Chapter 6 Flashcards
a large-scale action plan that sets the direction for an organization
strategy
a process that involves managers from all parts of the organization in the formulation and implementation of strategies and strategic goals; involves middle managers
strategic management
“building blocks” of competitive advantage
- responsiveness to customers
- innovation
- quality
- efficiency
the world’s leading expert on competitive strategy; emphasized the importance of not confusing tactics with strategy
Michael Porter
when a company attempts to achieve competitive advantage by preserving what is distinctive about it
strategic positioning
ex: Walmart & Target
when a firm is engaged in _______ positioning, it produces a subset of an industry’s products or services
variety-based positioning
ex: Southwest Airlines focuses on point-to-point
when a firm attempts to serve most or all of the needs of a particular group of customers
needs-based positioning
serving the broad needs of a few customers
ex: Bessemer only caters to a handful of wealthy customers
serving the differing needs of similar customers
ex: IKEA
two approaches to needs-based positioning
when a firm segments customers who are accessible in different ways, rather than on actual differences between them
ex: Carmike Cinemas serves customers in small markets of fewer than 200,000
access-based positioning
few needs, many customers
variety-based
broad needs, few customers
needs-based
broad needs, many customers
access-based
when a strategy aligns with an organization’s activities to reinforce one another in a strategic fit
virtuous circle
ex: SW Airlines
difference between operational efficiency and strategy
operational efficiency is performing tasks better than your competitors
strategy is a plan for competing in the market
the strategic management process
- determine a mission and vision
- determine the grand strategy
- generate strategic plans
- execute the strategic plan
- maintain control over the strategy
explains how an organization will accomplish its mission
grand strategy
a grand strategy that involves expansion - as in sales revenues, market share, number of employees, etc.
growth strategy
a grand strategy that involves little or no significant change
stability strategy
a grand strategy that involves the reduction of an organization’s efforts
defensive strategy
a strategic planning tool that involves the search for strengths, weaknesses, opportunities, and threats affecting the organization
SWOT analysis
refers to internal skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission
organizational strengths
refers to the internal drawbacks that hinder an organization in executing strategies in pursuit of its mission
organizational weaknesses
refers to the environmental factors that the organization may exploit for competitive advantage
organizational opportunities
refers to the environmental factors that hinder an organization’s achievement of competitive advantage
organizational threats
a vision or projection of the future, used by managers to determine strategies going forward
forecast
a hypothetical extension of a past series of events into the future
trend analysis
the creation of alternative hypothetical, but equally likely, future conditions
contingency planning (or scenario planning/analysis)
Porter’s Model for Industry Analysis
- threat of new entry: new competitors take customers away from existing organizations
- suppliers’ bargaining power: the more concentrated the industry, the greater the bargaining power of suppliers
- buyers’ bargaining power: buyers have more power when there is a relatively small numbers of buyers in the market
- threats of substitute products: a firm faces more competition when there are more available substitutes for its products and services
- competitive rivalry: firms in industries with more competitors tend to be less profitable
Porter’s 4 Competitive Strategies
- cost-leadership strategy (wide)
- differentiation strategy (wide)
- cost-focus strategy (narrow)
- focused-differentiation strategy (narrow)
strategy that is used to keep costs, and hence prices, of a product or service below those of competitors and to target a wide market
ex: Walmart
cost-leadership strategy
strategy that is used to offer products or different services that are of unique and superior value compared to those of competitors and to a wide market
ex: Apple, Target, Coca-Cola
differentiation strategy
strategy that is used to keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow market
ex: store that produces low-end products
cost-focus strategy
strategy that is used to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market
ex: IKEA
focused-differentiation strategy
when a company makes and sells only one product within its market
(advantage is focus, increased competition is risk)
single-product strategy
when a company operates several businesses to spread out the risk
diversification strategy
occurs when an organization, under one ownership, operates several unrelated businesses
ex: GE, Virgin
unrelated diversification
occurs when an organization operates, under one ownership, several separate businesses that are related to one another
ex: Pepsi; beverages and snacks
related diversification
making products that involve the same type of management, capital investment, production, or have similar sources of risk
resource allocation
making products that have similar key success factors, are in similar stages of the industry life cycle, or occupy similar competitive positions
strategy formulation
making products that have targets defined in similar performance variables
performance management
allocation, strategy formation, and performance management
factors that may influence a decision to use related diversification
a means of evaluating business units based on growth rate and market share
The BCG Matrix
____ are in a high growth industry and have high market share
stars; eventually become cash cows
____ have low growth but high market share
cows; finance stars and question marks
____ are new ventures with a high market growth but low market share
question marks; may grow into stars or diminish like dogs
____ have a low growth and low market share
dogs; companies should divest from these markets
refers to putting strategic plans into effect
strategy implementation
consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve promised results
execution
tool effective leaders use to get their followers to adopt behaviors that lead to successful strategy execution; displayed through motivating people, modeling desired behaviors, and shaping culture and values
visible leadership
tool used by managers to clearly define roles, delegate authority, and hold individuals accountable for strategy execution
clear roles and accountability
tool used by managers to create a culture of honesty and openness, and they must listen to and encourage debate amongst subordinate
candid communication
tool used by managers to ensure that the organization’s recruiting, selection, training, compensation, promotion, transfers, and layoffs fit well within the strategy
appropriate human responsibility practices
three core processes of business
- people
- strategy
- operations
consists of monitoring the execution of strategy and making adjustments if necessary
strategic control
