business in canada (chapter 5)

- Strategy: The plans of actions taken by an organization to accomplish an
objective.
-The tools that help to form effective strategies to create and sustain the competitive advantage of an organization (consisting of analysis, evaluations, decision-making, implementations, and re-evaluations)
- Sustain a business organization’s competitive advantage
- Sustain survival (and growth) of the business
- Sustain purpose-driven performance
- Ghost kitchens are popular for many reasons.

SWOT (Strength, Weaknesses, Opportunities and Threats)
session 4 slide 19

corporate level strategy:
specifies actions taken by the firm to gain a competitive advantage by selecting and managing a group of different businesses competing in serveral industries and product markets

(diversification strategies)
- Internal development
- Mergers or Acquisitions
- Strategic alliances (Non-equity alliances, Equity alliances, Joint venture)

business level strategy:
each business unit in diversified firm chooses a business level strategy as its means of competing in individual product market (examples session 5 slide 6)
subtopics:
cost leadership- Superior profits through lower cost. Example: Walmart
differentiation- Creating a product or service that is
perceived as being unique "throughout the industry" Example: Apple
focus- Concentrating on a limited part of the market. Example: Custommade furniture business in Waterloo, Ontario.

1. threats of new entrance
- New entrants can take two basic forms: new start-ups, and diversification of existing firms in other industries.
- Regardless, the entrants bring new competition, a desire to gain market share, and substantial resources and capabilities.
- As a result, prices can be bid down or incumbents' costs inflated, reducing profitability.
- As such, the new entrants may impose significant threats to incumbents, who thus need to consider how to create barriers to deter them. From the new entrants' point of view, there are five major sources of entry barriers.
-subtopics***: economic of scale, capital requirements, switching costs, access to distribution channels, cost disadvantage independent of scale)

2. bargaining power of suppliers:
- Therefore, the power suppliers hold has a direct impact on the industry's profitability, as well as the incumbents' performance.
- There are two major factors contributing to suppliers' power in relation to incumbents in an industry.
The first one is the criticality to the incumbents of the resources the suppliers hold.
- The second factor is the number of suppliers available relative to the number of incumbents in an industry.
- Suppliers, in that scenario, have more power to negotiate better prices.

3. bargaining power of the buyer:
- our attention is to the power held by individuals or organizations that purchase incumbents' products or services.
- Buyers can affect industry performance by demanding lower prices or better quality or services, or playing incumbents against one another.
- These actions can erode industry profitability, as well as firm performance.
- There are many factors contributing to buyer power in relation to incumbents in an industry.
- subtopics: switching costs, undifferentiated products, importance of incumbents' products to buys, the # of incumbents relative to the # of buyers

4. threats of substitutes:
- All firms in an industry often compete with other firms in different industries, where the firms provide substitute products or services with similar purposes.
- For example, newspapers faced a steady decline as substitute news sources replaced the traditional print form.
- The Internet and electronic media have also threatened the traditional print newspaper.
- Social media has officially surpassed print newspapers as a source of news for Americans.?
- As such, these substitutes continue to threaten the profitability of the newspaper industry as a whole: so much so, that the print industry has faced

5. rivalry among existing firms:
- The rivalry among incumbents in an industry can take many different forms.
- For example, Canadian insurance providers compete by using different strategic actions, including cutting prices, new insurance products, improvement of operational efficiency, advertising, and mergers and acquisitions.
- More broadly, rivalry can be intensified by several interacting factors.
- subtopics: lack of differentiation or switching costs, numerous or equally balanced competitors, high exit barriers

1. question of (V)alue:
- Managers need to ask if their firms' resources and capabilities add any value that will increase their ability to capture market share or enhance profitability, either through exploiting emerging opportunities or by neutralizing threats.
- Some firms do have such resources and capabilities.
- For example, Procter & Gamble Co. (P&G), a consumer goods corporation specializing in products such as beauty, grooming, health care, home care, baby care, family care, and feminine care, has reached an all-time high in terms of its earnings.
- After Pampers Pure was a success, the company did the same with its feminine hygiene products, called Always Pure.
- P&G also created higher price items for its laundry products.

2. question of (R)areness:
- valuable resources and capabilities help firms to survive, the resources and capabilities need to be rare.
- Thus, managers need to assess whether their valuable resources and capabilities are unique among their competitors.
- For example, Tesla, the electric vehicle, and clean energy company has developed a mini-monopoly within the auto industry.
- However, there is not much real competition on the electric vehicle front. Tesla does not want to be a monopoly.

3. question of (I)mitability:
- Valuable and rare resources and capabilities can provide firms with a competitive advantage; however, how long the advantage lasts depends upon how quickly imitation can occur.
- When imitation occurs it diminishes the degree of rareness, which may further erode the value of the resources and capabilities.
- Thus, managers need to ask themselves if it is difficult for their resources and capabilities to be imitated by other firms, and/or how they can create barriers to imitation.
- For example, a pharmaceutical company that invents a new drug can obtain a patent and create a temporary barrier to prevent other firms from imitating its product.
- Other companies, like Apple, have managed to become so "iconic" and embedded in the consumer psyche that, for many years, competitors found it almost impossible to imitate them.

4. question of (O)rganization:
The last question managers have to consider is whether their firms can be organized in effective and efficient ways to exploit their valuable, rare, and difficult to imitate resources and capabilities to maximize their potentials.
Organization of a firm is critical for firm success.
Quite often, firms with valuable resources and capabilities experience decline in performance because they do not have appropriate organizational structure and design, compensation policies, and organizational culture to exploit the resources and capabilities.

vrio model pg 130

cost leadership: superior profits through lower cost. Example: Walmart

differentiation: Creating a product or service that is perceived as being unique "throughout the industry" Example: Apple

focus: Concentrating on a limited part of the market. Example: Custom-made furniture business in Waterloo, Ontario.

- Diversifying to new markets gives organizations opportunities to sustain growth and increase revenue.
- By diversifying into new markets, firms have opportunities to share related activities, which in turn achieves economies of scope and then increases profitability and revenue.
- Economies of scope here refers to the situation where the total costs of serving two markets or producing the products for two markets, are less than the costs for only serving them or only producing them.
- Such cost savings may derive from sharing production facilities, personnel, or marketing activities.
- In addition to benefits from economies of scope achieved through sharing activities, diversification allows firms to leverage their core resources and capabilities to explore growth opportunities in new markets. (ie. Kodak Camera pg 139)
- Diversifying into related markets allows the firm to sustain growth or enhance revenue. Pursuing vertical integration is a way for the firm to secure and control their raw materials or distribution channels. Finally, diversification can be driven by inter-firm imitation that can be independent of economic motives (e.g., growth, profitability, securing supply).

related: is a strategic business expansion approach in which a company enters new markets or industries that are closely related to its existing core business.
This means that the new ventures share some commonalities, such as technology, distribution channels, or customers, with the company's current operations. The goal of related diversification is to leverage synergies, minimize risks, and create opportunities for growth while building on the company's existing strengths and capabilities.

unrelated: where a firm diversifies into a new market that is not similar to its current market domains. This kind of unrelated diversification tends to yield few
synergies for a firm, given that there are few opportunities for sharing activities or leveraging resources and capabilities. ie. holding companies

vertical: refers to an extension or expansion of the firm's value chain activities by integrating preceding or successive productive processes. That is, the firm incorporates more processes toward the source of the raw materials (backward integration) or toward the ultimate customers (forward integration). For example, Tesla has an advantage over its competitors when it comes to batteries, which can be attributed to its vertical integration strategy.
Tesla acquired various companies in order to both design its own battery in-house, with proprietary chemistry and to begin to manufacture its own batteries

internal development: also known as organic growth, involves expanding a company's business by developing and launching new products, services, or processes using its existing resources, capabilities, and expertise. This approach to diversification is typically less risky than external strategies like mergers and acquisitions and can help a company leverage its strengths to explore new opportunities.

mergers and acquisitions: (M&A) involves expanding a company's business portfolio by acquiring or merging with other businesses that operate in different industries or markets. This strategic move can help reduce risk, increase revenue streams, and enhance the company's competitive position.

strategic alliances: involves forming partnerships with a variety of organizations or entities to expand business opportunities, reduce risk, and enhance competitive advantage.

(major forms of strategic alliance: non-equity alliances, equity alliances, joint ventures)