal co st (MC) curve abo ve t he minimum po int o f it s average variable co st (AVC) curve.
Economies of scale are reduct ions in unit cost s result ing f rom increased siz e of operat ions.
1. Oppo rt unit y f o r s pe cializ at io n 2. Ut iliz at io n o f advance d t e chno lo gy 3. Mas s pro duct io n is no rmally mo re e f f icie nt
Diseconomies of scale are increases in average costs of operations resulting from problems in managing large-scale enterprises.
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What are the f actors causing diseconomies of scale?
1. Bottlenecks and costs of transporting materials 2. Difficulty of supervising and managing a large bureaucracy (inefficient performance of the management function).
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What are t he at t ribut es of perf ect compet it ive market ?
Under a perfectly competitive market, strategic plans may include maintaining the market share and responsiveness of the sales price to market conditions.
Under a perf ect ly compet it ive market , no individual f irm can inf luence t he market price of it s product .
Under a perfectly competitive market, no individual firm can shift the market supply sufficiently to make a good more scarce or abundant.
1. A la rg e n u mb e r o f s u p p lie rs a n d cu s to me rs a ctin g in d e p e n d e n tly 2 . Ho mo g e n o u s p ro d u cts 3. No b a rrie rs to e n try b e ca u s e firms e xe rt n o in flu e n ce o ve r th e ma rke t o r p rice .
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In a pe rfe ctly co m pe titive m arke t a pro fit m axim iz ing firm will co ntinue adding units to pro ductio n until the co s t o f pro ducing o ne m o re unit is gre ate r than the re ve nue that unit will ge ne rate (P=MR=MC).
In t he perf ect co mpet it ive market t he f irm sho uld co nt inue t o pro duce as lo ng as price is great er t han t he variable co st s
I n t he perf ect compet it ive market t he f irm is a price t aker not a price set t er like at t he Monopolist ic market

What are t he advant ages of t he perf ect ly compet it ive market ?
1 . Lo w p r i ce s 2 . La r g e q u a n ti ti e s 3. If a b n o r m a l p r o fi ts e xi s t, n e w co m p e ti to r s e n te r a n d d r i ve th e p r i ce d o wn . 4 . Re s p o n s i ve n e s s to co n s u m e r wi s h e s , In cr e a s e i n demand
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What are t he assumpt ions and market condit ions f or Monopolist ic compet it ion market st ruct ure?
Un d e r m o n o p o l i s ti c co m p e ti ti o n s tr a te g i c p l a n s m a y i n cl u d e : 1 . Ma i n ta i n i n g th e m a r ke t s hare 2 . P l a n fo r e n h a n ce d p r o d u ct d i ffe r e n ti a ti o n 3. Exte n s i ve a l l o ca ti o n o f r e s o u r ce s to a d ve r ti s i n g , m a r ke ti n g , p r o d u ct r e s e a r ch
1 . Nu m e r o u s fi r m s wi th d i ffe r e n ti a te d p r o d u cts 2 . Fe w b a r r i e r s to e n tr y 3. Th e a b i l i ty o f fi r m s to e xe r t s o m e i n fl u e n ce o ve r th e p r i ce andmar ke t 4 . S i g n i fi ca n t n o n -p r i ce co m p e ti ti o n i n th e m a r ke t ( e .g .,
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T here is lit t le market cont rol by each f irm in t he monopolist ic compet it ion market st ruct ure.
Un d e r th e mo n o p o lis tic co mp e titio n th e firm ma ximiz e s p ro fits b y p ro d u cin g th e le ve l o f o u tp u t th a t e q u a te s MR a n d MC (i.e ., p ro d u ce wh e re MR = MC)
Under t he monopolist ic compet it ion t he f irm earns an economic prof it
Because there are free barriers to entry under monopolistic competition, in the long run, monopolistically competitive firms will earn z ero profits

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Unde r and o ligo po ly, s trate gic plans fo cus o n m arke t s hare , and call fo r the pro pe r am o unt o f adve rtis ing and ways to pro pe rly adapt to price change s o r re quire d change s in pro ductio n vo lum e

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What are t he assumpt ions and market condit ions under t he Oligopoly market st ruct ure?
An O ligopoly is a market structure in which few sellers dominate the sales of a product and entry of new sellers is difficult or impossible
1. Re la tive ly fe w firms with d iffe re n tia te d p ro d u cts 2 . Fa irly s ig n ifica n t b a rrie rs to e n try (e .g . , h ig h ca p ita l re q u ire d ) 3. Stro n g ly in te rd e p e n d e n t firms (p rice s te n d to b e fixe d )
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What are t he assumpt ions and market charact erist ics of Monopoly?
O ligopolists face a kinked demand curve because firms match price cuts of competitors but ignore price increases.
Regardless of the model that represents the industry, the firm will operate best when marginal revenue equals marginal cost (MR=MC)
Under Monopoly, strategic plans will likely ignore market share and focus on profitability from production levels that maximiz e profits.
Monopoly represent s t he concent rat ion of supply in t he hands of a single f irm
1. A single firm with a unique product 2. Significant barriers to market entry 3. T he ability of the firm to set output and prices 4. No substitute products

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Under t he Monopoly market st ruct ure t he f irms demand curve is t he same as t he indust rys demand curve

Under t he Monopoly market st ruct ure t he f irm is a price set t er
In a Mo n o p o l y, th e fi r m wi l l m a xi m i z e p r o fi ts wh e r e m a r g i n a l r e ve nueequals m a r g i n a l co s t; h o we ve r , th e m o n o p o l i s ts p r i ce wi l l b e h i g h e r th a n m a r g i n a l r e ve n u e [( MR=MC a n d P > MR ( a n d MC) ].
Quant it y produced by a monopolist is below t he socially ef f icient level
Ca rte ls a re g ro u p s o f firms a ctin g to g e th e r to co o rd in a te o u tp u t d e cis io n s a n d co n tro l p rice s a s if th e y we re a s in g le mo n o p o ly (i.e ., OPEC). Th e like ly e ffe ct o f a ca rte l is to in cre a s e p rice a n d re d u ce o u tp u t b e lo w th e s o cia lly e fficie n t le ve l.
Boycot t s are organiz ed group ref usals t o conduct market t ransact ions wit h a t arget group T here are 2 t ypes of input s: 1. Complement ary input s 2. Subst it ut e
Derived demand is the demand f or f actors of production.

If t he demand f or a f irms out put increases, t he demand f or t he input s used t o produce t hat out put will also increase.
If t he marginal product of an input increases, t he demand f or t hat input will also increase.
A Monopsony occurs when t here is only one employer in t he market

Firms desiring to achieve competitive advantage must focus on the needs and preferences of the buyers, and then either meet or exceed their expectations.
Value Chain analysis is a strategic tool that assists a firm in determining how important its perceived value by the buyers- is with respect to the market the firm operates in.
Managers must determine the flow of activities undertaken by the organiz ation to produce a service or product and critique the value added to the customer by each link in the value chain.
O nce the firm is aware of how its product is perceived, value chain analysis is invaluable in assessing the ability of the firm to attain competitive advantage.
T he result of t he value chain is t he reduced cost or t he improved innovat ion.

T he one who has f irst suggest ed t he idea of t he Value Chain is called Michael Port er at 1985.
According to Porter, there are 2 major categories of business value activities exist which are: 1. Primary activities 2. Support activities
P ri ma ry Ac t i vi t i e s a re t h o s e t h a t a re i n vo l ve d wi t h t h e d i re c t ma n u f a c t u re o f p ro d u c t s , t h e d e l i ve ry o f t h e p ro d u c t s t h ro u g h d i s t ri b u t i o n c h a n n e l s , a n d t h e s u p p o rt o f t h e p ro d u c t t h a t e xi s t s a f t e r t h e s a l e i s ma d e (e .g . h a n d l i n g t h e ra w ma t e ri als,the ma n u f a c t u ri n g p ro c e s s , t a k i n g o rd e rs f o r t h e p ro d u c t , a d ve rt i s i n g t h e p ro d u c t , a n d s e rvi c i n g t h e p ro d u c t a f t e r i t i s s o l d ).
Sup p o r t Ac ti vi ti e s a r e tho s e a c ti vi ti e s tha t a r e p e r fo r m e d b y the s up p o r t s ta ff o f a n o r g a ni z a ti o n ( e .g ., p ur c ha s i ng o f the m a te r i a l s a nd s up p l i e s , d e ve l o p m e nt o f the te c hno l o g y us e d , m a na g e m e nt o f e m p l o ye e s , a c c o unti ng , fi na nc e , s tr a te g i c p l a nni ng , e tc .) .
J o h n S h a n k a n d V. G o vi n d a ra j a n t o o k a l o o k a t t h e va l u e c h a i n i n a n d e ve n b ro a d e r s e n s e t h a n M i c h a e l P o rt e r. Th e y i n d i c a t e d t h a t t h e f i rm i t s e l f i s a p a rt o f t h e o ve ra l l va l u e c h a i n o f t h e i n d u s t ry. I n t h i s vi e w, t h e va l u e s t a rt s wi t h t h e s u p p l i e rs wh o p ro vi d e t h e ra w ma t e ri a l s f o r t h e p ro d u c t i o n p ro c e s s , c o n t i n u e s wi t h t h e f i rm a n d i t s s t ra t e g i c p l a n , c o n t i n u e s f u rt h e r wi t h t h e va l u e c re a t e d b y t h e c u s t o me rs , a n d t h e n e n d s wi t h t h e d i s p o s a l a n d
T here are 3 forms of the value chain analysis: 1. Internal costs analysis 2. Internal differentiation analysis 3. Vertical linkage analysis
An a lyz in g th e ve rtica l lin ka g e o f th e firm me a n s u n d e rs ta n d in g th e a ctivitie s o f th e s u p p lie rs a n d b u ye rs o f th e p ro d u ct a n d d e te rmin in g wh e re th e va lu e ca n b e cre a te d e xte rn a l to th e firms o p e ra tio n s .
Ofte n th e g re a te s t va lu e a n d co mp e titive a d va n ta g e s te ms fro m th e in fo rma tio n o b ta in e d fro m th e ve rtica l lin ka g e a n a lys is b e ca u s e th e a ctivitie s th a t cre a te th e mo s t a n d le a s t a mo u n t o f va lu e ca n b e d e te rmin e d .

Va lu e Ch a in a n a lys is co n s is ts o f 3 s te p s wh ich a re : 1. Id e n tify va lu e a ctivitie s 2 . In d e n tify co s t d rive rs a s s o cia te d with e a ch a ctivity 3. De ve lo p a co mp e titive a d va n ta g e b y re d u cin g co s t o r a d d in g va lu e
Value activities are generally those processes that are involved with designing, preparing, manufacturing, and delivering a good or service
Cost drivers represent f actors that increase total cost

Ident if icat io n o f co st drivers assist t he o rganizat io n in det ermining t ho se areas in which it has a co mpet it ive advant age.
Organiz at ions might also ident if y t hose areas in which out sourcing is valuable
Th e l a s t s te p i n th e va l u e ch a i n a n a l ys i s i s to s tu d y th e co s t d r i ve r s a s s o ci a te d wi th e a ch a cti vi ty i n th e va l u e ch a i n fr o m a s p e ci fi c p e r s p e cti ve : a . Id e n ti fy co m p e ti ti ve a d va n ta g e b . Id e n ti fy o p p o r tu n i ti e s fo r a d d e d va l u e c. Id e n ti fy o p p o r tu n i ti e s fo r r e d u ce d co s t
In s o m e ca s e s th e va l u e th a t e a ch s te p i n th e va l u e ch a i n p r o d u ce n o t o n l y b e n e fi ts th e s p e ci fi c a cti vi ty i n th e ch a i n b u t a l s o b e n e fi ts o th e r a cti vi ti e s ( e .g . Cu s to m e r s e r vi ce m i g h t n o t o n l y b e n e fi t th e fi r m b y cr e a ti n g l o ya l ty fr o m i ts cu s to m e r s b u t ca n a l s o i n fl u e n ce th e p r o d u ct d e s i g n i n th e fu tu r e ) .
T he r e a r e 3 typ e s o f s tr a te g i c fr a m e wo r ks tha t ha ve p r o ve n to b e us e ful fo r the va l ue c ha i n a na l ys i s whi c h are: 1. Ind us tr y s tr uc tur e a na l ys i s 2 . C o r e c o m p e te nc i e s a na l ys i s

Note Note Note Note Note Note Note

What are t he int ernal f act ors t he inf luence t he st rat egy of t he f irm?
M i c h a e l P o rt e r wo rk i n 19 8 0 a n d 19 8 5 i d e n t i f i e d f i ve f o rc e sthat i n f l u e n c e p ro f i t a b i l i t y o f t h e f i rm a n d t h u s , i mp a c t t h e c o mp e t i t i ve e n vi ro n me n t o f a f i rm a n d a l s o i n f l u e n c i n g t h e b u s i n e s s s t ra t e g y wh i c h a re : 1. B a rri e rs t o ma rk e t e n t ry 2 . M a rk e t c o mp e t i t i ve ness
Co r e co m p e te n ci e s ca n b e cr e a te d wh e n th e fi r m h a s a s o l i d fo u n d a ti o n i n th e fo l l o wi n g : 1 . Exce l l e n t e m p l o ye e s 2 . Q u a l i ty p h ys i ca l r e s o u r ce s 3. S u p e r i o r te ch n o logy 4 . Ab i l i ty to i n te g r a te a l l th o s e fa cto r s a p p r o p r i a te l y
A co m p e te n cy i s d e e m e d a co r e co m p e te n cy i f i t h a s th e a b i l i ty to : 1 . Re d u ce th e th r e a t th a t co m p e ti to r s m a y co p y th e p r o d u ct 2 . In cr e a s e d p e r ce i ve d cu s to m e r va l u e 3. P r o vi d e l e ve r a g e ( i .e . ca n a l a r g e a m o u n t o f m a r ke ts b e a cce s s e d?)
Al o n g wi t h h i s f i ve f o rc e s t h a t i mp a c t t h e p ro f i t s a n d c o mp e t i t i ve e n vi ro n me n t o f a n i n d u s t ry P o rt e r i n d i c a t e d f o u r ma j o r f a c t o rs t h a t i mp a c t g l o b a l c o mp e t i t i ve a d va n t a g e (t o b e c o n s i d e re d a l o n g wi t h t h e ri s k s o f t h e p o l i t i c a l e n vi ro n me n t o f t h e n a t i o n , i n f l a t i o n ra t e s , c u rre n c y f l u c t u a t i o n s , t a x re g u l a t i o n s , s o c i a l va l u e s , e t c .) wh i c h a re : 1. C o n d i t i o n s o f t h e f a c t o rs o f p ro d u ction
Whe n d e te r m i ni ng the e ffe c ts o f the m a r ke t o n b us i ne s s s tr a te g y, a l o o k a t the o ve r a l l m a c r o -e nvi r o nm e nt i n whi c h the fi r m o p e r a te s i s e s s e nti a l b e c a us e i t c a n s i g ni fi c a ntl y a s s i s t the c o m p a ny i n d e ve l o p i ng a nd c ho o s i ng the b e s t s tr a te g y to m e e t i ts goals.
Firms use SWOT analysis t o assist in developing t heir appropriat e st rat egic plans
SWO T analysis consists of 2 factors that influence the firms strategy which are: 1. Internal factors (Strengths and Weaknesses) 2. External factors (O pportunities and T hreats)
Th e y a re s o u rc e s o f s t re n g t h s a n d we a k n e s s wh i c h i n c lude: 1. I n n o va t i o n o f p ro d u c t l ines 2 . C o mp e t e n c e o f ma n a g e me n t 3 . C o re c o mp e t e n cies 4 . I n f l u e n c e o f h i g h -l e ve l ma n a g e rs 5 . C a p i t a l i mp ro ve me n t s 6 . L e a d e rs h i p i n re s e a rc h a n d d e ve l o p

What are t he ext ernal f act ors t he inf luence t he st rat egy of t he f irm?
Th e y a re s o u rc e s o f o p p o rt u n i t i e s i n t h e ma rk e t a n d t h re a t s t o t h e f i rms a b i l i t y t o c o n t i n u e wi t h i t s s t ra t e g i c p l a n a n dinclude: 1. Th e e c o n o my 2.Regulationsandl a ws 3 . D e mo g ra p h i c s o f t h e p o p u l ation 4 . Te c h n o l o g i c a l a d va n c e s a n d e xi s t i n g t e c h n ology 5 . S o c i a l va l Typ e s o f b a rri e rs t o ma rk e t e n t ry: 1. G o ve rn me n t re g u l a tion 2.Supplierac cess 3 . H i g h u p -f ro n t c a p i t a l re q u i re me n t s 4 . P re -e xi s t i n g c u s t o me r p re f e re n c e s a n d l o ya l t i e s 5 . E c o n o mi e s o f s cale
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What are t he f act ors t hat impact market compet it iveness?
What are t he f act ors t hat lead t o st rengt hening t he bargaining power of cust omers?
1. Ab ility o f riva l firms to re s p o n d to ch a nge 2 . Ad ve rtis in g o f riva l firms 3. R&D o f riva l firms 4 . Allia n ce s o f riva l firms a n d s u p p lie rs 1. La rg e vo lu me o f a firms b u s in e s s (h ig h b u ye r co n ce n tra tio n ) 2 . Ava ila b ility o f in fo rma tio n 3. Bu ye rs lo w co s t o f s witch in g p ro d u cts 4 . Hig h n u mb e r o f a lte rn a te s u p p lie rs
What are t he f act ors t hat lead t o st rengt hening t he bargaining power of t he supplier?
1. Firm is unable t o change suppliers 2. Reput at ion of supplier and demand f or it s goods
Wh e n firms d e s ire to a ch ie ve co mp e titive a d va n ta g e with re s p e ct to p ro d u cts , th e re a re two b a s ic fo rms o f a d va n ta g e th a t th e y will ch o o s e fro m: 1. Co s t le a d e rs h ip a d va n ta g e 2 . Diffe re n tia tio n a d va n ta g e
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Cost leadership advantage may be used by the firm in one of two ways: 1. Build market share 2. Match the price of rivals Differentiation leadership advantage may be used by the firm in one of two ways: 1. Build market share 2. Increase price

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What are the types of Competitive strategies?
1. Buye rs have large am o unts o f bargaining po we r 2. Buye rs are able to s witch be twe e n co m pe titive pro ducts witho ut incurring s ignificant co s t 3. The re is he avy co m pe titio n
1. C o s t l e a d e rs h i p s t ra t e gies 2 . D i f f e re n t i a t i o n s t ra t egies 3 . B e s t c o s t s t ra t e gies 4 . Fo c u s /N i c h e s t ra t e gies 5 . M e rg e r a n d Ac q u i s i tion 6 . C o o p e ra t i ve /s t ra t e g i c a l l i
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What are the dif f erentiation strategies that a f irm may use?
C o s t l e a d e rs h i p s t ra t e g i e s f ailif: 1. Fi rms f o c u s t o o mu c h o n c u t t i n g c o s t s a n d o ve rl o o k t e c h n o l o g i c a l a d va nces 2 . Fi rms o ve rl o o k t h e f a c t t h a t c o n s u me rs ma y d e s i re i mp ro ve me n t s t o t h e p ro d u c t o r ma y n o t c a re a n ymo re a b o u t t h e e xi s t e n ceof l o we r p ri c e i n t h e d e s i re d p ro d uct
1. Create/Promote a unique feature in the product 2. Build customer brand loyalty 3. Perception is often greater than reality
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Di ffe r e n ti a ti o n s tr a te g i e s wo r k we l l wh e n : 1 . Cu s to m e r s a r e a b l e to s e e va l u e i n a p r o d u ct 2 . P r o d u ct a p p e a l s to d i ffe r e n t p e o p l e fo r d i ffe r e n t reasons 3. Fi r m s wh o a r e co m p e ti n g i n th e m a r ke t ch o o s e d i ffe r e n t fe a tu r e s wi th wh i ch to d i ffe r e n ti a te th e i r p r o
D i f f e re n t i a t i o n s t ra t e g i e s failif: 1. Fi rms c h o o s e t o d i f f e re n t i a t e i n a n a re a wi t h o u t p ro p e rl y a s s e s s i n g t h e re q u i re me n t s o f t h e c o n s u me r f o r d e s i re d f e a t u re s 2 . Fi rms f o c u s t o o mu c h o n t h e wro n g a re a a n d e n d u p c re a t i n ga p ro d u c t wh o s e va l u e d o e s n t e xc e e d t h e h i g h e r p ri c e t h a t mu stbe c h a rg e d f o r t h e f e a t u re
The be s t co s t s trate gy co m bine s the co s t le ade rs hip s trate gy with the diffe re ntiatio n s trate gy to give cus to m e rs highe r value fo r the ir purchas e price (i.e . , a quality pro duct at a re as o nable price )
Under t he best cost st rat egy t he overall lowest cost in indust ry is not an opt ion.

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What are the Focus/Niche strategies?
Best cost st rat egies work well when generic product s are not accept able t o t he varied needs of t he buyers
Best cost st rat egies lose when it f ails t o at t ain t he proper middle ground in t he market place
Fi r m s wi th co s t l e a d e r s h i p o r d i ffe r e n ti a ti o n s tr a te g i e s m a y ch o o s e to fo cu s th e i r ch o s e n s tr a te g y o n a s e l e ct s m a l l g r o u p o f co n s u m e r s o r a n i ch e wh e r e co n s u m e r s h a ve s p e ci a l i z e d n e e d s a n d p r e fe r e n ce s , r a th e r th a n h a vi n g to a d d r e s s th e n e e d s a n d p r e fe r e n ce s o f a b r o a d r a n g e o f co n s u m e r s .
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What are t he reasons beyond t he merger or acquisit ion of any f irm t o anot her?
Fo c u s /N i c h e s t ra t e g i e s wo rk we l l i n t h o s e c ases: 1. P ro vi d e d t h e n i c h e h a s a l a rg e e n o u g h d e ma n d t o c re a t e a p ro f i t forthef i rm 2 . P ro vi d e d t h e f i rm h a s p ro p e r re s o u rc e s t o a d e q u a t e l y s e rve t h e needsofthenicheg ro u p 3 . P ro vi d e d t h a t f e w f i rms a re f o c u s i n g i n a n a re a wh e re o t h e rs c a n t Fo c u s /N i c h e s t ra t e g i e s f a i l i n t h o s e c ases: 1. Wh e n o t h e r f i rms s e e t h a t t h e n i c h e h a s b e e n s u c c e s s f ulfor t h o s e s e rvi n g i t , t h e y wi l l a t t e mp t t o e n t e r t h e ma rk e t a s c o mp e t i t o rs a n d t a k e a wa y s o me o f t h e s a l e s o f t h e f i rm, l i k e l y re d u c i n gthe f i rms p ro f i t s a n d i t s c o mp e t i t i ve a d va n t age. 2 . P re f e re n c e s c h a n g e o r t h e s t a n d a rd p ro d u c t s h a ve s i g n i f icantly
1. To o b t a i n o p p o rt u n i t i e s f o r c o s t re d u c t i o n s t h a t t h e y c o u l d n t o t h e rwi s e o b t a i n 2 . To o b t a i n t e c h n o l o g i c a l k n o wl e d g e o f o t h e rs t h a t t h e y d o n t c u rre n t l y h a ve 3 . To c o mb i n e R & D a c t i vi t i e s f o r e f f i c i e n c y a n d e f f e c t i ve n e s s 4 . To e xp a nd 5 . To c o ve r a re a s o f ma rk e t d e ma n d t h a t t h e y a re n o t c u rre ntly s e rvi ng
What are t he reasons t hat might lead t o t he f ormat ion of st rat egic or cooperat ive alliances?
1 . Wh e n co m p a n i e s d e s i r e to a ch i e ve s u ch th i n g s a s e co n o m i e s o f s ca l e ( i n m a r ke ti n g o r p r o d u cti o n ) 2 . To s h a r e th e co s t o f o b ta i n i n g i n fo r m a ti o n o n i n n o va ti o n s i n te ch n o l o g y 3. To o b ta i n i n fo r m a ti o n a s a g r o u p th a t th e y co u l d n t o b ta i n i n d i vi d u a l l y
What leads t o t he success of t he cooperat ive/st rat egic alliances st rat egies?
1. Individual partne rs are able to wo rk as a te am to ward a co m m o n go al 2. Partne rs do no t take the info rm atio n the y re ce ive and be gin to co m pe te he avily with e ach o the r.

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What are t he disadvant ages of vert ical int egrat ion compet it ive st rat egy?
Ve rtica l in te g ra tio n is a s tra te g y in wh ich th e firm s e e ks to co n tro l th e va lu e ch a in o n th e s u p p ly e n d a n d o n th e d e ma n d e n d with in th e s a me in d u s try via in te g ra tio n o f th e s e p ro ce s s e s to th e firms o p e ra tio n s .
Reducing the firms flexibility with respect to suppliers and distribution channels and force the firm to be too focused on one industry or too committed to one supplier or distribution channel.
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Arrange t he supply chain management st ages f ro m t he least so phist icat ed t o t he mo st so phist icat ed.
In te g ra te d s u p p ly ch a in ma n a g e me n t is a co lla b o ra tive e ffo rt b e twe e n b u ye rs a n d s e lle rs th a t le t th e m b e e n a b le to re a s o n a b ly p re d ict th e e xp e cte d d e ma n d o f co n s u me rs fo r a p ro d u ct a n d th e n p la n a cco rd in g ly fo r s u p p lyin g th a t d e ma n d
The go al o f the ISCM is to be tte r unde rs tand the ne e ds and pre fe re nce s o f cus to m e rs and cultivate the re latio ns hip with the m , als o the s e he lps in m inim iz ing the co s ts all alo ng the s upply chain.
Th e S u p p l y c h a i n o p e ra t i o n s mo d e l S C O R a s s i s t s a f i rm i n ma p p i n g o u t i t s t ru e s u p p l y c h a i n a n d t h e n c o n f i g u ri n g i t t o b estfit t h e n e e d s o f t h e f i rm a n d c o n s i s t s o f f o u r k e y ma n a g e me n t p ro c e s s e s (C o re a c t i vi t i e s o f S C O R ): 1. P l an 2.Sou rc e
1. Th e fu n d a me n ta ls 2 . Cro s s - fu n ctio n a l te a ms 3. In te g ra te d e n te rp ris e 4 . Exte n d e d s u p p ly ch a in
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In t he f undame nt als s t age o f t he s upply chain manage me nt , t he main bus ine s s is s ue it is co nce rne d wit h is t he co s t o f qualit y
In the cro s s - functio nal te am s s tage o f the s upply chain m anage m e nt, the m ain bus ine s s is s ue the firm is co nce rne d with is unre liable o rde r fulfillm e nt, and it is ve ry co nce rne d abo ut cus to m e r s e rvice .

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What are t he benef it s of implement ing t he supply chain management ?
In th e i n te g r a te d e n te r p r i s e s ta g e o f th e s u p p l y ch a i n m a n a g e m e n t, m a n a g e m e n t wi l l m o ve a wa y fr o m simple co n s o l i d a ti o n o f i ts o p e r a ti o n s to a n i n te r n a l l y-i n te g r a te d s u p p l y ch a i n , wh i ch a l l wo r ks to g e th e r wi th cr o s s -fu n cti o n a l p u r p o s e s to wa r d s th e m a i n b u s i n e s s i s s u e o f th e co s t o f
In t he e xt e nde d s upply chain o f t he s upply chain manage me nt , t he main bus ine s s is s ue o f t his s t age is s lo w, pro f it able gro wt h.
In the supply chain communities stage of the supply chain management, networks play a large role and the main business issue facing the firm is creating networks of preferred suppliers
1. R e d u c e d c o s t i n i n ve n t o ry ma n a g e me n t 2 . R e d u c e d c o s t s i n wa re h o u sing 3 . O p t i mi z a t i o n o f t h e d i s t ri b u t i o n n e t wo rk a n d f a c i l i t y l o cations 4 . E n h a n c e d re ve n ues 5 . I mp ro ve d s e rvi c e t i me s 6 . S t ra t e g i c s h i p me n t c o n s o l i d ation 7. R e d u c e d c o s t i n p a c k a ging
What are the general steps in implementing ISCM?
1. As s e s s t h e o p p o rt u n i t i e s i n t h e s u p p l y chain 2 . D e ve l o p a vi s i o n f o r t h e I SCM 3 . D e ve l o p a s t ra t e g y f o r t h e I SCM 4 . C re a t e a n o p t i mu m o rg a n i z a t i o n a l s t ru c t u re f o rISCM 5 . E s t a b l i s h a n i n f o rma t i o n a n d c o mmu n i c a t i o n n e t wo rk f o rISCM 6 . Tra n s l a t e t h e I S C M s t ra t e g y i n t o a c
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T he supply chain of a firm must be both responsive to the changing needs of customers and allow the firm to do so in an efficient manner.
Supply chain drivers are drivers t hat det ermine t he supply chain perf ormance
S u p p l y ch a i n d r i ve r s i n cl u d e : 1.Produ cti o n 2 . In ve n to r y 3. Lo ca ti on 4 . Tr a n s p o r ta ti o n


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S t e p s t o a l i g n t h e s u p p l y c h a i n a n d t h e b u s i n e s s s t ra t e g y a re : 1. U n d e rs t a n d t h e ma rk e t s t h e f i rm o p e ra t e s i n a n d t h e c u s t o me rs i t s e rvi c e s 2 . I d e n t i f y t h e c o re c o mp e t e n c i e s o f t h e f i rm a n d h o w t h e f i rm wi l l u s e t h e s e t o b e s t s e rve i t s c u s t o me rs 3 . Af t e r t h e c o mp a n y h a s c h o s e n h o w i t wi l l b e s t s e rve i t s c u s t o me rs , c re a t e va l u e a l o n g t h e s u p p l y c h a i n t o a c h i e ve t h e p l a n n e d g o a ls.

What Are The Steps in Strategic Management?

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What Are The Steps in Strategic Management?

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Market inf luences on business st rat egies

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