Strategic Management Study Guide

What are the two newest issues that are increasingly being considered in the development and revision of mission statements?

-Sensitivity to customer wants -Concern for quality

What is a value chain analysis (VCA)?

Looks at a business as a chain of processes and activities that transforms inputs into outputs that customers will value.

What quality strategies evolved in Japan after WWII and why

- Upper management personally took charge of leading the quality revolution · All levels and functions were trained to manage for quality · Workers were involved in Quality Circles where they could work across functions to examine and discuss how to improve their work processes and the quality result

What is an external customer?

The ultimate user of the product or service, the one who makes the purchase decision.

What does "differentiation" require?

Differentiation requires a business to have sustainable advantages that allow it to provide buyers with something uniquely valuable to them.

What is a 'stakeholder" in an organization and provide a list of examples?

Someone with vested interest in the organization's success. Customer, employee, owner, stock holder, supplier, creditors, community, government, etc.

Who are two of the people who helped lead the quality initiatives in Japan, and later in the United States?

W. Edwards Deming and Joseph Juran

What is a division or strategic business unit (SBU) structure, what is the key strategic advantage,

corporate management delegates profit responsibility and authority for strategic management of district business entities to expedite decision making.

What is Special Alert COntrol

a thorough and rapid review and change of strategies in response to sudden, unexpected events that affect the strategy direction.

What do long-term goals create

balance between financial, customer and learning growth

What is Divestiture

Involves the sale of the firm or one of its major components. Occasionally forced by government anti-trust action

What is a matrix organization, what is the key strategic advantage, and what is the key strategic disadvantage of this type of structure?

It provides dual channels of authority, performance, responsibility, evaluation and control. It is EX. development of a new product like an airplane or satellite.

The first of Deming's 14 points is constancy of purpose. How did this help define the role of a company?

The company's role was to stay in business and provide jobs through innovation, research, constant improvement of product and service and investing in maintenance and new aids to production or service delivery. It encourages a long term focus rather than short term focus on just making money.

What is often perceived to be a limiting factor to pursuing ISO 9000:2000 standard?

The cost and the certification to be accepted as a supplier or provider of services.

What types of firms use matrix organization

used by firms to focus on long term product and project initiatives of strategic significance.

What is a geographic organizational structure, what kind of firms predominantly use it, and what is the key strategic advantage of this structure?

Are firms organized by geographic regions that have unique characteristics. This is dominant in that is has multiple operating units across several regions. but sometimes it may not include all the functional support services.

What is the key word that explains what policies must do to make strategy implementation effective?

Policies are guidelines designed to EMPOWER managers and their subordinates to think, make decisions and take actions.

What is Bankruptcy

The firm involuntarily sells assets due to creditor threat or when liabilities exceed asset value.

What is vertical integration?

Strategy to acquire firms that supply inputs (backward integration) or are customers of outputs (forward integration). EX A furniture shop acquiring a chain of furniture retail stores (forward) or a lumber mill that produces the materials they use to build furniture (backward).

What is horizontal integration?

Strategy to grow through acquisition of one or more similar firms operating at the same stage of the production-marketing chain. EX. A furniture store acquiring another furniture store

Instead of the average, what should a firm use to compare its performance results to industry wide performance data? Why?

The firm should compare its performance to the best performers n the industry rather than the average. They are not looking for mediocrity, they are looking to be the best.

What is liquidation

The firm voluntarily sells its tangible assets for their value rather than selling the firm or business unit as a going concern. Admission of failure by company.

What are long-term objectives

The results a firm seeks over a multi-year period of time (Usually 3-5) address: What Profitability, Productivity, Competitive position, Employee development, Employee relations, Technological leadership, Public responsibility.

Strategic disadvantage of SBU

The structure that it fosters potentially is dysfunctional in competing among SBUs for corporate level resources.

\What is a key success factor (KSF)?

The things that when done extremely well, create a competitive advantage for the organization.

What does a turnaround strategy usually focus on and what change usually precedes it?

The turnaround most often focuses on cost reduction (decreasing workforce, improving processes, reducing inventory) or asset reduction (sale of land, buildings, equipment not essential to the core activity). Most turnaround strategies are preceded by a change in leadership

What is the purpose of core (grand) strategies?

They evolve from the strategic analysis and direction to shape the general approach regarding how the long-term objectives will be attained.

What do effective rewards achieve/align?

They should align manager and employee priorities with organizational objectives and shareholder values

What is the purpose of the internal analysis?

develop a realistic analysis of the firm's resources and capabilities; the areas which it has the ability to change and control

What is a functional organizational structure, in what kind of firms does it predominate,

Tasks are divided into functional specialities to enable the personnel to concentrate on only one aspect of the necessary work.

In a typical corporation, who are the strategic managers at the highest level who are responsible for overseeing the creation and accomplishment of the company mission?

The Board of Directors

WHat is performance benchmarking

Compares results.

What is the purpose of action plans and tactics and what makes them effective?

Specific time horizon Participants

What must managers of diversified firms do in addition to dealing with each business's strategic situation (pg 28)?

They must also develop and promote a corporate strategy that rationalizes the collection of business in their portfolio.

What are support activities of VCA

provide the infrastructure that allows the primary activities to take place on an ongoing basis.

on what should GAP planning solutions be focused on?

the ideal state rather than just incremental change.

What is the definition of strategic management?

the formulation and implementation of plans designed to achieve an organization's mission and objectives. The process regarding making these plans must be deliberate, systematic and sustainable.

How is the CEO's principle duty often defined and what role do they play in strategic planning?

they should provide long-term direction for the planning process after soliciting guidance from the senior leadership team and approval from the board. Ultimately responsible for the firm's success.

What is Premise Control

used to systematically assess whether the assumptions and predictions used in developing a strategy are still valid.

What three ingredients are critical to the success of a strategy?

Realistic, consistent and carefully executed

What is Market development

focus on marketing present products in new markets. Second least costly and risky (ex. Pg. 30)

What is an intangible asset

measurable, non-physical that can still appear on the balance sheet - patents, goodwill and copyrights. Non-balance sheet items: trade secrets, key employees, quality culture, etc.

What are the two primary groups of customers?

Internal and External

What are the two broad categories of business problems and how do they differ?

a. Strategic Problems - cause gaps between current performance and organizational goals. They relate to functions of management: planning, organizing, directing, and controlling. b. Process Problems - problems in the procedure or the way work is done.

What does strategic control mean and what are the two key questions related to strategic control?

a. Strategic control means that the performance of a strategy is systematically tracked as it is implemented, detects changes in its underlying premises, and makes necessary adjustments. The two key questions are: i. Are we moving in the right direction? ii. How are we performing?

what is the primary strategic challenge in the organizational structure?

accomplishing the effective coordination of the functional units in support of strategic objectives.

What are the four key perspectives that Kaplan and Norton identify in the Balanced Scorecard as key links to achieving the company's specific vision and strategy?

a. Learning and Growth b. Business Process c. Customer d. Financial

What is a SWOT analysis, on what two areas does it focus, and under what conditions is it less effective as a tool?

Focuses on internal and external analysis Not effective when downsizing or reengineering

What are primary activities of vca?

they create the physical product or service. They begin with the inputs a firm receives and finish with firm's products or services and after-sales service to customers.

what does cost leadership require?

Cost leadership requires a business to provide its product or service at a cost below what competitors can achieve.

What is innovation

Creates a new product life cycle, thereby making similar existing products obsolete. Made under assumption that consumer and business markets are expecting new features and uses of products and services.

What is the advantage of SBU

It forces authority and responsibility down the appropriate level to provide rapid response and expertise.

Key strategic advantage of matrix organization?

Advantage is that it accommodates a wide variety of project oriented business activity.

What is an internal customer?

Anyone to whom work is handed off to within an organization

How does the potential reaction of competitors affect strategic choice?

Provide current products quicker, accelerate new development, quickly adjust processes and quickly make decisions

What are three important qualities of short-term objectives and be able to discern good from poor short-term objectives when given a list?

- measurable - provide a time frame for objectives - crease a clear path towards achieving the long term objective

What are the three potential motives to be socially responsible?

-It is the moral thing to do -It is good business -It is required (laws, regulations)

What should long-term objectives be?

Should shape future direction and have the qualities of being: 1. Measurable 2. Achievable 3. Motivating 4. Flexible

What are economies of scale?

savings achieved through the ability to make large volume purchases

Four primary types of strategic control:

Premise Control Strategic Surveillance Special Alert Control Implementation Control

Why are organizational capabilities of a firm important?

They are used to transform inputs into outputs in a productive and efficient ways that competitors cannot imitate easily

What is the primary reason to develop a quality culture (pg 41)?

To create an organization that can adapt and embrace rapid change.

Describe the Six-Sigma approach to continuous improvement and its objectives?

Six-Sigma provides a highly rigorous and analytical approach to quality and continuous improvement with an objective to improve profits through deficit reduction, yield improvement, improved customer satisfaction and best-in-class performance.

What is product development

develop new product for present markets

What are the five key steps of an effective operational control system?

a. Set standards of performance. b. processes and policies to achieve the standards. c. Measure actual performance d. Compare actual performance e. corrective action

What is Concentrated growth

focus on the profitable growth of a single product or products in a single market using a core capability that provides a competitive advantage. Least costly and lowest risk

What is a tangible asset

found on balance sheet, measurable value

What is Implementation Control

monitors the incremental effect of implementing action plans and tactics and/or the review of specific milestones during implementation to determine if the overall strategy should be changed.

What are the five steps of the GAP Analysis methodology

Define desired state Define Current State Identify Gaps Analyze Root Cause Plan Solution

What do the letters stand for in the problem solving methodology often associated with Six Sigma called DMAIC?

Define Measure ANalyze Improve Control

What is meant by "quality is in the system" (one of the critical management methods of quality).

Quality is in the systems that converts inputs into outputs and most problems are the outcomes of inadequate processes and systems rather than the people working in them.

What is outsourcing?

Outsourcing is contracting work previously done by employees inside a company from sources outside the company.

When was the Malcolm Baldrige Quality Award established and what was its purpose

1987 for the purpose of spurring interest in quality in American businesses and services.

What are three primary generic strategies that single or dominant product businesses can choose to create a sustainable competitive advantage (SCA)?

- Cost Leadership - Differentiation - Speed/Rapid Response to Customers' Requests

What four things does "speed/rapid response to customers' requests" require?

- Provide current products quicker - Accelerate new product development or improvement - Quickly adjust production processes - Make decisions quickly.

What are the primary management strategies that relate to each of the four categories of the BCG Growth-Share Matrix?

-Cash Cow: High market share, Low growth rate -Dog: Low market share, Low growth rate -Star: High market share, High growth rate -Question Mark: Low market share, High growth rate

What is activity based cost accounting and what does it accomplish?

ABC assigns costs to each key activity to help analyze if the activity is efficient and adding value to the customer.

What are the organizational capabilities of a firm?

Ability to combine assets, people, and processes

Which performance improvement model is sponsored by the U. S. Government?

Baldaridge National Quality Program

What does BHAG mean and what does it represent?

Big, Hairy, Audacious Goals. They are either quantitative or qualitative, have a time frame, are measurable, and require a creative process

What are the two components of core ideology

COre values and Core Purpose

What is the "core competence" of a firm?

Capability or skill resident in a firm that must be identified, nurtured and deployed to provide a sustainable competitive advantage

What three things are required for action plans and tactics to be effective?

Downsizing team management outsourcing

Following the industrial revolution, what evolution in management resulted in the key system change where planning for quality was separated from execution and factories created a central inspection department to restore balance?

Fredrick Taylor's system of scientific management and the assembly line

What is a joint venture?

Joint venture is a corporate combination by two or more capable firms who are both lacking in one common element to enter a market or new business venture.

Of several ways to measure quality, what is the best way?

Measure customer satisfaction based on the various attributes that they have identified as being important.

What is the simple definition of quality?

Meeting and exceeding the expectations of the customer.

Strategic Model -- I will provide you with the strategic management model shown in the handouts without the labels. The model will show the boxes and all of the arrows. You will need to fill in the content of the boxes except for the Core Ideology box at the top and the Strategic Analysis and Direction box in the middle. Some boxes may contain one word as a prompt. All boxes will include lines indicating the number of words to be inserted.

Model on pg 9

Are mergers usually successful? Explain.

Often times, mergers are not successful. Due to the clashes of two very different cultures, resistance is created and success becomes difficult.

Definition of an external environment

Opportunities and threats the organization faces currently or may in the future

What new approach is needed to meet the quality competition in the future?

Organizations will have to enlarge their strategic business plans to include quality goals and systems.

What became the central activity of the quality oriented departments?

Seperate the good product from the bad product without scheduling delay

How is stockholder value ultimately enhanced in a diversified company?

When the company is able to share skills and core competencies across multiple businesses to: o Strengthen value chains o Build competitive advantage

In Deming's Point Fourteen, the Shewhart Cycle is emphasized. This Cycle is called the Deming Cycle in Japan. The cycle has been abbreviated into four steps called the PDSA Cycle. What are the four steps (words) represented by PDSA?

a. Plan: What are you trying to change? What idea are you testing? What will you measure? Plan your change. b. Do: Pilot your test. What were the results? Document the results. c. Study: What happened? Summarized what you learned. d. Act: Revise plan and retest. Spread or expand test. Implement change on a larger scale.

What is the difference between root cause, apparent cause, and symptoms of problems?

a. Root cause - the most basic reason why a problem or undesirable condition occurs. b. Apparent cause - immediate or obvious problem. Must be determined by analysis not speculations. c. Symptoms - tangible evidence or conditions indicating that something is wrong.

What is a strategic alliance?

an agreement by two firms to work together for a defined period on a joint project for which they each have something to contribute.

What is Strategic Surveillance

collects information from a broad range of key events inside and outside the firm that are likely to affect the course of its strategy.

What is process benchmarking

compares processes - purpose is to propel performance improvement by learning and adopting the processes used by a firm who has achieved the best.

what is the primary strategic advantage of the Organizational structure

it achieves efficiency through specialization.

Key disadvantage of matrix organization?

it is difficult to implement because it necessitates tremendous horizontal and vertical coordination.

What are four key principles related to strategy formulation

· Changes in any one component will affect other components. · The formulation and implementation of strategies are sequential. · A systematic feedback system process is necessary to evaluate the effectiveness of strategies. · Strategy formulation is dynamic, involving constant changes.

what are the three interrelated subcategories that constitute the external environment?

·Remote Environment ·Industry Environment ·Operating Environment

What are the four key activities that must to aligned to implement strategy?

• identify short term objectives • initiate specific functional tactics and action plans • communicate policies to empower people • design effective rewards

What is the purpose of short-term objectives?

• make long term objective operational through current year tangents. • identify potential conflicts and issues in current functions and policies that could create confusion or adverse consequences • create relevant feedback