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MGT 409 Exam 1

Terms in this set (59)

Strategy
Anything you can do to gain an advantage over the competition
3 Parts of Strategic Management
Analysis, Formulation, and Implementation
Strategic Management
The study of why some firms outperform others. Analyses, decisions, and actions taken to create and sustain competitive advantage
Strategic Management Questions
What are our objectives/What are we trying to do?
What industry are we in/Is it the right one?
Can we compete on price/On quality or features?
Romantic View of Leadership
The leader is responsible for the success or failure of the firm
External Control Perspective
All companies are controlled by market forces. The best the CEO can do is anticipate these and prepare for them. I.e. Hurrican Katrina, BP Oil Spill
Ambidextrous Behaviors
-Taking care of your own duties as well as looking for new opportunities
-Cooperating with other people while optimizing your own performance
-Finding the balance between getting the most out of current products or services and developing new ones
Cooperative Governance
The relationship between 3 interconnected groups: the stockholders, management, and board of directors
Role of Board of Directors
-Elected representatives of the owners
-Ensure interests and motives of management are aligned with those of the owners
Stakeholder Management
-Stakeholder is anyone who will be affected by the success, failure, or continued operation of the firm
-Management, ownership, and the employees are not the whole story
-Customers, suppliers, competitors, neighbors, community members, political leaders, and other may have a stake in your success
Views of Stakeholder Management
Zero Sum and Symbiosis
Zero Sum
Stakeholders compete for attention and resources of the organization. Gain of one is a loss to the other
Symbiosis
Stakeholders are dependent upon each other. Mutual benefits
Social Responsibility
The expectation that businesses or individuals will strive to improve the overall welfare of society
-Managers take active steps to make society better
-Socially responsible behavior changes over time
-Managers consider the "triple bottom line"
Strategic Imperative
-Top-down takes too long, misses too much
-Ideas can come from anywhere
-Customer service function can inform sectors of business of information
-Inexperience: the snowball effect
Strategic Direction Pyramid
Top: Company Vision
Middle: Mission Statement
Bottom: Strategic Objectives
Company Vision
Inspiring, overarching, long-term, fundamental statement of organization's values, aspiration, and goals
Mission Statement
Purpose of company, basis of competition and competitive advantages, more specific than vision, focused on the means by which the firm will compete
Strategic Objectives
Operationalize the mission statement, provide guidance on how the organization can fulfill or move toward the higher goals, more specific, cover a more well-defined time frame
SMART
Strategic Objectives should be:
Specific, Measurable, Appropriate, Realistic, and Timely (Time-Specific)
Forecasting
Gathering and sorting information. 3 major functions: 1. External Scanning 2. External Monitoring 3. Competitive Intelligence
External Scanning
Predicting changes in the firm's environment, detecting changes already underway, working out possible responses
External Monitoring
Tracking trends, sequences of related activities, organized programs
Competitive Intelligence
Tracking and understanding the industry, monitoring the competition, identifying opportunities and threats that may be emerging
Forecasting & Competitive Intelligence
-Based on information collected through various public and industry sources, not espionage
-A tool that can alert management to threats before they get out of control
-An analysis, a set of opinions, calculations, and conclusions, not just raw data
-A way of life - or at least it should be, everyone in the company should be paying attention to these things
Scenario Analysis
-Predicting future events based on past experience
-Possible with enough good data
-Advantage: improved planning, multiple contingencies developed in advance
-Disadvantage: confirmation bias, GIGO errors, wishful thinking (GIGO=Garbage In, Garbage Out)
SWOT Analysis
Four basic categories that sum up general environment, industry conditions, and firm resources and needs:
1. Strengths: what are we good at?
2. Weaknesses: where do we need help?
3. Opportunities: where can we expand, gain market share, etc.
4. Threats: where are we vulnerable to external threats?
General Environment
Demographics, sociocultural measures, legal/political issues, technological, economic, international
Porter's Five Forces Model
Suppliers (bargaining power of suppliers) -->
Potential Entrants (threat of new entrants) -->
Substitutes (threat of substitute products) -->
Buyers (bargaining power of buyers) -->
INDUSTRY COMPETITORS (rivalry among existing firms) [CENTER OF DIAGRAM]
Value Net Analysis
Substitutes - Interactions
Complements - Interactions
Customers - Transactions
Suppliers - Transactions
COMPANY [CENTER OF DIAGRAM]
Strategic Groups
-No two firms are exactly alike
-No two firms are completely different
-Within an industry, firms with similar products, geographic scope, price, quality or utility will utilize similar strategies
-Using the same strategies will result in many of the same actions, including direct competition
Assessing the Internal Environment
-Value chain model
-Resourced-based view of the firm
-Evaluating firm performance
Value Chain Model
-Primary and secondary activities
-Service and sales variants
Resourced-based view of the firm
Elements & Sustainability
-Tangible Assets: all physical and financial assets used to create value for customers
>Financial resources: cash, available capital or equity
>Physical resources: state-of-the-art plant of equipment
-Intangible Assets: routines, practices, knowledge, experience, reputation and human resources, accumulated over time
-Organizational Capabilities: competencies or skills the firm can use to provide superior product or service value
Evaluating Firm Performance
-Financial ratio analysis
-The balanced scorecard approach
Value Chain: Primary Activities
-Inbound Logistics: receiving, storing, and distributing inputs for productions. Includes issues like distribution center location, inventory control, warehouse layout, return to supplies, etc.
-Operations: turning inputs into products. Includes plant operations, automation, quality control, workflow design
-Outbound Logistics: collecting, storing, and distributing the product or service. Includes shipping and distribution issues
-Marketing and Sales: everything concerned with getting end users to purchase products or services. Includes pricing packaging, selection of distribution channels, advertising, etc.
-Service: all activities that enhance or maintain value for the product. Includes warranty policies and replacement parts
Value Chain: Support Activities
-General Administration: supports the entire value chain and not individual activities. Includes planning and forecasting, capital development, stakeholder management, etc.
-Human Resources Management: includes recruiting, hiring, training, development, and compensation function, retention, development, performance, and incentive activities, union relations and quality of life issues
-Technology Development: usually means R&D, but developing the technology the firm uses is important
-Procurement: more than just the purchasing function. Includes vendor relations, supply channel development, and media buying activities
Applying Value Chain to Service Organizations
-Similar to manufacturing version, but does not include inbound or outbound logistics, and has no plant operations
-These steps are replaced with other transformational processes by which inputs are converted to outputs
Firm Resources and Sustainable Competitive Advantages
-Valuable: does the resource add or product value?
-Rare: does everyone have one or can get one?
-Difficult to imitate: physically unique, hard to make, difficult to figure out
-Difficult to substitute for: equivalent
Why Can't They Imitate It?
-Path Dependency: some things are hard to imitate because there's a whole long path you have to follow to get them in the first place
-Casual Ambiguity: it's harder for people to imitate something if they don't know how it works in the first place
-Social Complexity: sometimes it's not even the people, but the relationships that is critical
Financial Ratio Analysis
-Balance sheet, income statement, historical comparison, comparison with industry norms
-Meaningful ratio analysis includes: analysis of how ratios change over time and how ratios are interrelated
5 Types of Financial Ratios
1. Short-term solvency or liquidity
2. Long-term solvency or liquidity
3. Asset management (or turnover)
4. Profitability
5. Market value
Balanced Scorecard
-Customer Perspective: time, quality, performance, service, and price
-Internal Business Perspective: what must we excel at? Process issues, decision making, resources, capabilities
-Innovation and Learning Perspective: how are we at introducing new products, adding value, increasing efficiency, driving the market?
-Financial Perspective: profitability, growth, market share, shareholder value, asset turnover, cost containment
Limitations of the Balanced Scorecard Analysis
Lack of clear strategy, limited or ineffective executive sponsorship, too much emphasis on financial measures rather than nonfinancial measures, poor data on actual performance, inappropriate links to scorecard measures to compensation, and inconsistent of inappropriate terminology
Limitations of the SWOT Analysis
Strengths may not lead to competitive advantage, focus on the external environment is too narrow, distinction between strengths and opportunities, or between weaknesses and threats is ambiguous, SWOT oversimplifies the strategic picture and fails to consider all of the dimensions of strategy
Creating Wealth in a Knowledge Economy
-Knowledge-based labor now makes up over 50% of the GDP in industrialized countries
-Assets such as brand names, company reputation, customer relationships, and employee ability and commitment are key to wealth/value generation
-All of these things required the possession and use of intellectual assets
3 Types of Intellectual Assets
1. Human Capital: individual capabilities, knowledge, skills, and experience of the company's employees and managers
2. Social Capital: the network of relationships that individuals have throughout the organization
3. Knowledge: explicit and tactic
Human Capital
-3 major aspects of managing human capital: attracting, developing, and retaining
-All 3 are necessary for success
-Firms often neglect one or more of them: poor hiring and recruitment practices, lack of training, development, or education programs, retention programs often ignored, especially in weak job market
Attracting Human Capital
-Hire for attitude, train for skill
-Additional emphasis on general knowledge and experience, social skills, and values
-Sound recruiting approaches: scanning pools of available candidates, challenge becomes having the right job candidates, not the greatest # of them
-Networking: current employees may be best source of new ones, incentives for referrals
Developing Human Capital
-Train and develop people at all levels - don't just leave it up to HR deparment
-Encourage widespread involvement - capture tacit as well as explicit knowledge
-Monitor progress and track development - regular evaluation and feedback systems
-Employee buy-in is critical - 360 degree analysis covers both aspects of the relationship
Retaining Human Capital
-Avoid transfer of valuable or sensitive information outside of the organization: promote identification with the firm's mission and values, develop loyalty and strategic intent
-Provide challenging work and a stimulating environment
-Provide financial and non-financial rewards and incentives: rewards are an important motivator - but not the only one
Enhancing Human Capital: Diversity
-All knowledge is useful; every viewpoint adds to the collective knowledge of the organization
-Identical viewpoints don't add new information
-Different people have different life experiences, bring different knowledge and expertise to the group
Role of Social Capital
-Workers are often more loyal to their colleagues and profession than to their employer
-Social Capital can help to attract and retain talent: some employees can bring talent with them, employees can migrate into new ventures or start-ups, mechanism for obtaining outside information and expertise
-Can help connect the firm to Social Networks maintained by the employees
Social Networks
3 Unique Advantages:
1. Private information
2. Access to diverse skill sets
3. Power
-Impact your career: silos and structural holes, bridging relationships, close vs. arm's length
Downside of Social Networks
-Groupthink - people in groups tend to go along with the opinions of the group; this also happens in social networks
-Cost of financial resources - time your employees spend networking, and of concessions you make to close partners
-Managerial commitment - management has to be committed to social networking
Leveraging Human Capital with Technology
-Sharing knowledge and information allows us to: conserve resources, develop new products, create new opportunities
-Can use electronic networks to record and share information through: email, electronic or virtual teams, knowledge capture
-Improves speed and efficiency, improves connections with customers and suppliers
Tactic Knowledge
-Used to leverage human capital
-Personal experience
-Shared only with the consent and participation of the individual
Explicit Knowledge
-Used to leverage human capital
-Can be: documented, widely distributed, easily replicated, reused many times at low cost
Creating Value with Human Capital
-Recruiting top-notch talent: hire for attitude, problem-solving, ability and social skills, not background
-Employee development: involve employees at all levels, follow core values and mission
-Retain the best employees
-Social Capital
-Technology: retain knowledge and promote best practices
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