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September 27th-29th Notes

by: Callisa Ruschmeyer

September 27th-29th Notes MNGT 3100- 004

Marketplace > Auburn University > Business > MNGT 3100- 004 > September 27th 29th Notes
Callisa Ruschmeyer
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About this Document

Conclusion of Chapter 5 Strategy
Principles of Management
Joel Carnevale
Class Notes
Management, Carnevale, Chapter5, auburn
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This 4 page Class Notes was uploaded by Callisa Ruschmeyer on Thursday September 29, 2016. The Class Notes belongs to MNGT 3100- 004 at Auburn University taught by Joel Carnevale in Fall 2016. Since its upload, it has received 5 views. For similar materials see Principles of Management in Business at Auburn University.


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Date Created: 09/29/16
September 27 -29 Notes Completion of Chapter 5 SWOT Analysis  Internal- strengths and weaknesses  External- opportunities and threats  This is the only model we cover that deals with internal and external analysis of a business  Strengths and opportunities are helpful to achieving an objective  Weaknesses and threats are harmful to achieving the objective  Break down of each of the four segments o Strengths- what gives a firm its competitive advantage  Examples- customer loyalty, brand image o Weaknesses- what hinders a firm from competing well  Examples- strategy easy to copy, slow to change o Opportunities- what areas/markets are there for a firm to grow into  Example- complimentary industries (think about the many Disney mergers) o Threats- what threatens a company from the outside  Example- growing number of substitutions or technological advances Internal and External Analysis Tools  Internal- value chain and VRIO  External- PESTEL and industry analysis o Example of football team: industry analysis is understanding the team you are competing against; PESTEL is anything else in the environment that could affect your playing Microenvironment- refers to an organization's industry and the markets related to it o The industry microenvironment consists of stakeholder groups that a firm has regular dealings with Porter's Five Forces  How to look at the microenvironment  To have a successful business, you want all of these forces to be low 1. Rivalry amongst existing competitors- the power of competitors o At the center of all the other four o Measures the degree of competition between firms  If you are in an industry that sells very similar products or similarly priced products, the competitive rivalry increases o Factors most likely to affect firm rivalry:  Numerous competitors  Lack of differentiation  High exit barriers 2. Threat of new entrants- the power of competitors to enter a market o The likelihood of new entry is a function of the extent to which barriers to entry exist o Low rivalry and low threat of entrant = high profitability 3. Buyer power- the power of customers to drive down price o Represents the influence buyers have over firms o Firms seek their highest attainable profit margins September 27 -29 Notes Completion of Chapter 5  Buyers (customers) however, seek higher quality and better service at the lowest possible price  Cable provider industry does not offer buyer power where the candy industry does 4. Supplier power- the power of suppliers to dive up prices of materials o High supplier power means they can largely set the terms and conditions o Potential ways suppliers can exert their power over firms:  Increasing prices  Decreasing quality 5. Threat of substitute products or services- the power of customers to purchase alternatives o The ease with which buyers can switch to another product that does the same thing  Example- gaming systems  But, think about trying to switch cell phone companies- you have tons of substitutes, but cannot switch due to high canceling fees and such PESTEL  PESTEL informs you about the broader, macro-environment where industry analysis provides you with a good sense of the organization's micro-environment  The PESTEL framework directs managers to collect information about, and analyze, each environmental dimension to identify the broad range of threats and opportunities facing the organization  PESTEL o Political- tax policies, changes in trade restrictions and tariffs, and the stability of governments o Economic- interest rates, inflation rates, gross domestic product, unemployment rates, levels of disposable income, and the general growth or decline of the economy o Sociocultural- includes trends in demographics such as population size, age, and ethnic mix, as well as cultural trends such as attitudes toward obesity and consumer activism o Technological- changes in the rate of new product development, increases in automation, and advancements in service industry diversity o Environment- natural disasters and weather patterns o Legal- laws involving issues such as employment, health and safety, discrimination and antitrust Developing Strategy through Internal Analysis  The primary purpose for internal analysis is to understand the unique resources, capabilities, and core competencies of organizations that may enable them to outperform their competitors overtime  Tools: Value Chain and VRIO  Resources and Capabilities o Resources are what an organization owns  Tangible- assets that can be see and quantified  Example- production equipment  Intangible- assets that are difficult to see, touch or quantify  Example: firm reputation September 27 -29 Notes Completion of Chapter 5 o Capabilities are what firms can do  Dynamic- when a firm is skilled at continually updating its array of capabilities to keep pace with changes in its environment  Example- Coke constantly building brand with new products Value Chain  The primary and support activities that an organization uses to create value in the form of products or services  Primary activities- if there is a disruption in any of these, you cannot provide your product (direct value) o Inbound logistics- receiving, warehousing, and inventory control o Operations- value creating activities that transform the inputs into the final product o Outbound logistics- the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc. o Marketing and sales- the activities associated with getting buyers to purchase the product, including advertising, pricing, etc. o Service- the activities that maintain and enhance the product's value including customer support, repair services, etc.  Support activities- if any of these are disrupted in the short run, you can still function- but thriving in the long run will be tough (indirect value) o Procurement- the function of purchasing the raw materials and other inputs used in the value-creating activities o Technology development- includes research and development, process automation, and other technological development used to support the value-chain activities o HR Management- the activities associated with recruiting, development, and compensation of employees o Firm infrastructure- includes activities such as finance, legal, quality management, etc. VRIO Analysis  The purpose of VRIO analysis is to determine whether a resource or capability has competitive potential o Value- exploit opportunity or negate a threat o Rarity- not possessed by other competitors o Inimitability- difficult to imitate or to create ready substitutes for it  Most difficult criteria to meet o Organization- ability to exploit resource or capability  Various factors can undermine a strategy o The plan is poorly constructed o Competitors undermine the advantages envisioned by the plan o The plan was good, but poorly executed How do Strategies Emerge  Intended strategy- initially thought of by managers and impetus for initial attempts at strategy implementation September 27 -29 Notes Completion of Chapter 5  Emergent strategy- a pattern of action that develops over time in the absence of mission, vision and goals, or in spite of mission, vision and goals, or in addition to what was conceived of in the intended and deliberate strategies  Deliberate strategy- a plan of action, that flows form the intended strategy, that an organization implements to support the mission, vision, and goals  Realized strategy- actual strategy that is implemented; result of the deliberate and emerging strategies


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