ADMS 1000 Lecture Notes - Lecture 4: Vertical Integration, Sobeys, Starbucks
16 Oct 2018
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Lecture 4: Strategic Management
Why are some organizations more successful than other?
- What would attract you? What would you like?
- They plan; have direction and purpose
- If you have benefits, you can attract
- Ex. canon in japan; job for life
o Life time security
- Partnerships ability to innovate
- Listen to your employees long term success
Strategic management: analyses, decisions and implementations; firm undertakes to create
and sustain its competitive advantage
- Process: how are you going to do it?
What is strategy?
- Plans made or the actions taken in an effort to help an organization obtain its
intended purposed
o Need combination of both strategy and strategic
Industry structure analysis
- Industry: group of firms with similar resource requirements in raw materials, labour,
technology, customers
o Ex. American airlines; different companies, same purpose
- Five forces model attempts to evaluate the attractiveness of an industry
o How will it survive in that industry?
o Potential entrants
▪ Always have to be at the top
▪ Potential threat of a new entry
o Suppliers
▪ Raw materials you need
▪ Bargaining power
o Buyers
o Threat of substitutes
Threat of new entrants
- Can be new firms or diversifying entrants
- Incumbents must create barriers to entry
o Economies of scale
▪ Average cost of production of good decreases
▪ New entrant will be discouraged
▪ Always cheaper for someone already established
o Capital requirements
▪ How are you going to produce what you want and how much will it
cost?
o Switching costs
▪ Cost becomes competitive, switch to new carrier
▪ Switching costs has become low, much easier to jump to new carriers
o Access to distribution channels
▪ If someone established has exclusivity right, can only apply to one, can
be challenge
o Cost disadvantages unrelated to scale
Bargaining power of suppliers
- How critical are the inputs provided by suppliers?
- Are there many suppliers relative to producers?
o Starbucks, other companies; many suppliers for coffee beans
o Multiple suppliers; can negotiate
o If there are the only supplier; can raise the price
Bargaining power of buyers
- Are switching costs for buyers high?
- Are competitive products undifferentiated?
o Same product, different price; they’ll match
o Bargaining power goes up
- How important are the products to buyers?
o Vegan options at burger places now
o Organic options
o Gas; you can’t dictate but government could step in
- Are there many buyers relative to producers?
o Grocery stores; go to different stores to buy the same thing
- Your ability to choose bargaining power goes up
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Document Summary
Ex. canon in japan; job for life. If you have benefits, you can attract: life time security. Listen to your employees ability to innovate long term success. Strategic management: analyses, decisions and implementations; firm undertakes to create and sustain its competitive advantage. Plans made or the actions taken in an effort to help an organization obtain its intended purposed: need combination of both strategy and strategic. Industry: group of firms with similar resource requirements in raw materials, labour, technology, customers: ex. Can be new firms or diversifying entrants. If someone established has exclusivity right, can only apply to one, can be challenge: cost disadvantages unrelated to scale. Are there many suppliers relative to producers: starbucks, other companies; many suppliers for coffee beans, multiple suppliers; can negotiate, if there are the only supplier; can raise the price. Are competitive products undifferentiated: same product, different price; they"ll match, bargaining power goes up.
