Questions & explanations
1. What are incumbent response strategies?
Incumbent response strategies are actions that established companies—often called incumbents—take when facing disruption. These strategies include creating a spin-off, where the company sets up a new, separate unit to develop a disruptive product. Another strategy is an acquisition, where the incumbent buys the disruptive startup. Ambidexterity means the company runs both its traditional business and a new disruptive unit at the same time. The goal is to respond without destroying the current profitable business. Each strategy has trade-offs: spin-offs give freedom but may lack resources; acquisitions can be expensive but bring in new talent. Choosing the right strategy helps the incumbent survive the disruption.
2. Compare population reduction with another approach to intragenerational justice, like equalization.
Both aim for fairness among people alive, but they work differently. Equalization focuses on sharing resources more evenly, like giving more to the poor. Population reduction focuses on reducing the number of people so that each person gets a larger share of existing resources. Equalization does not change the number of people; it changes the distribution. Population reduction changes the denominator. Both can help, but population reduction takes a long time to show effects. Equalization can happen faster through taxes and social programs. Many experts prefer equalization because it addresses root causes of inequality directly. Population reduction should be voluntary and part of a broader strategy.
3. What are the four actions framework used in Blue Ocean Strategy, and how do they help?
The four actions framework consists of four questions: Eliminate, Reduce, Raise, and Create. Eliminate: Which factors the industry takes for granted should be eliminated? Reduce: Which factors should be reduced well below the industry standard? Raise: Which factors should be raised above the industry standard? Create: Which factors that the industry has never offered should be created? By answering these, a company can break the trade-off between differentiation and low cost. For example, in the case of the Yellow Tail wine brand, they eliminated aging and complexity, reduced wine terminology, raised ease of drinking, and created a fun, simple wine. This framework helps design a new value curve.
4. Compare close substitutes and weak substitutes.
Close substitutes are products that customers see as almost the same, like Coke and Pepsi. A small price change makes customers switch easily. Weak substitutes meet the same basic need but are quite different, like a bike and a car for transportation. For close substitutes, the company has very little power to raise prices. For weak substitutes, the company can raise prices more because customers are less likely to switch. Close substitutes have high cross-price elasticity, meaning a price rise in one causes a big increase in demand for the other. Weak substitutes have low cross-price elasticity. Companies need to identify which substitutes are close to set the right pricing strategy.
5. Describe a method to measure the threat of substitutes.
One method is to calculate the cross-price elasticity of demand. This measures how much the demand for your product changes when the price of a substitute changes. A high positive number means the threat is strong. Another method is to survey customers about what they would do if your product's price rose by 10%. You can also track the market share of substitute products over time. If a substitute's market share is growing while yours is shrinking, it's a threat. Also look at the price trends of substitutes: if they are dropping, they become more attractive. Finally, consider the profit margins of substitute industries; high margins may encourage more investment in substitutes.
6. What role do incentive systems play in aligning employee actions with strategic goals?
Incentive systems, like bonuses and promotions, motivate employees to work towards strategic objectives. For example, if a firm's strategy is to increase market share, salespeople might be rewarded for new customer acquisition. If the strategy emphasizes quality, bonuses tied to defect rates encourage attention to detail. Well-designed incentives ensure that individual efforts support the company's big goals. However, if incentives are misaligned, employees may focus on short-term gains at the expense of long-term strategy. For instance, rewarding only quarterly sales may discourage needed R&D investment. Therefore, incentives must be carefully crafted to match strategy.
7. Explain the role of stakeholders in nonprofit strategy.
Stakeholders are any groups that care about or are affected by the nonprofit's work. They include beneficiaries, donors, volunteers, staff, board members, and the community. Each stakeholder group has different interests and expectations. For example, donors want to see their money used effectively, while beneficiaries need quality services. Nonprofit strategy must balance these sometimes conflicting interests. Involving stakeholders in planning helps build trust and ensures the strategy meets real needs. Regular communication with stakeholders is key to getting feedback and support. A good strategy makes clear whose needs come first—usually the mission's target group.
8. Compare the Resource-Based View with Porter's Five Forces model.
Porter's Five Forces looks at the external industry structure to find attractive markets. It analyzes threats from competitors, new entrants, substitutes, suppliers, and buyers. RBV looks inside the firm at its unique resources. Five Forces suggests that advantage comes from industry positioning; RBV suggests advantage comes from firm-specific resources. Both are useful: five forces helps choose which industry to compete in, RBV helps develop unique strengths within an industry. Many strategists combine them to understand both the environment and internal capabilities. For example, a company may choose an attractive industry but fail if it lacks resources to compete.
9. Compare an integrative framework with a single-issue strategy like just reducing waste. Why is integration better?
A single-issue strategy focuses on one problem, like waste. It can succeed in cutting waste but might ignore other issues. For example, reducing waste by recycling could increase energy use in a different process. An integrative framework looks at the whole picture, so it catches these side effects. Integration also finds synergies: a change that reduces waste might also save water and money. Single-issue strategies are easier to start, but they can lead to missing bigger opportunities or creating new problems. For long-term sustainability, integration is better because it balances all dimensions. It ensures that the company moves forward on all fronts, not just one.
10. How can you identify potential substitutes for a product?
Start by thinking about what basic need your product meets. For a smartphone, the need is communication, entertainment, and information. Then list all other ways a customer could meet that need. For communication, substitutes include landline phones, laptops with internet, or even face-to-face meetings. Also look at different technologies or business models. For example, streaming video is a substitute for cable TV. Talk to customers to find out what alternatives they consider. Check if any products are gaining market share in the same usage situations. Also consider indirect substitutes, like a movie ticket versus a video game; both provide entertainment at home.
11. Why is measuring carbon footprint important before reducing it?
Measuring the carbon footprint provides a baseline to understand where the biggest emissions come from. Without this data, a company might focus on small actions while ignoring major sources. For example, if most emissions come from supply chain transport, efforts to reduce office electricity would have little effect. Measurement also allows setting specific, achievable reduction targets and tracking progress over time. It helps prioritize investments in the most impactful areas. Additionally, a carbon footprint calculation is often required for reporting to investors, customers, or regulators. It is the essential first step for any credible reduction strategy.
12. How does sustainable procurement differ from traditional procurement?
Traditional procurement mainly focuses on cost, quality, and delivery time. Sustainable procurement adds environmental and social criteria to the decision process. This means evaluating suppliers not only on price but also on their record in reducing waste, using energy efficiently, and treating workers fairly. Sustainable procurement considers the life cycle impacts of products, such as how easy they are to recycle. It often involves longer-term contracts to build relationships with responsible suppliers. While traditional procurement aims for lowest upfront cost, sustainable procurement weighs the total cost including environmental and social implications.