Strategic management
Price-Earnings Ratio
Market price per share/ Earnings per share Attractiveness of firm on equity markets
Net Profit Margin
Net income Sales After-tax profits per dollar of sales
Return on Total Assets (ROA)
Net income/ Total assets After-tax profits per dollar of assets; this ratio is also called return on investment (ROI)
Collaborative machines
Robots used in manufacturing operations; these robots are flexible, capable of doing a variety of tasks.
Total Assets Turnover
Sales /Total assets Whether a firm is generating a sufficient volume of business for the size of its asset investment
Fixed Assets Turnover
Sales/ Fixed assets Sales productivity and plant and equipment utilization
Accounts Receivable Turnover
Sales/Accounts Receivable The average length of time it takes a firm to collect credit sales (in percentage terms)
Market Penetration
Seeking increased market share for present products in present markets through greater marketing, Ex: Cristiano Ronaldo and LeBron James sign lifetime endorsement deal with Nike
Product Development
Seeking increased sales by improv-ing present products or developing new ones, Ex: Ford shifting one-third of its sched-uled R&D budget on gas/diesel en-gines to electric engines
Relative market share position is given on the x-axis of the Boston Consulting Group (BCG) Matrix.
TRUE
Value chain
The business of a firm, where total revenues minus total costs of all activities undertaken to develop, produce, and market a product or service yields value.
Capacity utilization
The extent to which a manufacturing plant's output reaches its potential output; the higher the capacity uti-lization the better, because otherwise equipment may sit idle
Relative market share position
The horizontal axis in a BCG Matrix, which is the firm's particular segment's market share (or revenues or number of stores) divided by the industry leader's analogous number.
Nonprofit organizations are similar to for-profit companies in virtually evey respect except for two major differences:
(1) Nonprofits do not pay taxes, and (2) nonprofits do not have shareholders to provide capital.
Marketing consists of five basic activities:
(1) marketing research and target market analy-sis, (2) product planning, (3) pricing products, (4) promoting products, and (5) placing or distrib-uting products.
Which strategies aim at improving internal weaknesses by taking advantage of external opportunities?
WO
organic growth
When firms build from within,
In the Boston Consulting Group (BCG) Matrix, which element represents the industry growth rate in sales, measured in percentage terms?
Y-axis
A blue ocean strategy
aims to target a new market where competition is not yet present,
The match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors can be defined as
-strategy
ix Ways Human Resource Management Can Provide a Competitive Advantage
1. Analyze turnover rates to determine where problems may lie. 2. Measure and monitor employee engagement and morale scores. 3. Track employee data to identify high and low performers. 4. Determine going market rates for talent and align compensation with company goals. 5. Design employee development and training pathways that take into account the strategic and long-term needs of the organization. 6. Provide guidance on legal issues related to all personnel matters.
Controlling consists of four basic steps:
1. Establishing performance standards 2. Measuring individual and organizational performance 3. Comparing actual performance to planned performance standards 4. Taking corrective actions
Six Reasons Why Many Mergers and Acquisitions Fail
1. Integration difficulties up and down the two value chains 2. Taking on too much new debt the target firm owes or to buy the target 3. Inability to achieve synergy 4. Too much diversification 5. Difficult to integrate different organizational cultures 6. Reduced employee morale due to layoffs and relocations
Benefits of Having Clear Objectives
1. Provide direction by revealing expectations. 2. Allow synergy. 3. Assist in evaluation by serving as standards. 4. Establish priorities. 5. Reduce uncertainty. 6. Minimize conflicts. 7. Stimulate exertion. 8. Aid in allocation of resources. 9. Aid in design of jobs. 10. Provide basis for consistent decision making.
e financing decision
determines the best capital structure for the firm and includes examining various methods by which the firm can raise capital (for example, by issuing stock, increasing debt, selling assets, or using a combination of these approaches)
generic strategies
strategies allow organizations to gain competitive advantage from two different bases: cost leadership and differentiation.
Marketing
the process of defining, anticipating, and fulfilling consum-ers' needs and wants. Marketing is about satisfying current and potential customers' needs.
ST strategies
use a firm's strengths to avoid or reduce the impact of external threats
Six Benefits of a Firm Being the First Mover
1. Secure access and commitments to rare resources. 2. Gain new knowledge of critical success factors and issues. 3. Gain market share and position in the best locations. 4. Establish and secure long-term relationships with customers, suppliers, distributors, and investors. 5. Gain customer loyalty and commitments. 6. Gain patent protection early
Planning enables a firm to:
1. Take into account relevant factors and focus on the critical ones 2. Ensure that the firm is prepared for all reasonable eventualities and can make timely changes and adapt as needed 3. Gather the resources needed and carry out tasks in the most efficient way possible 4. Conserve its own resources and avoid wasting natural resources 5. Assess whether the effort, costs, and implications associated with achieving desired objec-tives are warranted 6. Be proactive, anticipate, and influence the future
Twelve Potential Benefits of Merging With or Acquiring Another Firm
1. To provide improved capacity utilization 2. To make better use of the existing sales force 3. To reduce managerial staff 4. To gain economies of scale 5. To smooth out seasonal trends in sales 6. To gain access to new suppliers, distributors, customers, products, and creditors 7. To gain new technology 8. To gain market share 9. To enter global markets 10. To gain pricing power 11. To reduce tax obligations 12. To eliminate competitors
Boston Consulting Group (BCG) Matrix
A four-quadrant, strategic planning analytical tool that places an organiza-tion's various divisions as circles in a display (similar to the IE Matrix) based on two key dimensions: (1) relative market share position and (2) industry growth rate. The diagram's four quadrants (Stars, Question Marks, Cash Cows, Question Marks) each have different strategy implications.
Grand Strategy Matrix
A four-quadrant, two-axis tool for formulating alternative strategies. All organizations can be positioned in one of this matrix's four strategy quadrants, based on their position on two evaluative dimensions: compet-itive position and market (industry) growth. Strategy sugges-tions ensue depending on which quadrant the firm is located.
Internal-External (IE) Matrix
A nine-quadrant, strategic planning analytical tool that places an organization's various divisions as circles in a display (similar to the BCG Matrix) based on two key dimensions:
Organizational culture
A pattern of behavior developed by an organization over time as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel in the firm.
Stars
A quadrant in the BCG Matrix for divisions that have a high relative market share position and compete in a high-growth industry; this is the upper-left quadrant.
Cash cows
A quadrant in the BCG Matrix for divisions that have a high relative market share position but compete in a low-growth industry; they generate cash in excess of their needs, they are often milked, this is the lower-left quadrant.
dogs
A quadrant in the BCG Matrix for divisions that have a low relative market share position and compete in a low-growth industry; this is the lower-right quadrant.
Question marks
A quadrant in the BCG Matrix for divisions that have a low relative market share position but compete in a high-growth industry; this is the upper-right quadrant; firms generally must decide whether to strengthen such divi-sions or sell them (hence a question is at hand).
empirical indicators
A resource can be considered valuable to the extent that it is (1) rare, (2) hard to imitate, or (3) not easily substitutable
Strategy-formulation analytical framework
A three-stage, nine-matrix array of tools widely used for strategic planning as a guide: (stage 1: input stage; stage 2: matching stage; stage 3: decision stage).
What kind of strategy is retrenchment?
A turnaround strategy
Quantitative Strategic Planning Matrix (QSPM)
An analytical technique designed to determine the relative attractiveness of feasible alternative actions. This technique comprises Stage 3 of the strategy-formulation analytical framework; it objectively indicates which alternative strategies are best
Average Collection Period
Accounts receivable/ Total credit sales/365 days The average length of time it takes a firm to collect on credit sales (in days)
Related Diversification
Adding new but related productsm EX:Walmart acquired Jet.com for $3.3 billion
Unrelated Diversification
Adding new, unrelated products, Ex: CVS pharmacy acquiring Aetna insurance
Promotion
Advertising Personal selling Sales promotion Publicity
Marketing Audit Checklist of Questions
Are markets segmented effectively? 2. Is the organization positioned well among competitors? 3. Are present channels of distribution reliable and cost effective? 4. Is the firm conducting and using market research effectively? 5. Are product quality and customer service good? 6. Are the firm's products and services priced appropriately? 7. Does the firm have an effective promotional strategy? 8. Is the firm's Internet presence excellent as compared to rivals?
Business portfolio
Autonomous divisions (or profit centers or segments) of an organization as represented by circles in BCG and IE matrices.
Current Ratio
Current assets /Current liabilities The extent to which a firm can meet its short-term obligations
Quick Ratio
Current assets minus inventory/ Current liabilities The extent to which a firm can meet its short-term obligations without relying on the sale of its inventories
Inventory Turnover
COGS/Inventory Whether a firm holds excessive stocks of inventories and whether a firm is slowly selling its inventories compared to the industry average
The Boston Consulting Group (BCG) Matrix is designed specifically to enhance which type of firm's efforts to formulate strategies?
Companies with more than one division
The top row of a Quantitative Strategic Planning Matrix (QSPM) consists of alternative strategies derived from all of the following EXCEPT
Competitive Profile Matrix (CPM).
Long-term objectives are needed at which level(s) in an organization?
Corporate divsional, functional
What analytical tool has four quadrants based on two dimensions: competitive position and market growth?
Grand Strategy Matrix
Place
Distribution channels Distribution coverage Outlet location Sales territories Inventory levels Transportation carriers
Procter & Gamble's (P&G) sale of many of its brands in order to focus on its core brands is an example of which type of strategy?
Divestiture
Forward Integration
Gaining ownership or increased con-trol over distributors or retailers, EX:Nike opening 100 outlet stores and sell-ing 30% more products on its website
The midpoint on the x-axis of a Boston Consulting Group (BCG) Matrix is typically set at 0.05.
FALSE
The two positive-rated dimensions on the SPACE Matrix are
FP and IP
According to Porter, which strategy offers products or services to a niche group of customers at the lowest price available on the market?
Focus - Low Cost
Gross Profit Margin
Gross Profit/Sales The total margin available to cover operating expenses and yield a profit
Although a firm positioned in Quadrant ________ of the Grand Strategy Matrix is in a growing industry, it is unable to compete effectively and needs to determine why the firm's current approach is ineffective and how to best change to improve competitiveness.
II
According to the Grand Strategy Matrix, organizations in which quadrant have a strong competitive position but are in a slow-growth industry?
IV
Defensive quadrant
In a SPACE Matrix analysis, when the firm's directional vector goes into the lower-left quadrant it suggests that the firm should pursue defensive strategies such as retrenchment.
Competitive quadrant
In a SPACE Matrix analysis, when the firm's directional vector points in the lower-right quadrant it suggests that the firm should pursue competitive strategies such as horizontal integration.
Conservative quadrant
In a SPACE Matrix analysis, when the firm's directional vector points in the upper-left quadrant it suggests that the firm should pursue conservative strategies such as market penetration.
Aggressive quadrant
In a SPACE matrix analysis, when the firm's directional vector points in the upper-right quadrant, the firm should pursue aggressive strategies.
Strategic Position and Action Evaluation (SPACE) Matrix
Indi-cates whether aggressive, conservative, defensive, or compet-itive strategies are most appropriate for a given organization. The axes of this matrix represent two internal dimensions (financial position [FP] and competitive position [CP]) and two external dimensions (stability position [SP] and industry position [IP]). These four factors are perhaps the most important determinants of an organization's overall strategic position.
Champions
Individuals most strongly identified with a firm's new idea/product/service, and whose futures are linked to its success.
Market Development
Introducing present products into new geographic area, Ex: Publix building 20 new supermarkets in North and South Carolina
Which of the following is a limitation associated with a SWOT Matrix?
It is a static assessment in time.
Price
Level Discounts Allowances Payment terms
Which of the following is NOT one of the steps involved in constructing a SWOT Matrix
List the firm's external weaknesses.
Long-Term Debt-to-Equity Ratio
Long-term debt/ Total stockholders' equity The balance between debt and equity in a firm's long-term capital structure
CHEM.
Managing By Crisis Hope Extrapolation & Managing By Extrapolation
What principle is built on the idea that there is no general plan for which way to go and what to do?
Managing by subjectives
Which term refers to selling a division or part of an organization?
Market development
According to the Grand Strategy Matrix, which strategy is recommended for a firm with rapid market growth and a strong competitive position?
Market penetration
Which of these is NOT a SPACE Matrix quadrant?
Offensive
Financial position (FP)
One of four dimensions/axes of the SPACE Matrix that determines an organization's financial strength, considering such factors as return on investment, leverage, liquidity, working capital, and cash flow
Stability position (SP)
One of four dimensions/axes of the SPACE Matrix that determines how stable/unstable a firm's industry is, considering such factors as technological changes, rate of inflation, demand of variability, price range of competing products, barriers to entry into market, com-petitive pressure, ease of exit from market, price elasticity of demand, and risk involved in business.
Industry position (IP)
One of four dimensions/axes of the SPACE Matrix that determines how strong/weak a firm's industry is, considering such factors as growth potential, profit potential, financial stability, extent leveraged, resource utilization, ease of entry into market, productivity and capacity utilization.
Competitive position (CP)
One of four dimensions/axes of the SPACE Matrix; determines an organization's competitiveness, using such factors as market share, product quality, product life cycle, customer loyalty, capacity utilization, technological know-how, and control over suppliers and distributors.
Which strategy generally entails large research and development expenditures?
Product development
Times-Interest-Earned Ratio
Profits before interest and taxes /Total interest charges The extent to which earnings can decline without the firm becoming unable to meet its annual interest costs
Product
Quality Place Features and options Style and brands Packaging Product line Warranty and services
Which strategy-formulation technique reveals the relative attractiveness of alternative strategies and thus provides an objective basis for selecting specific strategies?
Quantitative Strategic Planning Matrix (QSPM)
Retrenchment
Regrouping through cost and asset reduction to reverse declining sales and profit, Ex: Eli Lilly laying off 3,500 employees
Horizontal Integration
Seeking ownership or increased con-trol over competitors, Ex:Seeking ownership or increased con-trol over competitors
Backward Integration
Seeking ownership or increased con-trol over suppliers, Ex: Boeing building 80% of its wing flap motors in-house
Divestiture
Selling a division or part of an organization EX: Toshiba aims to sell its memory-chip unit to Bain Capital
Liquidation
Selling all of a company's assets, in parts, for their tangible worth, Ex:Ringling Bros. and Barnum & Bailey Circus liquidated (last performance was on May 21, 2017)
Input stage
Stage 1 of the strategy-formulation analytical frame-work that summarizes the basic input information needed to formulate strategies; consists of an EFEM, CPM, and IFEM
Matching stage
Stage 2 of the strategy-formulation framework that focuses on generating feasible alternative strategies by aligning internal with external factors by utilizing five matri-ces: BCG, IE, SWOT, GRAND, SPACE.
Which stage of the strategy-formulation framework involves the Quantitative Strategic Planning Matrix?
Stage 3
Decision stage
Stage 3 of the strategy formulation analytical framework that involves development of the Quantitative Strategic Planning Matrix (QSPM). A QSPM uses input infor-mation from Stage 1 to objectively evaluate feasible alternative strategies identified in Stage 2. A QSPM reveals the relative attractiveness of alternative strategies and thus provides objec-tive basis for selecting specific strategies.
Strategy Evaluation
Stage of Strategic-Management Process When ControllingMost Important
Strategy Implementation
Stage of Strategic-Management Process When Organizing & Motivating Most Important
Strategy Formulation
Stage of Strategic-Management Process When Planning Most Important
An IFE Matrix can be developed in five steps:
Step 1: Develop a Full and Narrow List of Key Internal Factors Step 2: Assign Weights to Key Internal Factors Step 3: Assign Ratings to Key Internal Factors Step 4: Obtain Weighted Scores Step 5: Obtain Total Weighted Score
WO strategies
Strategies that result from matching a firm's internal weaknesses with its external opportunities.
WT strategies
Strategies that result from matching a firm's internal weaknesses with its external threats.
distinctive competencies.
Strengths that cannot be easily matched or imitated by competitors
Value chain analysis (VCA)
The process whereby a firm deter-mines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products, and compares these costs to rival firms using benchmarking.
Marketing research
The systematic gathering, recording, and analyzing of data about problems/practices/issues related to the marketing of goods and services.
Industry growth rate
The vertical axis in a BCG Matrix; the average percent increase or decrease in sales/revenues this year (versus last year) for a given industry.
What is the highest number of strategies that can be examined at one time with the QSPM?
There is no limit
Internal Factor Evaluation (IFE) Matrix.
This strategy-formulation tool weights and rates major strengths and weaknesses in the functional areas of a business, providing a total weighted score indicating the overall strength of a firm's internal position.
Debt-to-Total-Assets Ratio
Total debt/ Total Assets The percentage of total funds provided by creditors
Debt-to-Equity Ratio
Total debt/ Total stockholders' equity The percentage of total funds provided by creditors versus by owners
The organizing function of management can be viewed as consisting of three sequential activities
breaking down tasks into jobs, combining jobs to form departments, and delegating authority. I
management information system (MIS)
collects, codes, stores, synthesizes, and presents information in such a manner that it aids in operational and strategic decision making.
The two internal dimensions represented on the axes of the SPACE Matrix are
competitive position and financial position
Dividend decisions
concern issues such as the dollar amount per share to pay quarterly to stock-holders, the stability of dividends paid over time, and the repurchase or issuance of stock.
Planning
consists of all managerial activities related to preparing for the future, such as establishing objectives, devising strategies, and developing policies; Even though planning is considered the foundation of manage-ment, it is the task that managers most commonly neglect
production/operations
consists of all those activities that trans-form inputs (raw materials, labor, capital, machines, and facilities) into finished goods and ser-vices.
Cost leadership
emphasizes producing standardized products or services at a low per-unit cost for consumers who are price sensitive.
An organization's present strategies, objectives, vision, and mission, coupled with the external and internal audit information, provide a basis for
evaluating structural strategies, but not generating those strategies.
strategic objectives
focus on goals for obtaining a competitive advantage, including factors such as a larger market share, quicker on-time delivery than rivals, lower costs than rivals, higher product quality than rivals, wider geographic coverage than rivals, achieving technological leadership
Financial objectives
include those associated with growth in revenues, growth in earn-ings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and all other objectives relating to the financial position of the firm,
Human resource management (HRM)
includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union rela-tions.
Product planning
includes devising warranties; packaging; determining product options, features, brand style, and quality; deleting old products; and providing customer service
Business analytics
is a business technique that involves using software to mine huge volumes of data to help executives make decisions.
Differentiation
is a strategy aimed at producing products and services considered unique to the industry and directed at consumers who are relatively price insensitive. Unlike with cost leadership where a firm examines how to reduce costs all along its value chain, with differentiation the firm looks to maximize value all along its value chain.
Channels of distribution
is a term that refers to the various intermediaries that take a product from a producer to an end customer. These intermediaries bear a variety of names such as whole-salers, retailers, brokers, facilitators, agents, vendors—or simply distributors
The investment decision, also called capital budgeting,
is the allocation and real-location of capital and resources to projects, products, assets, and divisions of an organization.
Financial ratio analysis
is the most widely used method for determining an organization's streng-ths and weaknesses in the investment, financing, and dividend areas.
recommendation
is used to re-fer to "any alternative strategy that is selected for implementation."
leveraged buyout (LBO)
occurs when a firm's shareholders are bought (hence buyout) by the company's management and other private investors using borrowed funds (hence lever-age). Besides trying to avoid a hostile takeover, other reasons for initiating an LBO include instances when a particular division(s) lacks fit with an overall corporate strategy, as well as when selling a division could raise needed cash. An LBO converts a public firm into a private company.
Management
planning, organizing, motivating, and controlling.
Objectives should be
quantitative, understandable, challenging, compatible (consistent vertically and horizontally in a chain of command), and obtainable.
First-mover advantages
refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.
Long-term objectives
represent the results expected from pursuing certain strategies.
four Ps of marketing
s product, price, promotion, and place,
test marketing
which allows an organiza-tion to examine alternative marketing plans, learn about potential problems with the product, uncover ways to better market the product, or forecast future sales of new products
portfolio analysis
—a tool that compares divisions of a firm to determine how best to allocate resources among those divisions.
target market analysis
—the examina-tion and evaluation of consumer needs and wants.
