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48 terms

Ch. 8 mgmt.Strategy Formulation and Implementation

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Strategic Management
The set of decisions and actions used to formulate and implement strategies that will provide a competitively superioer fit between the organization and its environment so as to achieve organizational goals.
What is strategic management?
Is considered one specific type of planning. It is used by top executives to define an overall direction for the organization. Which is the fris's grand strategy.
Grand Strategy
The general plan of major action by which an organization intends to achieve its long-term goals.
The 3 general categories of Grand Strategy
Growth, Stability , and retrenchment.
Growth
Can be promoted internally by investing in expanision or externally by acquiring additional business divsions. Internal growth can inclued development of new or changed products.
External growth
Typically involves diversification, which means the acquistion of businesses that are related to current product lines or that take the corporation into new areas. Ex. Proctor Gambles purchaes of Iams Company,
Stability
Sometimes called paused strategy, means that the organization wants to remain the same size or grow slowly and in a controlled fashion. The corp. wants to stay in its current business. Ex Allied Tire Stores.
Retrenchment
Means that the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses. Managers often use a period of retrenchment to stabilize a company and attempt to restore profitability and competitiveness.
Liquidation
means selling off a business unit for the cash value of the assets, thus terminating its existence. Ex. Minnie Pearl Fried Chicken
Divestiture
Involves the selling off of businesses that no longer seem central to the corporation.
Globalization
The standarization of product design and advertising strategies throughout the world.
Multidomestic strategy
The modification of product design and advertising strategies to suit the specific needs of individual countries.
Transnational Strategy
A strategy that combines global coordination to attain efficiency with flexibility to meet specific needs in various countries..
Strategy
The plan of action that prescribes resource allocation and other activities for dealing with the enviornment, achieving a competitive advantage, and attaining organizational goals.
Competitive Advantage
What sets the organization apart from others and provides it with a distinctive edge in the marketplace.
Core Competence
A buisness activity that an organiziation does particularly well in comparison to competitors.
Synergy
The condition that exists when the organization's parts interact to produce a joint effect that is greater than the sum of the parts acting alone. May attain advantage with respect to cost, market power, technology or market power. When properly managed it can create added value with existing resources.
Three Levels of Strategy in Organization
Corporate-Level, Business-Level, Functional-Level strategies
Corporate-level strategy
The level of strategy concerned with the question "What business are we in?" Pertains to the organization as a whole and the combination of business units and product lines that make it up.
Business-level- strategy
The level of strategy concerned with the question "How do we compete?" Pertains to each business unit or product line within the organization.
Functional-level strategy
The level of strategy concerned with the question"How do we support the business-level strategy?" Pertains to all of the organization's majjor departments.
Strategy Formulation
Assessing the external enviornment and internal problems and intergrating the results into goals and strategy.
Strategy Implementation
Is in contrast with the strategy formulation, which is the use of managerial and organizational tools to direct resources toward accomplishing strategic results. It is the administration and execution of the strategic plan.
Situation Analysis
Analysis of the strengths, weaknesses, opportunities and threats SWOT that affect organizational performance. Important to all companies but is more crucial to those considering globalization because of diverse external environment.
Internal Strengths
are positive internal characterisitcs that the orgaization can exploit to achieve its strategic performance goals.
Internal Weaknesses
are internal characterisitics that might inhibit or restrict the organization's performance.
Internal Analysis
examines overall organization structure, management competence and quality, and human resource characterisitcs.
Threats
are characteristics of the external environment that may prevent the organization from achieving its strategic goals.
Opportunities
are characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals.
What external environment is most relevant to strategic behavior
Task environment sectors which included the behavior of competitors, customers, and suppliers, and labor supply. The general environment contains indirect influences on the org. and include technological developments , the economy, legal-politcal and international events, and sociocultural changes.
Strategic business units(SBUs)
has a unique business mission, product line, competitors, and markets relative to other SBUs in the corpoeration.
Portfolio Strategy
pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation.
The BCG Matrix Boston Consulting Group
A concept developed by the Boston Consulting Group that evaluates strategic business units with respect to the dimensions of business growth rate and market share.
Business growth
pertains to how rapidly the entire industry is increasing.
Market share
defines whether a business unit has a larger or smaller share that competitors.
Star
has a large market share in a rapidly growing industry. Important b/c it has add. growth potential, and profits should be plowed into this business as investment for future growth and profits.
Cash Cow
exists in a mature, slow-growth industry bu is a dominant business in the industry, with a large market share. Can milk cow to invest in other riskier businesses.
Question Mark
exists in a new, rapidly growing industry, but has only a small market share. Buisness is risky
Dog
is a poor performer, Small share and slow-growth market. Could be terminated look for other opportunities.
Five Competitive Forces
Potential new entrants, Bargaining power of buyers. Bargaining power of suppliers, Threat of substitue products, Rivarly among competitors.
Potential new entrants
capital requirements and economies of scale are examples of two potential barriers to keep new competitors out.
Bargaining power of buyers
informed customers become empowered customers. the internet provides easy access to a wide array of information about products, services, and competitors, thereby greatly increasing the bargaining power of end users.
bargaining power of suppliers
the concentration of suppliers and the availability of substitute suppliers are significant factors in determining supplier power. The internet can impact positive(access to greater number of customers ability to reach end users) or negative(procurement) . tends to raise the power.
threat of substitute products
power of alternatives and substitutes for company's product may be affected by changes in cost or in trends such as increased health consciousness that will deflect buyer loyalty. Internet created a greater threat of new subs. enabling new approaches to meeting customer needs.
rivalry among competitors
is influenced by the preceding four forces, as well as by the cost and product differentiation. Internet intensifies rivalry.
differentiation
a type of competitive strategy with which the organization seeks to distinguish its products or services from that of competitors.
cost leadership
a type of competitive strategy with which the organization aggressively seeks efficient facilities, cuts costs, and employs tight cost controls to be more efficient that competitors
focus
a type of competitive strategy that emphasizes concentration on a specific regional market or buyer group.