Ch 7 Flashcards
Strategy
describes “how” organizational goals are to be achieved. it refers to the method or plan of action that describes resource allocation and activities for attaining goals
Strategic Management
process of formulating and implementing strategies that will help the organization exploit its core competencies, build synergies, and deliver value to gain sustainable competitive advantage
Nepolian
great strategist win battles with less supplies 1805 fighting Russian enemy created strategy forced enemy to spread out kept reserve back
Want 2 things out of Strategy
use limited RESOURCES to have
the maximum IMPACT
Impact
competitive advantage
Competitive advantage
- core competencies
- synergy
- value
Core Competitencies
identify strengths
Synergy
bring together skills; avoid duplication more efficient; utilize resources in best possible manner; use other facilities and build on eachother
Value
how we deliver profits
Levels of Strategy
- corporate
- business division
- functional
Corporate
- help define market
- expands across industries
ex. PMG, Samsung, General Electric
Business Divison
- how we navigate the market
- 1 industry (industry specific)
Functional
- how operationalize
- within organization
- ex. HR
Focus Cost
small market; ex. jumping beans sells kids clothes
Differential Focus
trendy clothes for kids
Best Buy
- bought high end brand
- strategic alliance with other company
- 1966 customers more choice
- differentiation: customer service ex. geek squad, online development
Corporate strategies
-sets long-term direction for the total enterprise
grow-utilizes alliances
joint venture
-growth (multiple industries; Samsung)
-retrenchment (cut down on business)
-international (global)
-cooperation (joint-venture; strategic alliances)–get together with other company
Business or Competitive Strategies
-identifies how a division or strategic business unit will compete in its product or service domain
-Target Scope vs Advantage Low Cost Prod . Uniqueness
-Broad (Industry Wide) Cost Leadership Strategy . …………………………………………………………………Differentiation Strategy
-Narrow (Market Segment) Focus Strategy (low cost) ……………………………………………………………..Focus Strategy
………………………………………………………………….(differentiation)
Functional Strategies
guides activities within on specific area of operations
Circuit City
1949 started 1970s enjoyed status quo
- cost strategy laid off most experienced employees
- sold products at discounts
- employees not trained
Wal-Mart
- outskirts of land b/c its cheaper
- by pass traffic (big volumes)
- Functional Strategy: makes different what they do
- Same business strategy;; operationally different btw Circuit City
- needs to increase operations research one to first to start JIT
- invested a lot; negotiate; distribution cost how to make things go down
Kmart
- cut costs by giving discounts
- more customers bargaining with suppliers
- no electronic system of what is selling
How do Firms make strategic choices to gain competitive advantage?
the strategic management process
Strategic Management Process
1) strategic analysis
2) Strategy formulation
3) strategy implementation
Strategic Analysis
First, Analyze mission, vision, and goals
Next, Analyze internal and external environment–what do customers want?
Mission
- WHO we are?
- fundamental purpose
- company philosophy
- company identity
Vision
- WHERE we want to be?
- long term view
- what we want to achieve?
- direction and aspiration
Goals
- WHAT specifically we need to achieve?
- SMART goals
- -continually resetting
SWOT Analysis
internal and external
- External: Opportunities; threats
- Internal: strengths; weaknesses
BCG (Boston Consulting Group)
- internal (portfolio)
- ?; *; dogs, $ cows
Porter’s 5-Forces Model
- Potential new entrants
- Suppliers
- Customers
- Substitute products
- Competition
Strategy Implementation
implementation–> control
Implementation
- operational plans
- assign responsibilities
- decide reward structures
- allocate resources
- decide time line
- fit organizational structure and activities to the environment
Control
- reporting mechanisms
- -how effective have strategies been?
- -what adjustments, if any, are necessary?
To be successful
managers need to learn the art of planning and strategic management
Picking right strategy
equally critical
Planning and Strategizing
need to be based on thorough SWOT analysis
Plans and Strategies
need to be flexible
Implementation
should be fast and efficient to achieve planned goals
GM Corporate Level Strategy (growth)
- concentration: Auto Industry
- Diversification: ACDelco; GM Card; Onstar
- Vertical Integration: owning distribution and part companies 60%
GM CLS (Internationalization)
transnational strategy: operations in more than 120 countries woldwide
GM CLS (Cooperation)
Strategic Alliance: GM and its strategic partners produce cars and trucks in 34 countries
- -GM Korea Company
- -Shanghai Gneral Motors Co
- -SAIC-GM-Wuling Automobile Co
- -SAIC GM Investment Liminited
GM CLS (Retrenchment and Restructing)
- divested in unprofitable partnerships
- sold unprofitable brands
- reduced suppliers
GM Initial Strategy: Differentiation
“a car for every purse and purpose”
controlled more than half of car market
22% in 2008
GM Focus Now
Low-Cost Strategy
- less differentiation
- moving from 8-4 brands in the US
- Stronger focus on core brands
- more than a truck and SUV Co
- Focus on fuel-efficient cars and sedans
GM Manufacturing
Low Cost
- plant closures
- sustainability
- decrease operational costs
- standard parts and equipment
GM Human Resource
Low Cost
GM Marketing
low cost
- reducing their marketing budget by decreasing the amount advertisements they put out there buy making those advertisements have a bold statement and a lasting image in the customers minds
- comparing of products in their commercials and on paper
strategic formulation
process of crafting strategy
mission
organizations reason for existence in society
operating objectives
specific results that organizations try to accomplish
Porter’s competitive strategies
differentiation
cost leadership
focused differentiation
focused cost leadership
differentiation
make products that are unique and different
cost leadership
produce at lower cost and sell at lower price
focused differentiation
use differentiation and target needs of a special market
focused cost leadership
use cost leadership and target needs of a special market
BCG Matrix
analyzes business opportunities according to market growth rate and market share
stars
higher market shares in high growth markets;; produce large profits through substantial penetration of expanding markets;; preferred strategy is growth
cash cow
have high market shares in low-growth markets;; they produce large profits and a strong cash flow;;
Question Marks
low market shares in high growth markets; they may not generate much profit at the moment. the upside potential is there b/c of the growing markets
Question Marks
low market shares in high-growth markets;; although they may not generate much profit at the moment, the upside potential is there because of the growing markets
Dogs
low market shares in low growth markets;; they produce little if any profit, and they have low potential for future improvement
Which is the best question to ask to start the strategic management process?
What is our mission?
The ability of a business firm to consistently outperform its rivals is called
Competitive Advantage
GE is a complex conglomerate that owns many firms operating in very different industries. The strategies pursued for each individual firm within GE umbrella would best be called ___ level strategies
Business
An organization that is downsizing by cutting staff to reduce costs can be described as pursuing a ___ strategy
Retrenchment
When you buy music downloads online, the firm selling them to you is engaged in which type of e-business strategy?
B2C
The alliances that link firms in supply chain management relationships are examples of how businesses can use ___ strategies
Cooperation
Among the global strategies that international businesses might pursue, the ___ strategy most directly tries to customize products to fit local needs and cultures in different countries
Multidomestic
If Google’s top management were to announce that the firm was going to buy Federal Express, this would be a strategy of growth by ___
diversification
___ are special strengths that an organization has or does exceptionally well and that help it outperform competitiors
Core Competencies
A ___ in the BCG Matrix would have a high market share in a low-growth market
Cash COw
In Porter’s five forces model, which of the following conditions is most favorable from the standpoint of industry attractiveness?
Low bargaining power of suppliers
The two questions Porter asks to identify the correct competitive strategy for a business or product line are: 1 what is the market scope? 2 what is the __?
source of competitive advantage
When Coke and Pepsi spend millions on ads trying to convince customers that their products are unique, they are pursuing what Porter calls a ___ strategy
differentiation
A firm that wants to compete with rivals by selling a very- low-priced product in a broad market would need to successfully implement a ___ strategy
cost leadership
In addition to focusing on strategy implementation and strategic control, the responsibility for strategic leadership of an organization involves success with ___
the process of continuous change
