Chapter 9

Goals

the foundation for further planning. Measurable performance targets

Strategic Business Unit (SBU)

the single independent businesses of an organization that formulate their own competitive strategies. When an organization is in several different businesses, those single businesses that are independent and that have their own competitive strategies

core competencies

The major value-creating capabilities of the organization that determine its competitive weapons

mission

a statement of its purpose. Defining the mission forces managers to identify what it's in business to do. But sometimes that mission statement can be too limiting. For example, the co-founder of the leading Internet search engine Google says that while the company's purpose of "organizing the world's information and making it universally accessible and useful" has served them well, they failed to see the whole social side of the Internet and have been playing catch-up.

Implementation

effectively fitting organizational structure and activities to the environment. The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements.

growth by vertical integration

either backward, forward, or both integration types

Renewal

examination of organizational weaknesses that are leading to performance declines.

Growth

expansion into new products and markets.

Strategic flexibility

flexibility is the ability to recognize major external changes, to quickly commit resources, and to recognize when a strategic decision isn't working. Given the highly uncertain environment that managers face today, strategic flexibility seems absolutely necessary! When it's not working, change it, QUICKLY.

An organization that grows using concentration

focuses on its primary line of business and increases the number of products offered or markets served in this primary business. Ex. Auto industry. Residential, commercial, industrial, etc.

Stability

maintenance of the status quo.

e-Business strategies Differentiation

. A differentiator needs to offer products or services that customers perceive and value as unique. For instance, a business might use Internet-based knowledge systems to shorten customer response times, provide rapid online responses to service requests, or automate purchasing and payment systems so that customers have detailed status reports and purchasing histories.

e-Business strategies Focus

. Finally, because the focuser targets a narrow market segment with customized products, it might provide chat rooms or discussion boards for customers to interact with others who have common interests, design niche Web sites that target specific groups with specific interests, or use Web sites to perform standardized office functions such as payroll or budgeting.

3 Companies using speed as a competitive advantage

1. Amazon Prime. No company has mastered order fulfillment and shipping quite like Amazon. 2. UberEATS. While individual restaurants have long had their own food delivery services,... 3. Jimmy John's. When you think fast delivery, Jimmy John's instantly comes to mind.

e-Business strategies Cost Leadership

Cost leaders can use e-business to lower costs in a variety of ways. For instance, it might use online bidding and order processing to eliminate the need for sales calls and to decrease sales force expenses; it could use Web-based inventory control systems that reduce storage costs; or it might use online testing and evaluation of job applicants.

Stars

High market share/High anticipated growth rate

Cash Cows

High market share/Low anticipated growth rate

Five Forces Model

In any industry, five competitive forces dictate the rules of competition. Together, these five forces determine industry attractiveness and profitability, which managers assess using these five factors. Threat of new entrants Threat of substitutes Bargaining power of buyers Bargaining power of suppliers Current rivalry

Question Marks

Low market share/High anticipated growth rate

Dogs

Low market share/Low anticipated growth rate

Implementing strategies

Once strategies are formulated, they must be implemented. No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren't implemented properly.

Why is strategic management so important 1

The most significant one is that it can make a difference in how well an organization performs. In other words, it appears that organizations that use strategic management do have higher levels of performance. And that fact makes it pretty important for managers.

Types of Corporate Strategies

The three main types of corporate strategies are growth, stability, and renewal.

Competitive strategy

an organizational strategy for how an organization will compete in its business(es).

ALL ORGANIZATIONS

are locked in competitive battles, e.g. UPS vs. Post Office; Cell phone providers, Amazon vs. Walmart, etc

threats

are negative trends

Opportunities

are positive trends in the external environment

stability strategy

corporate strategy in which an organization continues to do what it is currently doing. Examples of this strategy include continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining the organization's current business operations. The organization doesn't grow, but doesn't fall behind, either.

corporate strategy

corporate strategy one that determines what businesses a company is in or wants to be in and what it wants to do with those businesses. It's based on the mission and goals of the organization and the roles that each business unit of the organization will play

types of organizational strategies

corporate, competitive, functional

e-Business strategies

cost leadership, differentiation, and focus

Strengths

create value for the customer and strengthen the competitive position of the firm.. Any activities the organization does well or any unique resources that it has are called strengths

retrenchment strategy

is a short-run renewal strategy used for minor performance problems. This strategy helps an organization stabilize operations, revitalize organizational resources and capabilities, and prepare to compete once again.

strategic management process

is a six-step process that encompasses strategy planning, implementation, and evaluation. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important! Even the best strategies can fail if management doesn't implement or evaluate them properly.

capabilities

skills and abilities in doing the work activities needed in its business—"how" it does its work.

Differentiation strategy

unique products that are widely valued by customers Product differences might come from exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image. Practically any successful consumer product or service can be identified as an example

Diversification

unrelated diversification, unrelated diversification

Competitive advantage

what sets an organization apart; its distinctive edge. Quality as a Competitive Advantage. Kellogg Design Thinking as a Competitive Advantage. Kiva Systems. Robotics. (Amazon) Sustaining Competitive Advantage

Unrelated diversification

when a company combines with firms in different and unrelated industries. No strategic fit.

Related diversification

when a company combines with other companies in different, but related industries. Google bought YouTube.

business model

term often used in strategic management which simply is how a company is going to make money. It focuses on two things: (1) whether customers will value what the company is providing, and (2) whether the company can make any money doing that.

Forward vertical integration

the organization becomes its own distributor and is able to control its outputs. . Apple has retail stores.

Backward vertical integration

the organization becomes its own supplier so it can control its inputs. Ebay owns PayPal

BCG matrix

- a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. was developed by the Boston Consulting Group and introduced the idea that an organization's various businesses could be evaluated and plotted using a 2 × 2 matrix to identify which ones offered high potential and which were a drain on organizational resources. The horizontal axis represents market share (low or high), and the vertical axis indicates anticipated market growth (low or high). A business unit is evaluated using a SWOT analysis and placed in one of the four categories Stars Cash Cows Question Marks Dogs

Weaknesses

- activities the organization does not execute well or needed resources it does not possess.

first mover

An organization that's first to bring a product innovation to the market or to use a new process innovation is called a first mover. Being a first mover has certain strategic advantages and disadvantages

resources

An organization's resources are its assets—financial, physical, human, and intangible—that it uses to develop, manufacture, and deliver products to its customers. They're "what" the organization has . Or don't have.

Strategic leadership

An organization's strategies are usually developed and overseen by its top managers. An organization's top manager is typically the CEO (chief executive officer). This individual usually works with a top management team that includes other executive or senior managers such as a COO (chief operating officer), CFO (chief financial officer), CIO (chief information officer), and other individuals who may have various titles. Traditional descriptions of the CEO's role in strategic management include being the "chief " strategist, structural architect, and developer of the organization's information/control systems. Strategic leadership is the ability to anticipate, envision, maintain flexibility, think strategically, and work with others in the organization to initiate changes that will create a viable and valuable future for the organization. Seems obvious, why talk about?

Doing an external analysis

Analyzing that environment is a critical step in the strategic management process. Managers do an external analysis so they know, for instance, what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In an external analysis, managers should examine the economic, demographic, political/legal, sociocultural, technological, and global components to see the trends and changes. Once they've analyzed the environment, managers need to pinpoint opportunities that the organization can exploit and threats that it must counteract or buffer against.

Why is strategic management so important2

Another reason it's important has to do with the fact that managers in organizations of all types and sizes face continually changing situations. They cope with this uncertainty by using the strategic management process to examine relevant factors and decide what actions to take.

Formulating strategies

As managers formulate strategies, they should consider the realities of the external environment and their available resources and capabilities in order to design strategies that will help an organization achieve its goals. The three main types of strategies managers will formulate include corporate, competitive, and functional. Develop and evaluate strategic alternatives. Select appropriate strategies for all levels in the organization that provide relative advantage over competitors. Match organizational strengths to environmental opportunities. Correct weaknesses and guard against threats.

The process

Assess the 5 Forces Do a SWOT Analysis Now, ready to choose a competitive strategy, i.e. one that fits your competitive advantages for the reality of the business you're in. Can't be all things to all people.

Doing an internal analysis

Assessing organizational resources, capabilities, and activities. After completing an internal analysis, managers should be able to identify organizational strengths and weaknesses

Why is strategic management so important3

Finally, strategic management is important because organizations are complex and diverse. Each part needs to work together toward achieving the organization's goals; strategic management helps do this.

customer service strategy

Having an effective customer communication system is an important customer service strategy. Managers should know what's going on with customers. They need to find out what customers liked and didn't like about their purchase encounter—from their interactions with employees to their experience with the actual product or service. It's also important to let customers know if something is going on with the company that might affect future purchase decisions. Finally, an organization's culture is important to providing excellent customer service. This typically requires that employees be trained to provide exceptional customer service.

effective strategies leadership

How can top managers provide effective strategic leadership? Eight key dimensions have been identified. These dimensions include determining the organization's purpose or vision, exploiting and maintaining the organization's core competencies, developing the organization's human capital, creating and sustaining a strong organizational culture, creating and maintaining organizational relationships, reframing prevailing views by asking penetrating questions and questioning assumptions, emphasizing ethical organizational decisions and practices, and establishing appropriately balanced organizational controls. Each dimension encompasses an important part of the strategic management process.

Current rivalry.

How intense is the rivalry among current industry competitors?

Threat of new entrants

How likely is it that new competitors will come into the industry?

Threat of substitutes

How likely is it that other industries' products can be substituted for our industry's products?

Bargaining power of buyers

How much bargaining power do buyers (customers) have?

Bargaining power of suppliers

How much bargaining power do suppliers have?

Innovation strategies

Innovation strategies aren't necessarily focused on just the radical, breakthrough products. They can include applying existing technology to new uses. And organizations have successfully used both approaches. What types of innovation strategies do organizations need in today's environment? Those strategies should reflect their innovation philosophy, which is shaped by two strategic decisions: innovation emphasis and innovation timing.

Evaluating results

The final step in the strategic management process is evaluating results. How effective have the strategies been at helping the organization reach its goals? What adjustments are necessary?

What are an organization's strategies?

They're the plans for how the organization will do whatever it's in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals.

cost leadership strategy

When an organization competes on the basis of having the lowest costs (costs or expenses, not prices) in its industry. Overhead is kept to a minimum, and the firm does everything it can to cut costs.

Turnaround strategy

When an organization's problems are more serious, more drastic action is needed . Any retailer vs. internet sales. Managers do two things for both renewal strategies: cut costs and restructure organizational operations. However, in a turnaround strategy, these measures are more extensive than in a retrenchment strategy.

Competitor Intelligence

Who are they?

Horizontal integration

a company grows by combining with competitors. Fiat bought Chrysler.

renewal strategies

a corporate strategy designed to address declining performance. The two main types of renewal strategies are retrenchment and turnaround strategies.. Managers do two things for both renewal strategies: cut costs and restructure organizational operations

SWOT analysis

an analysis of the organization's strengths, weaknesses, opportunities, and threats. After completing the SWOT analysis, managers are ready to formulate appropriate strategies—that is, strategies that (1) exploit an organization's strengths and external opportunities, (2) buffer or protect the organization from external threats, or (3) correct critical weaknesses.

Strategic management

is what managers do to develop the organization's strategies. It's an important task involving all the basic management functions—planning, organizing, leading, and controlling.

growth strategy

is when an organization expands the number of markets served or products offered, either through its current business(es) or through new business(es). Because of its growth strategy, an organization may increase revenues, number of employees, or market share. Organizations grow by using concentration, vertical integration, horizontal integration, or diversification