MGT 4890 Strategic Management Midterm Study Set

Change Management

A general introduction to managing change within an organization. Change Includes Top Management Give People Roles Small Victories Communication

Which of the following is a benefit of early warning scans? Supply chain consolidation Decreased business complexity Ability to change more quickly than competitors Preventing increased costs from Porter's 5 Forces

Ability to change more quickly than competitors

Physical Capital: The experience, knowledge, education, creativity, and abilities of all employees All machinery, computers, buildings, or other tangible items that shape raw materials into the final product The cash necessary to run the business Business intelligence and information technology All raw materials used in production

All machinery, computers, buildings, or other tangible items that shape raw materials into the final product

Scenario Planning: Determining how to interact with the individuals involved in a decision Preparing for hypothetical situations, particularly cataclysmic and disastrous possibilities Anticipating possible directions of the market and plausible changes to its current situation

Anticipating possible directions of the market and plausible changes to its current situation

Which of the following terms could be defined as "A complete overhaul of a business entity, redesigning it to improve its success?" (Select the best answer) Emergent Strategy War Gaming Contingency Planning Business Process Reengineering Benchmarking

Business Process Reengineering When a certain process or department of a business is underperforming, business process reengineering (BPR) may be the best solution. BPR is a complete overhaul of a business entity, redesigning it to improve its success. Such change can be motivated by financial goals to improve, customer satisfaction, employee well-being, or by a social cause.

Stakeholder Analysis : Determining how to interact with the individuals involved in a decision Preparing for hypothetical situations, particularly cataclysmic and disastrous possibilities Anticipating possible directions of the market and plausible changes to its current situation

Determining how to interact with the individuals involved in a decision

Stars: Entities with a large market share in a fast-growing industry Entities with a large market share in mature/slow growth industries Entities with a small market share in slow growth/mature industries Entities with a small market share in a fast-growing industry

Entities with a large market share in a fast-growing industry

Cash Cows : Entities with a large market share in a fast-growing industry Entities with a large market share in mature/slow growth industries Entities with a small market share in slow growth/mature industries Entities with a small market share in a fast-growing industry

Entities with a large market share in mature/slow growth industries

Organic Growth : Paying another company to do part of the work instead of doing it internally Selling part of the company Using a merger, acquisition, or strategic alliance to growth the company Using a merger, acquisition, or strategic alliance to growth the company Expanding a company through everyday business operations

Expanding a company through everyday business operations

True or False: Forecasting is generally very accurate.

False Forecasting professionals are the first to tell you that forecasting is always wrong. This means that forecasts are always inaccurate in some way because no matter what we do in the present, the future is out of our control, and unforeseeable surprises are always waiting on the horizon. No one can tell you how to make a perfect forecast because it's impossible.

Growth Hacking Strategies

Growth Hacking Strategies are effective ways for a small company to have explosive growth in the early stages of business creation. Word of Mouth Marketing and Scalability Invite a friend Free content Embedding/Pairing

In order to better understand where the organization currently is, firms should gain information from all of the following, except: Financial Statements/Documents. Shareholders and Employees. Customers and Vendors. Gut Feelings from Senior Management.

Gut Feelings from Senior Management.

Agreers: Implement the decision after it has been made Professionals in the field who provide relevant information to be analyzed Receive information, analyze possible options, and present a possible direction to take Finalize the decision or send it back for future consideration Listen to the recommenders and seek to better understand the facts involved

Listen to the recommenders and seek to better understand the facts involved

Decision-Rights Tool

The Decision-rights tool is a systematic process of making decisions within an organization where members of the team are assigned differing roles and accomplish specified tasks. Input Recommenders Agreers Decider Performers

Financial Capital: The experience, knowledge, education, creativity, and abilities of all employees All machinery, computers, buildings, or other tangible items that shape raw materials into the final product The cash necessary to run the business Business intelligence and information technology All raw materials used in production

The cash necessary to run the business

Human Capital: The experience, knowledge, education, creativity, and abilities of all employees All machinery, computers, buildings, or other tangible items that shape raw materials into the final product The cash necessary to run the business Business intelligence and information technology All raw materials used in production

The experience, knowledge, education, creativity, and abilities of all employees

Drivers: These are the strengths of the competitor Perceptions of the company and its place within the market The direction the competitor is pursuing There are the things that motivate the competitor, including goals and corporate culture

There are the things that motivate the competitor, including goals and corporate culture

Inorganic Growth: Paying another company to do part of the work instead of doing it internally Selling part of the company Using a merger, acquisition, or strategic alliance to growth the company Using a merger, acquisition, or strategic alliance to growth the company Expanding a company through everyday business operations

Using a merger, acquisition, or strategic alliance to growth the company

All of the following are the three basic questions that a strategists should ask, except: Where are we currently? What are our goals? What is our level of profitability. How will we reach our goals?

What is our level of profitability.

Diversification

While some companies focus on a single product or service, other companies diversify their product lines. This Diversification decreases the risk of any one product failing and ruining the company.

Commission: Provides and in-depth assessment by getting feedback from co-workers managers, and subordinates. Works well for manufacturing settings. Setting goals and measuring how well and how fast the goals are reached. Works well for employees who sell directly to customers.

Works well for employees who sell directly to customers.

Effective strategists will use all resources available - including the firm's accounting system, operations, information system, human capital, marketing and any other tool available - as part of its strategy. True False

True

Change management is best implemented by involving top management True False

True Change must include the leaders of the organization. Organizations won't change until top management can change themselves and prove the change worthwhile.

Complexity Reduction

As businesses grow, they inevitably encounter increasing amounts of complexity, which threatens to increase the cost of operating. Reducing complexity results in a more agile, profitable business. Complexity Creates High Fixed Costs Looking for Ways to Reduce Complexity-materials, markets, production plants

Virtual reality is a new market. All companies creating virtual reality technology are new entrants to the market and no one knows how many potential customers the industry could have. Which of the following best describes this market? Red Ocean Blue Ocean Core competency Porter's Forces Market

Blue Ocean Blue Oceans are new industries, new technology, and new product markets that have never existed before. Examples of Blue Oceans include future software concepts, ideas that have yet to be released, and some very recent new product industries (which will likely become Red Oceans in time) including smart glasses, virtual reality sets, self-driving cars, and new medical procedures and vaccines.

Horizontal and Vertical Integration

Horizontal Integration is when a business buys out or merges with competitors to gain a larger share of the market. This strategy to business--expanding business to grow within one specific market-- is known as horizontal integration. (competitor) Vertical Integration is when a company will either grow to control its own suppliers or grow to own the distribution channels that it generally has sold the product to.Vertical Integration, on the contrary, involves growing a business to either the preceding or succeeding market in the path a product follows. (supplier or distributor)

How is a Pareto Analysis performed? Identify the small number of causes (20%) that result in 80% of a problem The Shingo Model is used to divide the company into groups called Paretos Statistical process control is used to decrease the number of defects from 80% to 20% Analysis the process necessary to implement a zero-based budget

Identify the small number of causes (20%) that result in 80% of a problem A Pareto Analysis uses the Pareto Principle to evaluate a problem and identify which 20% of causes result in 80% of the problem. Based on statistical evidence, a Pareto Diagram can be created and analyzed.

How can a company develop its core competencies? (Select all that apply) Focus on short-term goals Imitate other competitors within the industry Invest in needed technologies Form strategic alliances

Invest in needed technologies & Form strategic alliances Developing Core Competencies: C. K. Prahalad and Gary Hamel developed and presented the idea of core competencies in a 1990 Harvard Review. They cited three things to do in order to develop core competencies. 1. Invest in Needed Technologies 2. Distribute Resources 3. Form Strategic Alliances

Diffusion of Innovations explains how products enter into a market and attract customers. It divides customers into several categories of adoption. Which of the following groups of consumers is the most sensitive to small changes in price? Early Adopters Innovators Early majority Late majority

Late majority The late majority are very price sensitive. Small differences in the price can make a huge difference to the conservative, late majority. They have watched most people around them adopt a product without buying it, so they are fine with waiting a bit longer if they can enjoy a lower price. If you want to attract the late majority, make the product cheaper, in addition to easier to use and more convenient.

If you were asked to perform a PESTLE analysis on a company, which of the following would be factors considered in your analysis? (Select all that apply) The legal environment of the company The technologies available to use and the impact of technology on business prospects The weaknesses of the company The rarity of the product being offered (potential for competitive advantage) The internal strengths of the company, including anything that could be monetized The state of the economy, including inflation and interest rates

The legal environment of the company The technologies available to use and the impact of technology on business prospects The state of the economy, including inflation and interest rates PESTLE represents the following factors: Political (political environment, unrest, balance of power, public ideology, etc.) Economic (state of the economy, inflation, interest rates, etc.) Social (customer culture, demographics, consumer attitude, etc.) Technological (new technologies, technology research and spending, internet, etc.) Legal (business regulation, government laws, ordinances, tax laws, trade laws, etc.) Environmental (climate, weather patterns, temperatures, seasons, fault lines, etc.)

Porter's 5 Forces are used to analyze the competition and opportunity in an industry. Which of the following best describes the force "threat of substitution?" The possibility of customers switching from the product or services of one firm to those of another firm The ability of suppliers to drive up prices The ability customers have to drive down prices offered by a firm The possibility and likelihood of new firms entering the market to compete

The possibility of customers switching from the product or services of one firm to those of another firm The threat of substitution points to the possibility of customers switching from the products or services of one firm for those of another. The threat of substitution increases as product quality and value decrease, prices increase, or with the ebb of product uniqueness.

Items produced per unit of time: Provides and in-depth assessment by getting feedback from co-workers managers, and subordinates. Works well for manufacturing settings. Setting goals and measuring how well and how fast the goals are reached. Works well for employees who sell directly to customers.

Works well for manufacturing settings.

7.11 Employee Engagement

you probably only work your very hardest at jobs you care about. The more engaged you are, the harder you will work. Increasing Employee Motivation-employee engagement is a measure of employees commitment to and passion for their role within an organization. Because employee engagement measures the extent to which employees are motivated to accomplish organizational goals, much of the organization is dependent on an effective employee engagement strategy. Everything from revenue, customer satisfaction, product or service quality, and innovation is driven by employee engagement. Modern companies realize the importance of keeping employees dedicated and put time and effort into creating an organization that cultivates employee engagement. Employee Engagement Surveys-questions at least annually - understanding and commitment to firm's goals and mission Ideas to boost Employee Engagement- Improve the Employee Engagement Survey Be genuine and transparent Understand the importance of communication Incentivize the right employee traits Realize employee engagement is contagious Do more than just work with your employees

Speedy Sid's Spicy Sandwiches offers delicious fast-food sandwiches. While performing a VRIO analysis on their Italian sub, the manager finds the following: No other sandwich shops have the same exact seasoning because Speedy Sid's keeps their seasoning mix a secret. Speedy Sid's has created a streamlined process of both sandwich making and business management that keeps costs low to produce the Italian sub. There are many sandwich shops which market themselves as being quick and tasty. All of these competitors also offer an Italian sandwich. 45% of regular customers come to Speedy Sid's for the Italian sub. Which of these findings bests matches the "value" aspect of the VRIO Framework?

45% of regular customers come to Speedy Sid's for the Italian sub. VRIO is a framework designed to aid in determining the comparative advantage of a product, resource, idea, or service. Knowing the comparative advantage of what a firm has to offer before the implementation aids in the decision making process and helps the firm or individual succeed. In order to determine the comparative advantage, the questions of value, rarity, imitability, and organization are taken into account. Starting with value: Does the product in question provide value to your company? If not, why is the firm even considering it? Putting out a product with no value will only be disadvantageous to the firm.

PESTLE Analysis

A PESTLE analysis looks in greater depth at the opportunities and threats a firm is confronted with. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors facing a firm. Political (political environment, unrest, balance of power, public ideology, etc.) Economic (state of the economy, inflation, interest rates, etc.) Social (customer culture, demographics, consumer attitude, etc.) Technological (new technologies, technology research and spending, internet, etc.) Legal (business regulation, government laws, ordinances, tax laws, trade laws, etc.) Environmental (climate, weather patterns, temperatures, seasons, fault lines, etc.) Create action plan Implement action plan PESTLE analysis can be particularly helpful for international companies that deal with global politics, economies, cultures, advancements, laws, and environments. The PESTLE framework helps these types of companies make sound decisions on where to expand and how to do it or to decide not to altogether.

SWOT Analysis

A SWOT analysis looks at the Strengths, Weaknesses, Opportunities, and Threats that face your business. This is a very common analysis to perform when assessing a company for potential strategies. What are the company's internal strengths? What are our internal weaknesses? What external opportunities do we have? What external threats stand in our way? Strengths A strength is a resource or capability that provides the organization with an advantage relative to its competitors in meeting or exceeding customers' expectations. Strengths may include competencies in developing new technologies, providing exceptional customer service, operating with superior efficiency, or predicting customer needs. Organizations may have a unique strength in marketing, operations, design, or other specialties that leads to a competitive advantage. Weaknesses A weakness is a shortcoming or vulnerability in an organization's capability to meet customers' needs compared to competitors. Weaknesses generally stem from a lack of resources or competencies. For example, an organization may lack the financial resources to fully implement a desired strategy. A firm may not have the needed technical or design talent required to effectively compete. Sometimes the weakness is an inability to rapidly adapt to a changing environment in a timely manner that allows for continued growth and prosperity. Opportunities An opportunity is a condition in the external environment that represents a prospect to improve the organization's competitive position in the market. Changes in technology, a growing middle class in international markets, or new sociocultural trends may provide fresh opportunities for businesses in the general environment. Stakeholders may also present opportunities such as improving relationships with key suppliers, finding a new segment of customers that had not previously been targeted, or partnering with a community to build goodwill. Threats A threat is a condition in the external environment that is unfavorable to the competitive potential of the firm. Examples of threats from the general environment might include a poor economy, changing sociocultural trends, or new laws and policies implemented by governments. Threats may also come from stakeholders in the external environment such as new competitors entering the market, poor relations with strategic partners, or special interest groups criticizing the organization.

Setting/Choosing a Strategy

A brief introduction to the basic process of choosing a strategy, as well as how to use the book. Ask various questions to help the reader think about what his/her business really excels at and will be successful at. Match Your Strategy to Your Business Set Yourself Apart How does your company differentiate itself from the competition? Perhaps too often, people will look at a successful company like Apple and copy its strategy. Instead, look for strategies that match your company. This will help your company have great strategic fit in future decisions.

Core Competency

A company's core competency is a specific feature or service that distinguishes a firm from its competitors. Strategies should seek to make the most of this competitive advantage. A core competency must be something difficult to emulate by competition and as such, provide somewhat of a sustainable advantage within the market. Because many of the skills and advantages emulated by a firm are fully transferable and applicable in multiple markets, having strong core competencies increases a firm's ability to enter new markets and succeed. Must Do: 1. Invest in Needed Technologies 2. Distribute Resources 3. Strategic Alliances

Which of the following are ways to create inorganic growth? (Select all that apply) Acquisitions Strategic Alliances Divestment Internal expansion Mergers

Acquisitions, Strategic Alliances, Mergers Inorganic growth is when a company uses either a merger, an acquisition, or an alliance to grow their business, rather than solely through internal expansion.

Early Warning Scans

After something disastrous happens in a business, it's easy to wonder how you didn't see it coming. Early warning scans are a method to help you see disastrous or fantastic events earlier along the way, allowing you to start creating plans earlier on. Constantly Search for Irregularities Analyze Trends Monitor and React to Important Trends Problems: Potential for inaccuracy, resistance to change, wasted resources

Blue Ocean vs. Red Ocean Strategy

All companies compete in either a Red Ocean or a Blue Ocean. A Red Ocean is a market saturated with competition, and companies battle between themselves over the available customers. Blue Oceans are new industries or products which are not saturated with competition. Red Ocean So what do these oceans represent? Red Oceans represent industries and markets which have existed long enough to become saturated by competition. The car industry, paper industry, oil industry, and paint industry are all examples of highly saturated markets which have existed for decades, if not centuries. These industries are few of the thousands which are Red Oceans. Blue Ocean Blue Oceans are new industries, new technology, and new product markets that have never existed before. Examples of Blue Oceans include future software concepts, ideas that have yet to be released, and some very recent new product industries (which will likely become Red Oceans in time) including smart glasses, virtual reality sets, self-driving cars, and new medical procedures and vaccines. Red Ocean - Stiff Competition (possible incumbency advantage) Blue Ocean - New Rules, New Boundaries, and New Vision ( invest enough in research and development to stay ahead )

How does a mission statement improve an organization? It explains how the organization will achieve its overarching goal It can help align activities with the company's strategy All of these It can inspire employees

All of these

Which of the following are often included groups in a company's war gaming analysis? All of these Competitors The market or consumer Uncontrollable factors or entities

All of these Wargaming in business is a method of simulating future situations and determining how your organization would react to each one. Essentially, an outside organization comes in and sets up a game that mimics real-life business situations. The goal is to provide insights about how the future will unfold and to create plans accordingly. Generally, the game will include groups representing 1) the market or consumer 2) a set of competitors and 3) uncontrollable factors or entities, as well as the team of executives from your company. Multiple rounds are undertaken in which all groups are given the same information and each determines how they will react.

Natural Resources: The experience, knowledge, education, creativity, and abilities of all employees All machinery, computers, buildings, or other tangible items that shape raw materials into the final product The cash necessary to run the business Business intelligence and information technology All raw materials used in production

All raw materials used in production

Diffusion of Innovations

As new products are offered on the market, there are different categories of consumers that adopt the products. These are, in chronological order: Innovators, early adopters, early majority, late majority, and laggards. Your business strategy should match the categories your product currently appeals to within this Diffusion of Innovations. Innovators 2.5% and Early Adopters 13.5% The different categories of consumers have very different levels of price sensitivity. Innovators are generally willing to pay an a much higher price for a product, particularly if it seems particularly novel. They may be unusually interested in the particular market, causing them to apportion a greater percentage of their disposable income towards products in that market. Early Adopters will pay premium prices, assuming the innovators had a positive experience with the product. Early Majority 34% As a product transitions into the early majority, price begins to become more of an issue. The early majority are moderately price sensitive, and may shy away from the prices which were acceptable in the earlier stages of the diffusion of innovations. However, they are not so price sensitive that your product risks being destroyed by excessively low margins. Late Majority 34% The late majority are very price sensitive. Small differences in the price can make a huge difference to the conservative, late majority. They have watched most people around them adopt a product without buying it, so they are fine with waiting a bit longer if they can enjoy a lower price. If you want to attract the late majority, make the product cheaper, in addition to easier to use and more convenient. Laggards 16.5% Laggards are at least as price sensitive as the late majority. However, a decrease in price won't necessarily attract them to a product. They will stick with the way they did things before either until their previous product becomes so outdated that it is no longer a good option to keep using or until their previous product is no longer offered.

The Future of the Firm

Because strategy is about understanding how the organization is going to compete, it is essential that all organizations build and create a solid foundation. In order to build this foundation, the firm must continually ask itself three basic questions: Where are we currently? What are our goals? How will we reach our goals?

Benchmarking

Benchmarking is when a company compares itself to different businesses in their industry. This gives a telling look into possible explanations for their success in the market, which can be put in place by your business. The most basic benchmarking areas: Cost to produce a single unit Productivity per unit Cycle time per unit Defects per unit Benchmarking can also occur within a company. Benchmarking can also be used from other industries

Information Capital : The experience, knowledge, education, creativity, and abilities of all employees All machinery, computers, buildings, or other tangible items that shape raw materials into the final product The cash necessary to run the business Business intelligence and information technology All raw materials used in production

Business intelligence and information technology

How can employees, customers, vendors, and other stakeholders understand an organization's chosen strategy? Evaluating the organization's stock price over the last few years. Evaluating the human resources of the firm. Doing background checks on all senior management. By evaluating what the firm does in the marketplace.

By evaluating what the firm does in the marketplace.

7.7 Economies of Scale

Can help cut costs Internal or External Benefits= advantages company gets by producing large qtys = decreased matl cost, ability to spread R&D cost wider base, increased specialization labor. External Economies of scale=in an industry, suppliers special deal reduce costs for all, increased infrastructure results in decreased costs for all, more efficient technology reduces costs for all. Does not give competitive advantage. Internal Economies of scale=company decreases own costs (both fixed and variable), and expands production. Example mass production, bulk supplies decreases costs, marketing costs spread over more products, R&D costs also spread over more products. Greater specialization of labor allowed. More growth equals more specialization. Give competitive advantage. Focus of strategy. Diseconomies of scale - occurs when increasing the production of a certain product no longer provides an economic benefit, and may actually hurt the company. Example producing more than market demand, increased complexity. Costs of complexity or cost of excess production exceeds or outweighs economies of scale.

Even when management gains companywide acceptance of goals and invests the necessary resources required to reach organizational goals, what may significantly prevent the firm from reaching where it wants to go? Changes in Resources. Changes in the External Environment. Changes in the Internal Environment. Changes in Employee Behavior.

Changes in the External Environment.

Within a SWOT analysis, strengths and weaknesses are part of the external environment. True False

False

Current Strategy: These are the strengths of the competitor Perceptions of the company and its place within the market The direction the competitor is pursuing There are the things that motivate the competitor, including goals and corporate culture

The direction the competitor is pursuing

Incumbency Advantage

Companies that have operated for a period of time in a market do enjoy many advantages because of their past success. These incumbency advantages include name recognition, lack of barriers to entry, and economies of scale and scope. Incumbency Advantage in Business The incumbency advantages is also very prevalent in business, and it parallels that of the political sector. Just as in elections, name recognition is a huge advantage in attracting potential customers and investors. Consumers trust the brands they already know.

What is benchmarking? Allowing employees to take more frequent breaks during the day One of Porter's Five Forces Comparing one business to other similar businesses Implementing six sigma practices Performing an internal analysis of a company using the SWOT framework

Comparing one business to other similar businesses When benchmarking, a company compares their business processes/performance to the best practices of other similar companies.

The purpose of strategy is to: Lower Costs. Compete more effectively, gain market share, and increase the profitability of the firm. Improve Research and Development. Understand Business Plans.

Compete more effectively, gain market share, and increase the profitability of the firm.

Historically, my backpack company has offered 9 different styles of backpack in 3 different sizes. However, since most of our revenue is generated through 2 styles, we are going to cut all of our offerings and focus on those 2 styles in the 3 sizes. What best explains what we are doing? Organic growth Blue Ocean strategy Complexity reduction Divestment Red Ocean strategy

Complexity reduction

Which of the following is a necessary element of Total Quality Management? (Select all that apply) The Pareto principle Continuous Feedback Customer-defined quality Economies of Scope Zero-based budgeting

Continuous Feedback Customer-defined quality Elements of Total Quality Management include: Continuous feedback Plan, Implement, Monitor, Plan Customer-defined quality

Kristen is the CEO of a small company that sells keychains. Initially, her company's strategy was to produce as many keychains as possible. Over time, it became apparent that a better strategy was to create customized keychains for premium customers. Which of the following best describes this strategy? Planning Strategy Emergent Strategy Crafting Strategy

Crafting Strategy Crafting strategy is the process of developing strategy through action, learning, commitment, dedication and experience. Henry Mintzberg suggests that crafting strategy, instead of planning strategy, will do a better job of capturing the process by which effective strategies are developed and implemented.

Which of the following are international issues in strategy that can increase costs for a company starting to expand internationally? (Select all that apply) Currency exchange rates Tariffs Repatriation Shipping costs

Currency exchange rates Tariffs Repatriation Shipping costs Expanding internationally is obviously a huge advantage for many companies, as they gain access to a much larger market, different suppliers, and new partners. However, there are many things to take into consideration, both when deciding if you will begin international expansion and in deciding how to handle continued international operations.These include: Currency exchange Tariffs Shipping costs International Taxes and Repatriation Bribery and Corruption

Jameson owns a company that sells a particular kind of soda. His soda has already passed its peak popularity but brings in a moderate profit each quarter. What phase of the industry life cycle is Jameson's soda currently in? Growth Introduction Maturity Decline

Decline The fourth phase of the life cycle is the product's or industry's decline. Most products reach a point where they are less and less interesting to consumers. They become less popular than they once were, but this is not to say such products are no longer profitable to a firm. They still may bring a firm considerable profit even if sales decline.

Topic 7 Summary

Decreasing Costs and Creating Efficiency Total Quality Management TQM is when a company continuously works on improving their business processes to create better products in a more efficient manner. Six Sigma Six Sigma is a process of statistical process control to reduce the amount of defects that are produced by your business. Pareto Analysis (80/20 rule) A Pareto Analysis looks at both the problems and the solutions that have the biggest impact in your business. In general, 80% of problems come from 20% of the causes, and 80% the work is accomplished by 20% of the people. By looking at what drives growth and what holds your company back, you can better craft your strategy to focus on the highest impact ideas. Measuring productivity Productivity will determine, in large measure, the success of your firm. The question is, how do we measure productivity? Zero-based budgeting Zero-based budgeting is done by taking every single item of the budget and reviewing its value whenever the budget is approved. This helps identify wasteful spending and eliminate expenses from previous operations that are no longer necessary. Economies of Scale As you produce more volume of a given product, your cost to produce each unit go down. This is referred to as economies of scale. Economies of Scope Sometimes, you can reduce your cost per unit on one item by also producing another item that shares materials, machines, or processes. Essentially, by diversifying your product line, you decrease your costs. This is referred to as Economies of Scope. Shingo Model of Excellence This model is a way of looking at the people, processes, purpose, and stakeholders involved with your business and finding the best way to structure each of these areas. The Shingo Model relies on 10 core principles that should guide business decisions. Organizational Time Management Organizational time management involves looking at all the aspects of our business that decrease employee productivity and finding ways to remove or lessen the inefficiencies. Employee Engagement If you help your employees become engaged in your business and invested in the success of your business, they are likely to be more productive and work harder at the job. Location The location where you decide to build retail stores, manufacturing plants, and company headquarters can help decreases many costs of your company. Effective Forecasting Forecasting future sales, expenses, demand, and other critical elements of your business will help your company align its present actions with future expectations.

7.3 Six Sigma

Defects are Costly -Every time you manufacture a defective part, you are losing money. -Early Stages- defects not a big problem -As expansion occurs, defects start really adding up -Time, money, and energy to catch, remove, recycle or dispose of defects, and make replacements Six Sigma -Statistical Process Control --Six Sigma is a method of statistical process control designed to reduce the number of defects. --variation follows a normal distribution-certain amount of that distribution will be within the acceptable range, or tolerance --most people think that three sigma, or three standard deviations above/below the mean is enough accuracy. After all, 99.73% of all parts will be within the given tolerance (in a million parts, 2,700 of the parts will be defective=3 sigma) -Three Sigma is Not Accurate Enough --So, three sigma isn't accurate enough for mass production. Six Sigma is far more accurate. 99.99966% of the opportunities for defects will not result in a defect when using **Six Sigma process control. This means that there will be 3.4 defective features per million -Shifts from the Mean --Six Sigma also allows for a shift away from the mean without creating huge numbers of defects. General Electric and Motorola, two of the early adopters of Six Sigma, have estimated their savings due to Six Sigma to be over 10 billion dollars. -Using Six Sigma --difficult and depends on the process --Becoming very familiar with the points where defects are created or hiring someone who is experienced in Six Sigma quality control are generally the most effective ways of implementing Six Sigma.

What term best describes new technologies that change the status quo, alter markets, reshape business, and modify livelihoods? Innovation Industry Life Cycle Diversification Disruptive technologies Diffusion of Innovations

Disruptive technologies Every once and awhile a new idea or technology comes along that seemingly changes everything. These new technologies change the status quo, they alter markets, reshape businesses, and modify our livelihoods. In an article published in 1995, Clayton M. Christensen classified such innovations as disruptive technologies.

What is the strategic value of divestment? (Choose the best answer) Divestment moves a company from a Blue Ocean to a Red Oceans Divestment allows a company to focus on organizational goals by selling a part of the company Divestment allows a company to expand quickly by purchasing relevant companies Divestment is a growth strategy based on slowly expanding operations over time

Divestment allows a company to focus on organizational goals by selling a part of the company As a general rule, companies make divestment decisions based on whether or not a project, asset, subsidiary, or branch aligns with company goals and direction.

Divestment

Divestment is when a business decides to sell part of itself to other companies. This can mean selling off a department, subsidiary, acquisition, or other asset and can be a useful strategy for focusing on the most profitable part of your business. Reasons for divestment vary widely from financial, governmental, ethical, or simply logical. As a general rule, companies make divestment decisions based on whether or not a project, asset, subsidiary, or branch aligns with company goals and direction. Divestments are generally done through a direct sale of the subsidiary, spin-offs, or asset liquidation.

My canning company produces canned asparagus for populous parts of Peru. In order to utilize our machines for a greater percentage of the day, we are going to start canning corn and green beans. What are we trying to achieve? Economies of Scale Employee Engagement Economies of Scope Zero-based budgeting

Economies of Scope Economies of scope means that if you produce multiple different products from the same fixed costs, profit will increase dramatically with a small increase in cost. It can also refer to other advantages obtained by producing multiple different products.

Vertical Integration means expanding business to grow within one specific market. True False

False Vertical Integration, on the contrary, involves growing a business to either the preceding or succeeding market in the path a product follows. Expanding business to grow within one specific market is known as horizontal integration.

7.8 Economies of Scope

Economies of scope means that if you produce multiple different products from the same fixed costs, profit will increase dramatically with a small increase in cost. It can also refer to other advantages obtained by producing multiple different products. Example -hotels providing hotel service & hosting events. Many fixed costs same, but additional costs are paid for by increased revenues. Increases profit - costs spread over more products/services Diseconomies of Scope- when companies think that expanding to a new product will decrease the per-unit cost, but instead it actually increases their per-unit cost- need addtl factories, decreased efficiency, lack of demand new products, higher than expected costs of labor or materials Opportunities What are opportunities for you to use economies of scope? 1. Look for excess capacity. Do you have machines that are idle for much of the day? Specialized workers that have extra time? Departments that are under utilized? 2. Is it easy for your machines to switch between tasks? 3. Are your fixed costs a very large portion of your overall costs? If so, look for a way to spread these fixed costs across multiple lines of revenue. 4. Do you have assets that aren't used very often? What else could they be used for? 5. Can technology create economies of scope in your business? Historically, many of the problems preventing economies of scope were caused by issues in manufacturing. It took a long time to set machines up for different tasks, workers were much more efficient when they only manufactured one item, etc. Now, computer-aided manufacturing overcomes much of that. The computer can switch between different parts instantaneously, has no learning curve, and can create very precise parts.

Why is employee engagement important to companies? (Select the best answer) Engaged employees are easier to layoff in an economic downturn Engaged employees are motivated and work harder Engaged employees are the basis for six sigma statistical process control Engaged employees generally have lower salaries than disengaged employees

Engaged employees are motivated and work harder Employee engagement is a measure of employees commitment to and passion for their role within an organization. Because employee engagement measures the extent to which employees are motivated to accomplish organizational goals, much of the organization is dependent on an effective employee engagement strategy. Everything from revenue, customer satisfaction, product or service quality, and innovation is driven by employee engagement. Modern companies realize the importance of keeping employees dedicated and put time and effort into creating an organization that cultivates employee engagement.

Question Marks: Entities with a large market share in a fast-growing industry Entities with a large market share in mature/slow growth industries Entities with a small market share in slow growth/mature industries Entities with a small market share in a fast-growing industry

Entities with a small market share in a fast-growing industry

Dogs: Entities with a large market share in a fast-growing industry Entities with a large market share in mature/slow growth industries Entities with a small market share in slow growth/mature industries Entities with a small market share in a fast-growing industry

Entities with a small market share in slow growth/mature industries

Currency exchange rates have relatively little impact on international businesses and are rarely part of business decisions. True False

False Currency exchange rates can have a huge impact on an international business. For starters, these rates fluctuate continuously, making it necessary to monitor rates to prevent losing thousands of dollars by transferring money on the wrong day. Exchange rates add a layer of uncertainty to doing business as a changing exchange rate may vastly decrease the margin on a given product at a given price.

True or False: One advantage of zero-based budgeting is that it is a relatively fast way to create a budget.

False There are some issues with zero-based budgeting. It takes forever - or at least a really long time. Being so meticulous about what is approved for company spending means that every detail of the business must be analyzed and scrutinized.

International Issues in Strategy

Expanding internationally is a tricky process. This essay explains several issues to consider when undergoing international expansion. Currency exchange rates can have a huge impact on an international business. Tariffs are a tax on a certain product when it is imported to a country. Shipping costs are an added cost, quite similar to a tariff. There are many issues in imports and exports that affect businesses. Every country has its own rules and regulations on what can be imported, as well as constraints on how items can be imported and exported. Products can be lost or damaged in transit, and shipping companies don't always cover the loss. Theft, accidents, and natural disasters all increase the risk of importing and exporting. When a company makes money overseas, it does not have to pay taxes on the money until it brings the funds back into the United States. This "repatriation" tax is at around 35% (this rate varies depending on the taxes the company has paid in the foreign company) and gives companies a huge incentive to keep money in foreign countries. This practice is allowed by law, even though some question it on ethical grounds. Bribery and Corruption

Typically, strategists will only those resources that are specifically dedicated to strategy to help the organization compete more effectively. True False

False

Deciders: Implement the decision after it has been made Professionals in the field who provide relevant information to be analyzed Receive information, analyze possible options, and present a possible direction to take Finalize the decision or send it back for future consideration Listen to the recommenders and seek to better understand the facts involved

Finalize the decision or send it back for future consideration

7.13 Effective Forecasting

Forecasting is always wrong - why use it? Forecasting Improves Planning- allow us to plan for the future in a manner that maximizes profit and minimizes wasteful expenses-particularly useful when it comes to projecting future sales, expenses, inventory, accounts receivable, taxes and salaries--those elements of business that largely determine success - align your future with expectations Accurate vs. Effective Forecasting-accurate impossible or extremely difficult. Effective-allows you to shape the strategy of your company in a way that gives you an advantage, even if the forecast is inaccurate in some way. If your forecast is effective, it doesn't need to be any more accurate- requires more common sense than anything-critical thinking and courage required. Look at past to predict future Strategic forecasting-understanding our competitors and our unique industry, and allowing our differentiation strategy to influence our forecast- insight into future - baseline is basic forecast Basic forecasting- can be used for various aspects of business Naive approach-cheapest, easiest (Forecasted demand= demand from last year) Time series methods-naive, mean, exponential smoothing - all rely on historical demand Exponential smoothing-most frequent of time series (Forecast of this year=Alpha*Actual value of last year + (1-alpha)*Forecast of last year) (FT+1=alphaAT+(1-alpha)FT Alpha is a smoothing coefficient between 0 and 1.0, determines how much you rely on last years data Times series fo not require consulting externally-info generally easy to get-inaccurate for strong shifts in market - better for stable, slow-growth industries Delphi method - asking many experts in field what expect, aggregate into prediction - series of rounds- given chance to revise-eventually converging into one prediction-time consuming, but gives insight into long-term developments of market Other methods-drift, seasonal naive, moving average, weighted moving average, Kalman filtering, casual/econometric, regression analysis, AI methods Principles of Effective Forecasting - Focus on Strategy Determine levels of uncertainty Embrace what doesn't fit, but challenge it Be willing to let go of your babies Look forwards, backwards, left, and right Stick to your guns within reason

7.5 Measuring Productivity

How do we measure productivity? In this essay we focus on the best way to measure productivity and specifically the productivity of employees. Hours Worked --Measuring productivity by number of hours worked is pretty much useless in today's society. Despite this, many companies still pay their employees by the hour, incentivizing them to work for more time rather than to get more done. Paying by the hour is still an acceptable practice as long as other incentives are given to motivate an increase in production. Output --Logically, the best way to measure employee productivity is to measure how much they produce, and reward them for their individual output. In some industries, this works fabulously (mfg). However, in more complicated/complex business, it is more difficult to measure a single employee's contribution (journalism firm). Equation for Productivity **The basic equation for productivity is this: Productivity = Output / Input Issues with Measuring Output --this may be deceptive if your measurement of output doesn't reflect the reality of your business. (Artist job) Doesn't account for Quality or Knowledge jobs Ways to Measure Productivity -Items produced per unit of time (mfg) -Sales (selling) - commission -360 Degree Feedback (small firms interact frequently everyone & individual depts in large firm) = in depth assessment of employee by everyone -Accomplishing Objectives - setting goals and measuring accomplishment of them - customizable - (knowledge workers, teams reliance)

Strategic Planning

If you want to create an effective strategy, you need to do effective strategic planning. This is the process of creating a strategy that you can put into practice. In strategic planning, a company determines what its strategy will be and makes plans to carry the strategy out. Generally, this involves using several different tools to analyse the business and determine what its goals are, as well as the things preventing it from getting there. During the 1960s, companies began strategic planning to a much greater extent than they had previously.

Stakeholder Analysis

If your company is planning on undergoing a major change, it may be beneficial to perform a stakeholder analysis. This is a process of evaluating the different groups who are involved in a decision and planning on how to interact with them. Powerful, but uninterested (avoid aggravating) Interested but Powerless (status updates) Un-involved (not considered) Key Individuals (consider their needs, collaborate with them) Timing Timing is also very important to stakeholder analysis. If the analysis is made after the finalization of plans, it doesn't serve any strategic purpose. If made before a course of action is adequately planned, it may be difficult to determine stakeholders' position on the matter at hand, and it is likely that the plan will change and force an additional analysis, which may be costly and time consuming.

Performers : Implement the decision after it has been made Professionals in the field who provide relevant information to be analyzed Receive information, analyze possible options, and present a possible direction to take Finalize the decision or send it back for future consideration Listen to the recommenders and seek to better understand the facts involved

Implement the decision after it has been made

7.10 Organizational Time Management

In an organization, the question is far broader than whether employees waste time. It applies to how they spend their time, what they focus on, and who is assigned to a given task. Time management has become such a prevalent problem that many organizations are creating various programs to help their employees better manage their time. "Work smarter, not harder!" Ideas to Improve Organizational Time Management First- spending time on organizational time management is an investment. Take time to work on becoming more productive. Establish clear priorities-number one task, and other important tasks Don't try to do everything-focus on 20% of tasks that determine 80% of the results. Streamline the process-trust employees-cut some bureaucratic paperwork Delegate correctly-right tasks, right people - look objectively at which employees can accomplish which tasks - people to projects that they enjoy Put limits in place-limit good, focus on best activities- limit time co-workers interact, number of reports given, adapt collaboration to style of organization Work on your workplace-tools have a place, files in a shared folder consider paying an outside consulting agency Effective employees almost always mean a successful company.

Customer Perspective: Includes shareholder value, economic value, net income, etc. Includes customer loyalty, customer satisfaction, and market share Includes quality and delivery of product or service, output, production, etc. Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. Not part of a balanced scorecard.

Includes customer loyalty, customer satisfaction, and market share

Learning and Growth Perspective: Includes shareholder value, economic value, net income, etc. Includes customer loyalty, customer satisfaction, and market share Includes quality and delivery of product or service, output, production, etc. Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. Not part of a balanced scorecard.

Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention.

Business Process/Internal Perspective: Includes shareholder value, economic value, net income, etc. Includes customer loyalty, customer satisfaction, and market share Includes quality and delivery of product or service, output, production, etc. Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. Not part of a balanced scorecard.

Includes quality and delivery of product or service, output, production, etc.

Financial Perspective: Includes shareholder value, economic value, net income, etc. Includes customer loyalty, customer satisfaction, and market share Includes quality and delivery of product or service, output, production, etc. Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. Not part of a balanced scorecard.

Includes shareholder value, economic value, net income, etc.

What is the best way to escape from the product life cycle? There isn't an effective way to beat the product life cycle Innovate before the product reaches decline Keep the product in the introduction phase Remove the product from the market after the growth stage

Innovate before the product reaches decline Innovation is the key to beating the product and industry life cycle. If a company can successfully innovate and develop their industry and products to continually fulfill consumer demand, they can avoid decline. An innovative company is one that continually seeks to improve by investing enough time, talent and money into its next generation products. Innovative companies keep their eyes on their competitors and watch for advancements, not only in their own industry but in others as well.

If the massive company Facebook acquires the smaller company Instagram, what type of growth would have occurred? Divestment Outsourcing Organic Growth Inorganic Growth

Inorganic Growth Inorganic growth is when a company uses either a merger, an acquisition, or an alliance to grow their business, rather than solely through internal expansion.

Inorganic Growth

Inorganic growth is when a company grows by merging with another company, acquiring another company, or forming a strategic alliance with another company. Inorganic growth tends to be a strategy used by larger companies. When to acquire: When your large company wants to combine with a small one When you want to buy their employee talent When you want to gain control of a supplier (vertical integration), decreasing cost of supplies For example, PepsiCo acquired its two largest anchor bottlers in 2010, consolidating these suppliers under the PepsiCo company. When you want to kill off competitors If you believe that you can sell the company later at a much higher price (more risky) When you want to get the assets of the company and the price makes it worth buying the whole company (less common) When you want to enter new markets When to merge: When both companies are of similar size When buying the other company is unrealistic When you want to combine both corporate structures When the value of the combined company exceeds the value of the individual companies added together (synergy) When previously underutilized personal can work effectively for both companies When to form an alliance When you only want to work together for a limited time When you only want to have one (or a few) products in common When neither company wants to give up its autonomy When the cultures between the two companies would clash if combined For a specific promotion

Business Process Reengineering

Instead of making minor changes to a department or process within your business, you can completely overhaul the entity to improve its success. This is called business process reengineering. Such change can be motivated by financial goals to improve, customer satisfaction, employee well-being, or by a social cause.

7.12 Location

It is tempting to simply find the cheapest piece of land and build or jump into a contract with either the cheapest or best located (and likely most expensive) rental space, but this misses several crucial factors to consider. Markets-closer to customers reduces shipping costs, retail advantageous location Shipping Materials-best spot to make shipping efficient Labor-large city=large labor pool, more selective, focus on employees who are productive and fit company culture (important if industry=high turnover) Other issues-taxes, pollution regulation, environmental issues, pollution taxes Buying property vs. Leasing-leasing typical for new companies- startup costs expensive. Buying becomes issue as business grows -Leasing-free up capital for other uses- money used to grow business-successful business grows faster than real estate appreciation -Buying-banks more willing to finance loans backed by real estate, real estate holds value well, once loan paid off, expenses go down Stay in same place long time- buy Expand to more space soon - lease

Which of the following is true of a Weighted Competitive Strength Assessment? This type of assessment is not easily quantifiable This type of assessment focuses on both the external and internal environment Key aspects of a business are given a weight and a rating This type of assessment focuses on the internal environment

Key aspects of a business are given a weight and a rating Weighted Competitive Strength Assessment is a tool used to quantify competition and simplify firm comparison and analyzation. When followed correctly, the process allows a firm to understand and see clearly its own strengths and weaknesses, as well as those of its competitors which help the firm make sound business decisions. The assessment is followed as such: Key factors of industry success and competition are listed. A firm and its competitors are rated on each industry factor from above. Weights are given to each element based on the value each factor has in the market (the total sum of all weights are 1.00). A competitive score is determined by multiplying each rating by each weight and then summing totals for each firm. An analyzation of each firm's competitive strength relative to each success factor is performed.

Which of the following is an example of the 'external environment'? Strategy of the Firm. Organizational Policies and Procedures. Laws and Regulations. Employees.

Laws and Regulations.

Which of the following is an advantage of organic growth? (Select the best answer) Rapid, explosive growth Low up-front cost Creating a limited partnership allows for flexibility Immediate access to a large pool of qualified talent

Low up-front cost Advantages of organic growth: Low up-front cost Maintaining control Lowered risk Greater flexibility Less risk of culture-clash

Which of the following accurately describes how an external factor evaluation matrix works? All factors influencing the business are identified, given a weight, rated, and used to calculate a score. The imitability, value, organization, and rarity of the internal products are evaluated Market and industry factors influencing the business are identified, given a weight, rated, and used to calculate a score. Internal factors influencing the business are identified, given a weight, rated, and used to calculate a score. The opportunities, strengths, weaknesses, and threats of an organization are evaluated

Market and industry factors influencing the business are identified, given a weight, rated, and used to calculate a score. An Internal Factor Evaluation Matrix (IFE) and an External Factor Evaluation Matrix (EFE) has both a weight and a rating. An IFE Matrix is an auditing tool a firm can use to assess its own internal strengths and weaknesses and an EFE Matrix is an analyzation tool a firm can use to assess the market and external elements of the business.

Which of the following best describes how to choose a strategy? Build your strategy around the points of parity your company possesses Create a strategy using the McKinsey 7 Steps Match your strategy to your business Find a successful business and emulate its strategy

Match your strategy to your business It is important that your strategy matches your business. Look for strategies that match your company. This will help your company have great strategic fit in future decisions.

360-degree feedback: Provides and in-depth assessment by getting feedback from co-workers managers, and subordinates. Works well for manufacturing settings. Setting goals and measuring how well and how fast the goals are reached. Works well for employees who sell directly to customers.

Provides and in-depth assessment by getting feedback from co-workers managers, and subordinates.

Mission and Vision Statements

Mission and Vision Statements focus on the big picture of a company - the reason it exists, its overall dream, and how it will achieve its goals. These help a company see its core focus and desires. Vision statement-a firm's vision statement is the overall dream that a firm hopes to accomplish. The vision statement expresses the organization's reason to exist which is useful in providing the organization a flagship to follow; something to always look to for direction. It gives the what without the how. An organization's mission statement takes the vision statement to the next level by providing insight on how the organization will achieve its overarching goal. What really makes the difference is the strategy behind the statement.

Imitability Perspective: Includes shareholder value, economic value, net income, etc. Includes customer loyalty, customer satisfaction, and market share Includes quality and delivery of product or service, output, production, etc. Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. Not part of a balanced scorecard.

Not part of a balanced scorecard.

Strategic Management

One of the most important responsibilities of top management teams is to develop and execute plans to align the internal environment with the external environment (see chapter 2) in a way that will provide a competitive advantage. In order to achieve this objective, managers follow a process of developing and implementing a competitive strategy. The strategic management process consists of: Crafting the principal mission of the organization. Evaluating the internal strengths and weaknesses of the organization. Analyzing the opportunities and threats in the external environment. Developing the plans that the organization should implement that will enable it to best compete in the changing environment. Executing an action plan that will achieve organizational goals.

Organic Growth

Organic growth is the traditional method of growing a company - by expanding your operations, cutting costs, hiring additional employees, and doing the necessary work. This is the alternative to inorganic growth. Advantages of Organic Growth By expanding internally, several advantages are realized: Low up-front cost: Maintaining control: Lowered risk: Greater flexibility: Less risk of culture-clash:

Which of the following is an example of the 'internal environment'? Industry Changes. Competitor Moves. Organizational Culture. Laws and Regulations.

Organizational Culture.

Organizational Resources

Organizational Resources are the different forms of capital (human, physical, financial, informational, etc.) that are available to an organization. An effective strategy must be backed by the correct organizational resources. Human capital, physical capital, financial capital, information capital and raw material all make up the resources available to organizations. Rightly named, these assets combined are known as a firm's organizational resources. These play a vital role in shaping a company's strategy. When to Focus on Weaknesses If your company has some weaknesses that really hold you back from realizing profits, your strategy should focus on fixing these. When to Focus on Strengths However, if your firm doesn't have any weaknesses that hold the company back unduly, you should consider focusing on a strength.

Outsourcing

Outsourcing allows a company to strategically focus on the parts of their business that add the most value to the final product, leaving other companies to do the rest. Benefits of Outsourcing There are many benefits of outsourcing, including the following: Outsourcing allows the company to focus on its core competencies, while allowing other companies to do the same. Outsourcing often benefits from inexpensive labor in foreign markets, lowering costs Outsourcing reduces the need for specialized staff required in the processes which they are outsourcing Outsourcing allows the business to operate on a smaller scale, with less capital and lower operating expenses Outsourcing sometimes improves overall quality, as each company focuses solely on what they do best Companies generally reduce spending by about 15% by effective outsourcing As Peter Drucker said, "Do what you do best and outsource the rest." Costs of Outsourcing There are some costs of outsourcing that are not immediately apparent. Outsourcing requires additional inspection and quality control on all products that are being brought in from an outside firm. There are often costs associated with travel and close communication with the company being outsourced to. An increased lead time from waiting for products to ship may decrease a company's agility. Time and energy must be spent to draft, negotiate, and sign contracts. The main issue with outsourcing is communicating effectively to the outsourcing firm about exactly what is wanted.

Which of the following is a growth hacking strategy? (Select all that apply) Pair the product with an extremely popular product Outsource the majority of product development Perform a SWOT analysis Reward users who get a friend to sign up for the product Offer content for free, with the option to upgrade to a premium version

Pair the product with an extremely popular product; Reward users who get a friend to sign up for the product; Offer content for free, with the option to upgrade to a premium version New companies have an uphill battle to fight against established companies. In order to effectively fight this battle, new companies will sometimes implement "growth hacking" strategies. Growth hacking means using tactics to create explosive growth in the early stages of a company. These strategies are often to get your name out there and to build customer recognition. These strategies include the following: Invite a friend Free content Embedding/Pairing

Outsourcing: Paying another company to do part of the work instead of doing it internally Selling part of the company Using a merger, acquisition, or strategic alliance to growth the company Using a merger, acquisition, or strategic alliance to growth the company Expanding a company through everyday business operations

Paying another company to do part of the work instead of doing it internally

Management Assumptions: These are the strengths of the competitor Perceptions of the company and its place within the market The direction the competitor is pursuing There are the things that motivate the competitor, including goals and corporate culture

Perceptions of the company and its place within the market

Planning, Crafting, and Emergent Strategies

Planning strategy is essentially when a person sits down, creates a plan for the business, and puts it into action. As such, most managers would agree that strategy is a plan, or course of action, that the firm should follow. This approach to strategy is often referred to as planning strategy. In other words, planning strategy involves a careful analysis of rivals and markets to plan specific objectives, goals and courses of action. A Crafting strategy is one where business leaders adapt the strategy as they learn more about the market and the business. It is molded and shaped over time. In other words, crafting strategy is the process of developing strategy through action, learning, commitment, dedication and experience. An Emergent strategy is a strategy that comes about without structured plans or delineated changes but comes from the needs of the market. This kind of strategy could be thought of as a pivot from the planned or crafted strategy.When an unplanned strategy emerges, it is often referred to as an emergent strategy. In other words, an emergent strategy is a strategy the simply comes about on its own that was not expressly intended. Brand new strategy completely unrelated to original strategy. Different category

__________________ are features or characteristics of a product that provide a comparative advantage, should be advertised, and win customers to the product. VRIO features Points of Parity SWOT features Points of Differentiation

Points of Differentiation Companies care obsessively about how they compare to their competition, and continuously look for ways to get a competitive advantage. These measures fall into the category of points of differentiation, or things that a company does differently from its competitors.

Points of Parity and Points of Differentiation

Points of parity are the features and services that all companies in your market must provide in order to compete. Points of differentiation are the features or services that set your company apart. Advertise Points of Differentiation

Porter's Five Forces

Porter's Five Forces are one of the fundamental ways of evaluating the competition in a market. The Five Forces are supplier power, buyer power, threat of substitution, threat of new entrants, and competition. Supplier power refers to the ability suppliers have to drive up prices for the firm. Buyer Power refers to the ability customers have to drive down prices offered by a firm. Threat of substitution points to the possibility of customers switching from the products or services of one firm for those of another. Threat of new entrants brings to question the possibility and likelihood of new firms entering the market to compete. Competition or rivalry refers to the existing market in which a firm is located. Competitive Rivalry (Competition) is surrounded by the other 4 threats/powers

Contingency Planning: Determining how to interact with the individuals involved in a decision Preparing for hypothetical situations, particularly cataclysmic and disastrous possibilities Anticipating possible directions of the market and plausible changes to its current situation

Preparing for hypothetical situations, particularly cataclysmic and disastrous possibilities

Product and Industry Life cycle

Products generally go through the 4 major stages of the Product Life Cycle: Introduction, Growth, Maturity, and Decline. Each of these stages is characterized by different pricing and promotional strategies. Although the life cycle of an industry is generally much longer than those of its products, both life cycles follow the same four phases from beginning to end starting with introduction, followed by growth, then maturity and finally terminating with Decline. Phases of the Product and Industry Life Cycle First Phase - Introduction The first phase of the cycle is the introduction of the product or industry. This phase is heavily characterized by endorsement and advertisement to promote and attract early buyers and participants. Let's consider a new candy bar created by Mars Inc. called the Snickers Crisper. At stage one, the Snickers Crisper was advertised on major television in order to promote the product. Second Phase - Growth The second phase, growth, is characterized by product innovation and expansion. During this phase firms seek to expand their market share by making their product attractive and accessible to everyone. It will be during this phase that we can expect the Snickers Crisper to come out in king size, mini, and family sized portions and be wrapped in holiday specific packaging. Third Phase - Maturity The third phase of the cycle is maturity. At this phase, a firm hopes to see great results from the previous two phases and the efforts that went into their product. There may be some continued innovation and product alteration but only moderately. During this phase, Mars Inc. expects large profit from the Snickers Crisper as its popularity and availability will likely reach its peak. Fourth Phase - Decline The fourth phase of the life cycle is the product's or industry's decline. Most products reach a point where they are less and less interesting to consumers. They become less popular than they once were, but this is not to say such products are no longer profitable to a firm. They still may bring a firm considerable profit even if sales decline. For Mars, the Snickers Crisper will eventually be on its decline and Mars will decide how long to continue its production. As long as profit made is greater than expenses incurred, the Snickers Crisper is likely to remain in production. Innovation is Key Innovation is the key to beating the product and industry life cycle. If a company can successfully innovate and develop their industry and products to continually fulfill consumer demand, they can avoid decline. An innovative company is one that continually seeks to improve by investing enough time, talent and money into its next generation products. Innovative companies keep their eyes on their competitors and watch for advancements not only in their own industry but in others as well. They seek to create disruptive technologies.

Input: Implement the decision after it has been made Professionals in the field who provide relevant information to be analyzed Receive information, analyze possible options, and present a possible direction to take Finalize the decision or send it back for future consideration Listen to the recommenders and seek to better understand the facts involved

Professionals in the field who provide relevant information to be analyzed

Recommenders: Implement the decision after it has been made Professionals in the field who provide relevant information to be analyzed Receive information, analyze possible options, and present a possible direction to take Finalize the decision or send it back for future consideration Listen to the recommenders and seek to better understand the facts involved

Receive information, analyze possible options, and present a possible direction to take

Which of the following is essentially performing business process re-engineering on an entire company? Emergent Strategy Restructuring Scenario Planning Complexity Reduction War Gaming

Restructuring Much like Business Process Reengineering, which involved overhauling a particular business process or entity, Restructuring is a complete overhaul of the entire business; each entity, process, and in many cases even the mission of the organization.

Restructuring

Restructuring is the process of overhauling your entire business, redesigning it to have success when it has been failing in the past. The general purpose behind restructuring is to improve the operation of a business. Other reasons for restructuring may be in response to a crisis, an acquisition, a change in law, or bankruptcy. The overall goal of a restructure is to increase a business's efficiency, cut down on costs, deal with problems, and create new value. Put simply, the goal of a restructure is to improve the profitability of a company.

William is a human resource manager at his company. He creates a set of plans for likely events that could change the market or situation that his company operates in. Which of the following best describes what William is doing? Contingency Planning Complexity Reduction Scenario Planning Restructuring

Scenario Planning Scenario planning is performed by anticipating possible directions of the market and plausible changes to its current situation. Based on the anticipated directions of the market, opportunities and risks can be identified for each scenario and an appropriate action plan can be created. Effective scenario planning can create an organization based on creative thinking and strategy; prepared for nearly any possible change.

Scenario Analysis

Scenario analysis is when a company looks at the most likely situations that will arise in the next projected time period and estimates how likely each of them is to occur. This allows your business to plan for strategies to deal with the most likely scenarios. Scenario Analysis is the process taken by a firm to project into the future and analyze possible different circumstances and events. Such projections include considering the future economy, future opportunities, competition, and threats. The analysis can go as far as attributing a probability as to the likelihood of each event occurring. Once future scenarios have been developed, strategy for each possibility is crafted so as to be ready for implementation in the occurrence of any future scenario.

Scenario and Contingency Planning

Scenario planning is the process in which companies look at possible changes in the market and create plausible plans to deal with these changes. Scenario planning is performed by anticipating possible directions of the market and plausible changes to its current situation. Based on the anticipated directions of the market, opportunities and risks can be identified for each scenario and an appropriate action plan can be created. Effective scenario planning can create an organization based on creative thinking and strategy; prepared for nearly any possible change. Contingency planning is much like scenario planning, except that it is focused on cataclysmic and disastrous possibilities. Contingency Planning, much like that of Scenario Planning, involves imaging what the future holds and planning accordingly. Rather than thinking of any possible scenario however, contingency planning focuses solely on cataclysmic and disastrous possibilities. Such catastrophic scenarios may include what a company might do if their building caught fire and burned down, or if their employees were all killed in a plane accident. Such events are incredibly unlikely but they do occur. Being prepared for such events can make the difference between the survival of a company or its demise.

Divestment: Paying another company to do part of the work instead of doing it internally Selling part of the company Using a merger, acquisition, or strategic alliance to growth the company Using a merger, acquisition, or strategic alliance to growth the company Expanding a company through everyday business operations

Selling part of the company

Accomplishing objectives: Provides and in-depth assessment by getting feedback from co-workers managers, and subordinates. Works well for manufacturing settings. Setting goals and measuring how well and how fast the goals are reached. Works well for employees who sell directly to customers.

Setting goals and measuring how well and how fast the goals are reached.

Disruptive Technologies

Sometimes, a technology will completely change the nature of a market, rendering products obsolete or changing the way people live day to day. These disruptive technologies are both difficult to achieve and tricky to plan for, but can provide some of the best possible growth for a company. Recognizing disruptive technologies is fine, but ultimately we want to adapt to and create disruptive technologies. Firms who fail to adapt to disruptive technologies will be destroyed by them, and firms who create disruptive technologies will become extremely successful. Two ways a firm can be best prepared to take advantage of disruptive technology is to watch their competition closely and to watch other industries. firm must be awake, watching, listening, and keeping up with their customers. They need to be aware of advances in society, technology, and production capacity as well as aware of changing customer needs and wants.

As Hannah considers merging her data analytics company with a larger tech company, she categorizes the people involved in the decision into the following groups: those to consult with, those to avoid aggravating, those to give status updates, and those to leave out of the decision-making process. Which of the following best describes what Hannah is doing? Business Process Reengineering Stakeholder Analysis Scenario Analysis Complexity Reduction Contingency Planning

Stakeholder Analysis

Strategic Fit

Strategic fit looks at how well various aspects of your business mesh with your strategy. This can be seeing if your strategy fits your market, looking at whether a particular project fits with your strategy, or determining if you have the organizational resources to accomplish your strategy. Supply Chain Distribution Price, Branding, and Advertising Human Resource Management Organizational Resources Leadership and Customer Support Company and Strategy Alignment Match your company to your strategy and match your strategy to your company. Fundamentally, your strategy and your company should align almost perfectly. If you have decided that a certain strategy is the best way for your business to move forward, you may have to adapt how you do business to fit that strategy. On the other hand, when creating a strategy, it is often wise to build the strategy around the business and success that you already have.

Strategic Fit - Topic 1.4

Strategic fit refers to the degree to which an organization is able to match its internal resources and capabilities with opportunities in the external environment. The external environment refers to stimuli that are 'external' to the firm. While organizations have the ability to respond to the external environment, they have no direct control over it. In order to understand the external environment, managers should ask questions such as: From an economic perspective, what are the dominant features of the industry? Given the current information available, what is the future of the industry? Within the industry, what are the dominant forces that competitors must overcome? How strong is each dominant force within the industry? What market position(s) does each competitor occupy? What moves are competitors likely to make? Which products/services will make this industry succeed? Are there players currently not in the market, which could easily compete within it? Are there disruptive technologies that could change the landscape of the industry? Are there economic and/or political changes that could re-define the industry? The internal environment refers to the conditions, events, entities and factors that occur within (or internally to) the organization. As such, the internal environment includes employees, management, organizational culture and climate, research and development, internal technology and operations, organizational mission, internal resources, internal accounting, and organizational structure.

What is Strategy?

Strategy refers to the way that an organization is going to reach its goals. Competitive strategy refers to the way that an organization is going to compete. In other words, strategy describes the process by which an organization decides on which products or services to market and sell, which industries to enter, and how the organization is going to reach its desired goals in the marketplace. A competitive advantage is defined as an attribute or combination of attributes that allows the organization to outperform its competitors. In other words, when an organization has a competitive advantage, it has an 'advantage' or 'unique capability' that sets it apart from all other players in the market. A central part of any strategy is the organization's ability to create a sustained competitive advantage.

Boston Consulting Group Growth-Share Matrix

The BCG Growth-Share Matrix focuses your business strategy on the most profitable products which you offer. It involves identifying your products or services as cash cows, dogs, stars, or question marks. Market Growth Rate (Cash Usage) Market Share (Cash Generation) Growth high, share high = star (requires high investment, may turn to cows as market share decreases) Growth high, share low = question mark (requires resources, but questionable outcome) Growth low, share high = cash cow (require little, generate a lot) Growth low, share low = dog (best served as divestitures) Goal: develop question marks into stars and stars into cows

Four Corners Analysis

The Four Corners Analysis is a way to potentially predict your competitor's future strategy. It looks at the Drivers, Current Strategy, Management Assumptions, and Capabilities of the competitor. Drivers What things motivate your competitor? Your competitor's drivers consist of the things which motivate them, including their financial and performance goals, corporate mission statement, leadership backgrounds, and organizational structure and culture. Current Strategy What are they currently striving to do? We often think that corporate strategies are kept secret (unless they are published), but it's not very hard to figure out what a given company's strategy is. Look at what your competitor is doing for it's customers, where they are investing their time, money, and effort, and what relationships they are developing. Management Assumptions How does your company see the world?Determining what those perceptions are is understanding their management assumptions. Capabilities What are the strengths of your competitor? These are their capabilities. Such elements of their business as their financial strength, quality of their product, marketing, customer service, skills of their employees and qualities of their leadership determine their capabilities. These show how well the company can react to external factors and adjust to the market.

GE-McKinsey Matrix

The GE-McKinsey Matrix helps companies decide which projects it will undertake. It looks at the business's competitive strength and the industry attractiveness to determine whether the project is a high, medium, or low rating. Industry Attractiveness The rating for Industry Attractiveness is determined based on a number of industry elements: Market size Barriers to Entry Competition (Porter's Five Forces) Political, economic, sociocultural and technological factors (PESTLE analysis) Business Competitive Strength The rating for Business Competitive Strength is determined by: Market share of the company Core Competencies of the company Customer loyalty and brand strength Financial strength Management strength After rating the industry attractiveness and business competitive strength for projects a firm is considering, the firm will be better able to choose those projects which are most likely to succeed.

Internal and External Factor Evaluation Matrices

The Internal and External Factor Evaluation Matrices seek to take some of the subjectivity out of assessments by giving each relevant business factor a weighted score. This allows for more objective evaluations of both your company and your competitors. One issue with many business analyses, especially those which involve examination of a firm or market, is how subjective they can be. One way to remove some of the subjectivity of internal assessment and external analyzation is to quantify the results with some sort of weight or rating. An Internal Factor Evaluation Matrix (IFE) and an External Factor Evaluation Matrix (EFE) has both a weight and a rating. An IFE Matrix is an auditing tool a firm can use to assess its own internal strengths and weaknesses and an EFE Matrix is an analyzation tool a firm can use to assess the market and external elements of the business. IFE - strengths or weaknesses - given weight - rated 1 to 4(1= poor, 4=phenomenal). Total Average Weighted score = 2.5 Less than is bad, higher than is better EFE - opportunity or threat - given weight - rated 1 to 4(1= poor, 4=phenomenal).. Total Average Weighted score = 2.5 Less than is bad, higher than is better

McKinsey 7S Model

The McKinsey 7S Model looks at the Strategy, Structure, Systems, Shared Values, Staff, Style, and Skills of your business. It helps you balance your company, seeing which areas you excel in and which areas are weaknesses The framework divides the factors into two groups - Hard S areas and Soft S areas. The top three, Strategy, Structure, and Systems, are hard areas. This means that these areas are easier to identify, manage, and work with. They are very tangible. The rest - Staff, Style, Skills, and Shared Values - are soft areas, meaning that they are harder to manage because they are difficult to define, alter, and control. Hard areas: Strategy Structure Systems Soft areas: Staff Style Skills Shared Values Strategy Strategy is a company's plan for how to be successful - how to stay ahead of competitors, how to grow, and how to improve on all these areas. Do your employees act in accordance with your strategy? Does your strategy drive growth? Does your strategy create long-term results? Structure Structure refers to the organization (structure) of your business - the organization of different departments and teams, as well as the leadership hierarchy. Can employees communicate problems to managers? Do you lose a lot of efficiency waiting for approval or other bureaucratic processes? Are your employees engaged and dedicated to the success of the company? Systems Systems are the business processes that make up your company. Do you have smaller profit margins than many companies in your industry? Do your manufacturing processes frequently cause delays in the orders you are sending out? Is your workplace a safe environment? Skills Skills are the things your employees are good at doing. Do you have productive employees who surprise you with how much they accomplish? Are there technical issues that you frequently have to hire outside help to solve? Could you get one very skilled employee instead of two lesser skilled employees? Do you have a competitive advantage thanks to your employee skills? Staff Staff deals with who you hire, how many of each type of job you need, and other Human Resource functions. These include recruitment, training, motivation, and compensation. Do you have enough people to keep up with the tasks at hand? Are employees frequently idle? Do you have the greatest number of people in the departments which drive the most growth in your company? Style Style means leadership style, or how the top-level managers lead the company and interact with each other and employees. Are your employees motivated by what your leaders say and do? Do you have lots of workplace conflict? High turnover? Perhaps solving issues in leadership will solve many issues throughout the company. Shared Values Shared Values means that each of the elements of the model are interconnected around the standards and culture that guide both how employees act and what the company chooses to do. These are the foundation of your organization. Do you have strong mission and vision statements? Are you an ethical corporation? Do you accomplish good in the world?

Product Revenue Analysis

The Product Revenue Analysis looks at which products bring in the greatest percentage of your revenue, allowing you to determine what to focus your company efforts on Most businesses with inventory sell more than one product. These products vary in their prices, their costs of production, their turnover rate, and how much of each product is sold. Product Revenue Analysis is a tool developed specifically to evaluate these product variations and help a firm make strategic decisions in regards to their products. Such decisions might involve deciding which products to focus on, how or if to change prices, which product lines to consider or cut, etc. To start you compile a spreadsheet that shows each of the company's products, the revenue brought in by each, the costs associated with the production of the products, and subsequently the income (sales-costs) of each. The next step you take is to determine the profit margin, percentage of sales, and percentage of income of each product. Profit margin is determined simply by dividing the income of each product by the revenue brought in by the product. Percentage of sales is calculated by dividing the revenue of each product by the total revenue of all product sales. Percentage of income is found by dividing the income from each product by the total income of all products.

The VRIO Framework

The VRIO Framework looks at the comparative advantage that a company offers to consumers. It looks at the value, rarity, imitability, and organization of the product, service, resource, or idea that it offers to customers. VRIO is a framework designed to aid in determining the comparative advantage of a product, resource, idea, or service. Knowing the comparative advantage of what a firm has to offer before the implementation aids in the decision making process and helps the firm or individual succeed. In order to determine the comparative advantage, the questions of value, rarity, imitability, and organization are taken into account. Value Starting with value: Does the product in question provide value to your company? If not, why is the firm even considering it? Putting out a product with no value will only be disadvantageous to the firm. Rarity Moving on to the question of rarity: Is the product we are offering new to the market or already existing in one form or another? If we are offering a simple but different product, are the changes we've made significant enough to consider it rare? If not, there's no expectation of a competitive advantage. Imitability Now considering imitability: Imitability brings to question the ease of copying or imitating the product being offered. Is the product you are offering difficult or easy to duplicate? Is it expensive or inexpensive to develop? If another firm is willing and able to replicate the product and undertake associated costs, our firm can only expect to hold a competitive advantage for a limited time (the time it takes our competition to develop their similar product). Organization Finally considering organization: When our product demonstrates value, rarity, and difficult imitability, the final and possibly most important element to consider is organization. Is our firm organized and operate in such a manner that we can capture as much profit from our product as possible? What changes need to be made to promote innovation within the firm, create a more dedicated culture, and support a more effective management strategy? If our firm leaves unclaimed value in the market for another firm to take advantage of, our competitive advantage won't last but when our organization can capture all available value, as well as pass the questions of value, rarity, and imitability, we expect a lasting sustainable competitive advantage.

Weighted Competitive Strength Assessment

The Weighted Competitive Strength Assessment gives a weight and a rating to the most important factors in an industry, and then compares them between different companies. This provides a more objective representation of the comparative strength of different companies. The assessment is followed as such: Key factors of industry success and competition are listed. A firm and its competitors are rated on each industry factor from above. Weights are given to each element based on the value each factor has in the market (the total sum of all weights are 1.00). A competitive score is determined by multiplying each rating by each weight and then summing totals for each firm. An analyzation of each firm's competitive strength relative to each success factor is performed. Rating Scale: 1-weak, 5-average, 10-strong

Balanced Scorecard

The balanced scorecard looks at your business from four different perspectives: a financial perspective, a customer perspective, a business process/internal perspective, and a learning/growth perspective. The Balanced Scorecard which was developed in 1992 by Robert Kaplan and David Norton, identifies four key perspectives which ultimately determine long term strategy. Financial Perspective - Includes shareholder value, economic value, net income, etc. Customer Perspective - Includes customer loyalty, customer satisfaction, and market share Business Process/Internal Perspective - Includes quality and delivery of product or service, output, production, etc. Learning and Growth Perspective - Includes elements of continual growth and value creation, employee skills, training, satisfaction and retention. To use the balanced scorecard to its full potential, goals and the actions taken to reach those goals are determined for each perspective. Creating goals and a plan of action for each of the four aspects of long term success can become the backbone of long term strategy and thus determine long term success.

Which of the following describes strategic fit? Understanding the tradeoff between opportunity and risk. The distance between top management and line employees. The degree to which an organization is able to match its internal resources and capabilities with opportunities in the external environment. The process of combining skills and abilities of employees.

The degree to which an organization is able to match its internal resources and capabilities with opportunities in the external environment.

Implementing Strategy

The final step in the strategic management process is the implementation of the strategy. No matter how brilliant the strategy, it can all fall short of expectations if it is not effectively implemented. Strategy falls primarily under the planning function of management. Implementation incorporates the organizing, leading, and controlling functions of management which will be covered in detail in the remaining chapters of the textbook.

Choosing Strategy and Goals

The grand strategy is the overarching plan for the firm. Under that grand strategy umbrella there may be corporate level strategies and business level strategies. Furthermore, those strategies can consist of more specific strategic goals, tactical goals, and operational goals. Diversification is seeking to expand into related or unrelated industries. Vertical integration is defined as the integration of new businesses that expand the range of value chain activities for the company. A merger happens when two or more organizations combine to become one. acquisition, one company purchases and assimilates another company. A strategic alliance is an agreement between two or more distinct companies in which they choose to share strategic resources or capabilities. The business level strategy is concerned with how the business unit competes within the industry. A goal is a desired future result that the organization strives to achieve.

Which of the following describes competitive strategy: Understanding Profits. The process of understanding how the organization is going to compete. Possible opportunities for investment. Understanding the marketability of the firm.

The process of understanding how the organization is going to compete.

Capabilities: These are the strengths of the competitor Perceptions of the company and its place within the market The direction the competitor is pursuing There are the things that motivate the competitor, including goals and corporate culture

These are the strengths of the competitor

Which of the following are ways to improve organizational time management? (Select all that apply) Work on the workplace Establish clear priorities Put limits in place Delegate correctly

Work on the workplace Establish clear priorities Put limits in place Delegate correctly Ideas to improve organizational time management: Establish clear priorities Don't try to do everything Streamline the process Delegate correctly Put limits in place Work on your workplace

Why do companies use Six Sigma statistical process control? To increase employee engagement To decrease the number of defects Six Sigma is the foundation for zero-based budgeting To comply with government regulation

To decrease the number of defects Every time you manufacture a defective part, you are losing money. Often, in early stages of a company, the defects don't seem to be a problem. They only occur every once in awhile, and the net loss in profit is quite low. However, as your company expands and starts producing millions or billions of parts, defects start really adding up. Even if only 1 part is defective in every thousand, it still is taking away a sizable chunk of time, money, and energy to catch the defects, remove them, recycle or dispose of them, and make a replacement. In order to deal with this problem, many manufacturing companies use a Six Sigma methodology.

7.2 Total Quality Management

Total Quality Management is the effort to continuously improve an organization's processes to create better products in a more efficient manner. Defects and errors are prevented and removed as time goes on. The goal of TQM is to make the customer happy by controlling every single step in the business process. Deming - statistical control mfg process - rejected in US first - accepted in Japan Used in medicine, finance, mfg, banking - adaptable - coordinated efforts between departments Elements of TQM - Continuous Feedback Plan, Implement, Monitor, Plan Customer-Defined Quality - goal is to improve product in the areas that the customer actually cares about

True or False: The Shingo Model of Excellence includes lean principles of manufacturing.

True Twenty years before the Shingo Model of Excellence was established, Utah State University created the Shingo Prize for Excellence in Manufacturing in honor of a Japanese industrial engineer named Shigeo Shingo. The prize was originally focused on the presence of lean principles in manufacturing companies but was eventually expanded to encompass principles of effective organization within companies of many industries. With this shift came the renaming of the Prize to the Shingo Prize for Operational Excellence. In 2008, the Shingo Model of Excellence was created to better show companies what the Shingo Prize was looking for in applicants, and to teach what they considered to be the best practices in business and manufacturing.

7.9 Shingo Model of Excellence

USU Shingo Prize 20 yrs before model- honored Shingeo Shingo - originally focused on lean principles, eventually expanded to principles of effective organization. Became Shingo Prize for Operational Excellence. 2008 Shingo model created. Culture-values, what is important Beliefs, what is right and wrong Behaviors, how we demonstrate above Behavior, described, observed, recorded Results, Guiding Principles, Systems, Tools, all cycle around Culture. People (Cultural Enablers) Lead with Humility, Respect Every Individual Process (Continuous Improvement) Focus on Process - Embrace Scientific Thinking, Flow & Pull Value - Assure Quality at the Source Seek Perfection Purpose (Enterprise Alignment) Create Constance of Purpose, Think Systematically Stakeholders (Results) Create Value for the Customer Principles of the Shingo Model The following principles are the core of the Shingo Model. As the chart displays, these principles interact and shape the culture, systems, results, and tools of an organization. Respect Every Individual- Lead with Humility- Seek Perfection- Embrace Scientific Thinking- Focus on Process- Assure Quality at the Source- Flow and Pull Value- Think Systematically- Create Constancy of Purpose- Create Value for the Customer-

7.4 Pareto Analysis

Usually roughly 80% of the problems result from only 20% of the causes. This principle, often known as the 80/20 rule, was named after an Italian economist who recognized that 80% of Italian income was allocated to 20% of the population 80% of company revenue results from 20% of products. 80% of the work is accomplished by 20% of the team 80% of customer complaints come from 20% of customers 80% of new ideas come from 20% of employees Performing a Pareto Analysis -Identifying Problems --A Pareto Analysis uses the Pareto Principle to evaluate a problem and identify which 20% of causes result in 80% of the problem. Based on statistical evidence, a Pareto Diagram can be created and analyzed. Example - University Computer Crashes 10 reasons 260 computers crashed over past year ranked in descending order of frequencies calculate cumulative percentage (adding each frequency to preceding frequency causes then dividing by total frequencies) reasons x axis, frequencies y axis cumulative freq. 2nd y axis Using the diagram, the team is able to identify the key issues (the 20%) which are causing most of the computer crashes (the 80%). The team now knows exactly which problems to focus their energy on to solve most of the computer crashing problems.

War Gaming

War gaming is a simulation of future events, with people assigned to represent customers, competitors, your executive team, and other factors. Various situations are presented, and each group reacts as the group they are representing would. Generally, the game will include groups representing 1) the market or consumer 2) a set of competitors and 3) uncontrollable factors or entities, as well as the team of executives from your company. Multiple rounds are undertaken in which all groups are given the same information and each determines how they will react. If performed correctly, wargaming can provide several benefits. These can include: Provide leadership with a specific plan of action Highlight potential problems that may arise and determine how to respond to them Build confidence in a proposed plan Streamline execution of the plan

7.6 Zero-Based Budgeting

every item of the budget is reviewed every time the budget is approved. Instead of basing the budget on the past, it is based on zero costs. This process forces executives to look at every single expense of the organization and analyze whether it is still relevant and worth the cost. Culture Shift and Cutting Costs --being more cost conscious --ambitious, seeking where value is greatest, and greatest cost incurred --when they want to cut costs to the bare minimum-executives can decide how aggressively they will cut costs and base approvals on that decision --growth-oriented company find areas of waste, but approve R&D expenses --almost always reduces costs, wasteful operations eliminated, prevents pasts cost no longer needed in budget Zero-based budgeting can help shape a company's future strategy.- outsource, acquire company to reduce costs - can be used in certain departments without applying it to the entire organization There are some issues with zero-based budgeting. -Takes really long time (scrutiny of everything) -favors areas that directly lead to revenue -R&D may be hurt -can limit a business, prevent from functioning to its potential Steps to Zero-Based Budgeting 1. Identify and Rank Core Business Activities What drives your business? What activities add the most value to the product? Which things do consumers value most? 2. Determine the Cost of Each Activity that the Business Does You can decide how in-depth this will be, but generally it works best if it is far-reaching and includes very detailed costs of each aspect of the business 3. Are the costs worth it? Look at each listed cost. Is it worth it? Are you spending the most money on your most important business activities? Are there expenses that seem unnaturally high? Cut each activity that doesn't seem to be worth it. Align this process of cost-cutting with how aggressively you want to cut costs and with your overall business strategy. 4. Establish guidelines Set up guidelines to keep your company within the budget you have established, specifying which costs are no longer needed and what things are most important to the organization.