Chapter 2 - Strategic Planning Flashcards
What is a value proposition?
Thirty-second “elevator speech” stating the specific benefits a product or service offering provides a buyer
What do companies segment markets?
Firms typically segment markets and then identify different target markets, or groups of customers they want to reach when they’re developing their value propositions. Companies sometimes develop different value propositions for different target markets
What is Strategic Planning?
- A process that helps an organization allocate its resources to capitalize on opportunities in the marketplace
- Typically, it is a long-term process.
What does Strategic Planning Process involve?
- Conducting a situation analysis
- Developing the organization’s mission statement, objectives, value proposition, and strategies
What does Situation Analysis involve?
Involves analyzing both the external and the internal environments
In what SWOT, what are the internal factors?
Strengths & Weaknesses
In what SWOT, what are the external factors?
Opportunities & Threats
What method should you use to assess the internal environment?
SWOT
What method should you use to assess the external environment?
PEST
What is the five forces model?
- An approach for analyzing industries
- Helps organizations understand their current competitors as well as organizations that could become competitors in the future
- Helps firms can find the best way to defend their position in the industry
What are the five forces in the five forces model?
- Potential New Entrants
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
- Substitutes
- Competitive Rivalry
In the five forces model, what effect does ‘Potential New Entrants’ have?
Profitable markets attract new entrants, which drives down profitability
In the five forces model, what effect does ‘Bargaining Power of Buyers’ have?
Buyers to drive prices down
In the five forces model, what effect does ‘Bargaining Power of Suppliers’ have?
Suppliers to drive up prices
In the five forces model, what effect does ‘Substitutes’ have?
Close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases
In the five forces model, what effect does ‘Competitive Rivalry’ have?
Number and capability of competitors in the market
What does competitive analysis involve?
Looking at any information available on competitors
What does PEST in PEST Analysis stand for?
- The Political and Legal Environment
- The Economic Environment
- The Social/Cultural Environment
- Technology
What is a mission statement?
States the purpose of the organization and why it exists
What are objectives?
What organizations want to accomplish
What are end results?
What they want to achieve in a given time frame
What are strategies?
What a firm is going to do to achieve its objectives
What are tactics?
Specific actions taken to execute the strategy.
What are the four terms in ‘Ansoffs Opportunity Matrix’?
- Market Penetration
- Product Development
- Market Development
- Diversification
Market Penetration focuses on ___ products for ___ markets
- Existing Products
- Existing Markets
Market Development focuses on ___ products for ___ markets
- Existing Products
- New Markets
Product Development focuses on ___ products for ___ markets
- New Products
- Existing Markets
Diversification focuses on ___ products for ___ markets
- New Products
- New Markets
What is franchising?
- A longer term form of licensing that’s extremely popular with service firms
- Franchisees pay a fee for the franchise and must adhere to certain standards.
What is Contract Manufacturing?
Companies hire manufacturers to produce their products in another country
What are Joint Ventures?
Combine the expertise and investments of two companies and help companies enter foreign markets
What is Direct Investment?
Owning a company or facility overseas as a way to enter a foreign market
What does SMART in SMART GOALS stand for?
- Specific
- Measurable
- Achievable
- Relevant
- Time-Bound
What are the 3 different levels within an organization where Strategic Planning may occur?
- Corporate Level
- Business Level
- Functional Level
What are corporate level plans?
In large organizations top executives will develop strategic plans for the corporation as a whole.
What is Strategic Business Unit (SBU)?
What are they also called?
- Business-level plans
- A business or product line within an organization that has its own competitors, customers and profit center for accounting purposes
What is a portfolio?
A group of businesses
What is the portfolio planning approach?
Analyzes a firm’s entire collection of business relative to one another
What are the 2 most widely used approaches to portfolio planning?
- BCG Matrix
- GE Approach
What 2 criteria does the BCG Matrix evaluate its SBUs on?
- The SBUs market growth rate
- The SBUs relative market share
In the BCG Matrix, what are the 4 categories SBU products can fall into?
- Stars
- Cash Cows
- Question Marks/Problem Children
- Dogs
Stars have:
- ___ market growth
- ___ market share
Companies should ___
- High Market Growth
- High Market Share
- Invest
Cash Cows have:
- ___ market growth
- ___ market share
Companies should ___
- Low Market Growth
- High Market Share
- Leave them alone
Question Marks have:
- ___ market growth
- ___ market share
Companies should ___
- High Market Growth
- Low Market Share
- Invest or gradually eliminate/sell them
Dogs have:
- ___ market growth
- ___ market share
Companies should ___
- Low Market Growth
- Low Market Share
- Sell
What is the General Electric (GE) Approach?
- Examines a business’s strengths and the attractiveness of the industry in which it competes
- Evaluate industries as high, medium, and low
