Strategic Management Chapters 1, 4, 5, 7, 6

Triple Bottom Line

Used to describe a business's sustainability. 1. Traditional Profit/Loss 2. People Account-social responsibility 3. Planet Account-environmental responsibility

cost leadership/ differentiation

broad market

dog

failing

EFAS

External Factors analysis summary. A way to organize external factors into categories of opportunities and threats and analyze how the company is responding to these categories.

Higher interest rates means _____ sales of major home appliances

Fewer

Corporate value chain (primary activities)

Inbound logistics, operations, outbound logistics, marketing and sales, service

Externally Oriented (strategic) planning

Initiating strategic planning to increase responsiveness to changing markets and competition. Planning is taken out of the hands of lower-level managers and given to a planning staff. Upper-level managers meet once a year at a retreat to evaluate and update the current strategic plan. Top-down planning. Upper-level management develops the plan with help from consultants and lower-level management input is minimal.

Strategic Management emphasizes ______________ performance.

Long-term. Many companies can sustain short bursts, but only a few can sustain it over a long period of time.

star

Market leaders

Hypercompetition

Market stability is threatened by short life cycles, new technologies. Constant disequilibrium and change.

?

New products with potential for success

Rivalry among existing firms

Number of competitors, rate of industry growth, product or service characteristic, amount of fixed costs, capacity, exit barriers

Business strategies

Occurs at the business unit or product level and emphasizes the improvement of the competitive position of the firm's product or service. 2 categories: competitive, cooperative

Corporate strategy

Overall direction of company and management of its businesses

PEST

Political-legal: allocate power and provide constraining and protecting laws and regulations Economic: exchange of materials, money, energy and information Sociocultural: regulates the values, mores and customs of society Technological: generate problem solving inventions

Producer Surplus

Price-Cost to produce

Mission

Purpose or reason for an organization's existence

Strategic Groups

a set of business units or firms that pursue similar strategies with similar resources. Sometimes strategic groups can be bigger rivals than actual competitors in the same industry. Mapping the market positions of industry competitors

Strategic Business Unit

divisions or groups of divisions composed of independent product market segments that are given primary responsibility and authority for the management of their own functional areas. must have a unique mission, identifiable competitors, external market focus, control of its buisness functions

Corporate value chain (supporting activities)

firm infrastructure, human resource management, technology development, procurement

Strategy formulation

investigation, analysis, decision making to make up the criteria for attaining a competitive advantage. 1. define the strategy 2. craft the corporation mission 3. specify achievable objectives 4. set policy guidelines

Cash cow

making more money than necessary

Societal environment

mankind's social system that includes general forces that do not directly touch on the short-run activities of the organization, but that can influence its long-term decisions: PEST

Functional Structure

medium-sized firm with several product lines in one industry. Stage 2

Environmental scanning

monitoring, evaluating and disseminating of information from the external and internal environments to key people within the corporation. To identify strategic factors (external and internal) that will assist in the deciding of strategic decisions. Easiest way to do this is SWOT analysis.

cost focus/ differentiation focus

narrow market

Corporate Strategy

parenting, directional, portfolio analysis

Technological examples

patent protection, R&D, internet, computer hacking

Divisional structure

large corporation with many product lines in several related industries

conglomerate structure

large corporations. typically an assemblage of legally independent firms under one corporate umbrella but controlled through the board of directors

Sociocultural examples

lifestyle changes, career expectations, consumer activism, rate of family formation, growth rate of population, living wage

Political/Legal

tax laws, special incentives, environmental protection laws,

Objective

the end results of a planned activity. Ex. Profitability, efficiency, growth, shareholder wealth, utilization of resources

4 phases of strategic management

1. Basic Financial Planning 2. Forecast-based planning 3. Externally oriented (strategic) planning 4. Strategic Management

3 Most highly rated benefits of strategic management

1. Clearer sense of strategic vision for the firm 2. A sharper focus on what's strategically important 3. An improved understanding of a rapidly changing environment

Natural environment

physical resources, wildlife, climate-inherent part of existence on Earth.

mintzberg

ploy, plan, promotion, perspective, position, pattern

Economic value added

producer surplus + consumer surplus

Directional

stability, growth, retrenchment

Industry matrix

summarizes key success factors: variables that can significantly affect the overall competitive positions of companies within any particular industry.

Basic Model of Strategic Management

1. Environmental Scanning 2. Strategy Formulation 3. Strategy Implementation 4. Evaluation and Control

Characteristics of Strategic Decisons

1. Rare: unusual and no precedent to follow 2. Consequential: commitment to substantial resources and people at all levels 3. Directive: to set precedents for lesser decisions and future actions

Porter's 5 forces

1. Threat of new entrants 2. Bargaining power of suppliers 3. Rivalry among existing firms 4.Threat of new substitutes 5. Bargaining power of buyers

Strategic decision making process: 8 steps

1. evaluate current performance results 2. Review corporate governance 3. scan and assess the external environment (OT) 4. scan and assess internal environment (SW) 5. analyze strategic factors 6. generate, evaluate, select the best alternative strategy 7. implement selected strategies 8. evaluate implemented strategies.

Competency

A cross-functional integration and coordination of capabilities (an ability for a company to exploit its resources)

Industry

A group of firms that produces a similar product or service

Strategic Management

A set of managerial decisions and actions that help determine the long-term performance of an organization

Functional Strategy

Achieve corporate and business unit objectives and strategies by maximizing resource productivity.

Strategic Management (phase 4)

All levels of management are involved. Planning is interactive across all levels. No more top-down. This phase details the implementation, evaluation and control issues. These plans emphasize probable scenarios and contingency strategies. Strategic thinking at all levels

Resources

An organization's assets and building blocks of the organization. Tangible, human, intangible.

Entry Barrier

Companies rely on entry barriers to keep out other companies from an industry. Ex. Economies of Scale, product differentiation, capital requirements, tariffs, gov't policies

Strategic types

Defenders, Prospectors, Reactors, Analyzers

VRIO Framework

To evaluate a firm's competencies. Value: Does it provide customer value and competitive advantage Rareness: Do no other competitors possess it? Imitability: Can it be cheaply duplicated? Organization: Is the firm organized to exploit the resource If yes, then it is a distinctive competency.

Hierarchy of strategy

Functional strategy influences business strategies which influence corporate strategies. Nesting of one strategy within another so that they complement and support one another.

Economic

GDP, Inflation, unemployment, interest rates

Task Environment

Groups that directly affect a corporation and intern are affected by it. ex. gov't, special interest groups, communities, customers, competitors, employees (Industry analysis)

Basic Financial Planning

Horizon time: 1 Year. Managers initiate serious financial planning to propose the following year's budget. Most information comes from within the firm and the sales force provides the small amount of environmental information.

Forecast-based Planning

Horizon time: 3-5 years To stimulate long-term planning. Gather internal and available environmental data on an ad hoc (as needed) basis and extrapolate current trends in the future. Lots of meetings and to evaluate proposals and assumptions.

Triggering Event

Something that acts as a stimulus for a change in strategy New CEO-questions the company External Intervention-bank refuses a loan Threat of a change in ownership-another firm takes over Performance Gap-performance doesn't meet expectations Strategic Inflection Point-major change due to technology, different regulatory environment, change in customer preference or values

Simple Structure

Stage 1 company. Small company with no functional or product categories

Consumer Suplus

Value-Price

Strategic Audit

a checklist of questions by area or issue that enables a systematic analysis to be made of various corporate functions and activities. Management audit to point out problem areas

Core Competency

a collection of competencies that crosses divisional boundaries, is widespread within the corporation and is something that the corporation can do well.

Strategy (3 types)

a comprehensive master approach that states how the corporation will achieve its mission and objectives. Maximize competitive advantage, minimize competitive disadvantage. 1. Corporate 2. Business 3. Functional

Value Chain

a linked set of value-creating activities that begin with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product or service and ending with distributors getting the final goods in the hands of the consumer