management exam 1 ch 3

strategic management

A comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges

strategy

A comprehensive plan for accomplishing an organization's goals

BCG matrix

A framework for evaluating businesses relative to the growth rate of their market and the organization's share of the market Classifies the types of businesses in which a diversified organization can engage as: Dogs Businesses that have a very small share of a market that is not expected to grow Cash cows Businesses that have a large share of a market that is not expected to grow substantially Question marks Businesses that have only a small share of a fast-growing market Stars Businesses that have the largest share of a rapidly growing market

strategic plans

General plans outlining decisions about the resource allocation, priorities, and action steps necessary to reach strategic goals Are set by the board of directors and top management, generally have an extended time horizon, and address questions of scope, resource deployment, competitive advantage, and synergy

operational goals

Goals set by and for an organization's lower-level managers Concerned with shorter-term issues associated with the tactical goals

tactical goals

Goals set by and for an organization's middle managers Focus on how to operationalize actions necessary to achieve the strategic goals

Strategic goals

Goals set by and for an organization's top management Focus on broad, general issues

2 types of strategy

1. Business-level strategy The set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market 2. Corporate-level strategy The set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets

three areas of strategy

1. Distinctive competence An organizational strength possessed by only a small number of competing firms 2. Scope The range of markets in which an organization will compete 3. Resource deployment How an organization distributes its resources across the areas in which it competes

GE business screem

A method of evaluating businesses along two dimensions: (1) industry attractiveness and (2) competitive position; in general, the more attractive the industry and the more competitive the position, the more an organization should invest in a business

Overall cost leadership strategy

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

focus strategy

A strategy in which an organization concentrates on a specific regional market, product line, or group of buyers

single product strategy

A strategy in which an organization manufactures just one product or service and sells it in a single geographic market Strength: By concentrating its efforts so completely on one product and market, a firm is likely to be very successful in manufacturing and marketing that product. Weakness: If the product is not accepted by the market or is replaced by a new one, the firm will suffer

related diversification

A strategy in which an organization operates in several businesses that are somehow linked with one another Advantages: It reduces an organization's dependence on any one of its business activities and thus reduces economic risk By managing several businesses at the same time, an organization can reduce the overhead costs associated with managing any one business. Related diversification allows an organization to exploit its strengths and capabilities in more than one business. When organizations do this successfully, they capitalize on synergies.

unrelated diversification

A strategy in which an organization operates multiple businesses that are not logically associated with one another Advantages: A business that uses this strategy should be able to achieve stable performance over time due to business-cycle differences among the multiple businesses. Resources can be allocated to areas with the highest return potentials to maximize corporate performance. Disadvantages: Corporate-level managers usually do not know enough about the unrelated businesses to provide helpful strategic guidance or to allocate capital appropriately. Because organizations that implement unrelated diversification fail to exploit important synergies, they may be at a competitive disadvantage compared to organizations that use related diversification.

differentation strategy

A strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services

effective strategy

A strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals

distinctive competence

A strength possessed by only a small number of competing firms Organizations that exploit their distinctive competencies often obtain a competitive advantage and attain above-normal economic performance

SWOT

An acronym that stands for strengths, weaknesses, opportunities, and threats SWOT analysis is a careful evaluation of an organization's internal strengths and weaknesses as well as its environmental opportunities and threats.

To properly execute a tactical plan, the manager must:

Evaluate every possible course of action in light of the goal it is intended to reach Make sure that each decision maker has the information and resources necessary to get the job done Make sure vertical and horizontal communication and integration of activities are present to minimize conflict and inconsistent activities Monitor ongoing activities derived from the plan to make sure they are achieving the desired results

profolio management techniques

Methods that diversified organizations use to determine which businesses to engage in and how to manage these businesses to maximize corporate performance Two important portfolio management techniques are the BCG matrix and the GE Business Screen

mission

Mission A statement of an organization's fundamental purpose Identifies the scope of the business's operations in product and market terms

tactical plans

Plans aimed at achieving tactical goals and developed to implement parts of a strategic plan; an organized sequence of steps designed to execute strategic plans

tactical plans

Plans aimed at achieving tactical goals and developed to implement specific parts of a strategic plan Typically involve upper and middle management and, compared with strategic plans, have a somewhat time horizon and a more specific and concrete focus

operational plans

Plans that focus on carrying out tactical plans to achieve operational goals Developed by middle- and lower-level managers, have a short-term focus, and are relatively narrow in scope Are derived from tactical plans and are aimed at achieving operational goals Tend to be narrowly focused, have relatively short time horizons, and involve lower-level managers Two most basic forms: Single-use plans Standing plans

product life cycle

Product life cycle A model that portrays how sales volume for products changes over the life of products Introduction stage Demand may be very high and sometimes outpaces the firm's ability to supply the product. Growth stage More firms begin producing the product, and sales continue to grow. Maturity stage Overall demand growth for the product begins to slow down, and the number of new firms producing the product begins to decline. Decline stage Demand for the product or technology decreases, the number of organizations producing the product drops, and total sales drop.

three types of diversification strategy

Single-product strategy Related diversification Unrelated diversification

organizational weaknesses

Skills or capabilities that do not enable an organization to choose and implement strategies that support its mission

organizational strengths

Skills or capabilities that enable an organization to create and implement its strategies

basic guidelines

Tactical planning must address a number of tactical goals derived from a broader strategic goal. Tactics must specify resources and time frames. Tactical planning requires the use of human resources.

contingency planning

The determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate

strategy implementation

The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved

diversification

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

crisis management

The set of procedures the organization uses in the event of a disaster or other unexpected calamity

strategy formulation

The set of processes involved in creating or determining an organization's strategies; it focuses on the content of strategies

purpose of organizationa goals

They provide guidance and a unified direction for people in the organization. Goal-setting practices strongly affect other aspects of planning. Goals can serve as a source of motivation for an organization's employees. Goals provide an effective mechanism for evaluation and control.

organizational threats

areas in the organization's environment that make it difficult for the organization to achieve high performance

organizational opportunities

areas in the organization's environment that may generate high performance