MGMT 309 Ch 8

Multidomestic Strategy

Used by firms that manage a portfolio of international business as a relatively autonomous and independent units

Location Efficincies

Seeking lower input cost locations

Emergent Stratgy

A pattern of action that develops over time in the absence of goals or missions or despite goals and missions

Deliberate Strategy

A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation

Strategic Management

A comprehensive and ongoing management process aimed at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals

Strategy

A comprehensive plan for accomplishing an organization's goals

Competitive Disadvantage

A situation in which an organization fails to implement strategies being implemented by competitors Can expect to attain below average levels of performance

Related Diversification

A strategy in which an organization operates in several different businesses, industriess, or markets that are somehow linked

Focus Strategy

An organization concentrates on a specific regional market, product line, or group buyers

Implementing Differentiation Strategy

Seeks to distinguish itself from competitors through quality of its products or services Firms successful can charge more because people are willing to pay more

Home Replication Strategy

Apply the distinctive competencies they developed in their home market to the foreign markets that they enter

Distinctive Competencies

Are useful for competitive advantage and superior performance

Forward Vertical Integration

Beginning a business previously handled by an intermediary and selling more directly to customers

Backward Vertical Inegration

Beginning a business that furnishes resources previously handled by a supplier

Economies of Scope

Broadening product lines

Types of Strategic Alternatives

Business Level Strategy Corporate Level Strategy

Transnational Strategy

Combines multidomestic and global Pursue both centralization and decentralization at the same time using whichever approach makes more sense in the particular circumstance

Global Strategy

Companies doing exactly the opposite of those using a multidomestic strategy

Porter's Generic Strategies

Differentiation Strategy Overall Cost Leadership Strategy Focus Strategy

Components of Strategy

Distinctive Competence Scope Resource Development

Strategic Imitation is Difficult When

Distinctive competence is based on unique historical circumstances The competence is based on a complex phenomenon such as organizational culture

Worldwide Learning

Diverse operating environments of multinational corporations contribute to organizational learning that can be transferred to other operating environments

Limitation of Distinctive Competencies

Duplicating another firm's distinctive competence

Strategic Business Units

Each business or grroup of businesses within an organization engaged in serving the same markets, customers or products

Prospector

Encourages creativity to seek out new market opportunities and to take risks Develops the flexibility to meet changing market conditions by decentralizing its organizational structure

GE Business Screen

Evaluates along two dimensions: Industry attractiveness and competitive position More attractive the industry and more competitive a business is the more resources an organization should invest in that business

Disadvantages of Unrelated Diversification

Firms with unrelated strategies fail to exploit important synergies putting them at a competitive disadvantage to firms with related diversification strategies Poor performance due to the complexity managing a diversity of businesses

Growth Stage

Focus on ensuring quality and delivery and begin to differentiate product

Introduction Stage

Focus on getting the product out the door without sacrificing quality

Mature Stage

Focus on low costs and new products. Essential stage if company is going to survive the long run

Defender

Focuses on defending its current markets by lowering its costs and/or improving the performance of its current products

Reactor

Has no clear strategy and reacts to changes and events

Strategic Alternatives for International Business

Home Replication Strategy Multidomestic Strategy Global Strategy Transnational Strategy

Resource Deployment

How an organization will distribute its resources across the areas in which i t compete

Organizational Weaknesses Can be Overcome By

Make investments to obtain the strengths required to implement strategies that support its mission Modify its mission so that it can be accomplished with the skills and capabilities that the organization already possesses

Implementing Analyzer Strategy

Incorporate elements of both the prospector and defender strategies in an attempt to maintain current business and to be somewhat innovative

Analyzer

Incorporates elements of both the prospector and the defender strategies to maintain business and to be somewhat inoovative

Become a Diversified Firm

Internal development of new products

Multimarket Flexibility

International businesses may respond to a change in one country by implementing a change in another country

Product Life Cycle

Introduction Stage Growth Stage Mature Stage Decline Stage

Economies of Scale

Larger facilities result in lower costs

Single Product Strategy

Manufactures one product or service and sells it in a single geographic market

Implementing Overall Cost Leadership Strategy

Marketing and sales are likely to focus on a simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner

BCG Matrix

Method of evaluating businesses relative to growth rate Classifies types of businesses as Dogs, Cash Cows, Question Marks, Stars

Organizational Structure

Methods that diversified organizations to use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance

Implementing Prospector Strategy

Must encourage creativity to seek out new market opportunities and to take risks Develop the flexibility to meet changing market conditions by decentralizing its organizational structure

Implementing Focus Strategy

Same approach for differentiation and cost leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group buyers

Sustained Competitive Advantage

Occurs when a distinctive competence cannot be easily duplicated

Differentiation Strategy

Organization seeks to distinguish itself from competitors through the quality of its products or services

Tools for Managing Diversification

Organizational Structure Portfolio Management Techniques: BCG Matrix and GE Matrix

Common Organizational Strenghts

Organizational capability possessed by a large number of competing firms A skill or capability held by numerous competing firms Competitive Parity-exists when large numbers of completing firms are able to implement the same strategy

Evaluating an Organization's Opportunities and Threats

Organizational opportunities are ares in the orgs environment that may generate high performance Organizational threats are areas in the organization's environment that make it difficult for the organization to achieve high performance

Evaluating Organizational Weaknesses

Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission

Miles and Snow's Strategy

Prospector Defender Analyzer Reactor

Scope

Range of markets in which an organization will compete

Decline Stage

Readjust Only bad thing if you do nothing about it/don't recognize the signs

Advantages of Related Diversification

Reduces orgs dependence on any one of its business activities and thus reduces economic risk Reduces overhead costs associated with managing any one business through economies of scale and economies of scope Allows an org to exploit its strengths and capabilities in more than one business Synergy

Develop Products and Services within Boundaries of Traditional Business Operation

Replacement of suppliers and customers

Organizational Strenghts

Skills and abilities enabling an organization to conceive of and implement strategies

Distinctive Competence

Something an organization does exceptionally well

Advantages of Unrelated Diversification

Stable corporate level performance over time due to business cycle differences among the multiple businesses Allocation of resources to areas with the highest return potentials to max corporate performance

Corporate Level Strategies

Strategic Business Units Diversification Single Product Strategy Related Diversification Unrelated Diversification Become a Diversified Firm Backward Vertical Integration Forward Vertical Integration

Effective Strategies

Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals

Unrelated Diversification

Strategy in which an org operates multiple businesses that are not logically associated with one another

Overall Cost Leadership Strategy

Strategy in which an organization attempts to gain a competitive advantage by reducing its costs below the costs of competing firms

Strategy Implementation

The methods by which strategies are operationalized or executed within the organization

Diversification

The number o businesses an organization is engaged in and the extent to which these businesses are related to one another

Strategy Formulation

The set of processes involved in creating or determining the organization's strategies

Business Level Strategy

The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market

Corporate Level Strategy

The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets

Implementing Defender Strategy

To support this strategy, an organization will focus on defending its current markets by lowering its costs and/or improving the performance of current products