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OBC1 - Set #6 - Strategic Management, Mission, Objectives, Strategies...

Terms in this set (30)

~ Philosophy: The statement of a company's philosophy, often called the company creed, usually accompanies or appears within the mission statement. It reflects or specifies the basic beliefs, values, aspirations, and philosophical priorities to which strategic decision makers are committed in managing the company. Stockholders can see which principles the company uses to guide its objectives and therefore its strategies, which ensure that objectives and strategies are aligned with the companies' principles and values.

~ Public Image: "Cross Pens makes high-quality writing instruments" is an example of a public image - how the public views the company - and the company should focus on strategies that are consistent w/ that image (i.e., not suddenly diversifying into .59 pen market). Companies need to be in tune with what the public 'thinks' of them, not just in times of crisis or downturn, but ALL the time and allow this to help guide strategy, to encourage alignment of mission and vision with what the public interprets so that company knows it is actually accomplishing it.

~ Company Self-Concept: to achieve its proper place in a competitive situation, the firm realistically must evaluate its competitive strengths and weaknesses. This idea—that the firm must know itself—is the essence of the company self-concept. The idea is not commonly integrated into theories of strategic management; its importance for individuals has been recognized since ancient times.

Both individuals and firms have a crucial need to know themselves. The ability of either to survive in a dynamic and highly competitive environment would be severely limited if they did not understand their impact on others or of others on them.
In FRAGMENTED industries:

~ Tightly Managed Decentralization: Fragmented industries are characterized by a need for intense local coordination, a local management orientation, high personal service, and local autonomy. Recently, however, successful firms in such industries have introduced a high degree of professionalism into the operations of local managers

~ "Formula" Facilities: This alternative, related to the previous one, introduces standardized, efficient, low-cost facilities at multiple locations. Thus, the firm gradually builds a low-cost advantage over localized competitors.

~ Increased Value Added: an effective strategy may be to add value by providing more service with the sale or by engaging in some product assembly that is of additional value to the customer.

Specialization Focus strategies that creatively segment the market can enable firms to cope with fragmentation. Specialization can be pursued by

1. Product type. The firm builds expertise focusing on a narrow range of products or services.
2. Customer type. The firm becomes intimately familiar with and serves the needs of a narrow customer segment.
3. Type of order. The firm handles only certain kinds of orders, such as small orders, custom orders, or quick turnaround orders.
4. Geographic area. The firm blankets or concentrates on a single area.

~ Although specialization in one or more of these ways can be the basis for a sound focus strategy in a fragmented industry, each of these types of specialization risks limiting the firm's potential sales volume.

~ Bare Bones/No Frills Given the intense competition and low margins in fragmented industries, a "bare bones" posture—low overhead, minimum wage employees, tight cost control—may build a sustainable cost advantage in such industries.
• A key problem with the portfolio matrix was that it did not address how value was being created across business units—the only relationship between them was cash.

• Truly accurate measurement for matrix classification was not as easy as the matrices portrayed.

• The underlying assumption about the relationship between market share and profitability—the experience curve effect—varied across different industries and market segments. Some have no such link.

• The limited strategic options, intended to describe the flow of resources in a company, came to be seen more as basic strategic missions, which creates a false sense of what each business's strategy actually entails.

• The portfolio approach portrayed the notion that firms needed to be self-sufficient in capital. This ignored capital raised in capital markets.

• The portfolio approach typically failed to compare the competitive advantage a business received from being owned by a particular company with the costs of owning it.

• Recent research by well-known consulting firm Booz Allen Hamilton suggests that "conventional wisdom is wrong. Corporate managers often rely on accounting metrics [based on past performance] to make business decisions." They go on to argue that "past performance is a poor predictor of the future. When performance is assessed over time, greater shareholder value can be created by improving the operations of the company's worst-performing businesses." "The way to thrive," they say, "is to love your dogs."