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Policy and Strategy Midterm (Kocur)

Key Concepts:

Terms in this set (83)

Strategic Management
The art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives
Long-Range Planning
Optimizes for tomorrow the trends of today
Stages of Strategic Management - Strategy Formulation
Includes developing a vision and a mission, identifying an organization's external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue
Stages of Strategic Management - Strategy Implementation
Requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed
Stages of Strategic Management - Strategy Evaluation
Final stage in strategic management; reviewing external and internal factors that are the bases for current strategies; measuring performance; taking corrective action
Competitive Advantage
Any activity a firm does especially well compared to activities done by rival firms or any resource a firm possesses that rival firms desire
Sustained Competitive Advantage
Continually adapting to changes in external trends and events and internal capabilities, competencies, and resources
Strategists
The individuals responsible for the success or failure of an organization; help an organization gather, analyze, and organize information
Vision Statement
Answers the question "what do we want to become?"
Mission Statement
Answers the question "what is our business?" ; enduring statements of purpose that distinguish one business from similar firms
External Opportunities and Threats
Refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm an organization in the future
Internal Strengths and Weaknesses
An organization's controllable activities that are performed especially well or poorly
Long Term Objectives
Specific results that an organization seeks to achieve in pursuing its basic mission over the course of a year or more
Strategies
Means by which long-term objectives are achieved; potential actions that require top-management decisions and large amounts of the firm's resources
Annual Objectives
Short-term milestones that organizations much achieve to reach long-term objectives
Policies
The means by which annual objectives will be achieved; guidelines, rules, and procedures established to support efforts to achieve stated objectives
3 Important Questions in the Strategic Management Model
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?
External Audit
Focuses on identifying and evaluating trends and events beyond the control of a single firm
5 Broad Categories of External Forces
1. Economic
2. Competitive
3. Technological
4. Political, governmental, legal
5. Social, demographic, cultural, natural environment
External Factor Evaluation (EFE) Matrix
Outlines opportunities and threats
Internal Audit
Focuses on identifying factors that are in control of the firm (inside the company)
Internal Factor Evaluation Matrix (IFE)
Outlines the strengths and weaknesses, then rates them on a 1-4 scale
IFE Factor - Marketing
We can control promotion, advertising, and message about our brand/products
IFE Factor - Finance and Accounting
We can control how much we spend, how budgets are allocated, and debt
IFE Factor - Operation
We can control supply chain, distribution, efficiency, and partnerships with outside agencies
IFE Factor - R&D
We can control processes used to develop new products and R&D focus
IFE Factor - Technology
We can control strategic position, use of most advanced technology
Distinctive Competency
A firm's strength that cannot easily be matched or imitated by competitors
Art
Creative, interpretive, expressive
Science
Empirical, driven by process, measured
What is the output of strategic management?
Strategic Plan
Components of the Strategic Plan
1. Mission and Vision
2. Core Objectives
3. Goals to Achieve
What is the biggest challenge in developing a strategic plan?
Picking what goals to focus on
3 Questions about the Strategic Plan
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?
Productivity Frontier
the end game, we can only get so efficient for so long
Porter's Thesis (What is Strategy?)
True competitive differentiation and the path to sustainable profitability is delivered via strategic positioning
Strategic Positioning is accomplished by...
1. Producing things differently
2. Producing something different
Components of a Mission Statement
1. Customers
2. Markets
3. Products/Services
4. Philosophy
5. Self-concept
6. Technology
7. Concern for public image
8. Concern for employees
9. Concern for profitability, growth
Porter's 5 Competitive Forces
1. Industry Rivals
2. Substitute Goods
3. Powerful Suppliers
4. New Entrants
5. Customers and Buyers
Industry Rivals
Companies that want your market share and will go to varying lengths to take it from you
Customers and Buyers
Savvy customers can force down prices by playing you and your rivals against one another
Substitute Goods
Offers an attractive price performance trade-off to the industry's product
Powerful Suppliers
Powerful suppliers will capture more of the value for themselves by charging higher prices, limiting quantity or services, or shifting costs to industry participants
Potential Entrants
Bring a new capacity and desire to gain market share
Two Components of Building Your Company's Vision
1. Core Ideology
2. Envisioned Future
2 Components of Core Ideology
1. Core Purpose
2. Core Values
2 Components of Envisioned Future
1. BHAGS
2. Vivid Description
Core Purpose
-Reason for being
-Idealistic
-Why we do what we do
Core Values
-Timeless
-Not externally justified
-May not be universal
BHAG
Big Hairy Audacious Goal
-ambition
-long-term
-not a sure thing
4 Types of BHAGS
1. Target
2. Common Enemy
3. Role Model
4. Internal Transformation
Vivid Description
-Context
-Describe achievement
5 Categories of External Audit
1. Economic
2. Competitive
3. Technology
4. Political, Legal, Govt.
5. Social, cultural, natural environment, demographic
Internal Audit Factors
1. Marketing
2. Finance and Accounting
3. R&D
4. Technology
5. Operations
Resource-Based View Approach (RBV)
Internal resources are more important for a firm than external factors in achieving and sustaining competitive advantage
Industrial Organization View (IO)
External (industry specific) factors are more important than internal factors in a firm for achieving and sustaining competitive advantage
In order to achieve a mission you need:
Objectives
In order to achieve objectives you need:
Strategies
In order to execute strategies you need:
Tactics
Customer Value Proposition (CVP)
Creates value for customers by helping them get an important job done
Profit Formula
Blueprint that defines how the company creates value for itself while providing values to customers
1. Cost Structure
2. Margin Model
3. Resource Velocity
Key Resources
Assets such as people, technology, products, facilities, equipment, channels, and brand required to deliver value proposition to the target customer
Key Processes
Operational and managerial processes that allow them to deliver value in a way they can successfully repeat and increase in scale
INTEGRATION STRATEGIES
1. Forward Integration
2. Backward Integration
3. Horizontal Integration
4. Vertical Integration
Forward Integration
involves gaining ownership or increased control over distributors or retailers
Backward Integration
strategy of seeking ownership or increased control of suppliers
Horizontal Integration
strategy of seeking ownership or increased control over a firm's competitors
Vertical Integration
the strategy of gaining ownership in the supply chain before or after the firm
INTENSIVE STRATEGIES
1. Market Penetration Strategy
2. Market Development
3. Product Development Strategy
Market Penetration Strategy
seeks to increase market share for present products and services in present markets through greater marketing efforts
Market Development
involves introducing present products or services into new geographic areas
Product Development Strategy
seeks increased sales by improving or modifying present products/services
DIVERSIFICATION STRATEGIES
1. Related Diversification
2. Unrelated Diversification
Related Diversification
competitively valuable cross-business fits
Unrelated Diversification
no competitively valuable cross-business relationships exist
DEFENSIVE STRATEGIES
1. Retrenchment
2. Divestiture
3. Liquidation
Retrenchment
occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits
Divestiture
selling a division or part of an organization
Liquidation
selling all or most of the company's assets, in parts, for their tangible worth
Porter's Generic Strategies
1. Cost Leadership
2. Differentiation
3. Focus
Cost Leadership
superior profits through lower per unit costs
Differentiation
creating a product or service that is perceived as being unique "throughout the industry"
Focus
superior profits through concentration on a limited part of the market
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