Management : Chapter 9
step 1: identify the organization's current mission, goals, and strategies
- every organization needs a mission - addressed the question what is the organization's reason for being in business
what are the types of corporate strategy?
- growth strategy - stability strategy - renewal strategy
why is strategic management important?
- has a positive impact on performance - helps managers decide how to act in face of change and uncertainty - helps complex and diverse organization work together
step 2: doing an external analysis
- managers need to conduct and external analysis. - influential factors such as competition, pending legislation, and labor supply are included in the external environment
examples of differentiation strategies
- quality - innovation strategies *transfer technology from one division to another * Invest in R&D * improve the process * first mover
competitive advantage can stem from
- quality - low cost - technology - other factors
step 3: doing internal analysis
- should lead to clear assessment of the organization's resources and capabilities
step 6: evaluating results
- the final step in the process is evaluating results - how effective have the strategies been at helping the organization reach its goals?
Porter's Five Forces Model
- threat of new entrants - threat of substitutes - bargaining power of buyers - bargaining power of supplies - current rivalry
focus strategy
A business strategy in which a company pursues a cost or differentiation advantage in a narrow industry segment
growth strategy
A corporate strategy that's used when an organization wants to expand the number of markets served or products offered, either through its current business(es) or through new business(es)
how are corporate strategies managed?
BCG matrix
other differentiation strategies
- customer service - mass customization - social media
Managers should "milk" cash cows for as much as they can, limit any new investment in them, and use the large amounts of cash generated to invest in ________ and _________ .
stars; question marks
what are the steps of strategic management process
step 1- identifying the organization's current mission, goals, and strategies step 2 - doing an external analysis step 3 - doing an internal analysis step 4 - formulating strategies step 5 - implementing strategies step 6 - evaluating results
Choosing a Competitive Strategy
- Cost leadership strategy - Differentiation strategy - Focus strategy - Stuck in the middle
step 5: implementing strageies
- a strategies is only as food as its implementation
step 4: formulating strategies
- after SWOT, managers develop and evaluate strategic alternatives and select strategies that are appropriate - need to be established for corporate, business and functional levels
three main types of strategies managers will formulate
- corporate - competitive - functional
stuck in the middle
an organization that has not been able to develop either a cost or differentiation advantage
first mover
an organization that's first to bring a product innovation to the market or to use a new process innovation
resources
an organization's assets that are used to develop, manufacture, and deliver products to its customers
capabilities
an organization's skills and abilities in doing the work activities needed in its business
competitive strategy
an organizational strategy for how an organization will compete in its business(es)
corporate strategy
an organizational strategy that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses
strengths
any activities the organization does well or its unique resources
sustaining competitive advantage
business must not only develop a competitive advantage but they must also sustain it
A __________ describes how a business will compete in its primary market.
competitive strategy
What are the three main types of corporate strategies?
growth, stability, and renewal
business model
how a company is going to make money
The CEO is meeting with his top managers to determine how best to compete successfully in the company's market. This group is developing company's _________.
strategy
SWOT analysis
strengths, weaknesses, opportunities, threats
stability strategy
corporate strategy in which an organization continues to do what it is currently doing
economic moat
sustaining competitive advantage by protecting long-term profits and market share using various means - popularized by Warren Buffett as a way to visualize the concept of keeping a competitive advantage
cost leadership strategy
the organization competes on the basis of having the lowest cost in the industry
Defining the organizational mission forces managers to identify what __________.
the organization is in business to do
core competencies
the organization's major value-creating capabilities that determine its competitive weapons
strategies
the plans for how the organization will do what it's in business to do, how it will complete successfully, and how it will attract and satisfy its customers in order to achieve its goal
mission
the purpose of an organization
Strategic Business Unit (SBU)
the single independent business of an organization that formulate their own competitive strategies
strategic management
what managers do to develop the organization's strategies
competitive advantage
what sets an organization apart; its distinctive edge
stars
High market share/High anticipated growth rate
cash cows
High market share/Low anticipated growth rate
question marks
Low market share/High anticipated growth rate
dogs
Low market share/Low anticipated growth rate
differentiation strategy
a business or competitive strategy in which a company offers unique products that are widely valued by customers
renewal strategy
a corporate strategy designed to address declining performance
strategic management process
a six-step process that encompasses strategic planning, implementation, and evaluation
BCG Matrix
a strategy tool that guides resources allocation decisions on the basis of market share and growth rate of SBUs
functional strategies
a strategy used by an organization's various functional departments to support the competitive strategy
weaknesses
activities the organization does not do well or resources it needs but does not possess
People's Airlines offers what it calls "no frills" flights: no reserved seating, no snacks or meals on flights, small planes that fly to smaller airports away from the city centers. People's Airlines is likely following a _________ strategy.
cost leadership
In the BCG matrix, a __________ has a low anticipated growth rate and a low market share
dog
when an organization is analyzing its labor supply, it is studying its?
external environment
An organization that initially beings a product innovation to the market is known as the _________.
first mover
Ferrari sells very expensive, stylish, high-quality cars to very wealthy people. Ferrari follows a _______________ strategy
focus
When once gas station lowers its price penny, the station on the other corner of the intersection lowers its price, followed by the gas station on the block, and so on, until nearly every gas station in town has lowered its prices. this situation illustrates
intense rivalry among competitors
A cost leadership strategy requires a firm to ________.
maintain the lowest cost structure
threats
negative trends in the external environment
implementing strategies
no matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren't implemented properly
Casey majored in marketing and really enjoyed studying market research as a subject. Through research on the Internet and in the university library, she discovers that this industry appears to have significant positive trends in employment. She interprets this as a(n) ________.
opportunity
opportunities
positive trends in the external environment
An organization's financial, physical, human, and intangible assets are known as the ________.
resources
A __________ strategy is used to deal with minor performance problems. it helps an organization stabilize operations, and capabilities, and prepare to compete once again.
retrenchment