week 2

• Business-level strategy


  The fundamental approach of a company to enable a single entity to retain a competitive edge within a given industry
• A competing single enterprise company can only have one generic strategy
• Cost-leadership generic strategy


  A standard market plan focused on being an industry's lowest-cost company
• Differentiation industry-wide generic strategy


  An essential business plan focused on a distinction that provides value for consumers and returns that more than offset the differentiation costs
• Cost focus and differentiation focus generic strategy


  A single business strategy that applies to a given part of an industry, such as a market segment or niche, where the business concerned can design a strategy that meets customer needs more closely than rivals could achieve
• Value chain


  An organizational framework to disaggregate and show the strategically relevant activities of an organization, which helps understand and manage cost behavior and existing and potential differentiation sources
• Business models


  Conceptualizations of critical areas or structures within an enterprise to establish the unique value that the organization provides for its customers
• Business-level strategy


  A fundamental approach that a company takes to help a single business survive and grow its overall intent
• The strategy typically aims at sustaining competitive advantage within a given industry
• Four broad forms of a strategic strategy focused on competitive advantage and reach

  • Cost leadership generic strategy
  • Differentiation industry-wide generic strategy
  • Cost focus generic strategy
  • Differentiation focus generic strategy
• Cost leadership generic strategy


  A generic strategy with lower costs per unit generated than competitors, and any future rivals in the industry will achieve that
• Scale economies


  Cost savings that arise when higher volumes allow for a reduction in unit costs
• Scope economies


  Cost reductions made possible by different goods sharing the same facilities
• Curve effect of experience


  When an organization's cumulative output doubles over time, unit costs when adjusted for inflation, could decrease by 20–30 percent
• Differentiation industry-wide generic strategy

  Offers unique value to the customers of an industry in a way that more than offsets the differentiation costs, which allows an organization to earn above-average profits for the industry
• The 'industry-wide' role is significant as it encompasses the industry as a whole and its markets
• Generic Strategies are Mutually Exclusive
• A company that selects a universal approach that blends cost and differentiation is called a straddle when it approaches a 'Leader of all companies, master of none'
• To all people doing all things is a formula for strategic mediocrity and below-average performance because, in Michael Porter's opinion, a company would have no competitive advantage whatsoever
• Value chain


  Identifies those strategic activities relevant to the organization's core areas to assess how they interact together to sustain a chosen strategy
• Value


  The amount the customers are prepared to pay for the products and services of an organization
• Primary activities in the value chain

  • Inbound logistics
  • Operations
  • Outbound logistics
  • Marketing and sales
  • Service
• Support activities in the value chain

  • Firm infrastructure
  • Human resource management
  • Technology development
  • Procurement
• Coordination is needed to promote common ways of working following the competitive strategy's needs
• Corporate-level strategy


  The corporate center's strategy for managing a multi-business organization; it is concerned with multiple business growth and development and, therefore, works at a higher level than a single business strategy
• Product expansion grid


  The matrix used by Ansoff to display four principal growth directions using the terms market penetration, product development, market development, and diversification
• Strategic organizational strategies


  • Prospectors
  • Analyzers
  • Defenders
  • Reactors
• Mergers and acquisitions (M&A)

  Transactions negotiated by companies to merge their activities into common ownership, while acquisitions occur when one company purchases a majority interest in another
• Vertical integration


  The expansion of the activities of an organization up or down a distribution chain
• Horizontal integration


  The expansion of the activities of an organization sideways in an industry, achieved through the acquisition of rivals within the same part of the supply chain
• Strategic portfolio analysis


  A collection of divisions or companies operated as a portfolio of independent businesses by a corporate core
• Related diversification


  When a company's businesses have certain features in common that allow a corporate parent to create synergies that favor all the businesses that would otherwise not exist
• Horizontal integration


  Narrows down the equal number
• M&A


  • Fast way to increase operational scale and market power
  • Can take an acquiring organization into new markets and industries
  • Traditionally associated with new and expanding branches and markets
• M&A activity results are often problematic
• Success in M&A


  Requires a clear consolidation strategy before completing an acquisition<|>Integration process needs to be quick and definitive to achieve cohesion once the financial transaction is over<|>Requires a clear understanding of an acquired organization on the part of the acquiring organization's senior management
• Most successful mergers


  Have been between organizations with an already established history of partnerships, such as joint ventures or alliances
• Strategic interdependence between acquired and acquiring entities

  Depends on the anticipated value it generates<|>Focused on the importance of exchanging resources at the organizational level - transfer of functional expertise, transfer of people, sharing information
• Extra value in M&A

  Can be achieved by combining the benefits created by leveraging resources (such as borrowing capacity, added buying power, and increased market power)
• Approaches to M&A integration

  • Absorption
  • Preservation
  • Symbiosis
  • Retention