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