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adms ch. 6.docx

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Administrative Studies
ADMS 1000
Eytan Lasry

Chapter 6 Strategic managementDefinition analysis decisions implementations and evaluations a firm undertakes to create and sustain is competitive advantage A firm will analyze there external and internal environments and based of that they pursue an effective strategy for change Although a company plans out its strategy sometimes an external effect can change the companies plan ie The SARS crises Microsoft entry into the environmentAnalyzing the external environmentIndustry definition group of organizations or firms that share similar resource requirements raw materials labor technology customers Example would be airline industry Air canada westjet Five Forces Model1 Threats of new Entrants New startup firms bring new capacity desire to gain market share and substantial resources and capabilities They may impose significant threats to incumbents due to their reduced profit ie Hyundai can sell cars cheap when they enter the market so Toyota has to compete with these pricesEconomies of scale spreading the costs of production over the number of units produced The cost of a product per unit therefore declines as the number of units per period increases Provides incumbents cost advantages to compete with new entrantsCapital requirements Barriers for new entrants The required capital to establish a new firm is very high mining company for example would need to buy land Switching costs refers to the costs wether monitory or psychological associated with changing from one supplier to another buyer Thus the threat of new entrants increases as the switching costs decrease For example if Bel enters the telecommunications market if Rogers has a switching fee of 100 dollars no one will make the switch regardless of Bells new pricesAccess to distribution channels If incumbents control most of the distribution channels new entrants find it difficult to distribute their products which defers new entry For example hydro one vs New electric Hydro one is all over the country so it is easy for them to distribute Compared to the difficulty of new electric which doesnt have plants all over the countryCost disadvantages independent of scale These advantages have nothing to do with scale but have to do with government policies legal protection patents trademarks2 Bargaining power of suppliers The firms organizations or individuals providing raw materials technologies or skills to incumbents ie Telus leaves the power of there chip in some dud in china who can raise the price when he wants This limits the profit that can be made by Telus Major factors contributing to suppliers power How critical the chip is to Telus If it is very critical obviously the suppliers are in good position to raise the price Number of suppliers If Telus has four people that supply the chip if one guy becomes a tight man they can just go to the other three ie Dell Hp IBM
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