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BUS-465 Complete Notes
Chapter-1
What is a strategy?
○ Analyses, decisions, and actions taken to achieve a goal
● Managerial Discretion
○ Latitude of action available to managers
○ Example:​ Low Discretion​-Love School of Business Dean’s ability to solely
decide the curriculum
...

● Intended Strategy vs Realized Strategy
○ What you want to do vs
...
External surveillance to predict changes ahead of the competition
● Environmental Monitoring
a
...
Monitoring macro inputs that could affect organizational strategy
● Competitive Intelligence
a
...
Planning for the direction and speed of external changes
● SWOT Analysis
a
...
Remedy weakness
c
...
Protecc from Threats
● General Environment: Factors hard to predict that are outside a firm’s control
a
...
Sociocultural
■ Beliefs, Values, Lifestyle choices
● Ex:Women in the workplace
● Gay Rights?
c
...
Technological
■ Innovation and the state of knowledge on an industrial scale
■ Drones?
e
...
Global
■ NAFTA, terrorism, globalism, international trade
Tech(med
...
pg 53
Competitive Environment
a
...


●

●

b
...
New Entrants
■ Strength of barriers to entry
● Economies of scale (production price per unit)
● Product Differentiation (brand strength)
● Capital Requirements (upfront financial commitment)
● Switching Costs (cost the buyer faces to leave current supplier)
● Access to Distribution Channels
● Cost Disadvantages Independent to Economies of Scale
○ Proprietary Products
○ Favorable access to raw materials
○ Government Subsidies
○ Favorable Gov
...
Barg
...
Barg Power of Suppliers
■ Supplier group is concentrated and sells to a vast market
■ Suppliers are not obligated to contend with substitute products
■ Industry is a not an important customer to the supplier group
■ Suppliers product is an important input to the buyer’s business
■ Suppliers products are highly differentiated or costly to switch
■ Supplier group could easily forward integrate
d
...
Rivalry among industry competitors
■ Many equally balanced competitors
■ Slow industry growth
■ High fixed costs
■ Lack of differentiation or switching costs
■ Capacity augmented in large additions
■ High Exit barriers
5 Forces Model ​Helps:
a
...
How to improve competitive position
c
...
Managers may avoid low profit industry
b
...
Static rather than dynamic analysis
Always keep a time horizon in mind (biz cycle 3-5yrs)
Understand the underpinnings of competition and the root of profitability

●

Strategic Groups: Companies that compete through similar strategy
○ Mobility Barriers
○ Identify groups whose competitive position may be marginal
○ Help chart the future direction firm strategy
○ Implications of industry trends for firms in the same group
Chapter 3-The Internal Environment
Value Chain Analysis
● A Firm is a process of value creating activities
● Value-The amount buyers are willing to pay for what the firm provides and is measured
in revenue
● 5 Primary Activities
○ Inbound logistics
■ Location of distribution facilities to minimize shipping time
■ Warehouse layout/design to increase efficiency of operations for incoming
materials
○ Operations
■ Efficient plant operations to minimize cost
■ Efficient plant layout and workflow design
■ Incorporation of process technology
○ Outbound Logistics
■ Effective shipping processes to provide quick delivery and min
...
costs
○ Marketing/Sales
■ Innovative promotion and advertising
■ Proper identification of customer segments and needs
○ Service
■ Quick response to customer needs
■ Quality service personnel and continuous training
● Support Activities
○ Procurement
■ Obtaining raw material inputs to optimize quality and speed
■ Developing win/win relationships with suppliers
■ Analysis of alternative sources for inputs to min
...

○ Technology (R&D)

○

○

■ Effective R&D for process and product activities
■ Positive collaboration between R&D and other departments
■ Excellent professional qualifications of personnel
HR Management
■ Effective recruiting, development and retention of employees
■ Good relationships with Trade Unions
■ Reward/Incentive programs to motivate all employees
General administration
■ Effective planning systems to attain goals
■ Excellent relationships with all stakeholders
■ Effective information to integrate value creating activities

Interrelationships amount value activities
● Relationships within the firm
● Relationships with other stakeholders (supplier & customer)
“Prosumer”
● Including the customer in the production of the product
○ Greater Satisfaction
● Can be done through loyalty programs/individualized marketing
Value Chain in Service Organizations
● Support activities may be more critical to primary activities
Resource Based View-Competitive advantage is created by bundling several resources in
unique combinations
● Tangible Resources
○ Physical, Financial, Technological, or Organizational Assets that a firm uses to
create value
● Intangible Resources
○ Human, Innovation, and Reputation
● Organizational Capabilities
○ Firm competencies or skills to turn inputs into outputs
○ Capacity to combine tangible and intangible resources using organizational
processes
Sustainable Competitive Advantage
1
...
Rare for the firm’s current and potential competitors
3
...
Physical Uniqueness
b
...

Hard to discern where value is added
c
...

Resources developed through a unique series of event
d
...
No Strategic Equivalent Substitutes
Employee Bargaining Power
Employee Replacement Cost
Employee Exit Cost
Manager Bargaining Power

Evaluation Based on Financial Ratios pg
...
Short Term Solvency
2
...
Asset Management
a
...
Profitability
5
...
Management of knowledge workers
○ Knowledge is a versatile resource
Intellectual Capital
○ Difference between the market value and firm value of a firm
○ Market Value to Book Value Ratio
Human Capital

●

●

●

○ Individual capabilities of the firms employees and managers
Social Capital
○ Network of relationships that individuals have throughout the
organization/industry
■ Critical in sharing and leveraging knowledge
Explicit vs Tacit Knowledge
○ Explicit-codified, documented and easily reproduced
■ Training Manuals, Patents, Processes
○ Tacit-Minds of the employees based on their experiences and backgrounds
■ Only shared with the consent and participation of the individual
Socially Complex Processes
○ Included leadership, culture, and trust
○ Helps create an environment where learning and sharing is easier

Leveraging Human Capital
● Attract High Level Talent
○ “Hire for attitude, Train for skill”
○ Person-Organization Fit
● Develop employees to reach their fulfill their maximum potential
○ Buy-In by leaders on every level
○ Transferring knowledge
○ Monitoring Progress
○ Evaluating Human Capital
■ 360 Degree Feedback
● Retain the best employees
○ Identifying with the organization's mission and values
○ Challenging work and stimulating environment\
○ Financial and Non-Financial awards

Diversity in the workplace
Demographic changes have arisen from globalization
1
...
Resource Acquisition
a
...
Marketing
a
...
Creativity
a
...
Problem Solving

a
...
Organizational Flexibility
a
...

Wide variety of information outside their normal field
Challenges
Groupthink
In order to maintain harmony or loyalty to the group, people collectively decide on a
course of action by suppressing dissenting viewpoints and by isolating themselves from outside
influences
Signs of Groupthink
-No debate
-Word Choice (negative to the minority opinion)
-All voices are not equal
Abilene Paradox
The group collectively decides to do something despite the fact that everyone
individually does not agree out of fear of “rocking the boat”
Don’t accept easy conformity
Collaboration Barriers
People hoard and arent willing to hlep
People cant find what they need
People are unable to work with people they dont know well
3 Levers for Collaboration
1
...
Set sights on a Common goal
2
...
Right people on the right project
3
...
Develop interpersonal relationships to foster collaboration

Codifying Knowledge
Developing software & processes that are readily accessible based on past experiences
Expensive to develop but can provide a competitive advantage
Dynamic Capabilities
The ability to build and protect competitive advantages
● Environmental and technological “sensing”
● Organizational form
● Ability to collectively strategize
● The ability to change using existing resources
Chapter 5-Business Level Strategy
Scope: Which parts of the market should we compete in?
Broad market or niche
Source of Advantage: What makes them competitive in this space?
Low cost or Differentiation
Overall Cost Leadership
Cost and overhead control
Cost minimization
Experience Curve-Help decrease production cost
Harder for powerful buyers to negotiate a lower price
Creates entry barriers
Strategy can sometimes easily be imitated
Ex-Costco
Differentiation
Higher entry barrier due to customer loyalty
Provides higher margins-helps deal with supplier power
Established consumer loyalty-less threat from substitutes
Uniqueness is not valuable
Diffusion of brand ID through product line extensions
Focus Strategy
Niche Targeting
Advantages in either cost or differentiation
Firms that use one or more competitive advantages outperform those who only used a single
form
...

Pooled Negotiating Power
Vertical Integration
Backward or Forward
Transaction Cost Perspective
Hidden costs of making a decision
By internalizing these activities you can reduce these costs
Only pursue when the savings outweigh administrative costs with internalization

Unrelated (​hierarchical​)-value derived from support activities at the corporate office
Corporate Restructuring/Parenting
Parenting​-Positive Contributions by the corporate office to a new business as a result of
expertise and support provided
Improve plans budgets
Legal, financial and HR Systems
Restructuring-​Intervention to change assets, capital structure, and management by selling off
parts of the business, reducing payroll and unnecessary expenses
...

Asset Restructuring
Capital Restructuring
Management Restructuring
Portfolio Management-​A method of assessing the competitive position of a portfolio of
businesses within a corporation
...
(Pg216)
BCG growth/share matrix-uses circles to show the size of business by revenue
...

Stars-high industry growth and high market share
Long term potential and need investment funding
Question marks-high industry growth and weak market share
Invest to enhance their competitive position
Cows-High market share and low industry growth
Limited long term potential but represent a source of cash flow to fund stars and
question marks
Dogs-Weak market shares in low growth

Usually should be divested
...
Corporate
Entrepreneurship or New Venture Development
M&A helps
Gain valuable resources to expand product offerings and services
Provide an opportunity for firms to attain 3 bases of synergy
Core competencies
Sharing activities
Building market share
Force other players in the industry to consolidate to keep an edge
Easy way to enter new market segments
Risks
Hard to integrate
High Premiums
Benefits
Speed
Novel Resources
Divestment-exit of a business from a firm's portfolio
Can help managers focus efforts on the firm’s core business
Provide the firms with more resources for better alternatives
BCG Matrix-Dogs
Raise cash to fund existing business

NOT ON THE TEST
Textron 3 Test Values
● Long term fundamental must be sound
○ Attractiveness of each SBU market and their position within that
● Ability to grow value by 15% or more annually
...


Managerial Motives-managers acting in their own self-interest rather maximizing shareholder
value
Antitakeover Tactics-actions to avoid losing wealth or power as a result of a takeover
Greenmail-payment by target firm to prevent a takeover
...

Golden Parachute-Contract between managers that gives them a high severance package in
the event of a takeover
Poison Pills-used by a company to give shareholders certain rights in the event of a takeover
Chapter 7-International Strategy
Globalization
Increase in international exchange of tangible/intangible goods
Growing similarity of laws,rules, norms, values and ideas across countries
Emerging Economy-Rapid growth, market liberalization,
Multinational Enterprise-organization that owns or controls productions of goods or services in
one of more countries
...

Marketing to the bottom of the pyramid
● The practice of marketing to the 5bn poor people in the world with nearly $14Trillion in
purchasing power
● Discretely innovating products to market to everyone on the economic curve

●

○ Shrinking packaging
○ Reducing features
○ Still making a profit
Understanding the needs of the community

Diamond of National Advantage
1
...
Production factors like infrastructure and skilled labor
b
...
Industry specific knowledge that is hard to imitate can be a national competitive
advantage
2
...
The home market demand for an industrys product or service
b
...
Related & Supporting Industries
a
...
Helps manage cost-effective inputs to reduce costs
4
...
Conditions of the national governing policy towards how businesses operate and
the nature of the domestic rivalry
...
Intense Domestic rivalry creates better global firms
c
...

● Norms, ways of thinking, culture
-Shape how we think and act
-Shapes what we value

Dimensions of National Culture
● Power Distance
○ Acceptance of the unequal distribution of power
● Collectivism
○ The degree to which people in a society are into groups
...
Recognize opportunity
a
...
Social Entrepreneurship
i
...
Elon
a
...
Barbershops
ii
...

Meets the 4 Characteristics
b
...
May occur as the result of deliberate search for new venture projects or creative
solutions to business problems
d
...
Characteristics
i
...

Achievable-opportunity must be practical and physically possible
iii
...

Value Creating-Benefits must exceed the cost

2
...

4
...

6
...


Define business concept
Assess the resource requirements
Get the resources
Implement the business plan
Managing results
Profit

Entrepreneurial Resources-Leverage one to get the other
1
...
Social Capital
3
...

Market Commonality-Extent to which competitors vie for the same customers
Resource Similarity-Extent to which competitors use the same types of strategic
resources
High Commonality + High Resource Similarity = High Chance of Response by Competitor
Types of Competitive Actions
● Strategic Actions
● Tactical Actions
Not Reacting
● A firm's choice of not reacting to competitive action

Co-Opetition
Firm's strategy of both cooperating and cooperating and rival firms
Chapter 9-Strategic Control
Informational Control
The ability to respond to environmental change
Behavioral Control
Balance between a firm’s culture, rewards, and boundaries
...

Traditional Control
1
...
Strategies are implemented
3
...
Flexibility and change in plan/objectives is the best
option for complex business environments that deal with uncertainty

Contemporary Control
Informational Control-The method in which a firm gathers and analyzes information from the
internal and external environment to gain the best fit between organizational goals + strategies,
and the strategic environment
...

4 Characteristics of Contemporary Control Systems
1
...
That has potential strategic importance
2
...
Is important enough to warrant freq
...

3
...
The control system is a key catalyst for an ongoing debate about underlying data,
assumptions, and action plans
...

● The competitive environment is complex and unpredictable
...

● Culture and rewards grow increasingly important, as young manager see themselves
more as ‘free agents” rather than committed to a long term career
...

Culture acts as a means of reducing monitoring costs
Reward System-policies that specify who gets rewarded and why
...

Plans must be:
● Fair and equitable
● Flexible to the changing environment
● Focused on growth
Ex-Starbucks Stock Option Plan
Boundaries & Constraints- Rules that specify behaviors that are acceptable and unacceptable
● Focusing efforts on Strategic Priorities
○ Provides the firm with greater strategic focus
○ Potential for stronger competitive advantages
● Providing Short Term Objectives and Action Plans
○ Specific and Measurable
○ Specific time horizon for attainment
○ Be achievable, yet challenging enough to motivate
...

Primary Participants include:
● Shareholders
● Management
● Board of Directors
Separation of Owners & Management
Corporation-a mechanism created to allow different parties to contribute capital,
expertise, and labor for the maximum benefit of each party
...

1
...

2
...
Committed/Involved Board of Directors
a
...
Ensure strategic plans undergo rigorous scrutiny
c
...
Board presentations and access to employees
e
...
Shareholder Activism
a
...

3
...
Boards often require that CEOs become substantial owners of stock
b
...

c
...

Creates focus, unity, and can enhance a firm’s responsiveness and ability to secure
critical resources
...
Boards cannot discharge their basic
duty of monitoring the boss if the boss is chairing the meetings and setting the agenda
...

Market for Corporate Control-Shareholders who are dissatisfied with a firm’s management sell
their shares
...

● Can often have conflicts of interests with the firms they audit
Banks and Analysts-Do research to support loan covenants and make recommendations
to investment firms
...

3 Interdependent Activities
● Setting a Direction
○ Scan the Environment
○ Integrate the knowledge
● Designing the Organization

●

○ Structures
○ Teams
○ Systems
○ Processes
Nurturing an Excellent and Ethical Culture
○ Focused on core competencies
○ High ethical standards

Integrative Thinking
● Reconciling opposing thoughts to generate new alternatives
● Using the “both” approach rather than “either or”
Dealing with Change
● Leadership is about creating change and helping people deal with it
● “Unfreezing” old behaviors and “Refreezing” new ones
Overcoming Barriers to Change
● Reasons why orgs are prone to inertia/slow change
○ Vested interest in status quo
○ Systemic Barriers
○ Behavioral Barriers
● Effective Use of Power
○ Organizational vs
...

Ethical Orientation
● Practices the firm used to promote ethical culture
● Includes ethical role models, codes of conduct, ethically based reward systems
Integrity vs Compliance Based Ethics

Compliance
● Actively complying to ethical standards
Integrity
● Concern for law with emphasis on managerial responsibilities
CSR Corporate Social Responsibility
● Degree to which a firms actions honor ethical values for individuals, communities and the
environment
Stakeholder Analyzed-Salience
● Power ​to influence the firm (large/small)
● The ​Legitimacy ​of the relationship the firm( is the group related to the firm)
● The ​Urgency​ of the claim on (how soon)
Chapter-12
Innovation
Definition-The use of new knowledge to transform organizational processes or create
commercially viable products and services

Strategic Renewal-Stay fresh and reinvent as business environment changes
Venture Opportunities-breakthroughs, new product concepts,evolving tech
Types of Innovation
● Product
○ Early in life cycle
○ Unique features or enhancements
● Process
○ Later stages of life cycle
○ Improving efficiency
Incremental vs Radical Innovation
● Radical-Fundamentally changes existing practices
○ Long Term
○ Government support
○ Open Ended Experimentation and time consuming markets
● Incremental-Enhancing existing practices
○ 6 months-2yrs to launch
○ May use a milestone approach driven by goals and deadlines
Sustaining vs Disruptive Innovation
● Sustaining-Extending sales in an existing market
● Disruptive-overturn markets by providing an altogether new approach

Innovation is external force (tech, competition) and internal (strategy, value-added activity)
Challenges with Innovation-Risk of failure & dedication of time/resources
● Seeds & Weeds
● Experience vs Initiative
● Internal vs External Staffing
● Building Capabilities vs Collaborating
● Incremental vs Preemptive Launch
Creative Intelligence-Core to managing innovative skills
1
...
Questioning
3
...
Experimenting
5

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