Completion of Accounting Chapter Summaries

ACC 201: Essentials of Accounting

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Chapter 5: How do you Position your Organization Strategically?

Based on Harvard Professor Michael A. Porter’s Video Lecture:

1. What is the Basic idea of a Strategy?

Strategy is the big picture of how the organization is going to win in its environment.

Plan of action to achieve a goal

how are you going to survive?

Keep in mind, What is the goal behind this business plan?

2. What is Not a Strategy?

Strategy is NOT competing to be the best.

Strategy is NOT goals, actions or mission.

It is not about making yourself the best!

Increase your demand to increase your revenue

3. What exactly is a Strategy?

Strategy is all about being unique.

Strategy defines a company’s unique approach to competing and the competitive advantages on which it is based.

Strategy describes a company’s unique place in the industry.

ex: the differences between samsung and apple.

What is the difference between you and your competitors that makes you BETTER?

Business plans for a firm enter a certain industry

4. What are the Two distinct Factors that affects a Company’s Performance (NCF)?

Inherent attractiveness of the industry

Strategic positioning within the Industry

How well positioned and attractive is your industry?

5. What are the Two Strategies companies use to Position themselves within an Industry?

Increasing revenues (demand and prices) through product differentiation

Decreasing costs (and prices) through operational efficiencies

6. What is Strategic Management?

Strategic Management therefore is the management of an industry’s attractiveness and the positioning of the company within an industry to achieve superior economic performance.

Game plan!!

Where you rank in an industry

7. How can a Business Decide which Positioning – Product Differentiation or Operational Efficiencies - suits them the best?

Based on your DNA (Desires, Needs and Assets), estimate the positioning that is appropriate for you. Within your chosen strategy try different ways to improve your net cash flow.

8. What is the Difference between Adding a Second Business versus Expanding the Product Line?

A second business involves entering into another market, investment in a different set of assets and targeting a different set of customers.

*AT&T Recently buying into Direct TV

In contrast, expanding the product line involves staying within the same industry, utilizing the same set of assets but more efficiently and selling an additional product / service normally to the currently targeted or related customers.

9. What should you Look for in Expanding the Product Line to improve Net Cash Flow?

Make better use of the capacity of extant assets.

Find a product or service that the currently targeted or related customers need.

Look for complementarity between the two products, at least avoid a conflict between them.

Ensure that the additional product is in line with the strategic positioning of the company. For example, it is not advisable to position one product under product differentiation and another under operational efficiency.