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ADMS 1000 Chapter 9.docx

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Administrative Studies
ADMS 1000
Eytan Lasry

Strategy Management 1 Chapter 9:  What is Strategic Management ? o The analyses, decisions and implementations a firm undertakes to create and sustain its competitive advantage o Why are some firms successful than others?  Strategic management attempts to explain differential performance  Analysing the external environment o Industry: Group of firms with similar resource requirements in raw materials, labour, technology, customers…  Ex: FedEx and UPS o The Five-Forces models Threat of o new o o entrain o o o Bargainin Bargaining Industry o Power of competition g power o Supplier of Buyers o (rivalry among existing firms) o o o o o Threat of o Substitute o Product or o Services o  Threat of New Entrants  Can be new firms or diversifying entrants  bring new capacity, gain market share, substantial resources and capabilities   Price will be lower  reduce profitability  Incumbents must create barriers to entry  Economies of scale: o The cost of product decrease when the number of product increase  Capital requirement o The threat of new entrants is reduced when the level of required capital increases (Airline industry, mining industry)  Switching cost: o The cost of changing from on supplier to another from buyer perspective. o The threat of new entrants increases when the switching cost decrease  Access to Distribution Channels o The threat of new entrants decreases when the accessibility to distribution channels decreases  Cost Disadvantages Independent of Scale Strategy Management 2 o Incumbent have advantages such as governmental policies, legal protection  create the barriers for new entrants  Bargaining Power of Suppliers  Supplier have a power over incumbents by demanding higher prices or threatening to reduce quality products   directly impact on profitability and incumbent’s performance  2 factors: (how important, how many number)  When the raw materials suppliers provide are important (critical) to incumbents in an industry, the supplier can demand higher prices  When the number of supplier is low, they can demand for higher p
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