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by: Fabiola Bogan


Fabiola Bogan
GPA 3.76

B. James

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B. James
Class Notes
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This 8 page Class Notes was uploaded by Fabiola Bogan on Tuesday October 13, 2015. The Class Notes belongs to MGT 3830 at Louisiana State University taught by B. James in Fall. Since its upload, it has received 17 views. For similar materials see /class/223123/mgt-3830-louisiana-state-university in Business, management at Louisiana State University.




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Date Created: 10/13/15
MGT 3830 Strategically Managing Organizations Professor Barclay James Review Questions for Exam 1 Exam 1 is Tuesday March 2 Please Bring a Scantron Sheet to Class and a 2 Pencil INTRODUCTION AND MEASURING PERFORMANCE What are three characteristics of Strategic decisions Important Involve a signi cant commitment of resources Not easily reversible In the Basic Framework Lecture Notes Session 2 a how is strategy de ned b What components make up the rm C What components make up the Industry Environment a Strategy the Link between the Firm and the Environment A sequence of actions that resolve the question of what markets should we serve and how should we improve our performance b Firm a Goals and Values b Resources and Capabilities c Structure and Systems c Industry Environment a Competitors b Customers c Suppliers Different Types of Resources a Physical 7 plant equipment real estate Financial 7 cash and leverage Human 7 individuals skills and capabilities Intangible 7 brand names tech reputation Organizational 7 organizational routines and teamembodied skills rug99 Explain the difference between corporate strategy and competitive strategy and give an example of each What is the primary question to be asked for each strategy Corporate Strategy focuses on industry attractiveness Which business should we be in Where do we compete BusinessCompetitive Strategy focuses on the competitive advantage within an industry How should we compete When is competitive advantage created What is sustainable competitive advantage Competitive advantage created when a rm provides something of value to customers 0 Low cost with equal value 0 Some cost with greater value Sustainable Competitive Advantage when rm s competitors cannot match the value the rm provides at a comparable cost Is strategic coherence important In your own words explain why Yes Use the following information for Questions X and Y Operating pro t 1 Billion Taxes 300 million Capital in Use 5 Billion Capital Structure 3 Billion of debt costing 8 2 Billion of equity at a cost of 15 Question X What is the cost of capital 08 X 3 15 X 2 540000 Question Y What is the Economic Value Added EVA EVA Operating Pro t 7 Taxes 7 Cost of Capital 1 7 3 7 54 160000 Consider the following Apple sells 5000 PicoPods at 100 dollars a PicoPod Fixed costs for equipment are 100000 Variable costs per PicoPod are 20 Assume all PicoPods manufactured are sold What is Apple39s pro t P QHAVFquot Q7FC 300000 Name 2 performance measures that are backwardlooking Accounting Pro t Economic Pro t Balanced Scorecard Name 2 performance measures that are forwardlooking Share Price Stockholder s View INDUSTRY ANALYSIS Name 5 barriers to entry and explain what each of them means In other words name and de ne them Economies of Scale 0 ProductSpeci c lower setup costs as a percentage of total costs 0 PlantSpeci c costs increase less than proportionally to output 0 MultiPlant economies of multiplant production and physical distribution Economies of Scope 0 Shared rescources o Modularity of Parts Capital Requirements and High Sunk Costs 2 ExperienceLearning Curve Advantages Ownership of Scarce Resources Proprietary Technology Government Policy and Regulation Reputation takes time and advertising intangible advantage High Switching Costs of Buyers Access to Distribution Channels Exit Barriers high asset speci city highly illiquid assets Porter s 5Forces Industry Analysis Rating depict the Industry s attractiveness Supplier Power suppliers relative to producers see buyers Buyers Power 0 Price Sensitivity I Cost of product relative to total cost I Product differentiation I Competition between buyers suppliers 0 Bargaining Power I Size and concentration of buyers suppliers relative to producers I Buyer s suppliers switching costs I Buyers suppliers information I Buyers suppliers ability to backward integrate Threat of Substitutes 0 Buyer propensity to substitute 0 Relative prices and performance of substitutes Threat of Entry 0 Capital requirements 0 Economies of scales 0 Absolute cost advantages 0 Product differentiation 0 Access to distribution channels 0 Government and legal barriers o Retaliation by established producers Industry Rivalry 0 Concentration 0 Diversity of competitors 0 Product differentiation 0 Excess capacity and exit barriers 0 Cost conditions Name 3 things that would cause industry rivalry to be high Price Wars Promotions Production innovation In one sentence explain the simple relationship between threat of entry and barriers to entry A high barrier to entry means a low threat of entry Explain at least 4 things that would cause Buyers to have stronger bargaining power Large and purchase large percentage of industry s product Buy in large quantities Can inegrate backwards Industry s product is standardized Low cost in switching to substitiues Can purchase from several sellers Product purchased doesn t save customer money Explain at least 4 things that would cause Suppliers to have stronger bargaining power They are the same things that cause Buyers to have stronger bargaining power Rivalry What is a good type of competition Why What is a bad type of competition Why Rivalry the most important of the 5 forces 0 Good compition product innovation advertiting increase demand and the ablility to charge higher prices and make pro ts 0 Bad competition price wars relsets in downward spirial of revenue for all competitiors One industry has 10 rms competing Another industry has 3 rms competing Which one is likely to have lower rivalry Why If there is low rivalry does that mean low or high industry pro tability The industry with fewer rms has lower rivalry and therefor higher industry pro tability The 5Forces Industry Analysis helps us to determine industry pro tability Is this just for rms already in the industry What might keep new entrants from being successful it has to do with one of the forces 5Forces is pro table for rms already in the industry Pro table industries will be dif cult to enter so they may not be attractive to rms not already competing in them RESOURCES AND CAPABILITIES De ne 5 different types of resources and give a general example of each Physical Assets PPE Financial Assets cash and leverage Human Assets individual skills and capabilities Intangible Assets brand name technology Organizational Assets routines team skills Do tangible or intangible resources typically provide a better source of sustainable competitive advantage Why Give an example Intangible it s harder to create good will or brand recognition than the actual products What do V R I and 0 stand for V Valuable R Rare I not easily Imitable O Organized to exploit the full competitive advantage A rm achieves sustainable competitive advantage when its resources and capabilities are VRIO What is a value chain used for Value Chain Analysis explains the sequence of activities that the organization is involved which create value to the company 4 Firm Infras mic hue Humm Res onu ce l Ianagemenl Teclmologyamp Product Development Inbound Operations Oulbound Markeljng Service Logistics Logislics Sales NIDHVW Why is a resource that CANNOT be easily imitated a good source for sustainable competitive advantage Which of the following is M an intangible asset a Trademarks b Organizational culture c Production equipment d Brand name BUSINESSLEVEL STRATEGIES What is a simple mathematical de nition for pro t PROFIT REVENUE 7 COST Describe two ways that a rm can achieve competitive advantage Differentiation Cost Describe drivers of cost advantage Economies of Scale indivisibilities specialization and division of labot ProductionTechniques mechanization and automation ef cient utilization of materials and increased precision Production Design design for automation designs to economize mateials Input Costs location advantages ownership of lowcost inputs bargaining power supplier coopera 39on Economies of Learning increased dexterity inproved coordinationorganization Explain the use of the value chain to analyze costs when pursuing a low cost strategy 1 Identify the Principle Activities 2 Allocate Total Costs 3 Indentify Cost Drivers 4 Identify Linkages 5 Recommendations for Cost Reduction exploit internal linkages to cut costs share resources and transfer capabilities List 2 ways a product or service could be tangibly differentiated Size color materials Performance Packaging Complementary Services List 2 ways a product or service could be intangibly differentiated Brand name Advertising of higher Status In the year 2000 Wendy s Widgets begins producing 200000 widgets a year In 2005 William s Widgets enters the widget market making 300000 widgets a year Based on this information which of the following is most likely to be accurate a Wendy s Widgets will have a cost advantage based on economies of scale but it will be at least partially offset by William s Widgets cost advantage based on economies of learning b Wendy s Widgets will have a cost advantage based on economies of learning but it will be at least partially offset by William s Widgets cost advantage based on economies of scale c Wendy s Widgets will have a cost advantage based on both economies oflearning and economies of scale d William s Widgets will have a cost advantage based on both economies of learning and economies of scale A differentiation strategy is appropriate when a It is possible to differentiate the physical product b It is possible to differentiate the image of the product c Only when a and b are both true d When either a or b is true COMPETITOR ANALYSIS Ed Day CEO of Forecasts Inc is currently considering investment in a project that has uncertain profitability The project costs 500 million to undertake Ifunsuccessful the project will result in a loss of 80 of the original investment on account of sunk costs If successful the project will result in a 25 increase in current profits The experience gained due to the undertaking of this project even if it proves to be unsuccessful will result in significant new projects being added to Forecasts Inc current portfolio each of which has high expected profitability Which of the following arguments could be made for committing to the project rather than retaining exibility by not investing at the present time a The project has a certain outcome b The option to abandon is high 0 The option to growexpand is high d The option to abandon is low A rm has to consider whether to build a plant under conditions of uncertainty Assume Cost to build plant 2000 Cost of capital 10 Uncertainty resolved in period 1 at time1 Cash ow at time0 is 300 Scenario 1 50 probability At time1 cash ow is 400 and this cash ow continues forever Scenario 2 50 probability At time1 cash ow is 100 and this cash ow continues forever a What is the NPV of building now 2000 300 51400 51100 800 1 b What is the NPV of waiting one period Senario 1 2000 400140011 2182 11 Senario 2 2000 10011001 818 11 NPV 52182 50 1091 c What is the value of waiting one period 10917 800 291 The next two questions refer to the following game matrix Consider a hypothetical scenario that develops between Blockbuster and NetFlix each of whom have signi cant market share in the videoDVD rental business Each is considering whether to maintain a high price or to reduce the rental rates in the next period so as to gain market share The following table shows the pro t in millions of dollars each firm would earn in each of the four possible high or low price combination The pro ts of Blockbuster is listed first followed by the pro ts of NetFlix are Blockbuster Example Read the rst cell as Blockbuster receives 900 million and NetFliX receives 400 million if each of them rent at a high price Assuming a one period interaction does Blockbuster have a dominant strategy 21 Yesiit is rent at high price 11 Yes it is rent at low price 0 No it does not have a dominant strategy Assuming a one period interaction What is the equilibrium of the gameiwhat will happen a Blockbuster will rent at high price NetFliX will rent at low price in Blockbuster will rent at low price NetFliX will rent at high price 0 Both will rent at high price d Both will rent at low price


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