Contemporary Management Chapter 6

Planning
identifying and selecting appropriate goals and courses of action for an organization
Strategy
a cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals
Planning is
-necessary to give the organization a sense of direction and purpose
-a useful way of getting managers to participate in decision making about appropriate goals and strategies for an organization
A plan helps
coordinate managers of the different functions and divisions
A plan can be uses
as a device for controlling managers within an organization
3 steps in planning
-determining the organization’s mission and goals
-formulating strategy
-implementing strategy
Mission Statement
a broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors
SWOT analysis
a planning exercise in which managers identify:
-organizational strengths and weaknesses
-external opportunities and threats
The Five Forces
Level of Rivalry
Potential for Entry
Power of Suppliers
Power of Customers
Substitutes
Corporate-Level plan
top mgmt’s decisions pertaining to the organization’s mission, overall strategy, and structure
-provides a framework for all other planning
Corporate-Level Strategy
a plan than indicates in which industries and national markets an organization intends to compete
Business-Level Plan
Divisional managers’ decisions pertaining to divisions long-term goals overall strategy, and structure
Business-Level Strategy
a plan that indicates how a division intends to compete against its rivals in a industry
Functional-Level Plan
functional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals
Functional Strategy
a plan that indicates how functional managers intend to increase the value of the organization’s goods and services
Low-Cost Strategy
driving the organization’s total costs down below the total costs of rivals
Differentiation
distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service
Stuck in the Middle
-attempting to simultaneously pursue both a low cost strategy and a differentiation strategy
-difficult to achieve low cost with added costs of differentiation
Focused Low-Cost
serving only one market segment and being the lowest-cost organization serving that segment
Focused Differentiation
serving only on market segment as the most differentiated organization serving that segment
Concentration in a Single Industry
reinvesting a company’s profits to strengthen its competitive position in its current industry
Diversification
expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services
Related diversification
entering a new business or industry to create a competitive advantage in one or more of an organization’z existing divisions or businesses
Unrelated diversification
entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current business or industries
Basic question
to what extent do we customize products and marketing for different national conditions
global strategy
selling the same standardized product and using the same basic marketing approach in each national market
multi-domestic strategy
customizing products and marketing strategies to specific national conditions
-helps gain local market share
-raises production costs
Four ways of expanding internationally
-importing and exporting
-licensing and franchising
-strategic alliances, joint ventures
-wholly owned foreign subsidiary
Exporting
making products at home and selling them abroad
Importing
selling at home products that are made aboard
Licensing
allowing a foreign organization to take charge of manufacturing and distributing a product in its country in return for a negotiated fee
Franchising
selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits
Strategic alliance
-managers pool resources with those of a foreign company
-organizations agree to share risk and reward
Joint venture
strategic alliance among companies that agree to jointly establish and share the ownership of a new business
Wholly Owned Foreign Subsidiary
managers invest in establishing production operations in a foreign country independent of any local direct involvement