Study Guides (238,082)
Canada (114,909)
Business (1,198)
BU111 (269)

BU 111 Notes.docx

14 Pages
Unlock Document

Wilfrid Laurier University
Leanne Hagarty

BU 111 Notes CRITICAL SUCCESS FACTORS The goal/essence of the business is to link together to get long-term success, survive and sustain against competitors. 1. Achieving Financial Performance a. Continuous cash flow b. Sustainable 2. Meeting Customer Needs 3. Building Quality Products and Services a. Generate customer loyalty 4. Encouraging Innovation and Creativity a. Find/Understand the quality b. Satisfy the constantly changing needs of consumers c. Adjust behind the scenes d. Anticipate the needs 5. Gaining Employee Commitment a. More proactive b. Take initiative c. Have incentives for better employees d. Lower turnover rate which also reduces costs, more innovative and creative word e. Proud of their work 6. Creating a Distinctive Competitive Advantage a. Uniqueness has to be valuable b. Create niche c. Otherwise compete against price d. Not imitable DIAMOND-E FRAMEWORK The internal and external parts are linked by strategy. A tool used to assess whether or not a strategy makes sense and helps to identify which variables to consider. Consistency=Alignment=Strategy makes sense & appropriate considering the resources available 1. Management Preference a. Managers are human b. Determines risk tolerance c. Drive d. Structure of business e. Match between preferences and strategies? (Is the conviction & similarity in their preferences & the company‟s?) f. Match different ranks and show a willingness to change? 2. Organization a. Culture/ethics/values b. Leadership style c. Capabilities d. Structure (chain of command) e. What capabilities are actually required? (to execute the strategy) f. What capabilities are already available? Is it feasible to fil that gap? g. What (organizational) structure makes sense culturally or in leadership? 3. Resources a. Human Resources b. Capital resources (skillsets, patents, shares, investments) c. Financial resources (land, property, physical assets) d. What resources are required? (in all 3 categories) e. What resources are available? Is it feasible? Can we fill the gap? If not, can/should we change the strategy? 4. Environment (Tells what they‟re not doing; can help/constrain in the 2-way relationship) a. General: PEST (technology, Canadian market) b. Specific: Porter‟s 5 (smartphones) 5. Strategy a. Opportunities/Threats b. Everything is linked to strategy c. Constantly changing to adapt to external changes d. Variable = management e. Must align with environment and internal variables Principle Logic = consistency or alignment, examples IKEA: stylish furniture, P&G: new brands Environment Risk when environment doesn‟t match your strategy. 1 task is to investigate the relationship between external environment & strategy, assess forces at work and their linkage External analysis involves: 1. Process of scanning and evaluating the external environment 2. How managers determine opportunities (positive external trends or changes) and threats (negative external trends or changes) 3. Firms face multiple environments: General environment (affects all businesses) & Specific environment (affects industry participants) a. General Environment: PEST Model—identifies general trends and changes b. Specific Environment: Porter‟s 5 Forces—analyzes 5 important sources of competitive pressure and intensity; predicts profitability of industry PEST 1. Legal a. Laws, regulations (environmental, bank laws) b. Taxes (Incentives/disincentives) c. Trade agreements or conditions (NAFTA, free trade between CA, US & Mexico) d. Political System/stability (capitalist? Business friendly?) e. Governments can create incentives, constraints, or support/bail out when needed f. Affects uncertainty, risk, and costs faced by firm 2. Economics a. Economic Growth—GDP and standard of living i. 70% economic activity through consumer spending b. Economic stability—inflation, unemployment c. Trade Balance—importing vs. exporting (surplus vs. deficit) d. National Debt—government borrowing e. Interest rates f. Exchange rates g. Influences costs, potential sales, and financial uncertainty 3. Social a. Customs, values, attitudes, and demographic characteristics b. Influences customer preferences c. Influences worker attitudes and behaviours (CSF Employee commitment) d. Influences standards of business conduct i. Ethics, social responsibility, stakeholder management e. Affects how we live, work, consume and produce 4. Technological a. Internet affects buying, selling, communication (Globalization) b. Information technologies affects information access, inter-firm cooperation, cycle times (inception to customers) i. Information Obesity c. Computer technologies have changed our products and how we design and build d. Not limited to computers and information e. Affects what we produce/what it can do, affects how we produce and how we sell f. Demands constant learning and canning 3 Most important issues facing Canadian business? 1. Canadian Dollar 2. Skilled Labour Shortage 3. National/Physical Environment (Green) PORTER’S 5 FORCES It`s industry specific. All elements can limit price or increase the cost of your good 1. Rivalry: Number of competitors/level of rivalry will dictate the probably of the industry a. Positioning: niche markets, slice of the pie b. Results in price competition and increased costs c. Most powerful of 5 forces d. Causes: i. Many competitors of equal size/capability ii. Growth rate of industry iii. Consumer‟s switching costs iv. Products are commodities are perishable e. No Solution 2. Suppliers: provide input, how much power they have a. Fewer suppliers, high switching costs, low attractiveness of substitute suppliers, high threat of forward integration means = increased bargaining power for supplier b. They set the price ceiling c. Adds costs, reduce profits d. They become competitors with Forward Integration e. Bargaining power increases costs of inputs f. Solution: i. Strategy Alliance or Buy Out(negotiate prices) ii. Internal Supply (backward integration) 3. Buyers (& relationship with customers) a. Buyers can control the price with elastic goods (airlines) b. Few or concentrated, standardized products, low switching costs, discretionary purchases (Luxury Items)=increased bargaining power for buyer c. Reduces price that you can demand d. Solution: i. Create alliances with other firms, build strong marketing ii. Loyalty Cards iii. Distinctive Competitive Advantage 4. Potential Entrants: companies that can enter industry, easy or not? a. Ease of entry = more intense competition (saturated?) b. Profitability (market growing/shrinking?) c. Solutions i. Distinctive Advantage ii. Create or use barriers 1. Capital Intensity: make it expensive to enter 2. Know-how: specialized skills, training employees 3. Know-who: networking with buyers & retailers 4. Regulatory meet certain laws, safety standards (banking, broadcasting) through lobbying 5. Brand loyalty 5. Substitutes: are there alternatives without your product/service? a. Many substitutes = increased competition b. Puts ceiling on price that can be charged c. Pressure increases as price of substitutes and switching costs decline d. Solution: i. Make buyers believe you are unique, lock them in ii. Absorb substitutes (offer a variety of substitutes: glasses, contacts, laser eye surgery) The value of 5 Forces Model: 1. Predicts industry profitability 2. Helps determine whether a firm should enter a particular industry 3. Helps determine whether and/or how it can carve out an attractive position in that industry Benefits of External Analysis 1. Makes managers proactive 2. Provides information used in planning 3. Helps organization get needed resources 4. Helps organizations cope with uncertainty 5. Improves consistency and performance Challenges of External Analysis 1. Forecasts and trends analysis imperfect 2. Rapidly changing environment hard to keep up with 3. Time consuming Positive Sum Competition: Achieve profit; everyone competing with slightly unique with their own niches; meet customer needs with good price & profit; all industry participants can be successful & healthy in the long run (soda) Zero Sum Competition: Flat line or negative profit; everyone is offering something undifferentiated except price; one competitor‟s gain is another‟s lost (airline) Sexy Industry: Attractive, cool (airlines, cars) Why is it important? To find alignment with strategy, general trends and survivability. ENTREPRENEURSHIP New Venture — a recently formed commercial organization that sells goods/services Entrepreneurship — identifying an opportunity and accessing resources to capitalize on it Intrepreneurs—People who use entrepreneurial spirit in a large, established company Aggregate—all employees by small employees who outcome the biggest corporations Small business 1. Owner-managed, not dominant in market, <100 employees 2. 97.8% of all businesses in Canada are small 3. Contribute >26% annually to GDP 4. Provide more jobs than large businesses 5. New ventures lead in new products and services Entrepreneurial Process — Influenced by PEST, Successful only when entrepreneur, opportunity & resources match 1. Identify Opportunity 2. Access Resources 3. Entrepreneur a. Knowledge b. Background c. Interest/passion/drive d. Experience e. Resources, profitable opportunity/idea Ideal Generation 1. Often paradigm shifts (changes the entire perspective) 2. Originate in events relating to work or daily life, hobbies, chance happening Screening—Weeding out bad ideas, saves time & money, ensures you have a viable idea with a competitive advantage 1. Idea creates or adds value for customer a. Solves a problem, meets or creates a need b. At an accepted value 2. Idea provides a competitive advantage that can be sustained a. Product unique in a valuable way/better than others (vs substitutes? Differences valuable to customers? Easily imitated?) b. Use Porter‟s Thinking c. Can the idea be protected legally? 3. The idea is marketable and financial viable a. Are there enough customers willing to buy it? What is the market demand likely to be? b. Who are the key competitors and what are the forces that affect profitability? c. Is the market growing, shrinking, concentrated (few big players), fragmented (many similar powered)? 4. Safety Point: Does the idea have low exist costs? a. Longer time to profitability or greater up-front investment needed = riskier venture How to screen for New Venture Project 1. Use PEST Analysis to assess environment — is it supportive of your idea? 2. Use Five Forces to determine ease of entry and profitability of industry 3. Use Five Forces, PEST, and market exploration to ensure uniqueness of idea 4. Use research of market (library databases) to evaluate how big your market is and whether it is growing, shrinking or stagnant 5. Research expert opinions in the industry 6. Identify and discuss how key trends in the environment and the industry affect your idea Evaluating your business opportunity Criterion Highest Potential Lowest Potential Product Changes way people live, work, learn, Incremental improvement only; one- etc.; recurring revenue time revenue Customers Reachable Loyal to others; unreachable Value Added High Low; minimal market impact Market Imperfect; fragmented competition Highly concentrated, mature Structure Market Large and growing Small and/or declining Incumbents‟ At or near full capacity Under capacity Production Capacity Barriers to Low, competition slow or napping, High, competition stiff, can‟t gain entry have or can gain protection, have
More Less

Related notes for BU111

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.