Strategy Exam 1
Silent killers
These CEOs are overlooked and ignored sources of harm to their companies.
Performance referent
a benchmark such as the industry average that is used to make sense of an organization's standing along a performance measure.
Best-cost
a business-level strategy followed by companies that charge relatively low prices and offers substantial differentiation.
Strategic plans
a carefully crafted set of steps that a firm intends to follow to be successful.
Generic strategy
a general way of positioning a company's business-level strategy within an industry.
Focused cost leadership
a generic business strategy that requires competing based on price to target a narrow market.
Differentiation strategy
a generic positioning that attempts to convince customers to pay a premium price for its good or services by providing unique and desirable features.
Performance measure
a metric such as profits, stock price, and sales along which organizations can be gauged.
Place
a physical purchase point as well as a distribution channel.
Piracy of intellectual property
a process wherein illegal copies are made and sold by others
Distintive competence
a set of activities that an organization performs especially well.
Strategic ploy
a specific move designed to outwit or trick competitors.
SWOT analysis
a technique for understanding a company's situation by considering its strengths and weaknesses, along with the opportunities and threats that exist in the company's environment.
Five forces analysis
a technique for understanding an industry by examining the interactions among competitors in an industry, potential new entrants to the industry, substitutes for the industry's offerings, suppliers to the industry, and the industry's buyers.
Enactment
a theoretical perspective that contends that an organization can, at least in part, create an environment for itself that is beneficial to the organization by putting strategies in place that reshape competitive conditions in a favorable way.
Environmental determinism
a theoretical perspective that contends that organizations are limited in their ability to adapt to the conditions around them. Offers a completely opposite view from enactment on why some companies succeed and others fail.
Transaction cost economics
a theory that centers on whether it is cheaper for a company to make or to buy the products that it needs. a theory that centers on just one element of business activity: whether it is cheaper for a company to make or to buy the products that it needs.
Resourced-based theory
a theory that contends that the possession of strategic resources can provide an organization with competitive advantages over its rivals.
Dynamic capability
a unique ability to create new capabilities by continually updating a firm's array of capabilities to keep pace with changes in it's environment.
Business-level strategy
addresses the question of how a company will compete in a particular industry.
Triple bottom line
an approach to assessing performance that emphasizes the concerns of people (social responsibility) and the planet (environmental sustainability) in addition to profit.
Balanced scorecard
an approach to assessing performance that targets managers' attention on four areas: (1) financial, (2) customer, (3) internal business process, and (4) learning and growth. Using the scorecard helps managers resist the temptation to fixate on financial measures and instead monitor a diverse set of important measures
Icons
are CEOs possessing both fame and strong reputations. The icon CEO combines style and substance in the execution of his or her job responsibilities.
Hidden gems
are CEOs who lack fame but possess positive reputations. These CEOs toil in relative obscurity while leading their firms to success. Their skill as executives is known mainly by those in their own company and by their competitors.
Trademarks
are phrases, pictures, names, or symbols used to identify a particular organization.
Applications for individuals: liquidity
cash in your checking account. do you have enough cash to cover your monthly debts?
Industry environment (or competitive environment)
consists of multiple organizations that collectively compete with one another by providing similar goods, services, or both.
Intellectual property
creations of the mind, such as inventions, artistic products, and symbols.
Applications for organizations: liquidity
current ratio (current assets/current liabilities) a ratio of less than 1.0 suggests the firm does not have enough cash to pay the bills.
Applications for organizations: leverage
debt-to-equity ratio competitor's debt-to-equity ratios. The use of debt varies across industries. Auto companies, for example, tend to have high debt-to-equity because they must build massive factories.
Applications for individuals: leverage
debt-to-income ratio (Monthly debt payments/monthly income) if you have a monthly debt-to-income ratio higher than 40 percent, you may be on the verge of becoming a credit risk.
Business model
describes the process through which a firm hopes to earn profits.
Organization's vision
describes what the organization hopes to become in the future. Well-constructed visions clearly articulate an organization's aspirations. Ex. Avon's vision is "to be the company that best understands and satisfies the product, service, and self-fulfillment needs of women—globally."
Mission statement
effectively capture an organization's identity and provide answers to the fundamental question "Who are we?" and reason for their existence.
Opportunities
events and trends that create chances to improve an organization's performance level.
Threats
events and trends that may undermine an organization's performance.
Specific goals
explicit rather than vague.
Mobility barriers
factors that make it unlikely or illogical for a company to change strategic groups over time.
Cost leadership
generic strategy that offers products or services with acceptable quality and features to a broad set of customers at a low price.
Product
goods and services a company sells to customers.
Portability measures
helpful for understanding how much profit, if any, is really being made.
Leverage measures
helpful for understanding if debt level is too high. The term leverage refers to the extent to which borrowed money is used.
Liquidity measures
helpful for understanding if obligations can be paid when due
Aggressive goals
if achieving it presents a significant challenge to the organization.
Patents
legal decree that protects inventions from direct imitation for a limited period of time.
Realistic goals
meaning that their achievement is feasible.
Goals
narrower aims that should provide clear and tangible guidance to employees as they perform their work on a daily basis. The most effective goals are those that are SMART.
Applications for individuals: portability
net income (Income after taxes) are you making enough money to cover your yearly expenses and save for retirement?)
Applications for organizations: portability
net income (Income after taxes) last year's net income. An increase shows the firm's profits are moving in the right direction.
General environment (or macroenvironment)
overall trends and events in society such as social trends, technological trends, demographics, and economic conditions.
Four main types of intellectual property
patents, trademarks, copyrights, trade secrets
The three P's of people
people - making sure that the actions of the organization are socially responsible planet - making sure organizations act in a way that promotes environmental sustainability traditional organization profits.
Copyrights
provide exclusive rights to the creators of original artistic works such as books, movies, songs, and screenplays.
Example of focused cost leader
redbox uses vending machines placed outside grocery stores and other retail outlets to rent DVDs of movies for $1.20.
Trade secrets
refer to formulas, practices, and designs that are central to a company's business and that remain unknown to competitors.
Intangible resources
resources that are difficult to see, to touch, or to quantify, such as the knowledge and skills of employees, a company's reputation, and a company's culture.
Tangible resources
resources that can be readily seen, touched, and quantified, such as physical assets, property, plant, equipment, and cash.
Franchising
An organization (called a franchisor) grants the right to use its brand name, products, and processes to other organizations (known as franchisees) in exchange for an up-front payment (a franchise fee) and a percentage of franchisees' revenues (a royalty fee).
Benefits of CEO celebrity
CEO celebrity can serve as an intangible asset for the CEO's company and may increase opportunities available to the company. Hiring or developing a celebrity CEO may increase stock price, enhance a firm's image, and improve the morale of employees and other stakeholders.
Scoundrels
CEOs who display high levels of relative fame but low levels of reputation
Costs of CEO celebrity
Celebrity CEOs tend to receive higher compensation and job perks than their colleagues. Celebrity CEOs are likely to enjoy increased prestige power, which facilitates invitations to serve on the boards of directors of other companies and creates opportunities to network with other "managerial elites." Celebrity also can provide CEOs with a "benefit of the doubt" effect that protects against quick sanctions for downturns in company performance and stock price.
Three considerations that executives should consider when using SWOT analysis
First, in laying out each of the four elements of SWOT, internal and external factors should not be confused with each other. Second, opportunities should not be confused with strategic moves designed to capitalize on these opportunities. Finally, and perhaps most important, the results of SWOT analysis should not be overemphasized.
Grenade
GOAL: Bring them back to their senses ASAP Gain their attention When contact is made, aim at the heart Once they hear you, their intensity will ease Take a break Grenade prevention
Sniper
GOAL: Bring them out of hiding Stop, look and backtrack Use searchlight questions: relevancy questions, such as, "What are you really trying to say?" Use tank strategy if needed If they will talk, listen Suggest a civil future
Tank
GOAL: Command respect Hold your ground Interrupt the interruptions Quickly backtrack the tank Aim at the bottom line Offer peace with honor
Yes person
GOAL: Get them to keep commitments Make honesty safe. In the long-term: pace them nonverbally for 30 days; in the short-term: use people talk: we, us, they Help them focus on task and prioritize, i.e. eat the big "frog" first: most time-consuming, most difficult, etc. Help plan it out - eliminate past excuses Ensure commitment: get word of honor; backtrack; and get it in writing Strengthen the relationship; through casual daily contact; acknowledge and appreciate their honest.
Maybe person
GOAL: Get them to make and follow through with decisions Make it safe for them to be honest Clarify the conflict in terms of making decisions; help them decide; consider alternatives; what is the best or worst thing that could happen in the long-term Help them make decision; let them model your decision-making process Ensure commitment: be specific about the next step and reassure good decisions; support their action but keep things in your court Strengthen the relationship, continue to validate their honesty.
Think they know it all
GOAL: Give their bad ideas the hook Backtrack Ask for specifics Give them a way out; Junk-O-Logic: string their idea together with yours Use "I" language and documentation to back it Give credit when credit is due. Avoid negative cycle: you dislike them, so they speak to gain your respect. Give them their moment.
Know it all
GOAL: Open their minds to new ideas Know your stuff Backtrack with respect Take into account their doubts and desires Present alternatives indirectly Turn them into mentors
Frederick W. Taylor
In 1911, Taylor published The Principles of Scientific Management. The book was a response to Taylor's observation that most tasks within organizations were organized haphazardly. Taylor believed that businesses would be much more efficient if management principles were derived through scientific investigation. Taylor stressed how organizations could become more efficient through identifying the "one best way" of performing important tasks. Implementing Taylor's principles was thought to have saved railroad companies hundreds of millions of dollars. Although many later works disputed the merits of trying to find the "one best way," Taylor's emphasis on maximizing organizational performance became the core concern of strategic management as the field developed.
The Art of War
Sun Tzu offered thoughts on strategy that continue to be studied carefully by business and military leaders today. Sun Tzu's best-known work is The Art of War. As this title implies, Sun Tzu emphasized the creative and deceptive aspects of strategy. "Winning a battle without fighting is the best way to win"
Example of strategy
revolves around the Trojan horse. Greek soldiers wanted to find a way to enter the gates of Troy and attack the city from the inside. They devised a ploy that involved creating a giant wooden horse, hiding soldiers inside the horse, and offering the horse to the Trojans as a gift.
Strategic groups
sets of companies that follow similar strategies.
Customer measures
such as number new or repeat customers and percentage of repeat customers - relate to customer attraction and satisfaction.
Financial measures
such as returns on assets and stock price - relate to effectiveness and profits.
Internal business process measures
such as speed at serving a customer and time it takes to create a new product and get it to the market - relate to organizational efficiency.
Learning and growth measures
such as the average measure of skills learned by each employee every year - relate to the future and emphasize the employee learning is often more important than formal training.
Intellectual property rights
the ability of an organization to protect intangible goods such as movies, software, and video games from piracy.
Price
the amount companies charge for their goods and services.
Promotion
the communications used to market a product, including advertising, public relations, and other forms of direct and indirect selling.
PESTEL analysis
the examination of political, economic, social, technological, environmental, and legal factors and their implications for an organization.
Institutional theory
the extent to which companies copy one another's strategies.
Marketing mix
the four Ps (product, price, place and promotion) that companies use to offer customers a coherent and persuasive message.
Social segment
the portion of the general environment that involves demographics and cultural trends.
Economic segment
the portion of the general environment that involves economic and financial conditions.
Political segment
the portion of the general environment that involves governments.
Technological segment
the portion of the general environment that involves scientific advances.
Legal segment
the portion of the general environment that involves the law and courts.
Environmental segment
the portion of the general environment that involves the natural environment.
Entrepreneurial orientation
the processes, practices, and decision-making styles of organizations that act entrepreneurially. is a key concept when executives are crafting strategies in the hopes of doing something new and exploiting opportunities that other organizations cannot exploit.
Proactiveness
the tendency to anticipate and act on future needs.
Risk taking
the tendency to engage in bold rather than cautious actions.
Competitive aggressiveness
the tendency to intensely and directly challenge competitors.
Innovativeness
the tendency to pursue creativity and experimentation.
Time-bound goals
through the creation of deadlines.
Measurable goals
to the extent that whether the goal is achieved can can be quantified.
Michael Porter
two competitive dimensions are the keys to business-level strategy. The first dimension is a company's source of competitive advantage. This dimension involves whether a company tries to gain an edge on rivals by keeping costs down or by offering something unique in the market. The second dimension is companies' scope of operations. This dimension involves whether a company tries to target customers in general or whether it seeks to attract just a segment of customers. Four generic business-level strategies emerge from these decisions: (1) cost leadership, (2) differentiation, (3) focused cost leadership, and (4) focused differentiation.
Example of cost leader
walmart, which has used a cost leadership strategy to become the largest company in the world. The company's advertising slogans such as "Always Low Prices" and "Save Money. Live Better" communicate Walmart's emphasis on price slashing to potential customers.
Capability
what the organization can do based on the resources it possesses.
Autonomy
whether an individual or team of individuals within an organization has the freedom to develop an entrepreneurial idea and then see it through to completion.
