SGMT 3000 Study Guide - Midterm Guide: Sg-43 Goryunov, Cost Leadership, Swot Analysis
25 Apr 2016
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SGMT 3000 – MIDTERM I
Week 1 – Chapter One: Strategic Leadership
Strategy: a set of related actions that managers take to increase their company’s performance
Competitive Advantage: if your firm can achieve above the industry average, then your firm has a competitive
advantage
o Sustained Competitive Advantage – if your firm can achieve above the industry average for a number of
years
Strategic Leadership: creating competitive advantage through effective management of the strategy-making
process.
Superior performance
o Risk Capital: equity capital for which there is no guarantee that stockholders will even recoup their
investment or earn a decent return
o Shareholder value: returns that shareholders earn from purchasing shares in a company
o Profitability: the return a company makes on the capital invested in the enterprise
o Profit Growth: the increase in net profit over time. A company can grow if:
o It sells products in a rapidly growing
o Gains market share from rivals
o Increases volume
o Expands overseas
o Diversifies profitability into new lines of business
o Key Challenges: grow simultaneously generate high profitability and increase the profits of the company
o Profitable Growth: high profitability & sustainable profit growth
Business Model – managers’ conception of how the set of strategies their company pursues should work
together as a congruent whole, enabling the company to gain a competitive advantage. Includes how a
company will:
o Select its customers
o Define and differentiate its product offerings
o Create value of its customers
o Acquire and keep customers
o Produce goods and services
o Lower cots
o Deliver goods and services to the market
o Organize activities within the company configure its resources
o Achieve and sustain a high level of profitability
o Grow the business over time
Industry Differences in performance
o A company’s performance is also determined by the characteristics of the industry in which it competes
Strategic Managers
o General managers: managers who bear responsibility for the overall performance of the company
o Functional Managers: responsible for supervising a particular function (a task activity, or operation – ex.
HR, accounting, marketing(
o Multidivisional company – a company that competes in several different businesses and has created a
separate self-contained division to manage each
o Corporate Level Managers (C-Suite)
o CEO’s responsibility to develop strategies for competiting in the specific business area
o Also provide a link between people who oversee the strategic development of a firm and those who
own it (ex. The shareholders)
o Business Level Managers – self contained division that provides a product or service for a particular market
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o Strategic role of these managers is to translate the general statements of direction and intent that
come from the corporate level into concrete strategies for individual businesses
o Functional Level Managers – responsible for the specific business functions or operations that constitute a
company or one of its divisions\
o Usually confined to one business activity
The Strategy Making Process
1) Select the corporate mission and major corporate goals
o Mission – describes what the company does. Answers the questions: What is our business? What
will it be? What should it be?. It should be customer oriented rather than product oriented
o Vision – defines a desired furutre state
o Values – state how managers and employees should conduct themselves, how they should do
business, and what kind of organization they should build to help a company achieve its missions
o Goals: must be
o Precise and Measureable
o Address Crucial issues
o Challenging but realistic
o Be in a specific time period
2) Analyze the organization’s external environment
3) Analyze the organization’s internal environment
4) Select strategies that: build on strengths, correct weaknesses, take advantage of opportunities, and
counter threats
o Essentially a SWOT Analysis
5) Implement the strategies – need to implement a feedback loop to see if the goals and objectives are being
achieved and to what degree competitive advantage is being creative and sustained
Strategy as an Emergent Process
Strategy Making in an Unpredictable World
o We live in a world where small chance events can have a large and unpredictable impact on outcomes
Strategy Making by Lower-Level Managers
o Another criticism is that too much importance us attached to the role of top management.
o Give more autonomy to the lower-level managers if you want change to be more accepted (ex. More buy
in)
Serendipity & Strategy
o Accidental events that help to push companies in new and profitable directions
o Ex. 3M Scotchguard
Intended and Emergent Strategies
o Emergent strategies – unplanned responses to unforeseen circumstances
Strategic Planning in Practice
o Scenario Planning – formulating plans that are based upon “what-if” scenarios about the future
o Decentralized Planning – a mistake that some companies make is that they treat planning as a strictly top-
down responsibility. The ivory tower concept of planning can also lead to tensions between corporate,
business, and functional level managers
Strategic Decision Making
Types of Biases
o Cognitive Biases – systematic errors in human decision making that arise from the way people process
information
o Prior Hypothesis Bias – occurs when decision makers who have strong prior beliefs tend to make decision
on the basis of these beliefs event when presented with information that their beliefs is wrong
o Escalating Commitment – when decision makers have already committed significant resources to a project,
commit even more resources even if they receive feedback that the project is failing
o Reasoning by Analogy – use of simple analogies to make sense out of complex problems
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o Representativeness – a bias rooted in the tendency to generalize from a small sample or even an small
anecdote
o Illusion of control – the tendency to overestimate one’s ability to control events
o Availability error – predisposition to estimate the probability of an outcome based on how easy it is to
imagine
Techniques of Improving Decision Making
o Devil’s Advocate – technique in which one member of a decision making team identifies all of the
considerations that might make a proposal unacceptable
o Dialectic inquiry – generation of a plan and a counterplan that reflect plausible but conflicting courses of
action
o Outside view – identification of past successful or failed strategic initiatives to determine whether those
initiatives will work for project at hand
Strategic Leadership
o Vision, Eloquence, and consistency
o Articulation of a business model
o Commitment
o Being well informed
o Willingness to delegate and empower
o Astute use of power
o Emotional intelligence
Week 2 – Chapter Two: External Analysis
o Opportunities – arise when a company can take advantage of its industry environment to formulate and
implement strategies that enable it to become more profitable
o Threats – arise when conditions in the external environment endanger the integrity and profitability of the
company’s business
Defining An Industry
o Industry – a group of companies offering products or services that are close substitutes for each other
o External analysis begins by identifying the industry within which a company competes. You must start by
looking at the basic customer needs their company is serving
o Sector – a group of closely related industries
o Market Segments – distinct groups of customers within a market that can be differentiated from each other
on the basis of their individual attributes and specific demands
o Industry boundaries may change over time as customer needs evolve, or as emerging new technologies
enable companies in unrelated industries to satisfy established customer needs in new ways (ex.
Convergence taking place between the computer and telecommunications industries)
o Industry competitive analysis begins by focusing upon the overall industry in which a firm competes before
market segments or sector-level issues are considered
Competitive Forces Model
1) Risk of entry by potential competitors – potential competitors are companies that are not currently
competing in an industry but have the capability to do so if they choose. The greater the costs to enter, the
greater the barrier, the weaker the force
o Economies of Scale – when unit cost falls as you expand output. Can be due to: 1) cost reductions through
mass production, 2) discount on bulk purchases, 3) spreading costs over large production volume, 4) cost
savings associated with SG&A over large volume.
o If a new company decides to enter on a large scale in an attempt to obtain these economies of
scale, then they will incur high investment costs, which also means higher risk
o Threat of entry is reduced when established companies have economies of scale
o Brand Loyalty – when consumers have a preference for the products of established companies
o Absolute Cost Advantage – a cost advantage that comes from: 1) superior production operations due to
experience/patents/trade secrets, 2) control of particular inputs, 3) access to cheaper funds
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Strategy: a set of related actions that managers take to increase their company"s performance. Competitive advantage: if your firm can achieve above the industry average, then your firm has a competitive advantage: sustained competitive advantage if your firm can achieve above the industry average for a number of years. Strategic leadership: creating competitive advantage through effective management of the strategy-making process. It sells products in a rapidly growing: gains market share from rivals. Increases volume: expands overseas, diversifies profitability into new lines of business, key challenges: grow simultaneously generate high profitability and increase the profits of the company, profitable growth: high profitability & sustainable profit growth. Business model managers" conception of how the set of strategies their company pursues should work together as a congruent whole, enabling the company to gain a competitive advantage. Industry differences in performance: a company"s performance is also determined by the characteristics of the industry in which it competes.
