Chapter 1 Questions:
1. What is competitive advantage, and how does it relate to a company’s business model?
Competitive advantage is an amicable situation an association looks for in place should a chance to be greater amount gainful over its contenders. Competitive advantage occurs when an organization’s profitability is greater than the average profitability of firms in its industry.
Competitive advantage plays very important role while defining business model for any organization. Competitive advantage is the key target that any firm plans to achieve by its strategic plans. A company’s business model enables to maintain sustained competitive advantage.
2. Describe the strategic planning model, and who is involved in the strategy-making process
Strategic planning is a managerial activity that is acclaimed to set resources, establish operations, make sure employees and other stake holders are moving towards common goals. Top level management of an organization involves in the strategic planning model and those are corporate level, business level, functional level managers. Strategic planning process involves selecting strategies that build the organizations strengths and correct its weaknesses.
3. Describe the SWOT analysis, its components, and how it aids a company in making strategic decisions. Provide examples of each component in the SWOT analysis.
The SWOT analysis is the most useful process for compassionating and decision- making for all kinds of circumstances in business and associations. SWOT analysis is an acronym of strengths, weaknesses, opportunities, and threats.
It identifies the strategies to accomplish external opportunities. It assures and relay on company’s strengths. It abolishes company’s weaknesses and hindering threats.
Strength improve the competitive advantage of any organization. Strengths of an organization includes maximum utilization of skilled labor and resources to reach company’s goals and usage of trending technologies to optimize the profits.
Weakness is anything that influence the vision, mission and profits of an organization. Misinterpretation of situations and lack of coordination between the tem may lead to organizational failure. It may include lack of skilled labor, lack of proper planning. We can run over the weakness by strategic planning.
Opportunities provides further improvements to initialize the strengths. By providing training to the employees to improve the skills to achieve the goals and employees could be up to date.
Threats includes external and internal, revelry with the competitors, political changes may affect the business model.
4. What are the various levels of management, and how do they participate in the process of strategic decision making?
Various levels of management include:
1) Corporate level management
2) Business level management
3) Functional level management
Strategic decision making is done in different ways in various levels based on the hierarchy. Corporate level management overlook the development of strategies for the entire organization and assures that business strategies accompanying by firm are consistent with maximizing profitability. Business level management are concerned with strategies distinct to an appropriate business and render the statement of intents into accurate strategies for induvial business. Functional level managers produce information that helps develop realistic and attainable strategies.
Chapter 2 Questions:
1. Define “Industry”, “Business” and “Sector”. How are these related?
Industry: it is a classification that refers to group of companies that are related and offering products or services that are close substitute for each other.
Business: it is an organization or enterprising firm enrolled in professional, commercial or industrial activities.
Sector: Group of likely related industries is called a sector.
All the individual businesses come under the industry, for example all the pharmaceutical companies come under pharma industry. And the group of likely related industries comes under a sector.
2. How can Porter’s five-forces model aid in strategic decision making?
Porter’s five-forces model includes competitive rivalry, supplier power, buyer power, threat of substitution, threat of new entry. This model helps in making affective strategic decision plan for an organization. This method helps in analyzing the competitor’s commodity products, and can make more product options available and costing techniques needed for products. Based on this method, top level management can estimate the budgets by analyzing the supplier power and can moderate number of suppliers, able to substitute and able to change the suppliers. Buyer power determines the scope of the business for any organization. By Identifying the right customer and providing right services is the most important strategies of an organization. Product design of any organization need to consider the opportunities from the substitutes and new entries. It helps to analyze how to recommend different kinds of products and services can be used in place of existing.
3. Describe how “Risk of Entry”, “Bargaining Power of Buyers”, “Bargaining Power of Suppliers”, and industry competition (“Threat of Substitutes”) affect the external threats a company faces. Provide examples of each.
Risk of Entry introduces to the threat new competitors bear to existing competitors in an industry. Any successful industry will intrigue more competitors looking to be successful. If the entry hurdles are low, this act as a threat to the organization already existing in the market.
Bargaining Power of Buyers indicates to the compression consumers can apply on businesses to get them to afford higher quality products, good consumer service, and lower prices. Strong buyers can burden sellers to diminish prices, revise product quality, and offer best services.
Bargaining Power of Suppliers refers to the power of bargaining ability by suppliers, and they can burden on a company by imposing higher prices, improving the quality and controlling availability. It may affect the pricing of the product of an organization
Threat of Substitutes is the opportunity of a product that the consumer can buy instead of organization product. It influences the profits of the industry because consumers can switch to substitute products.
4. Describe the industry life cycle, what strategic groups are, and what mobility barriers are.
Industry life cycle include five different steps: Embryonic industry, Growth industry, Industry shakeout, Mature industries, Declining industries.
Embryonic industry is the development stage and the growth in this stage is slow due to product is new to the customers, poor distribution, and high prices. In Growth industry demand expands rapidly due to new consumers and threat from competitors is high at this stage. Demand reaches to saturation level in Industry shake out cycle, due to rivalry between the competitors. Mature industry phase is the saturation point and in this phase demand is limited and growth is low, industries consolidate and become oligopolies.
Strategic groups are the similar kind of groups in which all companies pursue similar strategy. Here different strategic groups have different relationship to the competitive forces.
Mobility barriers are the difficulties facing an organization while switching between differnet strategic groups
References:
1) Chapter Slides
2) http://www.investopedia.com/terms/i/industry.asp
3) https://www.mindtools.com/pages/article/newTMC_08.htm
4) https://strategiccfo.com/threat-of-new-entrants-one-of-porters-five-forces/
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