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Mgtop 491
d. smiths test
10
Management
Undergraduate 4
02/28/2011
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Term
Five Forces Model
 Definition

¢Remember Porter’s five industry forces
—Rivalry – competitors avoid price wars with cost
—Power of Buyers – shift demand to you, raise market power. Leaders.
—Power of Suppliers – raise market power, absorb cost, raise
—Threat of New entrants barriers
—Threat of Substitutes – reinvest econ profit to maintain advantage
Term
Above Average Returns
 Definition

—Returns in excess of what investor expects in comparison to other investments with similar risk
Term
be able to descibe resources and how they are related to capabilities and core competencies.
 Definition
The two types of resources are physical, human and organizational capital. They are related to capabilities because the very definition of capabilities is the ability to use your resources. They are related to core competencies because they are the specific factors that the firm sees as integral to how it works.
Term

Be able to talk about competitive advantage and the resource characteristics that lead to competitive advantage.

 Definition
Competitive Advantage will exist if the firm has high barriers to entry, difficult to imitate, no substitutes and earns an above average return. For the firm to obtain a competitive advantage the resources must give the firm the ability to outperform its rivals.
Term

 

Know the business level strategies, and be able to define the different aspects of each (I.E. Scope)

 

 Definition

 

Business level-strategy:  Integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
Market Scope:
—…what goods and services to offer to which cost

Value Chain:
—How and where to produce the good or service
—… how to distribute the good or service to your customer

 
Term

 

Be able to talk about how cost leadership and differentiation relate to the 5 competitive forces. In other words know the strengths of the strategies

 

 Definition


¢How differentiation relates to the 5 competitive forces.:
—Rivalry against existing competitors
¢…cost, are loyal purchasers of different products
—Bargaining Power of Buyers (Customers)
¢…inverse relationship between loyalty/product
—Bargaining Power of Suppliers  
¢…provide high quality components, loyality, price sens
¢…driving rasies costs. Costs passed to customer
—Potential Entrants 
¢…substantial barriers and would require significant resources investment
—Product Substitutes
¢ Customer loyalty effectively positions firm against product substitutes

 

¢How cost leadership relates to 5 competitive forces.
—Rivalry – competitors avoid price wars with cost
—Power of Buyers – shift demand to you, raise market power. Leaders.
—Power of Suppliers – raise market power, absorb cost, raise
—Threat of New entrants barriers
—Threat of Substitutes – reinvest econ profit to maintain advantage
Term

Know and be able to describe the 3 main aspects of the external environment

 Definition

 

¢General …environment – focused on the future
¢Industry … environment – focused on industry specific
¢Competitor environment
—Focused on competitive dynamics
—competitors’ capabilities, intentions, actions, responses

 
Term
We discussed first movers and second movers, refer to our discussion and your notes about the characteristics of each
 Definition
First movers get customer loyalty and a large market share. Although they do lose market share and loyalty as competition by second movers come into the market.
Term
Know resource commonality and market similarity and how they relate to competitive rivalry
 Definition
Market commanality (aka multi market competition) is the number of markets that 2 firms might compete in. The more competition there is the less likely theyre going to engage in price wars. If they do compete in price wars the respondee will retaliate harder. Resource commonality compares tangible and intangible resources between 2 firms, typically very similar and hard for 1 company to repress opposition b/c of similarity.
Term
Extra credit saying
 Definition
A ham sandwich walks into a bar and the bartender says “Hey buddy, we don’t serve food here.”
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