MCE Exam 2

Emergent strategy (reactive, adaptive elements)

new strategy elements that emerge as managers react adaptively to changing circumstances

what do we mean by the word strategy?

the essence of strategy formulation is coping with competition

Yerkes-Dodson Law

the principle that performance increases with arousal only up to a point, beyond which performance decreases

strategy is actually .......

the quest for sustained competitive advantage, competing differently, evolving over time, and partly proactive and partly reactive

Accountability

the requirement of one person to answer to higher authority

value congruence

when both espoused and enacted values align

sustainable

when the advantage persists despise the best efforts of competitors to match or surpass

vision

creates an idealized future state for your organization that everyone is motivated to pursue wholeheartedly. Tells people: -Where the organization is headed -Why its moving in that stated direction -Makes members want to do everything they can to help get it

Informational

exchanging or processing information -Ex: monitoring and disseminating

Potential sources of capital for financing your business

***you need money to start a business*** 1. personal, family, or business associcates 2. banks and finance institutions (lenders) small business administration (SBA) 3. individual investors like angels, crowdfunding, and venture capitalists

What do all organizations need?

-Capital -Good ideas -Planning -Information management -Budgets (ex: financial management) -Accounting -Marketing -Good employee relations -overall managerial know-how

Organization

-Creates structure -Assigning tasks to individuals or groups (who will do that) -allocating resources -arranging tasks, people, and other resources to accomplish the work

Planning

-Establishing goals, objectives, and direction of individuals, groups, or the organization -Deciding how you will achieve the objectives

Revamping the Value Chain System to Lower Costs

-Selling direct to consumers and bypassing the activities and costs of distributors and dealers by using a direct sales force and a company website -Streamlining operations to eliminate low value-added or unnecessary work steps and activities -Reduce materials-handling and shipping costs by having suppliers locate their plants or warehouses close to the firm's own facilities

when strategically competing differently...

-cannot simply copy -must have distinctive element -it is about doing what rival firms It SHOULD aim to: 1. appeal to buyers in ways that sets a company apart from rivals 2. staking out a market position that is not crowded by strong competitors

Organizing

-creating structure -assigning tasks to individuals or groups (who will do that) -allocating resources

strategy designed with complexity in mind has a much greater success of leading to long-term competitive success

-flexible and creative -leverages connections -reacts to patterns -takes advantage of complexity mindset and systems thinking

Dwight Eisenhower said "Plans are useless, but planning is indispensable"... why is there a significant value in planning?

-forces you to get creative about possible futures -stimulates learning and creativity -aids in contingency planning and risk management Strict adherence can head to failure! -it only works in complicated systems -assumed future MUST be actual failure -cannot accurately predict in complex systems

Leading

-getting people enthused, excited, and inspired -building commitment to goals and organization -aligning individual and organizational values

Controlling

-measuring and collecting metrics of work performance -comparing performance to standards or goals -taking corrective action where needed **directly related to planning**

broad differentiation strategy

-offer unique product attributes that a wide range of buyers find appealing and worth paying for -can pursue from many angles -unique taste, superior service, engineering design and performance, product reliability, high fashion design, technology leadership, etc.

Strategy must evolve over time...

-seek enduring edge, not temporary advantage -internal and external business environments are complex systems, so... things change! -shifts in market conditions and buyer needs, disruptive innovations, advancing technology, changing political or economic climate, unexpected competitor moves, emerging marketing opportunities, etc. -must adjust to strategy in response to unfolding events (Kanye and Adidas is a great example) -**crafting strategy is not a one time event, rather a work in progress**

Planning your organization should include...

-strategic and financial values -mission, vision, and values Answers: -what products or services do you provide? -which population(s) do you serve? -what do you care about? -what makes you unique? -what are your short and long term goals?

Two avenues for achieving differentiation

1. Managing the value chain to create differentiating attributes 2. Revamp firm's overall value chain to increase differentiation

what are the five generic types of competitive strategies?

1. broad low-cost strategy 2. broad differentiation strategy 3. focused low-cost strategy 4. focused differentiation strategy 5. best-cost strategy **two biggest factors** 1. broad or narrow market 2. lower costs or differentiation

when it works best: broad differentiation strategy

1. buyer needs and uses of product are diverse 2. there are many ways to differentiate 3. few rivals are following similar approach 4. technology change and is fast-paced

cost efficient management of value chain activities: COST DRIVERS

1. economies of scale 2. learning and experience 3. capacity utilization 4. supply chain efficiency 5. lower-cost inputs 6. production technology and design 7. communication systems and information technology 8. bargaining power 9. outsourcing or vertical integration 10. incentive systems and culture

pitfalls to avoid: broad low-cost strategy:

1. getting carried away with price cutting 2. relying on easily replicable cost reduction approaches 3. becoming too fixated on cost reduction 4. not spending when needed **should continuously invest in complex, cost-saving technologies

avenues for delivering superior value

1. lower buyers' overall costs 2. incorporate tangible features that increase satisfaction 3. incorporate intangible features that increase satisfaction in noneconomic ways 4. signal the value (ex: high prices, fancy packaging, high luxury facilities, etc.)

two options for low-cost advantage:

1. lower price for higher market share of price sensitive consumer 2. increase efficiency for higher profit margin

two avenues for achieving cost advantage:

1. perform value chain activities more cost-effectively than rivals 2. revamp the firm's overall value chain to eliminate or bypass some cost-producing activities

Managing a small business...

1. planning your business 2. financing your business 3. knowing your customers (marketing) 4. managing your employees (Human Resources) 5. deciding on logistics (operations) 6. keeping records (accounting)

when it works best: low-cost strategy

1. price competition among rival sellers is vigorous 2. rival firm's products are essentially identical 3. difficult to achieve product differentiation that creates value for buyers 4. most buyers use product in the same way 5. low switching costs for buyers

value chain activities for differentiation: value drivers

1. product features and performance 2. customer services 3. production R&D 4. technology and innovation 5. input quality 6. employee skills, training, and experience 7. sales and marketing 8. quality and control processes

Two basic avenues for competitive advantage:

1. provide product or service that buyer values more highly than others (higher perceived value) 2. product product or service more efficiently (lower costs)

Small Business Administration (SBA)

A U.S. government agency that advises and assists small businesses by providing management training and financial advice and loans.

Manager

A person that uses influence to achieve goals. They directly supervise, support, and activate work efforts to achieve performance goals of individuals, groups, and organizations.

Stakeholder

An individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project. **Managers are also accountable to all stakeholders!!**

Objectives

An organization specific performance targets. This is the specific results management wants to achieve. - The purpose is to convert vision and mission into specific performance targets

Financial objectives

Communicate management goals for financial performance examples: -An X percent increase in annual revenues -annual increases in after-tax profits of X percent -annual increases in earnings per share of X percent - profit margins of X percent

Operations

Deciding on logistics -manufacturing plan= plant size, machinery is required , production capacity -supply chain considerations= inventory and inventory control-methods, location of plants and distributors, etc., and transportation costs

missions

Describe the organization's current business operations and purpose A mission clearly states the: -Organization's products/services -Constituent group or market the org serves -Constituent needs that org seeks to satisfy -Unique identity of org

Venture-capitalists

Individuals or companies that invest in new business in exchange for partial ownership of those businesses

Interpersonal

Interacting with people -Ex: building relationships, influencing

Accounting

Keeping records -daily sales, expenses, and profits -inventory control, customer records, and payroll This helps with -tax planning and financial forecasting -choosing sources of financing and wiring requests for funds -poor funding practices will lead to costly mistakes***

Strategic objectives

Layout target outcomes concerning a companies market standing, competitive positions, and future business prospects. examples: -winning X percent market share -achieving lower overall costs than rivals -overtaking key competitors on product performance, quality, or customer service -deriving X percent of revenues from the sale of a new product introduced within the past five years

Human Resources

Managing your employees -deciding your labor needs -recruiting and selecting the right people -training and development for growth -rewards and culture for retention -motivating for performance

What are the two types of social power?

Positional and personal

SMART goals

Specific, Measurable, Attainable, Realistic, Timely (smart) 1. Use clear, specific language 2. Start your goal statement with "to + verb" 3. Write your goals down and put them where you will see them and read them often 4. Share your list with people who care 5. Review and revise your list when necessary 6. Always think and speak in the affirmative

What do we ALWAYS want when crafting strategy?

Sustained competitive advantage We always want intangible resources (it's what we want to prioritize because it's hardest to reproduce)

Levels of Management

TOP MANAGERS- usually CEO, president, or Vice President... in a nonprofit could be executive director, president, or VP administrator... they deal with the ENTIRE organization MIDDLE MANAGERS- could be division manager, regional manager, plant manager (same for nonprofit)... they deal with groups, departments, or divisions FIRST/FRONT-LINE MANAGERS- could be department head, supervisor, or team leader (same for nonprofit) they deal with individuals or small teams ex: day-to-day-tasks of employees

strategy

The coordinated set of actions that managers take to outperform organization's competitors and achieve superior success

Management

The process of getting things done effectively and efficiently with and through people. This is about seeking ORDER AND STABILITY.

Goal setting theory

The types of goals reset impact our achievements..... increasing motivation: -specific goals -difficult goals

enacted values

The values you see a company actually enacting/practicing

why is strategy complex?

Unpredictability, lack of reproducibility, lack of control, role of serendipity, and inability to rely on complicated knowledge, skill, and training.

Decisional

Using information to make decisions -Ex: resource allocation, address opportunities

upside-down pyramid

View of organizations that puts *consumers* at the top and positions upper levels of management as supporters of lower levels of management TECHNICALLY goes.. Consumer Non-managerial First-line managers Middle Managers Top Managers

Espoused values

What an organization says it's values

Conceptual

ability to think analytically, work with abstract ideas, and solve complex problems

Technical

ability to use expertise, perform tasks with proficiency, and apply strong skill set to operations

Human

ability to work well with others, relate to people, develop social capital, and to build/manage relationships

Values

beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission

Successful differentiation allows a firm to

command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.

Three skills managers need?

conceptual, human, technical

Governance

consists of the board of directors and board of trustees... their goal is to maximize profits looking out for shareholders Board of directors oversee the leaders--> making decisions on who to hire/fire and how they're getting compensated Board of trustees have more accountability

Revamping the Value Chain System to Increase Differentiation

coordinate with downstream channel allies -enhances customer value coordinate with suppliers -address customer needs

Positional sources

derived from formal roles (ex: particular office or rank) you hold in an organization, a social system, or society.

Personal sources

derived from your unique personal attributes and skills that lead others to respect, idolize, adore, trust, like and/or view you as an expert and knowledgeable

strategy provides...

direction and guidance (what you should and should not do)

Crowdfunding

donation based or debt-investment (peer-to-peer lending)

Influence

having an effect or impact on the actions, behavior, opinions, etc., of another or others to set and achieve goals.

low-cost leadership

industry's lowest cost producer

What are the three roles of a manager?

informational, interpersonal, decisional

Whose actions should you always absolutely consider?

other stakeholders

Consumer market (marketing)

people with unsatisfied wants and needs who have both the resources and willingness to buy **for marketing, you must know your customers and adapt quickly to ever-changing demands... LISTEN LISTEN LISTEN***

Deliberate strategy (proactive strategy elements)

planned initiatives plus ongoing strategy elements continued from prior periods

proactive

planned initiatives to improve the company's financial performance and secure a competitive edge

What are the four functions of management?

planning, organizing, leading, controlling

low price

price to buyer

Angels

private individuals who invest their own money in potentially hot new companies before they go public

broad low-cost strategy

produce goods or services for a broad base of buyers at a lower cost than rivals -cost advantages over rivals -meaningfully lower, not simple absolute lowest

low cost

production of good or service

reactive

responding to unanticipated developments and fresh market conditions (emergency strategy) -thus, a firm's actual (or realized) strategy is a combination

Value Chain

set of activities that an organization carries out to create value for its customers (primary ex: operations, service, etc.) and support (ex: infrastructure, HRM, etc.) activities

competitive advantage

some type of edge over rivals in attracting buyers and competing with competitive forces

Developing and Executing Strategy

stage 1: -developing a strategic vision, mission, and core values stage 2: -setting objectives stage 3: -crafting a strategy to achieve objectives and vision stage 4: -executing strategy stage 5: - monitoring developments, evaluating performance, and initiating corrective adjustments *revise as needed... consider: actual performance, changing conditions, new opportunities, and new ideas)