Bay State College Boston Strategic Management and Business Policy Questions

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Meet the 500 word count, Makes connections to the course content and/or other experiences. The course is: Strategic Management and Business Policy Toward Global Sustainability, 15th edition, Authors: Thomas L. Wheelen and J. David Hunger. The chapter is chapters 6 and 7;

-Please refer to key terms and concepts from the text as you discuss the following:

Part 1: What are the advantages of being a first mover in an industry?

Part 2: What are the disadvantages of being a first mover in an industry?

Give an example of a first, and a late mover firm. Were they successful?

Cite your sources.

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Strategic Management and Business Policy 15e Chapter 6 Strategy Formulation: Business Strategy Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. Learning Objectives 6-1 Utilize the SFAS matrix and a SWOT diagram to examine business strategy. 6-2 Develop a mission statement that addresses the five elements of good design 6-3 Explain the competitive and cooperative strategies available to corporations 6-4 Identify the types of strategic alliances Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-2 A Framework for Examining Business Strategy (1 of 2) • Strategy formulation – concerned with developing a corporation’s mission, objectives, strategies, and policies • Situation analysis – the process of finding a strategic fit between external opportunities and internal strengths while working around external and internal weaknesses Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-3 A Framework for Examining Business Strategy (2 of 2) • SWOT – acronym used to describe the particular strengths, weaknesses, opportunities, and threats that are potential strategic factors for a specific company • Strategy = opportunity/capacity • Opportunity has no real value unless a company has the capacity to take advantage of that opportunity. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-4 Criticisms of SWOT Analysis (1 of 2) • It is simply the opinions of those filling out the boxes. • Virtually everything that is a strength is also a weakness. • Virtually everything that is an opportunity is also a threat. • Adding layers of effort does not improve the validity of the list. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-5 Generating a Strategic Factors Analysis Summary (SFAS) Matrix • SFAS (Strategic Factors Analysis Summary) Matrix – summarizes an organization’s strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-6 Criticisms of SWOT Analysis (2 of 2) • It uses a single point in time approach. • There is no tie to the view from the customer. • There is no validated evaluation approach. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-7 Figure 6-1: Strategic Factor Analysis Summary (SFAS) Matrix Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-8 Finding a Propitious Niche • Propitious niche – so well suited to the firm’s internal and external environment that other corporations are not likely to challenge or dislodge it • Strategic window – a unique market opportunity that is available for a particular time Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-9 Mission and Objectives (1 of 2) • The mission statement must enable a common thread to highlight and focus the energy of everyone in the organization in the direction that the top management team believes is best for the business. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-10 Mission and Objectives (2 of 2) A well-crafted mission statement has five common elements 1. It must be short. 2. The design must be simple. 3. It has to provide direction. 4. It should enable employees knowing exactly what the company does and what it does not do. 5. It should be measurable. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-11 Business Strategies • Business strategy – focuses on improving the competitive position of a company’s or business unit’s products or services within the specific industry or market segment that the company or business unit serve – Competitive, cooperative Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-12 Porter’s Competitive Strategies (1 of 8) Competitive strategy raises the following questions: • Should we compete on the basis of lower cost (and thus price), or should we differentiate our products or services on some basis other than cost, such as quality or service? Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-13 Porter’s Competitive Strategies (2 of 8) • Should we compete head-to-head with our major competitors for the biggest but most sought-after share of the market, or should we focus on a niche in which we can satisfy a less sought-after but also the profitable segment of the market? Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-14 Porter’s Competitive Strategies (3 of 8) • Cost leadership – ability of a company or a business unit to design, produce, and market a comparable product more efficiently than its competitors • Differentiation – ability of a company to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-15 Porter’s Competitive Strategies (4 of 8) • Focus – ability of a company to provide unique and superior value to a particular buyer group, segment of the market line, or geographic market Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-16 Porter’s Competitive Strategies (5 of 8) • Porter proposed that a firm’s competitive advantage in an industry is determined by its competitive scope—that is, the breadth of the company’s or business unit’s target market. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-17 Porter’s Competitive Strategies (6 of 8) • Cost leadership – lower-cost competitive strategy that aims at the broad mass market and requires “aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization – provides a defense against rivals – provides a barrier to entry – generates increased market share Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-18 Porter’s Competitive Strategies (7 of 8) • Differentiation – involves the creation of a product or service that is perceived throughout its industry as having passed through the elements of VRIO. • Lowers customers sensitivity to price • Increases buyer loyalty • Can generate higher profits Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-19 Porter’s Competitive Strategies (8 of 8) • Cost focus – low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche to the exclusion of others • Differentiation focus – concentrates on a particular buyer group, product line segment, or geographic market to serve the needs of a narrow strategic market more effectively than its competitors Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-20 Risks in Competitive Strategies • A company following a differentiation strategy must ensure that the higher price it charges for its higher quality is not too far above the price of the competition, otherwise customers will not see the extra quality as worth the extra cost. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-21 Issues in Competitive Strategies (1 of 2) • Stuck in the middle – when a company has no competitive advantage and is doomed to below-average performance Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-22 Issues in Competitive Strategies (2 of 2) • Successful entrepreneurial ventures follow focus strategies. • They differentiate their product or service from those of others by focusing on customer wants in a segment of the market, thereby achieving a dominant share of that part of the market. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-23 Industry Structure and Competitive Strategy (1 of 3) • Fragmented industry – many small and medium-sized companies compete for relatively small shares of the total market • Products are typically in early stages of product life cycle. • Focus strategies are used. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-24 Industry Structure and Competitive Strategy (2 of 3) • Consolidated industry – domination by a few large companies – premium on a firm’s ability to achieve cost leadership Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-25 Industry Structure and Competitive Strategy (3 of 3) • Strategic rollup – developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry • Rollups differ from mergers/acquisitions in three ways: 1. They involve large numbers of firms. 2. The acquired firms are typically owner operated. 3. The objective is to reinvent an entire industry. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-26 Hypercompetition and Competitive Advantage Sustainability (1 of 2) • According to D’Aveni: – “In a hypercompetitive environment, market stability is threatened by short product life cycles, short product design cycles, new technologies, frequent entry by unexpected outsiders, repositioning by incumbents, and tactical redefinitions of market boundaries as diverse industries merge.” • A company or business unit must constantly work to improve its competitive advantage. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-27 Hypercompetition and Competitive Advantage Sustainability (2 of 2) • Sustained competitive advantage is increasingly a matter not of a single advantage maintained over time, but more a matter of sequencing advantages over time. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-28 Cooperative Strategies (1 of 3) • Cooperative Strategies – used to gain a competitive advantage within an industry by working with other firms – collusion, strategic alliances Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-29 Cooperative Strategies (2 of 3) • Collusion – the active cooperation of firms within an industry to reduce output and raise prices to avoid economic law of supply and demand Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-30 Cooperative Strategies (3 of 3) • Strategic Alliances – a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain Figure 6-2: Continuum of Strategic Alliances Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-31 Reasons to Form an Alliance • Obtain or learn new capabilities • Obtain access to specific markets • Reduce financial risk • Reduce political risk Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-32 Types of Alliances (1 of 4) • Mutual service consortium – partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone, such as access to advanced technology Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-33 Types of Alliances (2 of 4) • Joint venture – cooperative business activity, formed by two or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and rewards to each member, while preserving their separate identity/autonomy Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-34 Types of Alliances (3 of 4) • Licensing arrangement – an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-35 Types of Alliances (4 of 4) • Value-chain partnership – a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-36 Table 6-1: Strategic Alliance Success Factors Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 6-37 Strategic Management and Business Policy 15e Chapter 7 Strategy Formulation: Corporate Strategy Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. Learning Objectives 7-1 Explain the three key issues that corporate strategy addresses 7-2 Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best 7-3 Apply portfolio analysis to guide decisions in companies with multiple products and businesses 7-4 Develop a parenting strategy for a multiplebusiness corporation Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-2 Corporate Strategy (1 of 3) • Corporate strategy – the choice of direction of the firm as a whole and the management of its business or product portfolio and concerns Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-3 Corporate Strategy (2 of 3) • Directional strategy – the firm’s overall orientation toward growth, stability, or retrenchment • Portfolio analysis – industries or markets in which the firm competes through its products and business unites Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-4 Corporate Strategy (3 of 3) • Parenting strategy – the manner in which management coordinates activities, transfers resources, and cultivates capabilities among product lines and business units Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-5 Figure 7-1: Corporate Directional Strategies Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-6 Directional Strategy • Growth strategies – expand the company’s activities • Stability strategies – make no change to the company’s current activities • Retrenchment strategies – reduce the company’s level of activities Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-7 Growth Strategies • Merger – a transaction involving two or more corporations in which both companies exchange stock in order to create one new corporation • Acquisition – purchase of another company Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-8 Concentration Strategies (1 of 7) • Vertical growth – achieved by taking over a function previously provided by a supplier or distributor Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-9 Concentration Strategies (2 of 7) • Vertical integration – the degree to which a firm operates vertically in multiple locations on an industry’s value chain from extracting raw materials to manufacturing to retailing Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-10 Concentration Strategies (3 of 7) • Backward integration – assuming a function previously provided by a supplier • Forward integration – assuming a function previously provided by a distributor Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-11 Concentration Strategies (4 of 7) • Transaction cost economies – vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying on the open market become too great Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-12 Concentration Strategies (5 of 7) • Full integration – a firm internally makes 100% of its key suppliers and completely controls its distributors • Taper integration – a firm internally produces less than half of its own requirements and buys the rest from outside suppliers Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-13 Concentration Strategies (6 of 7) • Quasi-integration – a company does not make any of its key supplies but purchases most of its requirements from outside suppliers that are under its partial control • Long-term contracts – agreements between two firms to provide agreed-upon goods and services to each other for a specific time Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-14 Concentration Strategies (7 of 7) • Horizontal growth – expansion of operations into other geographic locations and/or increasing the range of products and services offered to current markets • Horizontal integration – the degree to which a firm operates in multiple geographic locations at the same point in an industry’s value chain Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-15 Diversification Strategies (1 of 2) • Concentric (related) diversification – growth into a related industry when a firm has a strong competitive position, but industry attractiveness is low Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-16 Diversification Strategies (2 of 2) • Conglomerate (unrelated) diversification – diversifying into an industry unrelated to its current one – management realizes that the current industry is unattractive – firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-17 Controversies in Directional Strategies • Is vertical growth better than horizontal growth? • Is concentration better than diversification? • Is concentric diversification better than conglomerate diversification? Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-18 Stability Strategies • Pause/proceed with caution strategy – an opportunity to rest before continuing a growth or retrenchment strategy • No-change strategy – decision to do nothing new—a choice to continue current operations and policies for the foreseeable future. • Profit strategy – decision to do nothing new in a worsening situation but instead to act as though the company’s problems are only temporary Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-19 Retrenchment Strategies (1 of 4) • Retrenchment strategies – used when the firm has a weak competitive position in some or all of its product lines from poor performance Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-20 Retrenchment Strategies (2 of 4) • Turnaround strategy – emphasizes the improvement of operational efficiency when the corporation’s problems are pervasive but not critical • Contraction – effort to quickly “stop the bleeding” across the board but in size and costs • Consolidation – stabilization of the new leaner corporation Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-21 Retrenchment Strategies (3 of 4) • Captive company strategy – company gives up independence in exchange for security • Sell-out strategy – management can still obtain a good price for its shareholders and the employees can keep their jobs by selling the company to another firm • Divestment – sale of a division with low growth potential Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-22 Retrenchment Strategies (4 of 4) • Bankruptcy – company gives up management of the firm to the courts in return for some settlement of the corporation’s obligations • Liquidation – management terminates the firm Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-23 Portfolio Analysis • Portfolio analysis – management views its product lines and business units as a series of investments from which it expects a profitable return Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-24 BCG Growth-Share Matrix (1 of 3) Figure 7-3: BCG Growth-Share Matrix Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-25 BCG Growth-Share Matrix (2 of 3) • Question marks – new products with the potential for success but need a lot of cash for development • Stars – market leaders that are typically at or nearing the peak of their product life cycle and can generate enough cash to maintain their high share of the market and usually contribute to the company’s profits Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-26 BCG Growth-Share Matrix (3 of 3) • Cash cows – products that bring in far more money than is needed to maintain their market share • Dogs – products with low market share and do not have the potential to bring in much cash Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-27 BCG Growth-Share Matrix Limitations • Use of highs and lows to form categories is too simplistic. • Link between market share and profitability is questionable. • Growth rate is only one aspect of industry attractiveness. • Product lines or business units are considered only in relation to one competitor. • Market share is only one aspect of overall competitive position. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-28 Advantages and Limitations of Portfolio Analysis (1 of 2) Advantages • Encourages top management to evaluate each of the corporation’s businesses individually and to set objectives and allocate resources for each • Stimulates the use of externally oriented data to supplement management’s judgment. • Raises the issue of cash flow availability to use in expansion and growth. • Graphic depiction facilitates communication. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-29 Advantages and Limitations of Portfolio Analysis (2 of 2) Limitations • Defining product/market segments is difficult. • Suggest the use of standard strategies that can miss opportunities or be impractical. • Provides illusion of scientific rigor. • Value-laden terms such as cash cow and dog can lead to self-fulfilling prophecies • No clear what makes an industry attractive or where a product is in its life cycle. • Naively following prescriptions of model may reduce corporate profits if used inappropriately. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-30 Tasks Necessary for Managing a Strategic Alliance Portfolio (1 of 2) 1. Developing and implementing a portfolio strategy for each business unit and a corporate policy for managing all the alliances of the entire company. 2. Monitoring the alliance portfolio in terms of implementing business unit strategies and corporate strategy and policies. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-31 Tasks Necessary for Managing a Strategic Alliance Portfolio (2 of 2) 3. Coordinating the portfolio to obtain synergies and avoid conflicts among alliances. 4. Establishing an alliance management system to support other tasks of multi-alliance management. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-32 Corporate Parenting (1 of 2) • Corporate parenting – views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-33 Corporate Parenting (2 of 2) • Generates corporate strategy by focusing on the core competencies of the parent corporation and the value created from the relationship between the parent and its businesses. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-34 Developing a Corporate Parenting Strategy 1. Examine each business unit in terms of its strategic factors. 2. Examine each business unit in terms of areas in which performance can be improved. 3. Analyze how well the parent corporation fits with the business unit. Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-35 Horizontal Strategy and Multipoint Competition (1 of 2) • Horizontal strategy – cuts across business unit boundaries to build synergy across business units and to improve competitive position in one of more business units Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-36 Horizontal Strategy and Multipoint Competition (2 of 2) • Multipoint competition – large multi-business corporations compete against other large multi-business firms in a number of markets Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved. 7-37
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Attached.

Running Head: (FIRST MOVERS)

(Last Name) 1

(First Movers)

(Institutional Affiliation)
(Your Name)
(Instructor Name)
(Course Number)
(Due Date)

(First Movers)

Running Head: (FIRST MOVERS)

(Last Name) 2

Part One
What are the advantages of being a first-mover in an industry?
In the hypercompetitive globalized market, timing has become everything in the success
of a product or service roll-out. When a company is the first to manufacture and sell a new
product or service, it is called the first mover. Becoming a pioneer in a new industry can, on its
face, appear to be a good thing. However, in some cases, being second or third in the market
plays tremendous dividends. One advantage of being a first mover is that “the company is able to
establish a reputation as an industry leader” (Wheelen 2015, p.299). When establishing a new
industry product, all subsequent products that attempt to enter that market will have to compete
with the reputation the first-mover company has already launched. Furthermore, being a first
mover into an industry creates a “standard” that all subsequent companies must either follow or
exceed. This standard could be about the quality of the product or service or quality of
innovation in the products that come in second or third in the market. If we look at the empirical
data that supports first movers, “research does indicate that moving first or second into a new
industry or foreign country results in gr...


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