MGMT Concepts Exam 3 (Ch 9, 10)
feasibility study chart
1.) introduction, historical background, description of product or service 2.) accounting considerations 3.) management considerations 4.) marketing considerations 5.) financial considerations 6.) legal considerations 7.) tax considerations: sales/property/employee; federal, state, and local 8.) appendix: charts/graphs, diagrams, layouts, resumes, etc.
venture capitalists angel investors initial public offering (IPO)
3.) venture capitalists: external equity financing provided by professionally managed pools of investor money 4.) angel investors: a private investor (or group of private investors) who offers financial backing to an entrepreneurial venture in return for equity in the venture 5.) initial public offering (IPO): the first public registration and sale of a company's stock
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 (ex. cut jobs, sell assets, reorganize management)
e-business strategies
>use to develop a sustainable competitive advantage >cost leader can use e-business to lower costs (ex. online bidding and order processing to eliminate need for sales calls and to decrease sales force expenses) >differentiator needs to offer products/services that customers perceive and values as unique (ex. use Internet-based knowledge systems to shorten customer response time) >focuser targets narrow market segments with customized products (ex. provide chat rooms for customers to interact with others who have common interests, designs website for specific interests) >click-and-bricks strategy: firm uses both online (clicks) and traditional stand-alone locations (bricks) (ex. Walgreens order online, pick up in store) -has worked well
stability strategy
a corporate strategy in which an organization continues to do what it is currently doing >doesn't grow, doesn't fall behind >"status quo" >ex. continuing to serve same clients by offering same products, services, maintaining market share, sustaining organization's current business operations >ex. "to continue building strength-on-strength to deliver on our existing plans"
weaknesses
activities the organization does not do well or resources it needs but does not possess >ex. inferior product quality
resources
an organization's assets that are used to develop, manufacture, and deliver products to its customers >"what" the organization has
capabilities
an organization's skills and abilities in doing the work activities needed in its business >"how" it does its work
self-employment
individuals who work for profit or fees in their own business, profession, trade, or farm >ex. electricians, insurance agent
opportunities
positive trends in the external environment
supporting video: introduction to the SWOT Analysis - opportunities
possible changes in business's external environment that can benefit the company if taken advantage of >external factors: business does not have ability to control them; business must anticipate them and adapt to them >if leveraged properly, can turn into strengths in the future >include: changes in consumer preferences, new developments in technology, relaxing government regulations, removal of trade barriers, altering demographics of a society >ex. societal shift towards a healthier lifestyle (change in consumer preferences), grocery stores, and restaurants began to diversify product offerings, incorporating organic, gluten-fee, low-fat food alternatives for consumers >technology is significant opportunity as well as threat (ex. Dell, Ebay, Amazon, Netfix, and Uber have leveraged advances in technology to provide value for customers) >from business perspective it's important to be scanning environment for possible opportunities because they can serve as a unique advantage if leveraged
basic scientific research
requires most resource commitment, for industries like genetics engineering and pharmaceuticals it's the key to a sustainable competitive advantage
retrenchment strategy
short-run renewal strategy used for minor performance problems >helps an organization stabilize operations, revitalize organizational resources and capabilities, and prepare to compete at once >ex. Biogen reduced its workforce by 11% so company could increase spending for research
9 components of a mission statement
1.) customers: who are the firm's customers 2.) markets: where does the firm compete geographically 3.) concern for survival, growth, and profitability: is the firm committed to growth and financial stability 4.) philosophy: what are the firm's basic beliefs, values, and ethical priorities 5.) concern for public image: how responsive is the firm to societal and environmental concerns 6.) products or services: what are the firm's major products or services 7.) technology: is the firm technologically current 8.) self-concept: what are the firm's major competitive advantages and core comptencies 9.) concern for employees: are employees a valuable asset of the firm
8 key dimensions of effective strategic leadership
1.) determining the organization's purpose or vision 2.) exploiting and maintaining the organization's core competencies 3.) developing the organization's human capital 4.) creating and sustaining a strong organizational culture 5.) creating and maintaining organizational relationships 6.) reframing prevailing views by asking penetrating questions and questioning assumptions 7.) emphasizing ethical organizational decisions and practices 8.) establishing appropriately balanced organizational controls
evaluating potential ideas - personal considerations
1.) do you have the capabilities to do what you've selected 2.) are you ready to be an entrepreneur 3.) are you prepared emotionally to deal with the stresses and challenges of being an entrepreneur 4.) are you prepared to deal with rejection and failure 5.) are you ready to work hard 6.) do you have a realistic picture of the venture's potential 7.) have you educated yourself about financing issues 8.) are you willing and prepared to do continual financial and other types of analyses
8 suggestions for developing strategic flexibility
1.) encourage leadership unity by making sure everyone is on the same page 2.) keep resources fluid and move them as circumstances warrant 3.) have the right mindset to explore and understand issues and challenges 4.) know what's happening with strategies currently being used by monitoring and measuring results 5.) encourage employees to be open about disclosing and sharing negative information 6.) get new ideas and perspectives from outside the organization 7.) have multiple alternatives when making strategic decisions 8.) learn from mistakes
7 possible financing options available to entrepreneurs
1.) entrepreneur's personal resources (personal savings, home equity, personal loans, credit cards, etc.) 2.) financial institutions (banks, saving and loan institutions, government-guaranteed loan, credit unions, etc.) 3.) venture capitalists 4.) angel investors 5.) initial public offering (IPO) 6.) national, state, and local governmental business development programs 7.) unusual sources (television shows, judged competitions, crowdfunding, etc.) >the entrepreneur must devote time and effort to carefully researching a number of varied financing options
3 points of comparison between entrepreneurship v. self-employment
1.) entrepreneurs and self-employed individuals understand market needs >ex. Mark decides to start a business cleaning houses for a fee (self-employed), Nanxi Liu made vaccinations available where refrigeration is not (entrepreneur) 2.) entrepreneurs may be self-employed or they become employees of the company they have started >self-employed persons always work for themselves; they're not paid employees of another company, they rely on their own initiative to ensure income generation >self-employed individuals make all business decisions about how work gets done >self-employment doesn't prelude having one or more employees 3.) tax requirements and certain laws require that both entrepreneurs and self-employed individuals create a legally recognized organization >several types: ex. sole proprietary, corporation
4 key steps entrepreneurs must address as they begin and manage their entrepreneurial ventures
1.) explore the entrepreneurial context >includes the economic, political/legal, social and work environment >important because they determine "rules" of the game and which decisions/actions are likely to meet with success 2.) identify opportunities and possible competitive advantages 3.) start the venture >look at the issues involved with actually bringing their entrepreneurial venture to life >includes researching the feasibility of the venture, planning the venture, organizing venture, and launching the venture 4.) manage the venture >once venture is up and running, entrepreneur managers processes, people, and growth
3 types of corporate strategies
1.) growth 2.) stability 3.) renewal
3 reasons why strategic management is important
1.) it can make a difference in how well an organization performs >positive relationship between strategic planning and performance 2.) managers in organizations of all types and sizes face continually changing situations >ex. during recession, businesses focused on making strategies more flexible 3.) organizations are complex and diverse, each part needs to work together to achieve organization's goals >ex. Walmart has 2.1 million employees, uses strategic management to coordinate and focus employees on goals
7 potential sources of opportunity that entrepreneurs might seek to identify in the external context
1.) the unexpected 2.) the incongruous 3.) the process need 4.) industry and market structures 5.) demographics 6.) changes in perception 7.) new knowledge
possible questions entrepreneurs might consider in researching potential competitors
1.) what types of products or services are competitors offering? 2.) what are the major characteristics of these products or services? 3.) what are their products' strengths and weaknesses? 4.) how do they handle marketing, pricing, and distributing? 5.) what do they attempt to do differently from other competitors? 6.) do they appear to be successful at it? why or why not? 7.) what are they good at? 8.) what competitive advantage(s) do they appear to have? 9.) what are they not so good at? 10.) what competitive disadvantage(s) do they appear to have? 11.) how large and profitable are these competitors? >once entrepreneur has this information, they should assess how the proposed entrepreneurial venture is going to "fit" into this competitive arena (can they compete successfully)
evaluating potential ideas - marketplace considerations
1.) who are the potential customers for your idea: who, where, how many 2.) what similar or unique product features does your proposed idea have compared to what's currently on the market 3.) how and where will potential customers purchase your products 4.) have you considered pricing issues and whether the price you'll be able to charge will allow your venture to survive and prosper 5.) have you considered how you will need to promote and advertise your proposed entrepreneurial venture
five forces model
5 competitive forces dictate the rules of competition; they determine industry attractiveness and profitability: 1.) threat of new entrants: how likely is it that new competitors will come into the industry 2.) threat of substitutes: how likely is it that products of other industries could be substituted for a company's products 3.) bargaining power of buyers: how much bargaining power do buyers (customers) have 4.) bargaining power of suppliers: how much bargaining power do a company's suppliers have 5.) current rivalry: how intense is the competition among current industry competitors
innovation
>"creative destruction" process that characterized innovation leads to technology changes and employment growth (innovating: changing, experimenting, transforming, and revolutionizing) >entrepreneurial firms act as "agents of change" by providing an essential source of new and unique ideas that might otherwise go untapped >small firms produce 30 times more patents per employee than large patenting firms
social responsibility and ethics issues facing entrepreneurs
>95% of small companies believed developing a positive reputation and relationship in communities where they do business is important for achieving business goals but more than half lacked formal programs and 70% admitted failing to consider in plans >entrepreneurs need to be aware of the ethical consequences of what they do; the example they set can be significant in influencing behavior (particularly employees) >entrepreneurs don't stack up well (20% of employees disagreed that their organization was highly ethical) >some entrepreneurs take their social responsibilities seriously, others have pursued opportunities with products/services that protect the global environment
supporting video: introduction to the SWOT Analysis
>Feb 2011, Borders Group Inc., declared bankruptcy: after 40 years in business and 20,000 employees they had succumbed to competitive pressures and disruptive impact of technology (they failed to accurately assess its business and possible disruptions to it) >SWOT analysis: a tool used to help investor, business-owner gain a better understanding of an entity of some kind >investor perspective: used to complete an objective assessment of a business >but can actually be conducted on an industry, product, or an individual >each area (strengths, weaknesses, opportunities, threats) is designed to better familiarize the one conducting it w/ the internal working of the business as well as the external forces affecting that business
global entrepreneurship
>Global Entrepreneurship Monitor (GEM): studies impact of entrepreneurial activities on economic growth in various countries >GEM examines "total early-stage entrepreneurial activity (TEA)" (portion of people involved in setting up a business) >as economic development increases, overall levels of TEA decline, however, entrepreneurship is important for economic development
choosing a competitive strategy
>after managers have assessed the 5 forces and done a SWOT analysis, they select an appropriate competitive strategy (one that fits the organization's strengths and industry) >Porter identified 3 generic competitive strategies: cost leadership, differentiation, focus
the need for strategic leagership
>an organization's strategies are developed and overseen by top managers (CEO) >CEO (chief executive officer) works with other top management teams (COO, CFO, CIO) >CEO's role in strategic management: "chief" strategist, structural architect, developer of organization's information/control systems, key decision maker, visionary leader, political actor, monitor and interpreter of environmental changes, strategy designer >top manager is responsible for every decision and action of every organizational employee >top manager must provide effective strategic leadership
BCG matrix (business is evaluated using SWOT analysis and placed in 1 of 4 categories & implications)
>business is evaluated using SWOT analysis and placed in 1 of 4 categories: 1.) stars: high market share/high anticipated growth rate 2.) cash cow: high/low 3.) question marks: low/high 4.) dogs: low/low >implications: 1.) dogs should be sold off/liquidated 2.) managers should "milk" cash cows for as much as they can, limit and new investment in them, use cash to invest in stars and question marks with strong potential to improve market share 3.) heavy investment in stars will take advantage of markets growth and help maintain high market share 4.) stars will eventually develop into cash cows 5.) hardest decision is with question marks, after analysis some will be sold off, other nurtured into stars
formulating strategies
>consider external environment and resources and capabilities to design strategies that will help organization achieve its goals >3 types of strategies managers must formulate: corporate, competitive, functional
identifying the organization's current mission, goals, and strategies
>defining mission >components of a mission
start-up and planning issues
>entrepreneurs must first identify opportunities and possible competitive advantages, then should research the feasibility of the venture and carefully plan for its launch
researching the venture's feasibility - ideas
>entrepreneurs must research the venture's feasibility by generating and evaluating business ideas; ventures thrive on ideas; generating ideas will take time throughout the the life of a business
identifying environmental opportunities and competitive advantage
>environmental opportunities provide unique and distinct possibilities for innovating and creating value >entrepreneurs need to be able to pinpoint these opportunities that changing context provides before those opportunities disappear or are exploited by others >Peter Drucker identified 7 potential sources of opportunity that entrepreneurs might look for in the external context >as well as opportunities, must understand competitive advantage which is a necessary ingredient for an entrepreneurial venture's long-term success and survival
evaluating ideas
>evaluating entrepreneurial ideas revolves around personal and marketplace considerations (provides information about idea's potential) >entrepreneurs might ask questions as they evaluate potential ideas
innovation strategies
>focus on breakthrough products and application of existing technology to new uses >managers must first decide what the emphasis will be: basic scientific research, product development, process development
customer service strategies
>give customers what they want: major aspect of organization's marketing strategy (ex. New Balance gives customers shoes with varying widths; no others do that) >communicate effectively with customers: managers should know what's going on with customers, what customers liked/didn't like about their purchase encounter (employees and products), and let customers know if something is going on with company that might affect future purchase decisions >provide employees with customer service training; learn culture (ex. Singapore Airlines does not scrimp, employees are expected to get service right)
job creation
>job creation is important to the overall long-term economic health of communities, regions, and nations >over last 20 years, small businesses have created 63% (most of) of the net new jobs and employed 48.9% of U.S. workers >conclusion: entrepreneurial firms are important as job creators
implementing strategies
>no matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren't implemented properly
sustaining competitive advantage
>not enough to create a competitive advantage, organization must be able to sustain that advantage (keep its edge despite competitors' actions or changes in the industry) >not easy because market instabilities; new technology >Michael Porter's work explains how managers can create and sustain a competitive advantage that will give a company above average profitability
developing a business plan
>once the venture's feasibility has been researched, the entrepreneur must look at planning the venture >most important thing entrepreneur does in planning is developing a business plan
doing an internal analysis
>provides information about an organization's resources and capabilities >define core competencies >organizational culture is important in internal analysis; the company's culture can promote or hinder its strategic actions >after internal analysis, managers should be able to identify strengths and weaknesses
quality as a competitive advantage
>quality can be a way for an organization to create a sustainable competitive advantage >many organizations apply quality management concepts to set themselves apart >is continuously improve quality and reliability of products, may have competitive advantage that can't be taken away
doing an external analysis
>should examine the economic, demographic, political/legal, sociocultural, technological, and global components to see trends and changes >includes: competition, pending legislation, labor supply >once they've analyzed the environment, managers need to pinpoint opportunities the organization can exploit and threats it must counteract/buffer against >same external factor can be a threat to one and an opportunity to another >ex. Wyeth Pharmaceuticals enjoyed protection of its new product, its expiration was a threat to them and an opportunity for others to develop off brand of product and sell it for less
number of new start-ups
>since all businesses were start-ups once, most suitable measure of the important role of entrepreneurship is to look at the number of firms over a period of time >growth rate of new start-ups has been steady every year since 2005 >in 2014 200,000 new business were created every 3 months
generating ideas
>sources for entrepreneurial ventures include working in the same industry, personal interests and hobbies, looking at familiar and unfamiliar products and services, and opportunities in external environment sectors (technological, sociocultural, demographics, economic, political/legal) >as entrepreneurs explore these idea sources they should look for limitations of what's currently available, new and different approaches, advances and breakthroughs, unfilled niches, or trend and changes >ex. Joy, creator of Miracle Mop, made moping easier with twisting wringing
design thinking as a competitive advantage
>using design thinking means thinking in unusual ways about what the business is and how it's doing what it's in business to do >can be used for products, processes, or organizational work problems
differentiation strategy
a business or competitive strategy in which a company offers unique products that are widely valued by customers >practically any successful consumer product or service >might come from exceptionally high quality, extraordinary service, innovative design, technological capability, unusual positive brand image >ex. L.L. Bean allows customers to return merchandise anytime if not completely satisfied
focus strategy
a business or competitive strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment >segments can be based on product variety, customer type, distribution channel, or geographical location >ex. focus on high-end audio equipment >whether feasible depends on size of segment and whether an organization can make money serving that segment
cost leadership strategy
a business or competitive strategy in which the organization competes on the basis of having the lowest costs in its industry >leader is highly efficient >overhead is kept to a minimum, firm does everything it can to cut costs >ex. Ross's "no frills" lets them sell items for 20-60% less than competitors
renewal strategy
a corporate strategy designed to address declining performance >two types: retrenchment and turnaround
growth strategy
a corporate strategy that's used when an organization wants to expand 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
strategic management process & steps
a six-step process that encompasses strategic planning, implementation, and evaluation 1.) identifying the organization's current mission, goals, and strategies 2.) doing an external analysis 3.) doing an internal analysis 4.) formulating strategies 5.) implementing strategies 6.) evaluating results
BCG matrix
a strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs >developed by the Boston Consulting Group >organization's various businesses are plotted using 2x2 matrix to identifying which offered high potential and which a drain on organizational resources >horizontal axis: market share (low or high), vertical axis: anticipated market growth (low or high)
functional strategy
a strategy used by an organization's various functional departments to support the competitive strategy >ex. company wanted to invest in high-tech digital printing methods, marketing department had to develop new sales plans and promotional pieces, the production department had to incorporate digital equipment into printing plans >ex. research and development, manufacturing, marketing, human resources, finance
SWOT analysis
an analysis of the organization's strengths, weaknesses, opportunities, and threats >the combined external and internal analyses >after completing SWOT analysis, managers can formulate appropriate strategies; strategies that (1) exploit organization's strengths and external opportunities, (2) buffer or protect the organization from external threats, (3) correct critical weaknesses
feasibility study
an analysis of the various aspects of a proposed entrepreneurial venture designed to determine its feasibility >more structured evaluation approach >tool to determine whether idea is potentially successful and can serve as basis for the all-important business plan (takes significant amount of time to prepare) >feasibility study should give description of most important elements of entrepreneurial venture and the entrepreneur's analysis of the viability of these elements
small business
an organization that is independently owned, operated, and financed; has fewer than 100 employees; doesn't necessarily engage in any new or innovative practices; and has relatively little impact on its industry >a small business isn't necessarily entrepreneurial because it's small; entrepreneurial means business must be innovative, seek out new opportunities; small firms may grow but many remain small businesses by choice or default
first mover
an organization that's first to bring a product innovation to the market or to use a new process innovation >advantages: (1) reputation for being innovative and industry leader, (2) cost and learning benefits, (3) control over scarce resources and keeping competitors from having access to them, (4) opportunity to begin building customer relationships and customer loyalty >disadvantages: (1) uncertainty over exact direction technology and market will go, (2) risk of competitors imitating innovations, (3) financial and strategic risks, (4) high development costs >first mover has hope to develop a sustainable competitive advantage >ex. Yum! was the first fast-food company to establish itself in China, now there are many >others have developed a successful sustainable competitive advantage by following >ex. in spreadsheet programs Microsoft followed 1-2-3 who followed Visicorp >which approach managers choose depends on organization's innovation philosophy (emphasis and timing) and specific resources and capabilities
competitive strategy
an organizational strategy for how an organization will compete in its business(es) >for a small organization in one line of business or a large organization that has not diversified into different products or markets it describes its primary or main market >for organizations with multiple businesses, each business will have its own competitive strategy that defines its competitive advantage, products or services it will offer, customers it wants to reach >ex. strategic business 1, strategic business 2, strategic business 3
corporate strategy
an organizational strategy that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses >based on the mission and goals of the organization and the roles each business unit of the organization will play >ex. PepsiCo's mission is to be the best in food and beverage, pursues with corporate strategy that has put it in different businesses (PepsiCo Americas Beverage and PepsiCo Americas Foods) >ex. multibusiness corporation
strengths
any activities the organization does well or its unique resources >ex. loyal employees, low turnover, a well-trained workforce
supporting video: introduction to the SWOT Analysis - threats
based on changes in external environment, can harm company if not addressed >many threats were once likely opportunities that business failed to identify or they identified threat but downplayed its significance (the business failed to make a concerned effort to insulate itself from the threat) >includes: changing consumer preferences, new development in technology, impending government regulations, expiring patents, emergence of new competitors >ex. expiring patents can be significant threat to pharmaceutical companies, possession of patents is a strength, a patent that is expiring is equivalent of blood in the water; blood attracts competitors who can now sell generic versions of the medication >ex. new governmental regulations and taxes, another thing business's can't control, can be a substantial threat as well: tax on medical devices that is part of the 2010 Affordable Health Care Act, tax on medical devices will make it to expensive for medical device manufacturers to create products such as hip joint replacement and heart stints and force them to offshore production to keep costs down (predicted loss of 43,000 jobs), possibly tax will be delayed as congress attempts to craft working budget and raise debt ceiling, it represents a credible threat to relevant business who should be attempting to minimize affects caused by its implementation
vertical integration
can choose backward, forward, or both >backward: organization becomes its own supplier so it can control its inputs (ex. Walmart building a dairy-processing farm, will sell milk for cheaper) >forward: organization becomes its own distributer and is able to control its outputs (ex. Apple has 400 retail stores worldwide to distribute its products)
diversification
can choose related or unrelated >related: company combines with other companies in different, but related industries (ex. Google acquired YouTube, Double Click, Nest; all have information search capabilities and efficiencies) >unrelated: company combines with firms in different and unrelated industries (ex. Tata Group has businesses in chemicals, communications and IT, consumer products, and energy; no strategic fit among the businesses)
industry and market structures
changes in technology, social values, and consumer tastes can become opportunities for entrepreneurs who are willing to change >ex. Joe Born discovered how to fix CD's with scratches (SkipDr) >ex. eBay is online intermediary between buyers and sellers (connects people, doesn't sell them things)
horizontal integration
company grows by combining with competitors >ex. Bank of America has acquired MBNA, Summit Bancorp, Nations Bank >U.S. Federal Trade Commission: scrutinizes combinations to see if consumers might be harmed by decreased competition
stuck in the middle
costs are too high to compete with low-cost leader or products and services aren't differentiated enough >Porter said must choose which competitive advantage to pursue then align resources, capabilities, and core competencies >research shows organizations can successfully pursue both a low cost and differentiation advantage and achieve high performance (hard though)
what entrepreneurs do
entrepreneurs create something, search for a change, respond to it, and exploit it 1.) entrepreneur assesses potential for the entrepreneurial venture than deals with start-up issues (gathering information, identify potential opportunities, and pinpoint possible competitive advantages); then entrepreneur researches venture's feasibility (uncovering business ideas, looking at competitors, exploiting financing options) 2.) entrepreneur proceeds to plan venture (includes developing organizational mission, exploring organizational cultural issues, creating well-thought-out business plan); once resolved entrepreneur looks at organizing venture (involves choosing legal form of business organization, addressing other legal issues such as patent and copyright searches, and coming up with organizational design for structuring how work is going to be done) 3.) entrepreneur launches the venture (includes setting goals and strategies, establishing the technology-operation methods, marketing plans, information systems, financial-accounting systems, and cash flow management systems) 4.) entrepreneur manages venture (includes processes that are apart of every business: making decisions, establishing action plans, analyzing external and internal environment, measuring and evaluating performance, and making needed changes); manage people (selecting and hiring, appraising and training, motivating, managing conflict, delegating tasks, being an effective leader); managing venture's growth (developing and designing growth strategies, dealing with crisis, exploiting various avenues for financial growth, placing a value on the venture, exiting the venture)
concentration
focuses on its primary line of business and increases the number of products offered or markets served in this primary business ex. Buick focus on becoming a luxury automobile brand, Bose Co. focus on developing innovative audio products
business model & its 2 focuses
how a company is going to make money >it focuses on two things: (1) whether customers will value what the company is providing, (2) whether the company can make and money doing that >ex. Amazon selling books directly to ppl from online; ppl value it and Amazon makes money from it
4 areas where the importance of entrepreneurship can be found
innovation, number of new start-ups, job creation, global entrepreneurship
supporting video: introduction to the SWOT Analysis - strengths
internal characteristics of the business that provide it with an advantage over others >areas in which business excels and is often a source of a competitive advantage >common strengths: brand recognition, brand loyalty, strong financial position (abundance of cash), skilled and committed workforce, possible intellectual property (patents and trade secrets), significant cost advantages >ex. the strength that put Amazon in position to offer discount prices was its ability to maintain a cost advantage, by avoiding the overhead associated with traditional retail >ex. Cosco benefits from a more talented and committed workforce relative to the retail industry, this benefit due to paying higher wages and providing health insurance to part-time workers, serves to reduce voluntary turnover and make a more seasoned workforce >strengths provide business with a significant advantage and are difficult to mimic >strengths represent internal characteristics meaning company has some control over their development and implementations
supporting video: introduction to the SWOT Analysis - weaknesses
internal characteristics of the business that put it at a disadvantage in relation to competitors >areas in which business does not excel and can serve as liabilities in the future >coming to terms with weaknesses allows us the opportunity to devote time and energy necessary to improve in those areas >from business perspective weaknesses make a company vulnerable to competitors, so if weakness is identified must attempt to lessen the significance of it >includes: negative brand reputation, poor product quality, uncommitted workforce, unexperienced/poor quality management, aging equipment and technology, poor distribution networks, uncomplimentary organizational structure >weaknesses represent internal characteristics meaning can be controlled by business to some extent >ex. poor distribution network: even if business produced goods/services that were in demand, it would have little significance if they couldn't be offered in a way that consumers could readily purchase them
threats
negative trends in the external environment
new knowledge
new knowledge ranks high on list of opportunities; takes more than just having knowledge, entrepreneurs must be able to do something with that knowledge and protect important proprietary information from competitors >ex. Francital developed a fabric treated with chemicals to absorb perspiration and odors
process development
organization looks to improve and enhance its work processes; innovates new and improved ways for employees to do their work in all organizational areas; can lead to lower cost (competitive advantage)
product development
organization takes existing technology and improves on it or applies it in new ways >ex. Proctor & Gamble applies tartar-fighting knowledge in toothpaste to pet food
entrepreneurial ventures
organizations that pursue opportunities, are characterized by innovative practices, and have growth and profitability as their main goals
changes in perception
perception is one's view of reality; changes in perception influence people's psychographic profiles (what they value, what they believe in, and what they care about); changes in these attributes and values create potential market opportunities for alert entrepreneurs >ex. changes in perception of whether certain food groups are good brought opportunities for entrepreneurs such as John Mackey who started Whole Foods
social media as a competitive advantage
successful social media should: 1.) help people inside and outside of the organization connect 2.) reduce costs or increase revenue possibilities or both >can also boost productivity (ex. physicians collaborating with colleagues improves speed and efficiency of patient care)
strategic leadership
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
strategic flexibility
the ability to recognize major external changes, to quickly commit resources, and to recognize when a strategic decision was a mistake >no guarantee that a well thought out strategy will lead to positive outcomes, the key is responding quickly when strategy isn't working
demographics
the changing characteristics of the world's population influence industries and markets by altering the types and quantities of products/services desired and customers buying power; opportunities can arise by anticipating and meeting the changing needs >ex. WebMD recognizes aging population and publishes news and information about human health and well-being for health care providers and consumers
core competencies
the organization's major value-creating capabilities that determine its competitive weapons ex. "we believe we have the right strategic plan to streamline operations, accelerate growth and enhance values for shareholders;" they're using two core competencies: superior customer service and reliability, to meet companies strategic goals
strategies
the plans for how the organization will do what 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
entrepreneurship
the process of starting new businesses, generally in response to opportunities >they pursue opportunities by changing, revolutionizing, transforming, or introducing new products/services >ex. Nanxi Liv developed polymers allowing vaccines to be stored without refrigeration >entrepreneurial ventures and small business are not the same; key differences
mission
the purpose of an organization >every organization needs one >shouldn't be too limiting (ex. Nike made the definition of athlete broader) > defining mission forces managers to identify what it's in business to do
strategic business unit (SBUs)
the single independent businesses of an organization that formulate their own competitive strategies
corporate portfolio matrix
used when an organization's corporate strategy encompasses a number of businesses >managers collection/portfolio of businesses >provides framework for understanding diverse business and helps establish priorities for allocating resouces >the first portfolio matrix: BCG matrix
strategic management
what managers do to develop the organization's strategies >involves all basic management functions: planning, organizing, leading, controlling
competitive advantage
what sets an organization apart; its distinctive edge >do something others can't or doing it better >ex. Rolls-Royce gives customers what they want; customized cars >can come from companies resources >ex. Walmart has information systems that allow them to monitor and control inventories more efficiently then its competitors >can come from its core competencies
the incongruous
when conventional wisdom about the way things should be no longer holds true, opportunities are present >entrepreneurs who "think outside the box" (think beyond the traditional conventional approaches) may find potential profitability >ex. founder of FedEx recognized inefficiencies in the delivery of packages and documents, he started overnight delivery from his recognition of the incongruous
turnaround strategy
when organization's problem is more serious >both renewal strategies cut costs and restructure organizational operations but in turnaround strategy measures are more extensive >ex. CIT Group's profits declined, cut costs by $125 million and sold company's aircraft financing business unit to focus on commercial lending and leasing
the unexpected
when situations and events are unexpected (good or bad) opportunities can be found >ex. unexpected interest in portable music players proved to be an opportunity giving way to the successful Walkman
the process need
when technology doesn't immediately come up with big discovery that changes nature of product/service pockets of entrepreneurial opportunity emerge in the various stages of the process as they work towards breakthroughs >ex. researchers haven't found cure for cancer, but have found many possible cures >some process needs are more easily addressed (ex. Internet gave way to full-service online banking after ATMs)
