Chapter 8

Superior organizational performance is not a matter of luck. It is determined by the

choices managers make.

Strategic thinking is important for both businesses and nonprofit organizations. In for-profit firms, strategic planning typically pertains to .

competitive actions in the marketplace.

A core competence represents a ____ ________ because the company acquires expertise that competitors do not have.

competitive advantage

A _________ ______________ is something that the organization does especially well in comparison to its competitors.

core competence

In the context of the BCG matrix, which is named for the Boston Consulting Group that developed it, which of the following dimensions are associated with the cash cow?

high market share and low growth rate

In the context of SWOT analysis, in which SWOT stands for strengths, weaknesses, opportunities, and threats, an organization's growing global product demand and plant modernization are its:

opportunities

four elements of competitive advantage are

the company's target customer, core competencies, synergy, and value.

Managers in all types of organizations, including businesses, nonprofit organizations, and government agencies, must think about how the organization fits in

the environment.

strategy

the plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals.

In nonprofit organizations such as the American Red Cross or the Salvation Army, strategic planning pertains

to events in the external environment

Delivering ______ to the customer is at the heart of strategy.

value

____ can be defined as the combination of benefits received and costs paid.

value

In spite of the numerous pizza outlets in Chicago, Pete's Fast Pizza has zoomed past its counterparts in terms of popularity and sales due to its practice of adding a complimentary calzone and drink to each of its orders. In the context of strategy formulation, which of the following does this unique practice by Pete's Fast Pizza illustrate?

value creation

Some managers pursue diversification through a strategy of ______ _______, which means expanding into businesses that either provide the supplies needed to make products or distribute and sell the company's products.

vertical integration

Managers use (4) to execute strategy effectively.

visible leadership, clear roles and accountability, candid communication, and appropriate HR practices

managers ask this question when they consider corporate-level strategy

what business are we in?

Another aspect of strategic management concerns the organizational level to which strategic issues apply. 3 levels:

what business as we in? (corporate level), how do we compete (business level), how do we support the business-level strategy (functional-level strategy)

A _________ ___________ seeks to achieve both global standardization and national responsiveness. A standardized product or service is more likely to succeed with some customization for the local culture in which it is sold.

A glocalization strategy seeks to achieve both global standardization and national responsiveness. A standardized product or service is more likely to succeed with some customization for the local culture in which it is sold.

Soleks is a footwear company. Its target customers are people who prefer to shop in small stores with a limited selection of high-quality footwear. To cater to its customers, the company opens shops in upscale locations and stocks them accordingly. In this scenario, which of the following is Soleks trying to do?

Achieve a competitive advantage (by providing a distinctive edge for meeting customer or client needs in the marketplace.)

The ___ ______ organizes businesses along two dimensions—business growth rate and market share

BCG matrix

One coherent way to think about portfolio strategy is the

BCG matrix.

BCG MATRIX: ___ ____ ___ pertains to how rapidly the entire industry is increasing

Business growth rate

Strategic actions at this level usually relate to the acquisition of new businesses; additions or divestments of business units, plants, or product lines; and joint ventures with other corporations in new areas. For example, Amazon, described earlier, recently acquired the online gaming and streaming video company Twitch Interactive and has formed deals with companies such as HBO and Nickelodeon to expand its business of providing games, videos, and original TV show content.

Corporate level strategy (what business are we in)

_____ is the most important, but also the most difficult, part of strategy.

Execution

An___ has a unique business mission, product line, competitors, and markets relative to other ___'s in the corporation.

SBU

includes the planning and decision making that lead to the establishment of the firm's goals and the development of a specific strategic plan. includes assessing the external environment and internal problems to identify strategic issues, and then integrating the results into goals and strategy.

Strategy formulation

In the context of the BCG matrix that is named for the Boston Consulting Group, which developed it, which of the following statements is true of the question mark?

The question mark has a small market share in a new, rapidly growing industry.

In the context of strategic thinking, which of the following is a difference between for-profit organizations and nonprofit organizations?

Unlike nonprofit organizations, for-profit organizations focus on gaining competitive advantage in the marketplace. Feedback

------------- ---------- occurs when an organization expands into a totally new line of business, such as when food company Sara Lee Corporation moved into the intimate apparel business. With unrelated diversification, the company's lines of business aren't logically associated with one another; therefore, it can be difficult to make the strategy successful. Most companies are giving up on unrelated diversification strategies, selling off unrelated businesses to focus on core areas. For example, Sara Lee sold the intimate apparel business in 2006. It has since sold or spun off many of its units and been renamed Hillshire Brands.

Unrelated diversification

cash cow

a business unit that generates more cash than it needs to maintain its market share

Companies may ALSO obtain synergy through

acquisitions, mergers, partnership

how do we compete?

business level strategy

As sales at Macy's department stores declined significantly due to online competition, managers decided to open several Macy's Backstage stores, which are designed to compete with T.J. Maxx, Marshalls, and other chains selling name-brand goods at steep discounts. The new strategy is management's bet that Macy's Backstage will help get rid of piles of unsold products, enable the company to capture a slice of the "off-price" market, and bring in a new set of younger customers who don't relate to traditional department stores.

business-level strategy

____-____ _____ pertains to each business unit or product line.

business-level strategy

strategic decisions at this level concern the amount of advertising, direction and extent of R&D; product changes; new-product development; equipment and facilities; and expansion or contradiction of product and service lines

business-level strategy

Zeus Phones has launched a new cell phone model to keep up with the global "selfie" trend, which involves taking pictures of oneself. The phone has a 13 megapixel front camera with a wide angle lens to include the maximum number of faces. It also includes a timer and a beautification feature to enhance facial features. The selfie phone has now become the latest rage in the cell phone market and has won awards for its unique design. This scenario is illustrative of Zeus Phones's _____.

core competency (because a core competence reprsents a competative advantage because a company acquires expertise that competitors do not have.

_____-______ _____ pertains to the organization as a whole and the combination of business units and product lines that makes up the corporate entitity

corporate-level strategy

what business are we in?

corporate-level strategy

A ___ _________ _____ is a strategy with which managers aggressively seek efficient facilities, cut costs, and use tight cost controls to be more efficient than others in the industry.

cost leadership strategy

Managers at Allegiant Travel Company use a focused ___ _____ _______ by using older planes and bare bones service to fly people to holiday destinations out of small cities that other carriers have abandoned or never served.

cost leadership strategy

is a recent trend and creates opportunities for more meaningful participation by employees in strategy formulation and execution.

crowd sourcing

. Managers help their companies create value by

devising strategies that exploit core competencies and attain synergy.

The essence of formulating strategy is choosing how the organization will be

different.

A ____ _________ is a strategy with which managers seek to distinguish the organization's products and services from those of others in the industry.

differentiation strategy

To find a competititve edge within specific business environment, Porter suggests that a company can adopt one of three strategies

differentiation, cost leadership, focus

The strategy of moving into new lines of business is called

diversification

Hamza runs a small restaurant in the city. For the last few months, Hamza has been noticing a dip in the number of diners at the restaurant. Hamza decides to renovate the place and make it more appealing to attract a larger crowd. However, the number of diners remains low. Additionally, the number of take-outs begin to diminish as well. In the context of the BCG matrix (named for the Boston Consulting Group that developed it), Hamza's restaurant can be classified as a(n) _____.

dog (The dog is a poor performer. It has only a small share of a slow-growth market. The dog provides little profit for the corporation and may be targeted for divestment or liquidation if turnaround is not possible.)

One key to effective strategy execution is _______________, which means there is a deep understanding and acceptance of organizational direction and purpose throughout the organization.

embeddedness

With ___________, all aspects of the organization are in alignment and moving in the same direction to support strategic intent.

embeddedness

With a ___ _______, managers use either a differentiation or a cost leadership approach, but they concentrate on a specific regional market or buyer group.

focus strategy

____ _____involve all of the major functions, including finance, R&D, marketing, and manufacturing

functional level strategy

One element of ___ ____ _____ for Macy's marketing department, for example, is to scout trends so the company can add merchandise that will attract new customers. Marketing personnel are also monitoring the competition by visiting off-price stores to see how competitors operate and how customers respond to various merchandise displays and store layouts.

functional-level strategy

______-______ _____ pertains to the major functional departments within the business unit.

functional-level strategy

how do we support the business level strategy

functional-level strategy

Most large companies use a combination of ____ ______ to achieve global standardization and efficiency and to respond to local needs and preferences in various countries.

global strategies

This approach is based on the assumption that a single global market exists for many consumer and industrial products. The theory is that people everywhere want to buy the same products and live the same way

globalization strategy

When an organization chooses a ________ _____________, product design and advertising strategies are standardized throughout the world.

globalization strategy

4 global corporate strategies

globalization, glocalization, export, multidomestic (STRATEGIES)

A true ________ ______________ is difficult to achieve, however, because one goal requires close global coordination while the other requires local flexibility. However, many industries are finding that, although increased competition means that they must achieve global efficiency, growing pressure to meet local needs demands national responsiveness.

glocalization strategy

_______- acquire information about opportunities and threats to their organization from a variety of reports, including budgets, financial ratios, profit and loss statements, and surveys of employee attitudes and statisfaction

managers

BCG MATRIX: ___ ____ defines whether a business unit has a larger or small share than competitors.

market share

What does it mean to think strategically?

means to take the long-term view and to see the big picture, including the organization and the competitive environment, and consider how they fit together.

When an organization chooses a ____________ ________________, it means that competition in each country is handled independently of industry competition in other countries. Thus, a multinational company is present in many countries, but it encourages marketing, advertising, and product design to be modified and adapted to the specific needs of each country

multidomestic strategy

A global burger chain has tailored its logo, menu, ingredients, and advertisements to the tastes and preferences of the people in the various locations of its outlets. This customization means that the burger chain has adopted a(n) _____.

multidomestic strategy (The global burger chain's customization means that it has adopted a multidomestic strategy. Thus, a multinational company is present in many countries, but it encourages marketing, advertising, and product design to be modified and adapted to the specific needs of each country)

Amazon has core competencies of

operational efficiency and a superb distribution system.

illustrates the competitive forces that exist in a company's environment and indicates some ways that Internet technology is affecting each area.

porters 5 forces

pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation.

portfolio strategy

Three approaches to understanding corporate-level strategy are

portfolio strategy, the Boston Consulting Group (BCG) matrix, and diversification.

Porters Five COmpetitive forces

potential new entrants, bargaining power of buyers, bargaining power of suppliers, threat of subsitute products, rivalvry among competitors

strategic management

refers to the set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

competitive advantage

refers to what sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.

A well-established cosmetics company decides to launch a chain of beauty salons across the country. In order to attract a large clientele, these salons will offer premium beauty services and membership benefits. In the context of strategy formulation, this launch is an example of:

related diversification

The purpose of diversification is to expand the firm's business operations to produce new kinds of valuable products and services. When the new business is related to the company's existing business activities, the organization is implementing a strategy of -------- --------. For example, UnitedHealth's move into medical services and Nestlé's move into pet foods are linked to these firms' existing health care and nutrition businesses.

related diversification

crowdsourcing strategy, or "____ ____ ______" as it is sometimes called, is a recent trend and creates opportunities for more meaningful participation by employees in strategy formulation and execution.

social strategy setting

Onyx Stores has a chain of supermarkets in over 40 cities in the U.S. The individual supermarkets generate enough revenue for the organization to open another 20 supermarkets at other locations in some of the cities. In the context of the matrix developed by the Boston Consulting Group (BCG matrix), Onyx Stores can be classified as a _____.

star

BCG MATRIX divided into 4 categories

star, cash cow, question mark, dog

Individual investors often wish to diversify in an investment portfolio with some high-risk stocks, some low-risk stocks, some growth stocks, and perhaps a few income bonds. In much the same way, corporations like to have a balanced mix of business divisions called

strategic business units (SBUs).

the admnistration and implementeation of the strategic plan

strategic execution

the use of managerial and organizational tools to direct resources toward accomplishing strateic results.

strategic execution

in contrast to strategy execution

strategy formulation

When organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone, _________ occurs. The organization may attain a special advantage with respect to cost, market power, technology, or management skill.

synergy

When properly managed, ________ can create additional value with existing resources and provide a big boost to the bottom line

synergy