strategic management unit 4 & 5

7 components

shared values(centre of the clock) structure systems style staff skills strategy

four cells of bcg matrix

stars, cows, question marks, dogs

ETOP analysis

environmental threat and opportunity profile) is the process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business for the purpose of taking strategic decisions

Limitations of BCG Matrix

-focus is on current market position, not future planning -can be time consuming and complex -high market share does not always mean high profits, pricing strategy may be such that it has negative effect on profitability

five generic business-level strategies

1. Cost Leadership Strategy 2. Differentiation Strategy 3. Focused Cost Leadership Strategy 4. Focused Differentiation Strategy 5. Integrated Cost Leadership/Differentiation Strategy

strenghts weakness areas

1. Customer Service 2. Products 3. Systems and Processes 4. R&D 5. Cash Flow 6. Employee Training 7. Employee Loyalty 8. Others

Opportunities or Threats

1. Emerging Products and Services 3. Technological Change New Markets 4. Competitive Pressures 5. Supplier Relationships 6. Economic Conditions 7. Others?

Disadvantages

Needs a consultant or an expert to determine industry's attractiveness and business unit strength as accurately as possible. · It is expensive to conduct. · It doesn't take into account the harmony that could exist between two or more business units.

Staff

Numbers and types of personnel within the organization.

Strategic Evaluation

financial measurement, innovation, employee satisfaction & engagement, monitoring and gauging strategic impact of macro trends

Cash Cows (BCG Matrix)

-(lower left quadrant) are in low-growth markets but are high market share products -these products have already received heavy investments to develop their high market share, they have excess resources that can be spun off to those products that need it. EX: the firm may decided to use the excess resources generated by the cash cow Brand to fund products in the question mark quadrant.

Strategy Formulation

1. Strategy Formulation includes planning and decision-making involved in developing organization's strategic goals and plans. 2. In short, Strategy Formulation is placing the Forces before the action. 3. Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making. 4. Strategy Formulation emphasizes on effectiveness. 5.Strategy Formulation is a rational process. 6.Strategy Formulation requires coordination among few individuals. 7.Strategy Formulation requires a great deal of initiative and logical skills.

strategy implementation

1. Strategy Implementation involves all those means related to executing the strategic plans. 2. In short, Strategy Implementation is managing forces during the action. 3. Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions. 4. Strategy Implementation emphasizes on efficiency. 5. Strategy Implementation is basically an operational process. 6. Strategy Implementation requires coordination among many individuals. 7. Strategy Implementation requires specific motivational and leadership traits.

internal diversification

1. to market existing products in new markets 2. to market new products in existing markets.

strategu eval steps

1.Fixing benchmark of performance 2. Analyzing Variance 3. Taking Corrective Action

Vertical Integration Strategy

A corporate-level strategy through which a company either produces its own inputs or disposes of its own outputs

7-S Framework

A method for examining the various aspects of the organization in such a way that alignment can be achieved. Elements include strategy, structure, systems, style, skills, staff and superordinate goals (shared values).

GE Matrix

A multidimensional model for focusing corporate strategy in organizations with multiple product lines based on the dimensions of market attractiveness and business strength.

Define Policy?

A policy is a broad guideline for decision making that links the formulation of strategy with its implementation. Companies use form make decisions and take actions that support the corporations missions, objectives and strategies.

Conglomerate diversification strategy

A product growth strategy in which a company seeks new businesses that have no relationship to the company's current product line or markets

concentric diversification

A strategy used to add new businesses that produce related products or are involved in related markets and activities.

Horizontal axis represent

Along the X axis, the matrix measures how strong, in terms of competition, a particular business unit is against its rivals. In other words, managers try to determine whether a business unit has a sustainable competitive advantage (or at least temporary competitive advantage) or not.

What is Bargaining power of buyers?

Bargaining power of buyers refers to the ability of buyers to bargain down prices charged by companies or raise the cost of the product by demanding better quality product.

What is bargaining power of suppliers?

Bargaining power of suppliers refers to the ability of suppliers to raise input prices or to raise the cost of the industry by providing poor quality inputs.

two types of competitive scope

Broad market: serving a diverse market. Narrow market: focusing on a niche market.

Business-Level Strategies

Business-Level Strategies are a mechanism for a business to achieve a competitive advantage.

Yellow zone

Cautions you to 'wait and see' indicating hold and maintain type of strategies aimed at stability.

merger

Combination of two or more companies into a single firm

two types of competitive advantage

Cost Leadership: ensuring you cost less than your competitors. Differentiation: ensuring you are different from your competitors.

Style

Cultural style of the organization and how key managers behave in achieving the organization's goals.

Skill

Distinctive capabilities of personnel or of the organization as a whole. Core Competences

How to prepare an ETOP?

Dividing the environment into different sectors such as economical, market, social, international, legal, technological, political, ecological, etc. Analyzing the impact of each sector on the organization Sub-dividing each environmental sector into sub factors Impact of each sub-sector on organization in form of a statement

Dogs

Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor's/rival firms.

What are the four responsibilities of business?

Economic responsibility • Legal Responsibility • Ethical Responsibility • Discretionary Responsibility

External Diversification

External diversification occurs when a firm looks outside of its current operations and buys access to new products or markets. Mergers are one common form of external diversification

GE Nine

GE nine-box matrix is a strategy tool that offers a systematic approach for the multi business enterprises to prioritize their investments among the various business units. It is a framework that evaluates business portfolio and provides further strategic implications

Why ETOP is needed?

Helps organization to identify opportunities and threats • To consolidate and strengthen organizations position • Provides the strategists of which sectors have a favorable impact on the organization • Help organization know where it stands with respect to its environment • Helps in formulating appropriate strategy • Helps in formulating SWOT analysis

Advantages

Helps to prioritize the limited resources in order to achieve the best returns. · The performance of products or business units becomes evident. · It's more sophisticated business portfolio framework than the BCG matrix. · Determines the strategic steps the company needs to adopt to improve the performance of its business portfolio.

IMPLEMENTING GAP ANALYSIS

Identification of customer expectations • Identification of customer experiences • Identification of management perceptions • Evaluation of service standards • Evaluation of customer communications

How do resources determine competitive advantage

Identify and classify the firm's resources in terms of strengths and weaknesses. • Combine the firm's strengths into specific capabilities-these are core competitive • Appraise the profit potential of their resources and competencies in terms of their potential for sustainable. Competitive advantaged the ability to harvest the profits resulting from the use of these resources and capabilities. • Select the strategy that best exploits the firm's resources and competencies relative to external opportunities. • Identify resource gaps and invest in upgrade weaknesses.

Red zone

Indicates that you have to adopt turnover strategies of divestment and liquidation or rebuilding approach.

The vertical axis denotes

Industry attractiveness indicates how hard or easy it will be for a company to compete in the market and earn profits. The more profitable the industry is the more attractive it becomes. When evaluating the industry attractiveness, analysts should look how an industry will change in the long run rather than in the near future, because the investments needed for the product usually require long lasting commitment.

What is Band Loyalty?

It is the buyer's preference for the products of any established company. A company can create brand loyalty by providing high quality products; goods after sales service continuous advertising of its brand name and company name, patent protection of product, product innovation achieved through company research and development programs.

What is limitability?

Limitability is the rate at which firms underlying resources and capabilities or cores competencies can be duplicated by others. To the extent that a firms distinctive competency gives it competitive advantage in the market place. Expatiators. Will do what they can to skills and capabilities. A core competency can be easily limited to the extent that it is transparent transferable and replicable.

Factors the affect market attractiveness

Market Size Market growth Market profitability Pricing trends Competitive intensity / rivalry Overall risk of returns in the industry Opportunity to differentiate products and services Segmentation Distribution structure (e.g. retail, direct, wholesale

Organizational inertia?

Organizational inertia is the inability of the organization to adapt in a timely manner to new circumstances. This is on of the major reason that companies are often so slow to respond to new competitive conditions organizational inertia is complex and has a number of underlying causes. One source is he power and influence of individual managers another source is the existing allure of the organization.

What is organization structure?

Organizational structure is an established pattern of relationships among the component parts of an organization. Structure is made up of three component parts. Complexity, formalization and centralization. Complexity refers horizontal differentiation vertical differentiation and location differentiation. Formalization refers to the degree to which the jobs within the organization are standardized. High standardization of jobs results in less freedom and discretion. Centralization refers to the degree to which decision making is concentrated.

question marks

Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. There is no specific strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question marks as the company tries to enter a high growth market in which there is already a market-share. If ignored, then question marks may become dogs, while if huge investment is made, then they have potential of becoming stars.

Emotional Intelligence attributes

Self Awareness Self Regulation Motivation Empathy Social skills

Stars

Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Net cash flow is usually modest. SBU's located in this cell are attractive as they are located in a robust industry and these business units are highly competitive in the industry. If successful, a star will become a cash cow when the industry matures.

implementation procedure

Step 1: Assess Development Organization Step 2: Plan Process Implementation Step 3: Execute Process Implementation Step 4: Evaluate Process Implementation

strategic type?

Strategic type is a category of firms based on a common strategic orientation and a combination of structure, culture and processes consistent with that strategy. There are 4 strategic types. Defenders, prospectors, Analyzers and Reactors.

Factors that Affect Competitive Strength

Strength of assets and competencies Relative brand strength Market share Customer loyalty Relative cost position (cost structure compared with competitors) Distribution strength Record of technological or other innovation Access to financial and other investment resources

Business portfolio according to GE matrix

The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must: (1) Analyse its current business portfolio and decide which businesses should receive more or less investment, and (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.

customer switching cost

The costs arise open a customer switches from one company's product to another company is called customer switching cost switching from one product to another, costs the customer, time, money and energy. When the switching cost is high, customers can be locked into the product offerings of established companies. E.g. Microsoft's windows Operating System.

System

The procedures, processes and routines that characterize how important work is to be done: financial systems; hiring, promotion and performance appraisal systems; information systems.

structure

The way the organization's units relate to each other: centralized, functional divisions (top-down); decentralized (the trend in larger organizations); matrix, network, holding, etc.

diversification strategy

a growth strategy whereby a firm introduces a new product or service to a market segment that it does not currently serve

gap analysis

a marketing research method that measures the difference between a customer's expectation of a service quality and what actually occurred

BCG Matrix

a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market

relative market share

a measure of the product's strength in a particular market, defined as the sales of the focal product divided by the sales achieved by the largest firm in the industry

strategy

a plan of action

Horizontal diversification strategy

a product growth strategy whereby a company looks for new products that could appeal to current customers, which are technologically unrelated to its current line

conglomerate diversification

a strategy used to add new businesses that produce unrelated products or are involved in unrelated markets and activities

Fragmented Industry?

an industry composed of a large number of small and medium sized companies

Market Growth Rate

the annual rate of growth of the specific market in which the product competes

Implementation process

the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals.

shared values

values that people within the organization or work unit have in common and place near the top of their hierarchy of values

Green zone

you to 'go ahead', to grow and build, pushing you through expansion strategies.