Q1: Discuss, using examples, the resources view of the firm.
ANS:
The Resource-Based Model of above-average returns assumes that:
- Each organisation is a collection of unique resources and capabilities.
- The strategy the firm chooses should allow it to use its resources and capabilities to gain a competitive advantages in an attractive industry to earn above-average returns.
1. Identify the firm's resources by studying the strengths and weaknesses compared with those of the competitors.
- Resources are inputs into a firm's product process, such as capital equipment, skills of individual employees, patents, finances and talented managers.
- In general, a firm's resources are classified into three categories: physical, human and organisation capital.
- They have a greater likelihood of being a source of competitive advantage when they are formed into a capability.
2. Determine the firm's capabilities which allows the firm to do better than its competitors.
- Capability is the capacity for a set of resources to perform a task or an activity in an integrative manner.
- Capability should not be so simple that it is highly imitable or so complex that it defies internal steering and control.
3. Determine the potential of the firm's resources and capabilities in term of a competitive advantage.
- Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rival.
- The potential is realised when resources and capabilities are valuable, rare, costly to imitate and non-substitutable.
4. Locate an attractive industry.
- An attractive industry is an industry with opportunities that can be exploited by the firm's resources and capabilities.
5. Select a strategy that best allows the firm to ultilise its resources and capabilities relative to opportunities in the external environment.
- Strategy formulation and implementation are strategic actions taken to earn above-average returns.
The five steps above will result in earning above-average returns.
EXAMPLE:
After the merger of StarHub and Singapore Cable Vision (SCV) in year 2002, this gave the firm the resources and capabilities to launch its unique hubbing packages as its major competitive edge.
Q2: Discuss, using examples, the Industrial Organisation view of the firm.
ANS:
The Industrial Organisation (I/O) Model of above-average returns specifies that the industry in which a firm competes has a stronger influence on the performance than the choices manager make inside their organisations.
The determinants of a firm's performance are economies of scale, barriers to market entry, diversification, product differentiation and degree of concentration of firms in the industry.
The I/O Model assumes that:
- The external environment imposes pressures and constraints that determine strategies leading to above-average returns.
- Most firms competing in an industry control similar strategically relevant resources and pursue similar strategies.
- Resources used to implement strategies are highly mobile across firms.
- Organisational decision-makers are assumed to be rational and committed to acting in the firm's best interests such as profit maximising.
1. Study the external environment such as general environment, industry environment and competitor environment.
2. Locate an industry with high potential for above-average returns.
An attractive industry is an industry whose structural characteristics suggest above-average returns.
3. Identify and formulate the strategy called for by the attractive industry to earn above average returns.
4. Develop or acquire assets and skills needed to implement the strategy.
5. Use the firm's strengths to implement the strategy.
Strategy implementation is the selections of strategic actions linked with effective implementation of a chosen strategy.
The above five steps will result in earning of above-average returns.
EXAMPLE:
As the market of telecommunication industry in Singapore is saturated, SingTel adopted the acquisition strategy to acquire Optus in order to expand into the Australian market.
Q3: Discuss, using examples, the following two forces in the industry environment: power of suppliers and power of buyers.
ANS:
The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive response.
The five forces that influence the industry environment are:
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of product substitutes
- Intensity of rivalry among competitors
The interactions among these five factors determine an industry's attractiveness and profit potential. The greater a firm's capacity to favourably influence its industry environment, the likelihood that the firm will earn above-average returns.
In this case, the bargaining power of suppliers and the bargaining power of buyers will be discussed.
Bargaining power of suppliers:
Increasing prices and reducing the quality of their products are potential means used by suppliers to exert power over firms competing within the an industry.
Supplier power increases when:
- Suppliers are large and few in number
- Satisfactory substitute products are not available
- Industry firms are not a significant customer for the supplier
- Suppliers' goods are critical to buyers' marketplace success
- Suppliers' products create high switching costs
- Suppliers pose a threat to integrate forward into buyers' industry
EXAMPLE:
In the pharmaceutical industry, supplier such as Pfizer is large and few in number. Satisfactory substitute products are not available as Pfizer is the only company that supplies its patented product - Viagra. Thus, the industry firms are not a significant customer for Pfizer. As a monopoly, Pfizer's Viagra are critical to buyers' marketplace access and it creates a high switching costs for buyers. In addition, Pfizer pose a threat to integrate forward into buyers' industry by providing highly differentiated products. As a result, Pfizer has a higher bargaining power as a supplier.
Bargaining power of buyers:
Buyers want to buy products at the lowest possible price. In order to reduce their costs, buyers bargain for higher quality, greater levels of services and lower prices.
Buyer power increases when:
- Buyers are large and few in number
- Buyers purchase large portion of an industry's total output
- Buyers' purchase are a significant portion of a supplier's annual revenues
- Buyers can switch to another product without incurring high switching costs
- Buyers pose a threat to integrate backward into sellers' industry
EXAMPLE:
Buyers such as NTUC Fairprices and Watsons are large and few in number in their respective industries. They purchase large portion of an industry's total output which are a significant portion of the suppliers' annual revenues. As the stores of both NTUC Fairprices and Watsons carry a variety of merchandise lines and brands, they can easily switch to another product without incurring high switching costs. In addition, both of the companies pose a threat to integrate backward into the sellers' industry by launching their private label brands. Thus as buyers, their bargaining power will be high.
Q4: Describe, using examples, the impact of barriers to entry on firms in the industry environment.
ANS:
The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive response.
The five forces that influence the industry environment are:
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of product substitutes
- Intensity of rivalry among competitors
The interactions among these five factors determine an industry's attractiveness and profit potential. The greater a firm's capacity to favourably influence its industry environment, the likelihood that the firm will earn above-average returns.
In this case, the barriers to entry under threats of new entrants will be discussed.
Barriers to entry:
Barriers to entry makes it difficult for new firms to enter the industry and place them at a competitive disadvantage. High barriers of entry increase the returns for existing firms in the industry and may allow some of them to dominate the industry.
Below are the kinds of potentially significant entry barriers:
- Economies of scale - The incremental improvements in efficiency through experience as a firm increases in size.
EXAMPLE:
As the quantity of the Toyota's car produced during a given period increases, the cost of manufacturing each unit declines. Increasing of economies of scale enhances the firm's flexibility and Toyota's cars are now made affordable when the firm reduce its price to capture a greater share of the market. Hence, as economies of scale increases, the barriers to entry will be higher.
- Product Differentiation - Customers valuing a product's uniqueness tend to become loyal to both the product and the company producing it.
EXAMPLE:
The effective advertising campaigns for The Body Shop let the consumers aware of its core value of Against Animal Testing. This creates an uniqueness to its products and establishes a group of loyal customers for the firm. Hence, as the product differentiation is higher, the barriers to entry will be more tedious.
- Capital Requirement - Competing in a new industry requires a firm to have resources to invest.
EXAMPLE:
In order to compete in the banking industry with big players such as Citibank and HSBC, it requires the firms to have substantial resources and capital to invest in the physical facilities, inventories, marketing activities and other critical business functions. Hence, high capital requirement creates higher barriers to entry.
- Switching costs - This is a one-time costs customers incur when they buy from a different supplier.
EXAMPLE:
When a StarHub customer switches the mobile service provider to SingTel, he will lose his Hubbering benefits of getting discounts off his broadband (MaxOnline) and pay TV (Cable TV) services. Hence when the switch costs are high, the barriers of entry will be high.
- Access to distribution channels - Once a relationship with its distributors has been developed, a firm will nurture it to create switching costs for the distributors.
EXAMPLE:
In a grocery store where the shelf space is limited, F&N provides fridge and give cooperative allowances to the store owner to sell its can drinks. Hence, if the access to distribution channels is low, the barriers to entry will be high.
- Cost disadvantage independent of scale - Established competitors have cost advantages that new entrants cannot duplicate.
EXAMPLE:
ST Aerospace gains its cost advantages such as government subsidies, proprietary technology and favourable access to raw material to supply aircrafts to the Air Force in Singapore. Hence, the cost advantage independent of scale will create high barriers to entry.
- Government policy - Through licensing and permit requirements, local government can control entry into an industry.
EXAMPLE:
MediaCorp is a monopoly in free-to-air TV in Singapore. The government restricts entry into the TV broadcasting industry so as to ensure that quality service is provided. Hence, the higher in the control of government policy, the barriers to entry will be tedious.
- Expected retaliation - Firms seeking to enter an industry will need to anticipate the reactions of the firms in the industry.
EXAMPLE:
Petrona, the largest petroleum company in Malaysia, anticipate its difficulties in entering the Singapore petroleum industry as major local players such as Shell and Esso are expected to retaliate vigorously. Hence, the higher the expected retaliation, the higher the barriers to entry.
Q5: Discuss, using examples, the characteristics of core competencies.
ANS:
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rival.
It emerge over time through an organisational process of accumulating and learning how to deploy different resources and capabilities.
A capability becomes a core competency only when it is:
- Valuable - help a film neutralise threats and exploit opportunities
- Non-substitutable - no strategic equivalent
- Rare - are not possessed by many others
- Costly to imitate - historical: a unique and a valuable organisational culture or brand name ; ambiguous cause: the cause and uses of a competence are unclear ; social complexity: interpersonal relationships, trust and friendship among managers, suppliers and customers
EXAMPLE:
The world's largest research-based pharmaceutical company - Pfizer's Viagra is valuable as it helps Pfizer to neutralise threats and exploit opportunities. The product is non-substitutable with no strategic equivalent and is not possessed by many others due to its patent rights. Pfizer goes court to prevent competitors from imitating Viagra. Thus, make it costly to imitate.
Q6: Discuss the factors that influence the likelihood of attack and response in the model of Competitive Dynamics. Using examples to support your answer.
ANS:
Competitive dynamics is the series of actions and responses taken by all firms competing within a market.
1. Likelihood of attack:
In addition to market commonality, resource similarity and the drivers of awareness, motivation and ability, other factors affect the likelihood a competitor will use strategic actions and tactical actions to attack its competitors.
a. First mover incentive
- A first mover is a firm that takes an initial competitive action in order to build or defend its competitive advantages or to improve its market position.
- First movers allocate funds for product innovation and development, aggressive advertising and advanced research and development.
- First movers can gain (1) the loyalty of customers who may become committed to the goods or services of the firm that first made them available and (2) market share that can be difficult for competitors to take during future competitive rivalry.
EXAMPLE:
In the telecommunication industry, StarHub is the first mover to introduce free incoming calls and per second billing to the market.
b. Second mover
- Second mover responds to the first mover's competitive action, typically through imitation or a move designed to counter the effects of actions.
- Second mover carefully studies the customers reactions to product innovations and tries to find any mistakes that the first mover made so that it can avoid them and the problems they created.
- Second mover also have time to develop processes and technologies that are more efficient than those used by the first mover. Great efficiencies could result in lower costs for the second mover.
EXAMPLE:
OSIM launched the first slim belt, OSIM uZap into the market. Following, OTO the second mover launched a similar product known as Trimex.
c. Late mover
- Late mover is a firm that responds to a competitive action a significant amount of time after the first mover's action and second mover's response.
- Late mover's competitive action allows it to earn only a average returns and delays its understanding of how to create value for customers.
EXAMPLE:
Late mover - MobileOne (M1) launched its broadband service into the market in August 2008, which is several years later than the first mover - SingTel and second mover - StarHub.
d. Organisational size
- An organisation's size affects the likelihood that it will take competitive actions as well as the types of actions it will take and their timing.
- Small firms are more likely than large companies to launch competitive actions and tend to do it more quickly.
- Large firms are likely to imitate more competitive actions along with more strategic actions during a given period.
EXAMPLE:
NTUC Fairprice, a large supermarket retailer commonly have more resources to launch a larger number of total competitive actions as compared to a small family-owned provision shop business in the neighbourhood estate.
e. Quality
- Quality exists when the firm's goods or services meet or exceed customers' expectations.
- Product quality dimensions include performance, features, flexibility, durability, conformance, serviceability, aesthetics, perceived quality.
- Service quality dimensions include timeliness, courtesy, consistency, convenience, completeness and accuracy.
EXAMPLE:
Product: Canon vs Konica Minolta
Service: Singapore Airline vs Malaysia Airline
2. Likelihood of response:
A firm is likely to respond to a competitor's action when:
- the action leads to better use of the competitor's capabilities to gain or produce stronger competitive advantages or an improvement in its market position.
- the action damages the firm's ability to use its capabilities to create or maintain an advantage.
- the firm's market position becomes less defensible.
a. Type of competitive action
- Strategic actions receive strategic responses
EXAMPLE:
Burger King launched Big King to counter McDonald's Big Mac.
- Tactical response are taken to counter the effect of tactical actions.
EXAMPLE:
Selling Ramly Burger at lower price in the night market is a tactical response.
b. Actor's reputation
- An actor is the firm taking an action or a response while reputation is 'the positive or negative attribute ascribed by one rival to another based on past competitive behaviour'.
- Actions by market leaders with strong positive reputation often are imitated and gain a rapid response from their competitors.
- Actions by firms with reputation for risk-taking and unpredictability are less likely to gain a response from competitors.
EXAMPLE:
Emirates (second mover) launched Airbus A380 to attack Singapore Airline (first mover) by providing better facilities and lower air fares.
c. Market dependence
- Market dependence is the extent to which a firm's revenues or profits are derived from a particular market.
- Firms can predict that competitors with high market dependence are likely to respond strongly to attacks threatening their market position.
EXAMPLE:
In the movie industry, cinemas like Golden Village, Eng Wah, Shaw and Cathay face threats to piracy.
Q7: Identify and discuss the key characteristics and assumptions of an unrelated diversification strategy.
ANS:
Unrelated Diversification:
- Highly diversified firms that have no relationships between businesses are classified as unrelated diversification.
- With unrelated diversification strategy, firms cannot transfer core competencies and capabilities to different portfolios. They gain competitive advantage through financial economies.
- Value is created through two types of financial economies - (1) efficient internal capital allocations and (2) business restructuring.
1. Efficient internal capital allocation:
- Development of a portfolio of businesses with different risk profiles thereby reducing the business risk for the total corporation.
- Corporate office distribute capital to business divisions to create value for the overall company. It may have access to more detailed and accurate information than the external capital market.
- Internal information which does not have to be revealed may be a source of competitive advantage.
- The corporate office can make corrections and changes by adjusting managerial incentives or recommendation strategic changes in a division.
- Thus, capital can be allocated according to more specific criteria than in an external market.
2. Restructuring of Assets:
- Buying, restructuring and selling businesses in the external market with the intent of increasing the total value of the firm.
- Under-performing divisions are often sold and the remaining divisions are placed under the discipline of rigorous financial controls.
- Creating financial economies through the purchase of other companies and restructuring their assets requires an understanding of significant trade-offs.
- Success usually calls for a focus on mature, low-technology businesses.
Q8: Identify and discuss the key characteristics of a related diversification strategy.
ANS:
Related Diversification:
- When more than 30% of a firm's sales volume is outside its dominant business and its businesses are related, it is classified as related diversification.
- The reasons for related diversification strategy is to gain (1) economies of scope and (2) market power.
1. Economies of Scope:
- With related diversification firms build upon their resources and capabilities to create value and seeks to exploit economies of scope between business units.
- Economies of scope are cost savings attributed to transferring the capabilities and competencies developed in one business to a new business.
- Value is created from economies of scope through (a) operational relatedness and (b) corporate relatedness.
a. Operational Relatedness: Sharing Activities
- Sharing activities requires strategic control over business units.
- It is risky because ties between the business units create links between outcomes.
- Primary and support activities can be shared efficiently.
b. Corporate Relatedness: Transferring Core Competencies
- Corporate core competencies are complex sets of resources and capabilities that link different businesses, primarily through managerial and technological knowledge, experience and expertise.
- Intangible resources are the foundation of corporate core competencies.
- Transferring intangible resources requires appropriate coordination mechanisms to gain economies of scope.
- Corporate relatedness eliminates resources duplication by spreading corporate competencies across business units, which may then lead to a competitive advantage.
2. Market Power
- Market power exists when a firm is able to sell its products above the existing competitive level or reduce the costs if its primary and support activities below the competitive level, or both.
- Two corporate approaches to gaining market power are (a) multi-point competition and (2) vertical integration.
a. Multi-point Competition
- Two or more diversified firms competing in the same products areas or geographic markets.
- Multi-point competition will not create potential gains when there is excessive competitive activity. Mutual forbearance is said to occur when firms create value by engaging in less competitive rivalry.
b. Vertical Integration
- Exists when a firm produces its own inputs (backward integration) or owns its source of distribution of outputs (forward integration).
- A firm pursuing vertical integration usually is motivated to strengthen its position in its core business by gaining market power over competitors.
Q9: What is agency theory? How does an agency relationship affect control in a business?
ANS:
An agency relationship exists when one or more persons (principal or principals) hire another person or persons (agent or agents) as decision-making specialists to perform a service.
Problems of agency relationships:
- Principal and agent have different interests, and the separation of ownership and control provides potential for divergent interests to surface.
- Shareholders lack direct control of large publicly traded corporations.
- Problems also arise when the agent makes decisions resulting in the pursuit of goals that conflict with those of the principal.
- The principal establishes governance and control mechanisms. It remains difficult or expensive for the principal to verify that the agent has behaved appropriately.
- The agent sometimes exercises managerial opportunism.
- Managerial opportunism prevents the maximisation of shareholder wealth.
Q10: Resources, Incentives and Managerial Motives act as catalyst for diversification. Discuss, using examples, two of these.
*** give up!!!!!!
Q11: Identify the five main corporate governance mechanisms. Discuss, using examples, two of these mechanisms as they relate to strategy implementation.
ANS:
The five main corporate governance mechanisms are:
- Ownership concentration
- Board of Directors (BOD)
- Executive Compensation
- Market for Corporate Control
- Managerial Defence Tactics
In this case, two of the mechanisms above should be discussed.
Board of Directors
- Board of Directors is a group of elected individuals whose primary responsibility is to act in the owners' interested by formally monitoring and controlling the corporation's top-level executives.
- The board has the power to direct the affairs of the organisation, punish and reward managers and protect the rights and interests of shareholders.
- There are three classifications of the board members - insiders which is made up of the firm's CEO and other top-level managers, related outsiders who are individuals not involved with the firm's day-to-day operations but have a relationship with the firm and lastly the outsiders which consists of individuals who are independent of the firm's day-to-day operations and other relationships.
- To enhance the effectiveness of the boards and directors, it is important to:
- have a more diversity in the backgrounds of boards members
- stronger internal management and accounting control systems
- more formal processes to evaluate the board's performance
- more collaborative working and open debate
- appointing a reasonable numbers of outsiders
- ensuring directors have an ownership stake through share holdings
EXAMPLE:
The board of StarHub comprises 13 directors of which 12 of them are non-executive and independent of the management. The executive director, Mr Steven Terrell Clontz is the CEO. There is a strong independent element in the board as there are six non-executive independent directors which is within the meaning of the code. There is a clear separation of roles and responsibilities between the Chairman and CEO which enables the company to maintain an effective balance of power, authority and responsibility with the company, and to ensure accountability and board independence.
The board is supported by key board committees to provide independent oversight of management. The board committees are the Audit Committee (AC), the Executive Resource and Compensation Committee (ERCC), the Nominating Committee (NC) and Strategy Committee (SC).
The AC assists the board in fulfilling its fiduciary responsibilities relating to internal controls, financial and accounting matters and reporting practices of the Group. The ERCC oversees the remuneration policies for directors and key executives and the leadership development of the Group. The NC reviews and assesses the nominations for the appointment, re-appointment or re-election of directors. The SC support and advise the management and board in the formulation and review of the Group's strategies for achieving growth in shareholder value.
The board comprises business leaders with broad and diverse experience (both domestically and internationally) and professionals with financial, banking, accounting, regulatory, industry and management expertise. Each director brings to the board valuable insights and objective perspectives that enable balanced and well-considered decisions to be made, and a robust exchange of ideas and views to help shape strategic directions.
Executive Compensation
- Executive compensation is a governance mechanism that seeks to align the interests of managers and owners through salaries, bonuses and long-term incentive compensation such as stock awards and options.
- The use of longer term pay helps firms cope with or avoid potential agency problems by linking managerial wealth to the wealth of common shareholders. Because of this, the stock market generally reacts positively to the introduction of a long-range incentive plan for top executives.
- Long-term incentives will allow the proper implementation of strategy to ensure that top executives will act in the shareholders' best interests.
EXAMPLE:
In StarHub, the compensation of the CEO and the senior management consist of a base salary, allowances, performance-related bonus, benefits in-kind and share awards. Non-executive directors' remuneration consists of directors' fees based on the approved Directors' Fee policy and share awards.
Q12: Compare and contrast two of the multi-divisional structure options for diversified companies.
ANS:
There are three variations of the multi-divisional structure:
- Cooperative form - a structure in which horizontal integration is used to bring about interdivisional cooperative.
- Strategic Business Unit (SBU) form - consists of three levels - corporate headquarters, SBUs, SBU divisions.
- Competitive form - offers complete independence among the firm's divisions.
Compare & contrast:
1. Strategy used
Cooperative form: related constrained strategy
SBU form: related-linked strategy
Competitive form: unrelated diversification strategy
2. Centralisation of operations
Cooperative form: centralised at corporate office
SBU form: partially centralised (in SBUs)
Competitive form: decentralised to divisions
3. Use of integration mechanisms
Cooperative form: extensive
SBU form: moderate
Competitive form: non-existent
4. Divisional performance appraisals
Cooperative form: emphasise subjective (strategic) criteria
SBU form: use a mixture of subjective (strategic) and objective (financial) criteria
Competitive form: emphasise objective (financial) criteria
5. Divisional incentive compensation
Cooperative form: linked to overall performance
SBU form: mixed linkage to corporate, SBU and divisional performance
Competitive form: linked to divisional performance
Q13: Identify the three factors that affect Managerial Discretion. Discuss the role two of these factors play.
ANS:
The three factors that affect Managerial Discretion are:
- External environment - such as the industry structure, the rate of market growth in the firm's primary industry and the degree to which products can be differentiated
- Characteristic of the organisation - including its size, age, resources and culture
- Characteristics of the manager - including commitment to the firm and its strategic outcomes, tolerance for ambiguity, skills in working with different people and aspiration levels.
- Manager's decisions are greatly depend on whether the organisation is large or small, earlier stage or later stage of the firm's life cycle and culture of the organisation (clan, adaptability, mission or bureaucratic). Different strategy matches different characteristic of the organisation.
- Different manager's characteristics are different. If the manager has leadership qualities, the decision made by him would create value for the film. However, if the skills could not create value for the firm, the firm may remain stagnate and lose its competitive advantage.
- Because strategic leaders' decisions are intended to help the firm gain a competitive advantage, how managers exercise the discretion when determining appropriate strategic actions is critical to the firm's success.
Q14: How do to management teams contribute to the strategic performance of an organisation? How does heterogeneity or homogeneity potentially impact on this performance?
ANS:
Top Management Team:
- The top management team is composed of the key managers who are responsible for selecting and implementing the firm's strategies.
- To guard against CEO over-confidence and poor strategic decisions, firms often use the top management team to consider strategic opportunities and problems and to make strategic decisions.
- The quality of the strategic decisions made by a top management team affects the firm's ability to innovate and engage in effective strategic change.
Heterogeneous Top Management Team:
- A heterogeneous top management team is composed of individuals with different functional backgrounds, experience and education.
- It promotes debate, which often leads to better strategic decisions, producing higher firm performance. (disadvantage of homogenous)
- The more heterogeneous and larger the top management team is, the more difficult it is for the team to effectively implement strategies. Comprehensive and long-term strategic plans can be inhabited by communication difficulties among top executives who have different backgrounds and different cognitive skills. (advantage of homogenous)
- To resolve this issue, communication among diverse top management team members can be faciliated through electronic communications, sometime reducing the barriers before face-to-face meetings.
Q15: There are two approaches to corporate venturing. Discuss these using examples to illustrate your answer.
ANS:
The two approaches to corporate venturing are:
- 1. Autonomous strategic behaviour is a bottom-up process in which product champions pursue new ideas, often through a political process, by means of which they develop and coordinate the commercialisation of a new good or service until it achieves success in the marketplace.
EXAMPLE:
Intel's transformation from Dynamic Random Access Memory (DRAM) to Microprocessor Unit (MPU) maker, which was achieved not by a top management decision but by the middle management.
- 2. Induced strategic behaviour is a top-down process whereby the firm's current strategy and structure foster product innovations that are associated closely with that strategy and structure.
EXAMPLE:
Johnson & Johnson's top management uses its profit planning system interactively to focus attention on strategic uncertainties related to the development and protection of new products and markets. They re-estimate the predicted effects of competitive tactics and new product roll-outs on their profit plans for the current and following years.
Q16: Describe, using examples, how innovation impacts on competitive advantage.
ANS:
Innovation
- Innovation is the process of creating a commercial product from an invention.
- It is a mean by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.
- Innovation will also be important in renewing your products' life cycle and allows the firm to carve on more opportunities than other competitors.
- In reality, innovations are particularly linked to investors' confidence, thereby increasing the price of the firm's stock. Furthermore, innovation may be required to maintain or achieve competitive parity, much less a competitive advantage in many global markets. There must also be enough financial slack to support the pursuit of entrepreneurial opportunities.
EXAMPLE:
In the case of Apple's consistent release of newer and upgraded series of the Ipod products, this helps the firm to remain its leadership position in the industry.
- the end -
HAHA.. u must be wondering why im using my blog to do my homework? cos my new macbook does not have MS word!!! damn. well.. my sweat and tears and im depending on these questions to help me pass my SM Exam which is the FINAL ONE LIAO!!!! two nights to finish and one day to digest!! i just cant wait to end this miseryyyyyyyy... counting down to all the hardcore parties awaiting cos i've neglected too many people.. WOW WILL BE BACK SOON!!!!!!!!!
