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Lecture 4

Week 4 - Strategic Management.docx

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Administrative Studies
ADMS 1000
Eytan Lasry

ADMS 1000 October 1 , 2013 WEEK 4: STRATEGIC MANAGEMENT  What is Strategic Management? • Strategic management: the analyses, decisions, and implementations a firm undertakes to create and sustain competitive advantage • Analyzing the external environment o Industry structure analysis  Group of firms with similar resource requirements in raw materials • Ex: airline industry, beer o The Five-Forces model attempts to evaluate the attractiveness of an industry • 1 - Threat of new entrants o Incumbents must create barriers to entry  Economies of scale  Capital requirements ADMS 1000 October 1 , 2013  Switching costs for buyers  Access to distribution channels  Cost advantages unrelated to scale (ex: IP; patents, etc.) • 2 – Bargaining power of suppliers • 3 – Bargaining power of buyers • 4 – Threat of substitutes • 5 – Rivalry Among Existing Firms o High exit barriers increase competitive rivalry • The model is static and assumes all firms experiences forces in the same way • VRIO model o Asks 4 questions  Are they valuable?  Are they rare?  Are they difficult to imitate?  Is the firm organized to exploit these valuable, rare, and difficult to imitate resources? o Must answer yes to all 4 questions, or no one cares. If no to one of the questions, it will only be temporary + Difficult to + Organized to = Competitive Valuable? + Rare? + Imitate? Exploit? Advantage Yes Yes Yes Yes Sustainable Yes Yes No Yes
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