Fundamentals Of Management CLEP - Module 2 (Planning and Strategy)

What is the difference between a vision and mission statement?

Vision is somewhat vaguer description than a mission statement and looks into the future to say this is how we will know we have met our mission when we have accomplished this (ex: most effective org at doing this or cured cancer)

What is contingency planning?

What if plans. Plans for unexpected events aka crisis planning (building is on fire, airplane crashes into the building)

When is rational decision making used?

When companies have lots of time and money

When do you prefer to use a differentiated organization?

When decisions are pushed lower in the organization. Want customer-centered org where the needs of the customer quickly permeate the entire org and where managers are aware of what customers are looking for

When can you not use regression analysis?

When it is a new product with no data

What is scenario planning?

When you are not quite sure what to expect from the future, so you lay lots of different possible plans that vary slightly from each other and then these plans can be compared to ask yourself which one of them is going to be the most successful

What happens when your product goes into decline if you are a Question Mark?

You have a choice, it is not clear what to do. If you invest it could push the product in the market and become a new star. If you fail, you are most certainly going to become a dog

What happens when your product goes into decline if you are a Star?

You need to feed the product - give it more money (advertising, development, etc.)

What does your product deliver?

Your competitive advantage to customers and stakeholders

To start planning you need to define what two things/why are they imporatant?

Your mission and vision - most basic statements about your org that tend to not change over time and shape everything you do

What would happen if you did not have a competitive advantage?

Your organization is unlikely to survive for long

What comes after you set your goals?

Your strategic plan

What is the Five Forces Model?

a competitive analysis model that looks at five market or industry forces that, when combined, determine your competitive advantage

What is the Boston Consulting Group Matrix?

a planning tool that uses graphical representations of a company's products and services in an effort to help the company decide what it show keep, sell or invest more in

What do you set after your vision and mission statements?

Goals

What is the final solution if regression analysis or simulation modeling doesn't work?

Guess. When you don't have a better way to arrive at an idea of what will happen in an unknown future - NEVER GUESS ALONE

What is intensifying rivarlry?

Happens when the market begins to mature, slow down, there's less demand and individual business have to fight harder and harder for smaller and smaller returns

What is upside risk?

How much better could the outcome be than the outcome you expect (good thing)

What is downside risk?

How much worse it could be from the expected outcome (bad thing)

What is the goal of cost leaders?

To gain as many customers as possible because that lets them drive costs down

What is PERT (used in program management)?

Tool for managing time. Defining the critical paths through the project and allow us to manage our time. Tell us where to force management attention and where it makes sense to save time/where it doesn't) PERT stands for Program Evaluation and Review Template

What is bounded rationality?

Tries to satisfice - I'll take the first solution that comes along that works. Quit spending time and money

What two forms does risk come in?

Upside risk and downside risk

What is SWOT analysis (used in strategic management)?

a study undertaken by an organization to identify its internal strengths and weaknesses (what can we do better than our competitors, what are we worse at them our competitors), as well as its external opportunities and threats (declining markets, new tech that makes yours obsolete, etc.) Acronym for strengths, weakness, opportunities and threats.

What is a regression model?

can be very or complex math model. Quantitative tool where we look at what happened in the past and attempt to predict the future based on it

In a differentiated competitor why is it easier/less risk for them to create a new product?

can pass the cost due to brand name (Apple - people will buy it even when knowing the price)

In the Boston Consulting Group Matrix what is the representation if you have a high relative market share and a low market growth rate?

cash cows

What are differentiated competitiors?

competitors who say "I'm different, my product is different". Tend to end at very specific customers and very specific markets. Almost never mention prices - know they are no the lowest cost product, so they find other reasons for you to buy their product

What is a vision statement?

describes what you want to do and become in the future

In the Boston Consulting Group Matrix what is the representation if you have a low relative market share and a low market growth rate?

dogs

What is data mining?

gathering huge amounts of information and running it through complex software tools that look for relationships, look for when customers do one thing, and what is the likelihood that they'll doo something else When this happens, what else happens - look for patterns

What starts the entire management process in most organizations?

Planning

How do many businesses survive?

By producing a product - can be a manufactured item or a service.

Do cost leadership organs rather centralized or decentralized organization and do they rather functional or product organizations?

Centralized and functional - allow them to standardize and allows them to cut costs

What two thing do differentiated competitors battle for?

Brand/brand recognition and customer loyalty

What is strategic management?

Broad development of planning, is the planning to develop your strategic plan, to look into the future to arrive at our final goal

What planning tools do cost leaders value?

Budgets and spending reports - anything that helps them control costs

When does a differentiated competitor makes a new investment?

Aimed at improving sales

When do cost leaders make investments in new tech?

Aimed to reduce costs - like automations or any kind of tool that allows workers to produce more with less time

What is risk?

A function of what you don't know or you're not sure about. Makes decisions harder to make

What are the two things you need to think about when using the Generic competitive strategies model?

1. Is your market your in board or narrow 2. do you produce a unique product, but one that is higher cost or do you produce a very ordinary product that can be sold at lower cost?

How long are most businesses long term strategic plans?

5-7 years (software is three to four since technology is rapidly changing)

What is the thing that cost leadership organizations give up?

Flexibility - unable to make great modifications to products or respond to shifting customer needs very quickly

In the Generic competitive strategies model what is it called when you have a narrow market and is low costing/a non-unique product?

Focused Cost Leadership Strategy

In the Generic competitive strategies model what is it called when you have a narrow market and is high costing/a unique product?

Focused Differentiation Strategy

What two things does strategic planning involve?

Forecasting and predicting the future

What is the generic competitive strategies model?

Fundamental understanding to how businesses compete and how they lay strategy

In the Generic competitive strategies model what is it called when you have a broad market and is low costing/non-unique product?

Cost leadership strategy

What happens if you produce past the sweet spot in the ATC curve?

Costs begin to rise - experiencing diseconomies of scale. Using up machinery, over taxing people, running ahead of your ability to manage/supply things.

What is the difference between differentiation strategy and cost leadership strategy?

DS is when you sell a unique but higher costing product in a broad market while CL is when you sell at a low costing in a broad market.

What does it mean for decision-making conditions that are made under certainty conditions that deal with objective probabilities (known facts)?

Decisions at this side are easy to make, because we know everything that affects the decision - very sure of the outcomes

What does it mean for decision-making conditions that are made under uncertainty conditions that deal with subjective probabilities?

Decisions made under conditions of uncertainty. Things we are not sure, what we have to guess about.

What is a mission statement?

Describes your org's reason for being - why you exist

In the Generic competitive strategies model what is it called when you have a broad market and is high costing/a unique product?

Differentiation Strategy

What is the thing that cost leadership organizations seek?

Efficiency - want to use the least amount of resources to produce the most amount of produce.

What is competitive advantage?

First stop in developing your strategy/strategic plan. It is the thing that makes your org uniquely competitive. Thing your org can do better than your competitors and is very difficult to duplicate

What is cost leadership's competitive advantage?

Lowest cost

What are single-use plans?

Plans that are designed for a very specific situation that you expect to happen only once (like your CEO visits your branch and you want a specific way to receive them)

What can cost leadership do if they pass the sweet spot in the ATC curve?

Make deeper investments in new capitol equipment. Develop the capacity to produce even more units of the product. By doing so they move the curve to the right in each step they move the sweet spot downward

What should you ask yourself when you make a risk?

If this goes wrong, can I survive the downside and try again, and if not do I have enough left to lose to dissuade me from this risk

What are the five forces in the Five Forces Model?

Industry, potential of new entrants (competitors) into the industry, power of supplies, power of customers, and threat of substitute (new technologies) products.

What are the most common sources of competitive advantage?

Intellectual property, location, expertise, scale, and first to enter a new market

What is the Delphi Technique?

Interview a broad variety of people. Sales people, production people, accountants, and some customers. Interview anybody you think might know something about sales in the future and then combine/average their guesses to get a result Delphi comes from a famous oracle in Ancient Greece

Who created the Generic Competitive Strategies model?

Michael Porter

What happens when your product goes into decline if you are a Cash Cow?

Milk the cows. Cash cow is the place that makes you happy, it generates cash. You don't feed cash cows any more than you need to keep them alive because the market is not growing, more money doesn't mean more customers

What is project management?

More specific style of management where we are trying to get a single project, a single thing done in an organization

What is a forecast?

Need to look into the future and decide what the future will bring. Can't plan for the future unless you have an idea of what it will be like

Do cost leaders delgate authority?

No, very little. Tend to keep all key decisions centralized with upper management (ex: if you are a manager at Walmart you don't decide the merchandize on the shelves)

Why do we see lots of differentiation strategies but only one or two cost leadership strategy's in the world?

Nobody runs an advertisement saying they got the second cheapest product in town, if you are the cheapest as you say you are. If you are the second cheapest talk about other reasons besides prices

What are conditions in certainty usually called?

Non-programmed decisions (require deep analysis)

Why should businesses take risks?

Opportunity to gain more upsides. To do more thing, launch more products, grow faster, etc.

What is rational decision-making?

Optimize, means to select the very best possible outcome. Take all available data, all considerable analysis, and produce a decision that produces the best possible outcomes Very complex way to make a decisions - could produce best possible decision but takes time

What type of people do differentiated competitors want?

People who are creative, need problem solvers at all levels in the org.

What are cost leaders?

People who make a living by cutting out costs and offering products at the lowest possible price. Typically undifferentiated products - products not help up to the best, most unique.

What is the Average Total Cost (ATC) Curve?

Plotting the difference between product unit cost and cost of producing that product. As you produce more and more of a product, you move down this line we see that unit cost begin to drop. It costs you less and less to make a unit of product the more units you produce which is the economies of scale That sweet spot where you have the lowest possible cost is what cost leaders seek.

What are goals in planning?

Precise measurements that tell you how to accomplish that mission, how to reach that vision - the things you will do along the way (think of vision/mission statements as your destination)

What are the two things you need to know for the Boston Consulting Group Matrix?

Product growth rate and market shares (share of all the products sold that your company owns)

What are conditions in uncertainty usually called?

Program risks

What is simulation modeling?

Quantitative model that normally uses a computer and can sometimes be complex. Try to build a model of how customers will make decisions, wat prices they will be willing to pay, demand, etc.

What is a common model for sales forecasting?

Regression analysis

What three things makes one org able to take a risk when another can't?

Resources (most import money), more information which equals less uncertainty, and nothing left to lose (out of money, ideas, if I fail I'll lose the company but either way I will lose it)

What is a focused cost leader?

Same as a regular cost leader but pick a single target to focus on - ex: selling the lowest costing shoes in town, and you are the only one selling in town for shoes

What is a focused differentiated competitors?

Same as a regular differentiated competitor that target a very narrow group of people. Ex: Sell to very specific group of customers, my shoes products are aimed at "senior citizens who walk in the mall"

What do differentiated organizations seek/give up?

Seek flexibility (need to be able to change/adjust as their customers do) and give up efficiency

Michael Porter, Harvard professor developed what?

The Five forces model - called this because of a little diamond shape around it called the porter's diamond

What happens when your product goes into decline if you are a Dog?

Shoot the dog. Very small share in a very slow growth market. You are not competitive and its never going to get better so you sell

What are tactical or operating plans?

Short term, more detailed plans typically a year in length. Describe what you are going to do in a year, how it fits the strategic plan.

What do your specific goals/measurements tell you as you move forward?

Signs along the way that tell you how far you have gone and warn you about possible dangers, needs to change your plan

What does the advantage intellectual property mean?

Simply idea that you can own. Design of your product, key tech, brand logo, etc. Aka brand recognition - if people believe your product is somehow better than others, you own that fact through a trademark on your brand

What do tactical or operating plans offer more of?

Specific goals and more specific actions you are going to take

In the Boston Consulting Group Matrix what is the representation if you have a high relative market share and a high market growth rate?

Stars

What are the two functions of planning?

Strategic management and project management

What do you create after strategic plans?

Tactical or operating plans

What do differentiated competitors orgs live off of?

Their ability to keep in touch with customers

What is the idea of the product life cycle/The Boston Consulting group matrix tell you?

The future of the product usually depends on what you decide right from the beginning of it's lifecycle

What is a strategic plan?

The in-depth plan to get to your goals

What is differentiated competitors competitive advantage?

Their strong brand

In the Boston Consulting Group Matrix what is the representation if you have a low relative market share and a high market growth rate?

question marks

What are the two most important parts of any cost leadership org?

management of operations and finance (money).

What is a Gantt chart?

referred to as a waterfaull chart (visually looks like water falling). Idea is not to show critical path but to give you a quick visual reference of relationships between different kinds of tasks.