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Midterm

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Department
Business
Course
BU111
Professor
Leanne Hagarty
Semester
Fall

Description
Chapter 1: Critical Success Factors & Diamond-E Critical Success Factors vital to the success of a company 1. Achieving financial performance to make a goal and achieving it survival + growth money necessary 2. Meeting customer needs to satisfy what the market wants/needs People do not always know what they need. You discover what your market wants and you give it to them, or you create their wants/needs by creating something 3. Building quality products and services consistently giving a customer good value It does not have to be the best; it just has to be worth the money it costs. Everyone needs a certain amount & quality of that product, and the company only needs to give that much (not surpass the expectations) Make them come back for more 4. Encouraging innovation and creativity putting something new out there to capture the customers attention anticipating trends not just about what you give the customers but about how you create the product Apple doesnt just throw everything out at once. They do it step by step every time they produce something, people will talk about it, and hence by constantly producing new things, people are always talking about Apple 5. Gaining employee commitment Employees should be proud of their business, know that its cool Keep employees so they do not switch to competitors Enthusiasm = better business Happy employee will do more than what they are paid for 6. Creating a distinctive competitive advantage Businesses want monopoly By providing something that other companies dont provide, consumers are willing to pay more for that specific product you can set your own prices (not easy with competition) Diamond-E Framework Identifies key variables to be considered in strategic analysis Double headed arrows mean that everything influences each other Strategy-Environment linkage Strategy: what opportunities the business is pursuing - determines the resources, organizational capabilities, and the management preferences The critical linking variable in the model Any variable can either drive or constrain strategy Principal logic: consistency or alignment - strategy must be consistent with internal workings of company (preferences, resources, etc.) - strategy must align with the external environment; you may have the best strategy but it may not be right for that environment environment is changing, so strategy must be shifting First task: deal with strategy-environment linkage assess forces at work, and their implications Organization influences Organization refers to culture, leadership, structure, and capabilities (CLSC) Strategy: you have to have the right CLSC in order to have the right strategy you may not have the leadership/structure/etc appropriate for the strategy you prefer Management Preferences influence They are the biases & preferences within organization bias creeps into everything Environment: There should be a double-headed arrow between management preferences and environment because how the managers view the environment influences their preferences Strategy: your strategy must satisfy your personal preferences you lean toward a strategy Organization: how you prefer to organize your business affects the organization Resources influence Resources are the financial, capital, and human resources of the organization Organization: resources determine the capabilities, investments and how we spend money, type of human resources (culture) and hence organization Strategy: you have to have the right resources to do certain things External analysis Process of scanning + evaluating the external environment look for data, stats, trends, forecasts SWOT: strengths, weaknesses, opportunities, threats How managers determine - opportunities (positive external trends/changes) - threats (negative external trends/changes) Firms face multiple environments (must analyze both environments) 1. General environment: affect all businesses - PEST model identifies general trends/changes 2. Specific environment: affects industry participants every industry has its own environment - Porters 5 Forces analyzes 5 important sources of competitive pressure and intensity predicts profitability of industry Chapter 2: PEST Political-Legal environment Reflects relationship between business and government, government regulation of business Affects uncertainty, risk, and constricts/costs faced by firm New major/provincial leaders can affect many organizations, especially small firms that do business in a single location and are susceptible to zoning restrictions, property and school taxes, etc. Government can create incentives, constraints, support/bail out when needed if business closes, people lose jobs, suppliers suffer, communities suffer; thus easier to just prop up the business 1. Laws, regulations - determine what companies must and must not do regulation protects consumers (ex: banks) - Government regulates certain industries wants to ensure that there is an adequate amount of competition, but prevents too much competition 2. Taxes - The government uses taxes to subsidize things such as education and health care - Use taxes & the way they tax us to create incentives/disincentives to do certain things 3. Trade agreements or conditions - When FTA (free trade agreement) was first signed, businesses thought American companies will take over market but Canadian companies worked hard & overpowered the American market - Open up opportunities open up new markets - Can also be a threat due to competition 4. Political system - At one extreme, there is capitalism: the government is laissez faire allows private ownership of the FoP and encourages entrepreneurship by offering profits as an incentive - At the other extreme, there is communism: the government controls everything - Companies prefer capitalist approach more flexibility and room to pursue opportunities 5. Political stability - Businesses hate uncertainty No business wants to set up shop in another country unless trade relationships with that country are relatively well defined and stable - Need a plan and a strategy to predict what might happen Economic Environment Influences costs, potential sales, and financial uncertainty 1. Economic growth- aggregate output, GDP, and standard of living - More money with economic growth, thus more opportunity to sell things to the populations - They are sufficiently wealthy to buy things and with more money they want to spend more - Aggregate output total output of goods that a country produces in a given periodhigher output = growth = higher standard of living, more exports - GDP is the value of the goods and services that the country produces through FoP 2. Trade balance comparison of imports vs. exports - If imports > exports, you have a trade deficit - If exports > imports, you have a trade surplus - Wants to balance trade deficit = trade surplus 3. National debt government borrowing - Government borrows from the same places as businesses from us, banks, and foreign countries but there is only so much money to go around. - Affects economic growth because the government competes with every other potential borrower (households, businesses, etc) for available supply of loanable money. The more the government borrows, the less available for the private borrowing and investment that increases productivity businesses must compete - Budget deficits are when more is spent per year than gained accumulation of annual deficits lead to national debt amount of money that the government owes its creditors 4. Economic stability - Condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate - Inflation: o Good for inflation to be slow easier to adjust o When amount of money injected into the economy is greater than increase in actual output o People have more to spend; theres still the same number of products available to buy compete rising prices erases increase in money amount purchasing power declines o Consumer price index (CPI) is used to measure inflation - Deflation: o When amount of money injected into economy is less than the increase in actual output o Good: prices fall due to increasing productivity, cost savings passed onto customers jobs o Bad: when consumers have high debt and are thus unwilling to buy much unemployed - Unemployment o Level of joblessness among people actively seeking work o When unemployment is low, theres a shortage of labor for businesses compete raise wages eat profit margins prices rise buy less reduce workforce cycle A. Frictional: people are out of work temporarily while looking for a new job B. Seasonal: people are out of work because of the seasonal nature of their jobs C. Cyclical: people are out of work because of a downturn in the business cycle D. Structural: people are unemployed because they lack skills needed to perform available jobs 5. Interest rates time value of money - When interest rates rise, people are more likely to save because they get more interest borrow less so that they
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