MGMT 4860 Test 1 UVU
Market Size and Growth Rate
-How big is the industry and how fast is it growing? -What does the industry's position in the life cycle (early development, rapid growth and takeoff, early maturity and slowing growth, saturation and stagnation, decline) reveal about the industry's growth prospects?
Demand-Supply Conditions
-Is a surplus of capacity pushing prices and profit margins down? -Is the industry overcrowded with too many competitors?
Scope of Competitive Rivalry
-Is the geographic area over which most companies compete local, regional, national, multinational, or global?
5 competitive forces
1) pressure from buyer bargaining power 2) substitute products 3) supplier bargaining power 4) new entrants 5) rivalry (strongest)
attributes of a strategic visions
1) where we are going 2)the course and direction management has charted for the company's future
5 stages of strategic management process
1)developing a strategic vision, mission, and core values, 2)setting objectives, 3)crafting a strategy, 4)implementing strategy, 5)evaluation of performance and correcting problems
Desirable (Characteristic of Effectively Worded Vision Statement)
Indicates why the directional path makes good business sense.
Easy to communicate (Characteristic of Effectively Worded Vision Statement)
Is explainable in 5 to 10 minutes and, ideally, can be reduced to a simple, memorable "slogan" (like Henry Ford's famous vision of "a car in every garage").
Directional (Characteristic of Effectively Worded Vision Statement)
Is forward-looking; describes the strategic course that management has charted and the kinds of product-market-customer-technology changes that will help the company prepare for the future.
Flexible (Characteristic of Effectively Worded Vision Statement)
Is not so focused that it makes it difficult for management to adjust to changing circumstances in markets, customer preferences, or technology.
Focused (Characteristic of Effectively Worded Vision Statement)
Is specific enough to provide managers with guidance in making decisions and allocating resources.
Market Segmentation
Is the industry characterized by various product characteristics or customer wants, needs, or preferences that divide the market into distinct segments?
Feasible (Characteristic of Effectively Worded Vision Statement)
Is within the realm of what the company can reasonably expect to achieve.
Bland or Uninspiring (Common Shortcomings in Company Vision Statements)
Lacks the power to motivate company personnel or inspire shareholder confidence about the company's direction.
Not Distinctive (Common Shortcomings in Company Vision Statements)
Provides no unique company identity; could apply to companies in any of several industries (including rivals operating in the same market arena).
Emergent Strategy
Reactive adjustments to strategic moves on the part of rival firms, unexpected shifts in customer preferences, fast-changing technological developments, and new market opportunities call for unplanned
company values
beliefs, traits, and behavior norms that company employees are expected to display in conducting business
supplier bargaining power
presence of powerful suppliers reduces the profit in an industry, suppliers increase competition within an industry causing prices to increase and reduce quality
external market opportunities
provides and organization with a means to improve its performance and competitive advantage in a market environment
caliber of its strategy and the proficiency with which the strategy is executed.
How well a company performs
A Company's Board of Directors is Obligated to
(1) ensure that the company issues accurate financial reports and has adequate financial controls, (2) critically appraise and ultimately approve strategic action plans, (3) evaluate the strategic leadership skills of the CEO, and (4) institute a compensation plan for top executives that rewards them for actions and results that serve stakeholder interests, most especially those of shareholders.
a company's strategy can end up being
1) A blend of proactive actions to improve their competitiveness 2) Financial performance and reactions to conditions
7 Questions to Help Assess the Company's Industry and Competitive Environment
1. Do the dominant economic characteristics of the industry offer sellers opportunities for growth and attractive profits? 2. What kinds of competitive forces are industry members facing, and how strong is each force? 3. What forces are driving industry change, and what impact will these changes have on competitive intensity and industry profitability? 4. What market positions do industry rivals occupy—who is strongly positioned and who is not? 5. What strategic moves are rivals likely to make next? 6. What are the key factors of competitive success? 7. Does the industry outlook offer good prospects for profitability?
5 Stages of Crafting and Executing a Company's Strategy
1. Developing a Strategic Vision 2. Setting Objectives 3. Crafting a Strategy 4. Implementing and Executing the Chosen Strategy 5. Evaluating and Analyzing the External Environment and the Company's Internal Situation and Performances
Three questions can be used to distinguish a winning strategy from a so-so or flawed strategy
1.How well does the strategy fit the company's situation? 2.Is the strategy helping the company achieve a sustainable competitive advantage? 3.Is the strategy producing good company performance?
company's broad macro environment 6 components
6 components: political economic socio-cultural technological environmental and legal factors
Not forward-looking (Common Shortcomings in Company Vision Statements)
Doesn't indicate whether or how management intends to alter the company's current product-market-customer-technology focus.
Too Reliant on Superlatives (Common Shortcomings in Company Vision Statements)
Doesn't say anything specific about the company's strategic course beyond the pursuit of such distinctions as being a recognized leader, a global or worldwide leader, or the first choice of customers.
Strategy
Explains why the company matters in the marketplace by specifying an approach to creating superior value for customers and determining how capabilities and resources will be utilized to deliver the desired value to customers.
Core Values
Guide the pursuit of the strategic vision and mission.
Strategic Plan
Lays out its future direction, performance targets, and strategy
Graphic (Characteristic of Effectively Worded Vision Statement)
Paints a picture of the kind of company that management is trying to create and the market position(s) the company is striving to stake out.
Vague or Incomplete (Common Shortcomings in Company Vision Statements)
Short on specifics about where the company is headed or what the company is doing to prepare for the future.
Too Broad (Common Shortcomings in Company Vision Statements)
So all-inclusive that the company could head in most any direction, pursue most any opportunity, or enter most any business.
deliberate strategy
The biggest portion of a company's current strategy flows from ongoing actions that have proven themselves in the marketplace and newly launched initiatives aimed at building a larger lead over rivals and further boosting financial performance.
Strategic inflection points
The evaluation stage of the strategic management process also allows for a change in the company's vision, but this should be necessary only when it becomes evident to management that the industry has changed in a significant way that renders its vision obsolete
Political Factors (PESTEL Analysis)
These factors include political policies and processes, including the extent to which a government intervenes in the economy. They include such matters as tax policy, fiscal policy, tariffs, the political climate, and the strength of institutions such as the federal banking system
Legal and Regulatory Factors (PESTEL Analysis)
These factors include the regulations and laws with which companies must comply such as consumer laws, labor laws, antitrust laws, and occupational health and safety regulation. Some factors, such as banking deregulation, are industry-specific.
A low-cost provider strategy
achieving a cost-based advantage over rivals.
competitive conditions in specific industries
altering prices, buyer sensitivity, price variance, whether it is a good or bad service
Why does a company strategy evolve over time
because of the changing circumstances and management efforts to improve the company's strategy
Objectives
are an organization's performance targets--the results management wants to achieve.
Values
are the 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.
distinct capabilities
attributes which others can't replicate even when they realize the benefits they offer the company that possesses them
buyers can reduce process in an industry by driving down prices
bargaining for better services, forcing prices down, playing competitors against eachother
PESTEL Analysis
can be used to assess the strategic relevance of the six principal components of the macro-environment: political, economic, social, technological, environmental, and legal forces.
driving forces that change industries
change in growth, globalization, changes in why buys products, innovation, technology, marketing, entry or exit of firms, changes in cost and efficiency, buyer preference, government policy change, societal concerns
Developing a strategic vision
charts the company's long-term direction
realized strategy
combo of 1)deliberate planned elements 2)unplanned emergent elements
A focused low-cost strategy
concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price.
A focused differentiation strategy
concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals' products.
Functional-area Strategies
concern the actions related to particular functions or processes within a business. A company's product development strategy, for example, represents the managerial game plan for creating new products that are in tune with what buyers are looking for.
Operating Strategies
concern the relatively narrow strategic initiatives and approaches for managing key operating units (plants, distribution centers, geographic units) and specific operating activities such as materials purchasing or Internet sales.
elements of business model
customer value proposition and the profit formula
Strategic vision
describes "where we are going"—the course and direction management has charted and the company's future product-customer-market-technology focus
what does a mission statement address
describes present business and purpose, who we are, what we do, why we are here, identifies products, specific buyer, customer groups, and approach to pleasing customers, gives company identity
Mission Statement
describes the company's business. describes its present business and purpose ("who we are, what we do, and why we are here"). Conveys a company's purpose in language specific enough to give the company its own identity.
parts of a well worded vision statement (7)
easy to communicate desirable directional focused flexible feasible graphic
Implementing and executing the chosen strategy
efficiently and effectively.
Macro-Environment
encompasses the broad environmental context in which a company is situated and is comprised of six principal components: political factors, economic conditions, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions.
Corporate Strategy
establishes an overall game plan for managing a set of businesses in a diversified, multibusiness company.
resource based strategy
used based on strategic assets, uses all useful resources that a company can gather to gain competitive advantage
Crafting a strategy
for advancing the company along the path to management's envisioned future and achieving its performance objectives.
Setting objectives
for measuring the company's performance and tracking its progress in moving in the intended long-term direction. To convert the strategic vision into specific performance targets.
A best-cost provider strategy
giving customers more value for the money by satisfying buyers' expectations on key quality/features/performance/service attributes, while beating their price expectations. This approach is a hybrid strategy that blends elements of low-cost provider and differentiation strategies; the aim is to have the lowest (best) costs and prices among sellers offering products with comparable differentiating attributes.
guidelines for strategic group mapping
highly correlated, should reflect key approaches to offering value to customers and expose how rivals position themselves in the market, don't have to be quantitate or continuous, circles are proportional to sales, multiple maps can be used
business strategy elements
how to create products and services that attract and please customers, position the company, develop resources, functional operation, and how to reach goals
Emergent Strategy
identifying unexpected outcomes from the execution of strategy and learning to integrate those outcomes into future plans
Economic Conditions (PESTEL Analysis)
include the general economic climate and specific factors such as interest rates, exchange rates, the inflation rate, the unemployment rate, the rate of economic growth, trade deficits or surpluses, savings rates, and per capita domestic product. Economic factors also include conditions in the markets for stocks and bonds, which can affect consumer confidence and discretionary income.
Technological Factors (PESTEL Analysis)
include the pace of technological change and technical developments that have the potential for wide-ranging effects on society, such as genetic engineering and nanotechnology. They include institutions involved in creating knowledge and controlling the use of technology, such as R&D consortia, university-sponsored technology incubators, patent and copyright laws, and government control over the Internet.
Sociocultural Conditions (PESTEL Analysis)
include the societal values, attitudes, cultural factors, and lifestyles that impact businesses, as well as demographic factors such as the population size, growth rate, and age distribution. Sociocultural forces vary by locale and change over time.
lagging
indicators that follow and event
leading
indicators that signal future events
resource weakness
inferior skills or intellectual capital, lack of important physical assets, missing capabilities in key areas
Realized Strategy
is a combination deliberate planned elements and unplanned emergent elements. Some components of a company's deliberate strategy will fail in the marketplace and become abandoned strategy elements
Balanced Scorecard
is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
Business Strategy
is primarily concerned with strengthening the company's market position and building competitive advantage in a single business company or a single business unit of a diversified multibusiness corporation.
Why a distinctive strategy delivers a sustainable competitive advantage
it separates the company's product or service from competitors, it allows the business to attract a large number of buyers of a special product
5 questions for evaluation a company's strength and competitive structure
list success factors, assign a weight to each measure of competitive strength based on importance, calculate, sum weighted strength ratings, use overall strength to draw conclusions
weak bargaining power
low buyer concentration, high switching costs, less sensitivity, uneducated consumers, not substitute products
strategies used to set company apart and gain sustainable competitive advantage
low cost provider - Cost based advantage(Walmart) broad differentiation - Product or service different with a large spectrum of buyers ( johnson + johnson) focused low cost - Narrow buyer segment , having lower costs than competitors focused differentiation - Narrow buyer segment , offer customization to meet customer tastes best cost - best value at best price ( Target)
strategic objectives
relate to target outcomes that indicate a company is strengthening its market standing
Strategic Objectives
relate to target outcomes that indicate a company is strengthening its market standing, competitive vitality, and future business prospects.
Financial Objectives
relate to the financial performance targets management has established for the organization to achieve.
A broad differentiation strategy
seeking to differentiate the company's product or service from rivals' in ways that will appeal to a broad spectrum of buyers.
sustainable competitive advantage
separates business from other competitors by defining themselves differently
Business Model
sets forth how its strategy and operating approaches will create value for customers, while at the same time generate ample revenues to cover costs and realize a profit. The two elements of a company's business model are its (1) customer value proposition and (2) its profit formula.
business model
sets forth how strategy will create value for customers
Abandoned Strategy Elements
strategy will fail in the marketplace
SWOT analysis
strengths, weaknesses, opportunities, threats, most important is drawing conclusions about overall situation and translating conclusions into strategic actions to better match company's strategy to market opportunities
Environmental Forces (PESTEL Analysis)
such as weather, climate, climate change, and associated factors like water shortages. These factors can directly impact industries such as insurance, farming, energy production, and tourism. They may have an indirect but substantial effect on other industries such as transportation and utilities.
what is the strategic management process shaped by
the organization from the top down
Evaluating and analyzing the external environment and the company's internal situation and performance
to identify corrective adjustments that are needed in the company's long-term direction, objectives, strategy, or approach to strategy execution.
shortcomings of vision statement
vague or incomplete not forward looking too broad bland not distinct reliant on superlatives
strategic inflection point
when a company has to change its direction based off of the way market expectations are, changes the company
sustainable competitive advantage
when an attractively large number of buyers develop a durable preference for its products or services over the offerings of competitors, despite the efforts of competitors to overcome or erode its advantage.
strategy
why a company matters in the marketplace by creating superior value in the market
company's strategy basic definition
why the company matters in the marketplace by creating superior value to consumers
why does a company meet financial objectives
without profitability and financial strength, a company's long term health is jeopardized
why must you do more than a SWOT
you must be able to know how to implement the changes presented and realize opportunity for growth
