Study Guides (400,000)
CA (160,000)
York (10,000)
ADMS (1,000)
ADMS 1000 (300)
Final

ADMS 1000 Study Guide - Final Guide: Acculturation


Department
Administrative Studies
Course Code
ADMS 1000
Professor
Peter Modir
Study Guide
Final

This preview shows pages 1-3. to view the full 36 pages of the document.
CHAPTER 5 STRATEGIC MANAGEMENT
Developing Business Strategy
Industry: a group of organizations/firms that share similar resource requirements (raw materials, labour,
technology, customers).
Five-Forces Model Analyzing External Environment
Allows us to systematically assess the industry environment.
- The relationships between the five forces determines attractiveness of the industry
environment
- Used to make strategic decisions that leave the firm in the best position to defends itself
1. Threats of New Entrants
Two forms; new start-ups, or diversification of existing firms in other industries
New entrants bring new capacity, desire to gain market share, substantial resources, and capabilities
which can reduce profitability. Incumbents need to create entry barriers;
- Economies of scale: spreading costs of production over the number of units produced cost
advantages
- Capital Requirements: extremely high for a new firm, threat of new entrants is reduced as the
level of required capital increases
- Switching Costs: refers to the costs (monetary or psychological) associated with changing from
one supplier to another from the buyer perspective. Threat of new entrants is greater when the
switching costs of customers in minimal in that they can easily switch buying products from one
firm to another
- Access to Distribution Channels: If incumbents control most of the distribution channels,
potential entrants would find it difficult to distribute their products or services
- Cost Advantages Independent of Scale: Advantages independent of economic factors such as
governmental policies, legal production (patents, trademarks), and proprietary products. These
defer entries
2. Bargaining Power of Suppliers
Supplier power, the entities that provide raw materials, technologies, or skills to incumbents. Can
demand better prices or threaten to reduce quality. This can occur depending on the criticality of the
resources, the more critical, the more power lies with the supplier. Also the number of suppliers
available relative to the number of incumbents, if there are less suppliers than incumbents, power lies
with the supplier.
3. Bargaining Power of Buyers

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Power held by entities that purchase from incumbents. Can demand lower prices, better quality, play
incumbents against one another. Factors affecting buying power;
- Switching Costs: bargaining power of buyers increases as switching costs decrease
- Undifferentiated Products: allow buyers to find alternatives
- Importance of Incumbents’ Products to Buyers: the more important/critical the products or
services are, power of buyers diminishes.
- Number of Incumbents Relative to the Number of Buyers: power of buyers diminishes when
there are few incumbents, since there are fewer alternatives to choose from
4. Threat of Substitutes
All firms in an industry often compete with other firms in different industries, where the firms provide
substitute products or services with similar purposes. ex newspaper industry as a whole is threatened by
radio and internet.
5. Rivalry Among Existing Firms
Can be intensified by the following factors;
- Lack of Differentiation or Switching Costs
- Numerous or Equally Balance Competitors: some firms may believe that they can initiate
strategic action without being noticed, their action intensifies rivalry among incumbents. Rivalry
tends to be highest when the firms are similar in size and resources, these firms often tend to
target similar market niches and share similar resource requirements
- High Exit Barriers: refers to economic, strategic, and emotional factors that keep firms
competing even though they may be earning low or negative returns on their investments
(visible fixed costs, specialized assets, escalating commitment of management and
governmental and social pressures)
Analyzing the Internal Environment
Jay Barney’s VRIO model (value, rareness, imitability, organization)
Value: managers need to ask if their firm’s resources and capabilities add any value to capture market
share or enhance profitability, either through exploiting emerging opportunities or neutralizing threats.
Rareness: valuable resources and capabilities help firms survive, these resources and capabilities need
to be rare (controlled by a small number of firms) to obtain a competitive advantage
Imitability: How long the advantage lasts depends on how quickly imitation could occur, need to create
barriers to imitation so the degree of rareness and value of the resources and capabilities does not
diminish.

Only pages 1-3 are available for preview. Some parts have been intentionally blurred.

Organization: firms need to be organized in effective and efficient ways to exploit their valuable, rare,
and difficult-to-imitate resources and capabilities to maximize their potentials. This is critical to success.
If the firm does not achieve these four steps to ensuring a sustainable competitive advantage, it will
have a temporal competitive advantage.
SWOT Analysis
The conclusion of the VRIO model and Five-forces model complement and supplement each other and
can be summarized by SWOT Analysis (in combination with an analysis of the general external
environment trends) strategically use internal strengths in exploiting environmental opportunities,
and neutralizing environmental threats while avoiding internal weaknesses
STRATEGIES
1. BUSINESS-LEVEL
Cost Leadership: gaining competitive advantage by reducing economic cost below that of all
competitors. 3 sources; 1) economies of scale firms increase production volume to reduce marginal costs
2) learning curve economies firms can reduce MC by experience (learning by doing, and decreasing
defects of productions or services) 3) low cost access to factors of production. These three sources could
be easily imitated by competitors, but a combination of these three can make imitation difficult.
Advantages
- gives the firm the highest profit margins in the industry
- gives firm flexibility in response to pressures coming from five forces in industry environment
Product Differentiation: increasing perceived value of their products and services relative to that of
other firms’ (ex differentiate through product features, linkages between functions, location, product
mix, links with other firms, and service). In order to achieve abnormal returns the firm needs to obtain a
sustainable competitive advantage, need to create value that is rare and difficult to substitute or
imitate. Advantage good position to defend from pressures of five forces
Focus: target a particular buyer group, a segment of the product line, or the geographic market. By
targeting a narrow market the firm is able to compete efficiently or effectively, and achieve
differentiation by meeting the needs of the particular group or lower costs in serving the group.
2. CORPORATE-LEVEL
Two challenges; 1) which business or markets a firm should compete in 2) how these businesses or
markets can be managed so they create synergy
Very difficult to grow in a single market in today’s business world, globalization trend presents new
market opportunities. Successfully managing diversification (a firm operating in multiple markets
simultaneously) can give a firm enormous profitability and competitive advantage.
You're Reading a Preview

Unlock to view full version