Chapter 10 Flashcards
The Importance of Strategic Management (1 of 3): What is Strategic Management?
Strategic Management: what managers do to develop the organization’s strategies.
Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes (Nag, Hambrick, Chen, 2007).
Strategies: plans for how an organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers to achieve its goals.
Exhibit 10.1 The Strategic Management Process Explained
- Identify the orgs current mission, goals and strategies
- SWOT Analysis
A) Internal: Strengths and Weaknesses
B) External: Opportunities and Threats - Formulate Strategies
- Implement Strategies
- Evaluate Results
Types of Organizational Strategies (1 of 9) Corporate:
Corporate Strategy
Corporate Strategy: A strategy that evaluates what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses.
Types of Corporate Strategies
– Growth: expansion into new products and markets.
– Stability: maintenance of the status quo.
– Renewal: address organizational weaknesses that are leading to performance declines.
Exhibit 10.5 Levels of Corporate Strategy Explained:
Corporate: Multi-business Corporation
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Business Level: Consumer Products Unit, Digital Media Unit, Financial Services Unit
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Functional Level: Connects down from Digital Media Unit into Research and Development, Manufacturing, Marketing, HR, Finance
What is Growth Strategy?
Growth Strategy: A corporate strategy that’s used when an organization wants to expand the number of markets served or products offered, either through its current business(es) or through new business(es).
What are Types of Growth Strategy?
Types of Growth Strategies:
Concentration: Concentrates on a primary line of business and increasing the number of products offered or markets served.
Vertical integration: Backward vertical integration: attempting to gain control of inputs (become its own supplier).
Forward vertical integration: an organization becomes its own distributor and is able to control its outputs.
Horizontal integration: A company grows by combining with other organizations in the same industry—that is, combining operations with competitors.
Diversification: Related Diversification: When a company grows by combining with firms in different, but related, industries.
Unrelated Diversification: When a company grows by combining with firms in different and unrelated industries.
What is Stability Strategy?
A strategy characterized by an absence of significant change in what the organization is currently doing.
What is Renewal Strategy?
A strategy designed to address organizational weaknesses that are leading to performance declines.
Managers need to develop strategies that address organizational weaknesses that are leading to performance declines. There are two main types of renewal strategies, retrenchment and turnaround.
What is Retrenchment Strategy?
Retrenchment Strategy: a short-run renewal strategy.
This strategy helps an organization stabilize operations, revitalize organizational resources and capabilities, and prepare to compete once again.
What is Turnaround Strategy?
A renewal strategy for situations in which the organization’s performance problems are more serious.
What is the BCG Matrix?
Developed by the Boston Consulting Group
Considers market share and industry growth rate (x is market share from high to low, y is anticipated growth rate from low to high, so top left is high-high)
Classifies firms as:
– Cash cows (Bottom-left): low growth rate, high market share.
– Stars (Top-left): high growth rate, high market share.
– Question marks (Top-right): high growth rate, low market share.
– Dogs (Bottom-right): low growth rate, low market share.
What are competitive stratgies?
Michael Porter suggested, in any industry, five competitive forces dictate the rules of competition and determine industry attractiveness and profitability.
Threat of new entrants: How likely is it that new competitors will come into the industry?
Threat of substitutes: How likely is it that other industries’ products can be substituted for our industry’s products?
Bargaining power of buyers: How much bargaining power do buyers (customers) have?
Bargaining power of suppliers: How much bargaining power do suppliers have?
Current rivalry: How intense is the rivalry among current industry competitors?
Choosing a Competetive Strategy?
Once managers have assessed the five forces and determined what strengths, weaknesses, threats and opportunities exist, they are ready to select an appropriate competitive strategy.
Types of Competitive Strategies?
Cost Leadership Strategy: The organization sets out to be the lowest-cost producer in its industry.
Differentiation Strategy: A company seeks to offer unique products that are widely valued by customers.
Focus Strategy: A company pursues a cost or differentiation advantage in a narrow industry segment.
Stuck in the Middle: An organization is unable to develop a competitive advantage through cost or differentiation.
