Chapter 1: The Strategy Making Process (Business Policy and Strategy)

The Strategy-Making Process: As we shall see later in the chapter, valuable strategies often emerge from ____

deep within the organization without prior planning.

Strategic Managers: Business-Level Managers ---> Then the general managers of each division work out for their business the ____

details of a business model that is consistent with this objective.

Strategic Managers: Corporate-Level Managers ---> In other words, it is up to Immelt to _____; his concern is with building and managing the corporate portfolio of businesses to maximize corporate profitability

develop strategies that span individual businesses

Strategic Managers: It is individual managers who must take responsibility for _____ and ____

formulating strategies to attain a competitive advantage and putting those strategies into effect

Strategic Managers: _____ who are responsible for supervising a particular function—that is, a task, activity, or operation like accounting, marketing, R&D, information technology, or logistics

functional managers

Competitive Advantage and Superior Performance: In some industries, high profitability among incumbent companies might _____

induce new companies to enter the industry, and these new entrants might depress prices and profits.

Strategic Managers: The overriding concern of general managers is _____

the health of the whole company or division under their direction

The Strategy-Making Process: Although this view has some basis in reality, it is not ____

the whole story

Strategic Managers: Business-Level Managers ---> At GE, a major corporate goal is to be _____ in which the corporation competes

first or second in every business

Strategic Managers: In most companies, there are two main types of managers: --->

-General Managers -Functional Managers

Strategic Managers: Corporate-Level Managers ---> This role includes defining the _____ of the organization, determining what _____ it should be in, allocating _____ among the different businesses, formulating and implementing _____ that span individual businesses, and providing _____ for the entire organization.

-goals -businesses -resources -strategies -leadership

The Strategy-Making Process: A Model of the Strategic Planning Process ---> The formal strategic planning process has five main steps:

1). Select the corporate mission and major corporate goals. 2). Analyze the organization's external competitive environment to identify opportunities and threats. 3). Analyze the organization's internal operating environment to identify the organization's strengths and weaknesses. 4). Select strategies that build on the organization's strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organization. They should be congruent and constitute a viable business model. 5). Implement the strategies.

The Strategy-Making Process: A Model of the Strategic Planning Process ---> What is the 1st step of the strategic planning process?

1. Select the corporate mission and major corporate goals.

The Strategy-Making Process: A Model of the Strategic Planning Process ---> What is the 3rd step of the strategic planning process?

3. Analyze the organization's internal operating environment to identify the organization's strengths and weaknesses.

The Strategy-Making Process: A Model of the Strategic Planning Process ---> What is the 4th step of the strategic planning process?

4. Select strategies that build on the organization's strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organization. They should be congruent and constitute a viable business model.

Strategic Managers: Functional-Level Managers ---> _____ are responsible for the specific business functions or operations (human resources, purchasing, product development, customer service, and so on) that constitute a company or one of its divisions

Functional-level managers

Strategic Managers: Corporate-Level Managers ---> Consider _____ as an example. As it's active in a wide range of businesses, including lighting equipment, major appliances, motor and transportation equipment, turbine generators, construction and engineering services, industrial electronics, medical systems, aerospace, aircraft engines, and financial services

General Electric (GE)

The Strategy-Making Process: A Model of the Strategic Planning Process ---> What is the 5th step of the strategic planning process?

Implement the strategies

Strategic Managers: Corporate-Level Managers ---> These individuals occupy the _____ within the organization.

apex of decision making

Strategic Managers: Corporate-Level Managers ---> It is not Immelt's specific responsibility to develop strategies for _____

competing in the individual business areas, such as financial services

Competitive Advantage and Superior Performance: A company is said to have a _____ over its rivals when its profitability is greater than the average profitability for all firms in its industry

competitive advantage

If a company's strategy does result in superior performance, it is said to have a ____

competitive advantage.

Competitive Advantage and Superior Performance: Different industries are characterized by different ____

competitive conditions

Competitive Advantage and Superior Performance: Thus, average profitability is higher in some industries and lower in other industries because _____

competitive conditions vary from industry to industry

Competitive Advantage and Superior Performance: In some, demand is growing rapidly, while in others it is ____

contracting.

Strategic Managers: As you can see, there are three main levels of management: --->

corporate, business, and functional

Strategic Managers: Corporate-Level Managers ---> In consultation with other senior executives, the role of ______ is to oversee the development of strategies for the whole organization.

corporate-level managers

Strategic Managers: Corporate-Level Managers ---> This role includes _____

defining the goals of the organization, determining what businesses it should be in, allocating resources among the different businesses, formulating and implementing strategies that span individual businesses, and providing leadership for the entire organization

Competitive Advantage and Superior Performance: Some might be beset by_____, others by excess demand and rising prices.

excess capacity and persistent price wars,

The Strategy-Making Process: The mission statement is followed by the foundation of strategic thinking: ____

external analysis, internal analysis, and strategic choice.

Strategic Managers: ______ who bear responsibility for the overall performance of the company or for one of its major self-contained subunits or divisions

general managers

A central aim of this book is to ____ necessary to identify and implement strategies successfully

give you a thorough understanding of the analytical techniques and skills

Competitive Advantage and Superior Performance: The greater the extent to which a company's profitability exceeds the average profitability for its industry, the ____

greater its competitive advantage

Competitive Advantage and Superior Performance: In other industries, new entry might be difficult, and periods of _____.

high profitability might persist for a considerable time

Competitive Advantage and Superior Performance: The more efficient a company is, the _____

higher are its profitability and return on invested capital.

Competitive Advantage and Superior Performance: For example, _____ strategy of focusing on the realization of cost savings from efficient logistics and information systems, and then passing on the bulk of these cost savings to customers in the form of lower prices, has enabled the company to gain ever more market share, reap significant economies of scale, and further lower its cost structure, thereby boosting profitability (for details,see the Running Case on Wal-Mart).

Wal-Mart's

The Strategy-Making Process: Many writers have emphasized that strategy is the outcome of _____ and that top management plays the most important role in this process

a formal planning process

Strategic Managers: If a company provides several different kinds of products or services, it often duplicates these functions and creates _____ to manage each different product or service

a series of self-contained divisions (each of which contains its own set of functions)

Strategic Managers: Functional-Level Managers ---> Whereas general managers oversee the operation of ____

a whole company or division

Competitive Advantage and Superior Performance: Superior performance is typically thought of in terms of _____

one company's profitability relative to that of other companies in the same or a similar kind of business or industry.

Strategic Managers: Functional-Level Managers ---> Thus, a functional manager's sphere of responsibility is generally confined to _____

one organizational activity

Strategic Managers: Business-Level Managers ---> Thus, whereas corporate-level general managers are concerned with strategies that span individual businesses, business-level general managers are concerned with _____

strategies that are specific to a particular business

A _____ is a set of actions that managers take to increase their company's performance relative to rivals

strategy

The Strategy-Making Process: The task of analyzing the organization's external and internal environments and then selecting appropriate strategies is known as _____

strategy formulation

Strategic Managers: Functional-Level Managers ---> An equally great responsibility for managers at the operational level is _____ : the execution of corporate- and business-level plans

strategy implementation

The Strategy-Making Process: In contrast, _____ involves putting the strategies (or plan) into action.

strategy implementation

Strategic Managers: They must lead the _____

strategy-making process.

Competitive Advantage and Superior Performance: A company is said to have a _____ when it is able to maintain above-average profitability for a number of years.

sustained competitive advantage

The Strategy-Making Process: As shown in Figure 1.2, this statement is shaped by _____

the existing business model of the company.

Competitive Advantage and Superior Performance: This capital is used to buy ______

the resources a company needs to produce and sell goods and services

The Strategy-Making Process: A Model of the Strategic Planning Process ---> What is the 2nd step of the strategic planning process?

2. Analyze the organization's external competitive environment to identify opportunities and threats.

Strategic Managers: Corporate-Level Managers ---> The ____ is the principal general manager.

CEO

Strategic Managers: _____ are the linchpin in the strategy-making process

Managers

Strategic Managers: Functional-Level Managers ---> Thus, it is important for general managers to ____

listen closely to the ideas of their functional managers.

Strategic Managers: Functional-Level Managers ---> In GE's aerospace business, for instance, ____ are responsible for developing manufacturing strategies consistent with the corporate objective of being first or second in that industry

manufacturing managers

Strategic Managers: Corporate-Level Managers ---> It is their responsibility to ensure that the corporate and business strategies that the company pursues are consistent with _____

maximizing profitability and profit growth.

Strategic Managers: Functional-Level Managers ---> Moreover, functional managers provide ____ for business- and corporate-level general managers to formulate realistic and attainable strategies

most of the information that makes it possible

Strategic Managers: Figure 1.1 shows the organization of a _______ —that is, a company that competes in several different businesses and has created a separate self-contained division to manage each of these

multidivisional company

Strategic Leadership: Vision, Eloquence, and Consistency ---> Similarly, it was Sam Walton who established and articulated the vision that has been central to Wal-Mart's success—_____

passing on cost savings from suppliers and operating efficiencies to customers in the form of everyday low prices.

Strategic Managers: Corporate-Level Managers ---> However, it is Immelt's responsibility to _____ to make sure that they are pursuing strategies that will contribute toward the maximization of GE's long-run profitability, to coach and motivate those managers, to reward them for attaining or exceeding goals, and to hold them to account for poor performance

probe the strategic thinking of business-level managers

Competitive Advantage and Superior Performance: The _____ m of a company can be measured by the return that it makes on the capital invested in the enterprise.

profitability

The Strategy-Making Process: Nevertheless, a consideration of formal, _____ is a useful starting point for our journey into the world of strategy

rational planning

Competitive Advantage and Superior Performance: The _____ is defined as its profit over the capital invested in the firm (profit/capital invested).

return on invested capital that a company earns

The Strategy-Making Process: Each step in Figure 1.2 constitutes a ____ in the strategic planning process.

sequential step

Strategic Managers: Corporate-Level Managers ---> The main strategic responsibilities of its CEO, Jeffrey Immelt, are _____

setting overall strategic goals, allocating resources among the different business areas, deciding whether the firm should divest itself of any of its businesses, and determining whether it should acquire any new ones.

Strategic Managers: Here we look at the strategic roles of different types of managers. Later in the chapter, we discuss _____, which is how managers can effectively lead the strategy-making process.

strategic leadership,

In this book, we argue that the _____ have a major impact on its performance relative to rivals

strategies a company's managers pursue

The first step toward achieving this objective is to describe in more detail what ____ and ____ mean.

superior performance and competitive advantage

The Strategy-Making Process: strategy implementation includes _____

taking actions consistent with the selected strategies of the company at the corporate, business, and functional levels, allocating roles and responsibilities among managers (typically through the design of organization structure), allocating resources (including capital and people), setting short-term objectives, and designing the organization's control and reward systems.

Competitive Advantage and Superior Performance: In some, _____ might be revolutionizing competition.

technological change

Competitive Advantage and Superior Performance: Others might be characterized by a lack of ____

technological change

Competitive Advantage and Superior Performance: It is important to note that, in addition to its strategies, a company's performance is also determined by _____

the characteristics of the industry the company competes in.

Strategic Managers: Corporate-Level Managers ---> The corporate level of management consists of _____

the chief executive officer (CEO), other senior executives, the board of directors, and corporate staff.

The Strategy-Making Process: The strategy-making process ends with ____ and ____

the design of the organization structure, culture, and control systems necessary to implement the organization's chosen strategy.

Strategic Managers: Corporate-Level Managers ---> The development of such strategies is the responsibility of ____

the general managers of these different businesses, or business-level managers.

Strategic Managers: Business-Level Managers ---> The strategic role of these managers is to translate ____ into concrete strategies for individual businesses

the general statements of direction and intent that come from the corporate level

Strategic Managers: Corporate-Level Managers ---> Corporate-level managers also provide a link between ____ and ____

the people who oversee the strategic development of a firm and those who own it (the shareholders).

The Strategy-Making Process: Now that we know something about the strategic roles of managers, we can turn our attention to ____

the process by which managers formulate and implement strategies.

Competitive Advantage and Superior Performance: A company's profitability—its return on invested capital—is determined by ____

the strategies its managers adopt

Competitive Advantage and Superior Performance: By capital, we mean _____—that is, stockholders' equity plus debt owed to creditors.

the sum of money invested in the company

Strategic Managers: General managers are found at _____, but their strategic roles differ depending on their sphere of responsibility.

the first two of these levels (corporate and business level)

Strategic Managers: The general managers of these divisions then become responsible for ____

their particular product line

Strategic Managers: Functional-Level Managers ---> Indeed, because _____, functional managers themselves may generate important ideas that subsequently become major strategies for the company.

they are closer to the customer than the typical general manager is

Strategic Managers: General Managers are responsible for _____

they are responsible for deciding how to create a competitive advantage and achieve high profitability with the resources and capital they have at their disposal

Competitive Advantage and Superior Performance: Companies like Wal-Mart, Southwest, and Dell have had a significant and sustained competitive advantage because _____

they have pursued firm-specific strategies that result in superior performance.

Strategic Managers: Functional-Level Managers ---> .Although they are not responsible for the overall performance of the organization, functional managers nevertheless have a major strategic role: ---->

to develop functional strategies in their area that help fulfill the strategic objectives set by business- and corporate-level general managers.

Strategic Managers: Corporate-Level Managers ---> In consultation with other senior executives, the role of corporate-level managers is _____

to oversee the development of strategies for the whole organization.

The Strategy-Making Process: Here we consider _____

what might be described as a typical formal strategic planning model for making strategy.

Much of this book is about identifying and describing the strategies that managers can pursue to _____

achieve superior performance

Competitive Advantage and Superior Performance: By profit, we mean _____

after-tax earnings.

Strategic Managers: Corporate-Level Managers ---> Corporate-level managers, and particularly the CEO, can be viewed as the _____

agents of shareholders.

Competitive Advantage and Superior Performance: A company that uses its resources efficiently makes _____

a positive return on invested capital

The Strategy-Making Process: In step 1, each round or cycle of the planning process begins with _____

a statement of the corporate mission and major corporate goals.

Strategic Managers: A company is a collection of functions or departments that work together to _____

bring a particular product or service to the market

Strategic Managers: Business-Level Managers ---> A _____ is a self-contained division (with its own functions—for example, finance, purchasing, production, and marketing departments) that provides a product or service for a particular market.

business unit

Strategic Managers: Business-Level Managers ---> The principal general manager at the business level, or the _____, is the head of the division

business-level manager

Strategic Managers: Corporate-Level Managers ---> If they are not, then ultimately the CEO is likely to be _____

called to account by the shareholders.