1、Business Terms & Concepts,Some Basic Definitions,An organization is a group of people within some structure who possess a common objective, usually expressed in a mission statement. Organizations may be: for profit (frequently referred to as “firms”)not-for-profit A market is a place (real or virtua
2、l) where potential sellers and buyers meet to exchange resources (which may be money, products, services, etc.). An industry is a group of organizations competing in a predefined market under similar bases of competition,General Bases of Competition,A “basis of competition is a dimension upon which
3、companies choose to compete, e.g., Price Quality Delivery Service Innovation Knowledge Others?,Organization and Environment,An organization operates within an environment that is in a constant state of change Too often we hear of change and its effects, but exactly what can change?,Global,Social,Eco
4、nomic,Technological,Political,The General Environment,The Organization and Its Environment,Figure 3-4 Management (5th ed.) Robbins and Coulter Prentice Hall,The Specific Environment,Objective(s) of the Firm,What is the objective of the firm? Maximize shareholder wealth Generate above average economi
5、c rents (profits)Shareholder: Someone who holds stock (ownership) in the firm. Stakeholder: Anyone who possesses an interest in the firms activities (govt., public pressure groups, alumni, students, etc.),Strategy,To meet the organizations objective, managers craft a strategy. Whats a strategy? The
6、science of planning and directing large-scale operations, of maneuvering forces into the most advantageous position prior to actual engagement with the enemy (Webster) A strategy is a plan to marshall or deploy scarce resources. (Simpler) Levels of strategy: Corporate (Portfolio management) Business
7、 (Generate sustainable competitive advantage) Functional (Support the business level strategy),Corporate-Level Strategy,Diversification: the minimization of cash flow variance Integration Forward integration (one type of vertical): Gaining ownership or increased control over distributors or retailer
8、s (UA buys Priceline) Backward integration (the other): Gaining ownership or increased control over suppliers (Amazon buys RCA records) Horizontal integration Seeking ownership or increased control over competitors (Amazon buys BestBookBuys.Com) Also approving (but not crafting) business-level strat
9、egies,Business-Level Strategy,The primary objective of business-level strategy is to create sources of sustainable competitive advantage. OK what is sustainable competitive advantage? There are many definitions, used by different people in different ways. Here is a practical description. But first,
10、we have to back up,Sustainable Competitive Advantage,An asset is anything the firm owns or controls. Loosely, “Asset” is to Accounting as “Resource” is to Management. Types of assets: Physical: plant equipment, location, access to raw materials Human: training, experience, judgment, decision-making
11、skills, intelligence, relationships, knowledge Organizational: Culture, formal reporting structures, control systems, coordinating systems, informal relationships,Sustainable Competitive Advantage,A capability is usually considered a “bundle” of assets or resources to perform a business process (whi
12、ch is composed of individual activities) E.g. The product development process involves conceptualization, product design, pilot testing, new product launch in production, process debugging, etc. All firms have capabilities. However, a firm will usually focus on certain capabilities consistent with i
13、ts strategy. For example, a firm pursuing a differentiation strategy would focus on new product development. A firm focusing on a low cost strategy would focus on improving manufacturing process efficiency. The firms most important capabilities are called competencies.,Competencies vs. Core Competen
14、cies vs. Distinctive Competencies,A competency is an internal capability that a company performs better than other internal capabilities. A core competency is a well-performed internal capability that is central, not peripheral, to a companys strategy, competitiveness, and profitability. A distincti
15、ve competence is a competitively valuable capability that a company performs better than its rivals.,Examples: Distinctive Competencies,Sharp Corporation Expertise in flat-panel display technology Toyota, Honda, Nissan Low-cost, high-quality manufacturing capability and short design-to-market cycles
16、 Intel Ability to design and manufacture ever more powerful microprocessors for PCs Motorola Defect-free manufacture (six-sigma quality) of cell phones,Where are we?,We are discussing sustainable competitive advantage. Here we are now: AssetsCapabilitiesCompetenciesCompetitive Advantage Next is comp
17、etitive advantage. A competitive advantage is simply an advantage you have over your competitors. A competitive advantage is a special type of competency that will produce competitive advantage provided: A) it produces value for the organization, and B) it does this in a way that cannot easily be pursued by competitors.,
