MGMT Ch 6

What are the three steps to the strategy making process?

1. assess need for strategic change 2. conduct situational analysis 3. choose strategic alternatives

strategic group

a group of companies within an industry against which top managers compare, evaluate, and benchmark strategic threats and opportunities

threat of new entrants

a measure of degree to which barriers to entry make it easy or difficult for new companies to get started in an industry

threat of new substitutes

a measure of the ease with which customers can find substitutes for an industry's products or services

bargaining power of buyers

a measure of the influence that customers have on a firm's prices

bargaining power of suppliers

a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs

character of the rivalry

a measure of the intensity of competitive behavior between companies in an industry

BCG Matrix

a portfolio strategy developed by the Boston Consulting Group that categorizes a corporation's businesses by growth rate and relative market share and helps managers decide how to invest corporate funds (question mark, star, dogs, cash cow)

competitive inertia

a reluctance to change strategies or competitive practices that have been successful in the past

valuable resources

a resource that allows companies to improve efficiency and effectiveness

imperfectly imitable resource

a resource that is impossible or extremely costly or difficult for other firms to duplicate

rare resource

a resource that is not controlled or possessed by competing firms

nonsubstitutable resource

a resource that produces value or competitive advantage and has no equivalent substitutes or replacements

diversification

a strategy for reducing risk by buying a variety of items (stocks or, in the case of a corporation, types of businesses) so that failure of one stock or one business does not boom the entire portfolio

stability strategy

a strategy that focuses on improving the way in which the company sells the same products or services to the same customers

growth strategy

a strategy that focuses on increasing profits, revenues, market share, or the number of places in which the company does business

retrenchment strategy

a strategy that focuses on turning around very poor company performance by shrinking the size of scope of the business

Situational (SWAT) Analysis

an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment

porter's five industry focuses

character of rivalry threat of new entrants bargaining power of suppliers bargaining power of buyers threat of substitute products

reactors

companies that do not follow a consistent adaptive strategy but instead react to changes in the external environment after they occur

defenders

companies using an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high-quality products and services to a well-defined set of customers

prospectors

companies using an adaptive strategy that seeks fast growth by searching for new market opportunities, encouraging risk taking, and being the first to bring innovative new products to market

analyzers

companies using an adaptive strategy that seeks to minimize risk and maximize profits by following or imitating the proven success of prospectors

unrelated diversification

creating or acquiring companies in completely unrelated businesses

related diversification

creating/acquiring companies that share similar products, manufacturing, marketing, technology, or cultures

competitive advantage

providing greater value for customers than competitors can

resources

the assets, capabilities, processes, employee time, information, and knowledge that an organization uses to improve its efficiency and create and sustain competitive advantage

core firms

the central companies in a strategic group

market commonality

the degree to which two companies have overlapping products, services, or customers n multiple markets

resource similarity

the extent to which a competitor has similar amounts and kinds of resources

secondary firms

the firms in a strategic group that follow strategies related to but somewhat different from those of the core firms

core capabilities

the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs

corporate-level strategy

the overall organizational strategy that addresses the question "What business or businesses are we in or should we be in?"

cost leadership

the positioning strategy of producing a product or service of acceptable quality at consistently lower production costs than competitors can, so that the firm can offer the product or service at the lowest price in the industry

differentiation

the positioning strategy of providing a product or service that is sufficiently different from competitors' offerings that customers are willing to pay a premium price for it

focus strategy

the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment

acquisition

the purchase of a company by another company

direct competition

the rivalry between two companies that offer similar products and services, acknowledge each other as rivals, and act and react to each other's strategic actions

recovery

the strategic actions taken after retrenchment to return to a growth strategy

strategic reference points

the strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage

distinctive competence

what a company can make, do, or perform better than its competitors

firm-level strategy

a corporate strategy that addresses the question, "How should we compete against a particular firm?"

industry-level strategy

a corporate strategy that addresses the question, "How should we compete in this industry?"

portfolio strategy

a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines

strategic dissonance

a discrepancy between a company's intended strategy and the strategic actions managers take when implementing that strategy

grand strategy

a broad corporate-level strategic plan used to achieve strategic goals and guide the stratgeic alternatives that managers of individual businesses or subunits may use

shadow-strategy task force

a committee within a company that analyzes the company's own weaknesses to determine how competitors could exploit them for competitive advantage

Cash cow

a company with a large share of a slow-growing market

Question Mark

a company with a small share of a fast growing market

dog

a company with a small share of a slow-growing market

Star

a company with large share of fast-growing market

sustainable competitive advantage

a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for the moment, stopped trying to duplicate

response

a competitive countermove, prompted by a rival's attack, to defend or improve a company's market share or profit

attack

a competitive move designed to reduce a rival's market share or profits