MGMT Chapter 6

strategy
large-scale action plan that sets the direction for an organization
strategic management
process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals
Provide direction and momentum
Encourage new ideas
Develop a sustainable competitive advantage
why strategic management and strategic planning are important (3 things)
Being responsive to customers
Innovation
Quality
Effectiveness
Sustainable competitive advantage occurs when an organization can stay ahead in four areas:
strategic positioning
attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company
“performing different activities from rivals, or performing similar activities in different ways”
business plan
a document that outlines a proposed firm’s goals, the strategy for achieving them, and that standards for measuring success
Strategy is the creation of a unique & valuable position
Strategy requires trade-offs in competing
Strategy involves creating a “fit” among activities
3 key principles that underlie strategic positioning
growth strategy
involves expansion – as in sales revenues, market share, number of employees, or number of customers
stability strategy
involves little or no significant change
defensive strategy
involves reduction in the organization’s efforts
grand strategy
the step in which, after an assessment of current organizational performance, then explains how the organizations mission is to be accomplished
strategy formulation
process of choosing among different strategies and altering them to best fit the organization’s needs
strategy implementation
putting strategic plans into effect
strategic control
consists of monitoring the execution of strategy and making adjustments, if necessary
Engage people
Keep it simple
Stay focused
Keep moving
to keep a strategic plan on track you need to (four things):
competitive intelligence
means gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately
public prints and advertising, investor information, informal sources
competitive intelligence is gained through (3 things)
environmental scanning
careful monitoring of an organization’s internal and external environments to detect early signs of opportunities and threats that may influence the firm’s plans
organizational strengths
skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission
organizational weaknesses
drawbacks that hinder an organization in executing strategies in pursuit of its mission
organizational opportunities
environmental factors that the organization may exploit for competitive advantage
organizational threats
environmental factors that hinder an organization’s achieving a competitive
SWOT analysis
also known as situational analysis, a search of the strengths, weaknesses, opportunities, and threats affecting the organization
forecast
a vision or projection of the future
trend analysis
hypothetical extension of a past series of events into the future
contingency planning
creation of alternative hypothetical but equally likely future conditions
-also called scenario planning and scenario analysis
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products or services
Rivalry among competitors
porters five competitive forces
cost leadership
differentiation
cost-focus
focused differentiation
porters four competitive strategies
cost leadership strategy
keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market
-Don’t be cheap, just negotiate prices
differentiation strategy
offer products that are of unique and superior value compared to those of competitors but to target a wide market
cost-focus strategy
keep the costs of a product below those of competitors and to target a narrow market
focused-differentiation
offer products that are of unique and superior value compared to those of competitors and to target a narrow market
single-product strategy
company makes and sells only one product within its market
-Benefit-focus
-Risk-vulnerability
diversification
operating several businesses under one ownership that are not related to one another
-related, unrelated
unrelated diversification
operating several businesses under one ownership that are not related to one another
related diversification
an organization under one ownership operate separate businesses that are related to one another
benefits of related diversification
-Reduced risk: because more than one product
-Management efficiencies: administration spread over several businesses
-Synergy: the sum is greater than the parts
synergy
the economic value of separate, related businesses under one ownership and management is greater than the businesses are worth separately
the BCG matrix
a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market
execution
consists of using questioning, analysis, and follow-through in order to mesh strategy with reality, align people with goals, and achieve results promised
-central part of any company’s strategy
the three core processes of business
-People: Consider who will benefit you in the future
-Strategy: Consider how success will be accomplished
-Operations: Consider what path will be followed
building a foundation of execution
Know your people & your business
Insist on realism
Set clear goals & priorities
Follow through
Reward the doers
Expand the capabilities
Know yourself