Strategic Management/Business Policy

Define the term “strategic management”
Strategic management is a set of managerial decisions and actions that determines the long run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation, and evaluation and control.
Define the term “strategy”.
Strategy is a comprehensive plan that states how a corporation will achieve its mission and objectives.
What are the five forces that shape competition as described by Porter.
• Threat of new entrants
• Rivalry among existing firms
• Threat of substitute products or services
• Bargaining power of buyers
• Bargaining power of suppliers
• Other stakeholders (The 6th)
Explain what is meant by the term “competitive advantage”.
Distinctive competencies are when a company’s core competency is far superior to the competitions. The VRIO framework of analysis proposes four questions to evaluate a firm’s competencies:

Value: Does it provide customer value and competitive advantage?
Rareness: Do no other competitors possess it?
Imitability: Is it costly for others to imitate?
Organization: Is the firm organized to exploit the resource?

Answers yes to all these questions for a particular competency and it is considered to be strength and thus a distinctive competence. Have a distinctive competence is what gives a company a competitive advantage.

List four phases of strategic management
I. Basic financial planning
II. Forecast-based planning
III. Externally oriented (strategic) planning
IV. Strategic Management
Basic Financial Planning _______________
consists of formulating a budget for the following year. The time horizon for financial planning is usually one year.
Forecast-based planning ________________
is used for projects that will take longer than one year. Financial planning is less useful for forecasting these projects. Time horizon for forecast-based planning is 3 to 5 years.
Externally oriented (strategic) planning ______________
is conducted by top management in order to formulate long term plans. Consultants are brought in to provide sophisticated and innovative techniques to help forecast future trends.
Strategic management is _____________________
Top management brings in planning groups of managers and key employees at many levels to develop and integrate a series of strategic plains aimed at achieving the company’s primary objectives. Instead of forecasting the future, these plans emphasize probable scenarios and contingency strategies. Strategic information is communicated throughout the organization and all levels of the organization are involved.
List the five stages of international development.
Stage 1 (Domestic Company)
Stage 2 (Domestic company with export division)
Stage 3 (Primarily domestic company with international division)
Stage 4 (Multinational corporation with multidomestic emphasis)
Stage 5 (MNC with global emphasis)
The primarily domestic company exports some of its products through local dealers and distributors in the foreign countries. The impact on the organization’s structure is minimal because an export department at corporate headquarters handles everything.
Stage 1 (Domestic Company)
Success in Stage 1 leads the company to establish its own sales company with offices in other countries to eliminate the middlemen and to better control marketing. Because exports have now become more important, the company establishes and export division to oversee foreign sales offices.
Stage 2 (Domestic company with export division)
Success in earlier stages leads the company to establish manufacturing facilities in a addition to sales and service offices in key countries. The company now adds an international division with responsibilities for most of the business functions conducted in other countries.
Stage 3 (Primarily domestic company with international division)
Now a full-fledged MNC, the company increases its investments in other countries. The company establishes a local operating division or company in the host country, such as Ford of Britain, to better serve the market. The product line is expanded, and local manufacturing capacity is established. Managerial functions (product development, finance marketing, and so on) are organized locally. Over time, the parent company acquires other related businesses, broadening the base of the local operating division. As the subsidiary in the host country successfully develops a strong regional presence, it achieves greater autonomy and self-sufficiency. The operations in each country are, nevertheless, managed separately as if each is a domestic company.
Stage 4 (Multinational corporation with multidomestic emphasis)
The most successful MNCs move into a fifth stage in which they have worldwide human resources, R&D, and financing strategies. Typically operating in a global industry, the MNC denationalizes its operations and plans product design, manufacturing, and marketing around worldwide considerations. Global considerations now dominate organizational design. The global MNC structures itself in a matrix form around some combination of geographic areas, product lines, and functions. All managers are responsible for dealing with international as well as domestic issues
Stage 5 (MNC with global emphasis)
List four basic elements of strategic management.
Environmental Scanning
Strategy Formulation
Strategy Implementation
Evaluation and Control
Environmental Scanning is _____
is the monitoring, evaluating, and disseminating of information from the external and internal environments to key peoples within the corporation.
Strategy Formulation is _____
is the developing of long-range plans for the effective management of environmental opportunities and threats, in light of corporate strengths and weaknesses (SWOT).
Strategy Implementation is _____
is a process by which strategies and policies are put into action through the development of programs, budget’s, and procedures.
Evaluation and Control is _____
is a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance.
List three directional strategies.
A plan that is composed of three general orientations:
What are the two types of “growth” strategies?
– Concentration: Vertical and Horizontal growth on the value chain
– Diversification: Concentric (related) and Conglomerate (Unrelated)
What are the two types of “stability” strategies?
– Pause/Proceed-with-caution strategy (time-out)
– No-change (do nothing)
What are the four types of “retrenchment” strategies?
– Turnaround Strategy (cut costs, sell assets)
– Captive Company Strategy (become captive to a large customer to keep existence)
– Sell-out/Divestment Strategy (sell entire company to another firm)
– Bankruptcy/Liquidation Strategy