Chapter 3 Flashcards
a statement of an organization’s fundamental purpose that sets a business apart from another
Mission
a goal set by and for an organization’s top management that focuses on broad general issues
strategic goal
a goal set by and for an organization’s middle managers that focuses on how to operationalize actions necessary to achieve a goal
tactical goal
a goal set by and for an organization’s lower level managers that is concerned with short term issues
operational goal
a general plan outlining decisions about the resource allocation, priorities, and action steps necessary to reach strategic goals that is set by a board of directors and extends over a wide scope of topics
Strategic plan
aimed at achieving tactical goals, is developed to implement specific parts of strategic plan that involves upper management and has more of a concrete focus
tactical plans
a plan that focuses on carrying out tactical plans to achieve operational goals that are developed by middle and lower management with a short term focus and a narrow scope
operational plans
what does an organization’s mission outline?
- purpose
- premises
- values
- directions
what are the four important purposes of goals?
- Provide guidance and a unified direction for people in the organization
- Goal setting practices strongly affect other aspects of planning
- Goals can serve as a source of motivation for an organization’s employees
- Goals provide an effective mechanism for evaluation and control
a comprehensive plan for accomplishing an organization’s goals
strategy
a comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges
strategic management
a strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals
effective strategy
what three areas does a well conceived strategy address?
- distinctive competence
- scope
- resource deployment
an organizational strength possessed by only a small number of competing firms
distinctive competence
when applied to strategy, it specifies the range of markets in which an organization will compete
scope
how an organization distributes its resources across the areas in which it competes
resource deployment
what two levels do most businesses develop strategies at?
business level and corporate level
the set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market
business level strategy
the set of strategic alternatives from which an organization chooses as it manages its operations simultaneously across several industries and several markets
corporate level strategy
the set of processes involved in creating or determining an organization’s strategies; it focuses on the content of strategies
strategy formulation
the methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved
strategy implementation
an acronym that stands for strengths, weaknesses, opportunities, and threats
SWOT
a skill or capability that enables an organization to create and implement its strategies
organizational strengths
a strength possessed only by a small number of competing firms
Distinctive competence
an area in the environment that if exploited may generate higher performance
organizational opportunities
an area that increases the difficulty of an organization performing at a high level
organizational threats
a skill or capability that does not enable an organization to choose and implement strategies that support its mission
organizational weaknesses
a strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services
differentiation strategy
a strategy in which an organization attempts to gain a competitive advantage by reducing its costs below the costs of the competing firm
overall cost leadership strategy
a strategy in which an organization concentrates on a specific regional market, product line or group of buyers
focus strategy
a model that portrays how sales volume for products changes over the life of products
product life cycle
what are the four stages of the product life cycle
- introduction
- growth stage
- maturity stage
- decline stage
each business or set of businesses within an organization is frequently referred to as this
strategic business unit
the number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another
diversification
What are the three types of diversification?
- single product strategy
- Related diversification
- Unrelated diversification
a strategy in which an organization manufactures just one product or service and sells it in a single geographic market
single product strategy
a strategy in which an organization operates in several businesses that are somehow linked with one another
related diversification
What are the three primary advantages of related diversification?
- It reduces an organization’s dependence on any one of its business activities and then reduces economic risk
- By managing several businesses at the same time, an organization can reduce the overhead costs associated with managing any one business
- Related diversification allows an organization to exploit its strengths and capabilities in more than one business
a strategy in which an organization operates multiple businesses that are not logically associated with one another
Unrelated Diversification
what are two advantages of unrelated diversification?
- A business that uses this strategy should be able to achieve stable performance over time
- Because organizations that implement unrelated diversification fail to exploit important synergies, they are a competitive disadvantage compared to organizations that use related diversification
methods that diversified organizations use to determine in which businesses to engage and how to manage these businesses to maximize corporate performance
Portfolio management techniques
What are two important portfolio management techniques
- BCG (Boston Consulting Group) Matrix
- GE Business Screen
a framework for evaluating businesses relative to the growth rate of their market and the organization’s share of the market
BCG (Boston Consulting Group) Matrix
In the BCG Matrix, what is a dog?
businesses that have a very small share of the market that is not expected to grow
In the BCG Matrix, what is a cash cow?
businesses that have a large share of a market that is not expected to grow substantially
In the BCG Matrix, what is a question mark?
businesses that only have a small share of fast growing market
In the BCG Matrix, what is a star?
businesses that have the largest share of a rapidly growing market
a method of evaluating businesses along two dimensions: 1. Industry attractiveness and 2. Competitive position; in general, the more attractive the industry and the more competitive the position, the more an organization should invest in a business.
GE Business Screen
what can determine the attractiveness of an industry?
In addition to market growth, determinants such as market size, capital requirements, and competitive intensity
what can determine the competitiveness of an industry?
In addition to market share, determinants such as technological know how, product quality, service network, price competitiveness, and operating costs
a plan aimed at achieving tactical goals and developed to implement parts of a strategic plan; an organized sequence of steps designed to execute strategic plans
tactical plans
two basic forms of operational planning
- single use plans
- standing plans
a single use plan for a large set of activities
programs
a single use plan of less scope and complexity than a program
project
developed for activities that recur regularly over a period of time
standing plans
a standing plan that specifies the organization’s general response to a designated problem or situation
policy
a standard plan that outlines the steps to be followed in particular circumstances
SOP
describe exactly how specific activities are to be carried out
rules and regulations
the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate
contingency planning
at what four points does contingency planning come into play?
- Management develops the organizations basic plans
- The plan that management chooses is put into effect
- The company specifies certain indicators or signs that suggest a contingency event is about to take place
- Marks the successful completion of either the original or a contingency plan
the set of procedures the organization uses in the event of a disaster or other unexpected calamity
crisis management
