Handout 7 Flashcards
the investigation, analysis, and decision-making by outlining the company’s competitive advantages, finding areas of weakness that limit its ability to expand, creating the corporate mission, outlining realistic goals and establishing policy standards.
Strategy formulation
primary and basic reason for an organization’s existence
Purpose
It refers to the desired future state or “big picture” of what an organization desires to achieve.
It is a goal that is massively inspiring, in-depth, and long-term.
Vision
A good vision conveys a picture of what the future will be
Imaginable
it appeals to the long-term interests of employees, customers, stockholders, and others who have a stake in the enterprise.
Desirable
It comprises realistic and attainable goals
Feasible
It Is clear enough to guide decision-making
Focused
It is general enough to allow individual initiative and alternative responses in light of changing conditions.
Flexible
Is easy to communicate; can be successfully explained within five (5) minutes
Communicable
more specific and action-oriented than a vision. It outlines the organization’s primary purpose and the basis of competition and competitive advantage
Mission
it must be short so that everyone can remember and understand
Concise
It should be measurable so that the company can visibly see progress.
Outcome-oriented.
It must include all the stakeholders involved in implementing a company’s strategy.
Inclusive
These are the specific and measurable results focused on achieving an organization’s mission. This generally guide how the organization can fulfill or move toward the higher goals (mission and vision) in a more specific and well-defined time frame.
Strategic Objectives
At least one indicator must measure progress against fulfilling the objective
Measurable
This means providing a clear message as to what needs to be accomplished.
Specific
It must be consistent with the organization’s vision and mission
Appropriate
Given the organization’s capabilities and environmental opportunities, it must be an achievable target. In essence, it must be challenging but doable.
Realistic
There must be a time frame for achieving the objective.
Timely
primarily about the choice of direction for a firm and the management of its
various product lines and business units for maximum value.
Corporate-level strategy
It refers to the firm’s overall orientation toward growth, stability, or retrenchment.
Directional strategy.
It includes the industries or markets in which the firm competes through its products and business units.
Portfolio analysis
It is how the management coordinates activities, transfers resources, and cultivates capabilities among product lines and business units.
Parenting strategy.
These refer to the firm’s actions to expand its activities. It is the most widely pursued corporate directional strategy due to its design to achieve growth in sales, assets, and profits.
Growth strategies
It can be achieved through considerable growth in your respective industry. It means expanding supply chains to reach more outlets, adding new features to existing products, and offering new products in the same market
Concentration (Vertical Growth)
refers to the process in which a company purchases or internally
produces certain inputs of its supply chain that could be utilized in production.
Backward integration.
a strategy where the company gains control of the business activities ahead in the value chain.
Forward integration
It can be achieved by expanding a company’s operation into
other geographic locations or increasing the range of products and services offered to current
markets.
Diversification (Horizontal growth.)
It can be achieved by expanding the production portfolio by adding new products to fully utilize the potential of existing technologies and marketing systems. It occurs when the organization adds related products or markets to its existing product line.
Concentric diversification
It can be achieved by moving new products or services that have no technological or commercial relations with current products, equipment, or distribution channels but may appeal to new customers.
Conglomerate diversification
These refer to the firm’s actions to make no changes in its current activities
Stability strategies
It is typically conceived as a temporary strategy to be used until the environment becomes more hospitable or to enable a company to consolidate its resources after prolonged rapid growth
Pause/Proceed-with-Caution Strategy
It is a decision to do nothing new. It is demonstrated by a management’s
choice to continue current operations and policies for a company’s foreseeable future.
No-Change Strategy
It is a decision to do nothing new in a worsening situation but act as though the company’s problems are only temporary.
Profit Strategy
These refer to the firm’s actions to pursue cutback or ultimate divestment
when it has a weak competitive position in some or all of its product lines resulting in poor performance
Retrenchment strategies
It emphasizes improving operational efficiency and is most appropriate to implement when a corporation’s problems are pervasive but not yet critical. Companies improve their performance by cutting costs or selling off assets.
Turnaround Strategy
the initial effort to quickly “stop the bleeding” with the general purpose of
cutting back on company size and costs.
Contraction
implements a plan to reduce unnecessary expenses.
Consolidation
happens if the company is successful with its efforts and starts growing profitably again
Rebirth
It involves giving up independence in exchange for security. In this way, the corporation may reduce the scope of some of its functional activities to reduce costs significantly.
Captive Company Strategy
involves selling the entire company to another firm at a good deal, given that the shareholders and the employees can keep their jobs.
sell-out
involves selling a division of a company with low growth potential.
divestment
involves giving up management of the firm to the courts in return for some settlement of the corporation’s obligations.
Bankruptcy
involves the termination of the whole firm.
Liquidation
top management views its product lines and business units as a series of investments from which it expects a profitable return.
portfolio analysis
a single business or a collection of related businesses that can be planned separately from the rest of the company. it aims to develop different strategies and assign appropriate funding
strategic business unit
used relative market share and the annual market growth rate as criteria for investment decisions, classifying SBUs as dogs, cash cows, question marks, and stars.
BCG’s Growth-Share Matrix
These are products within a company’s product line, which can be considered a market leader since they generate enough cash to maintain their high share of the market and usually contribute to the company’s profits
Stars
These are new products with the potential for success but need a lot of cash investments for development
Question marks.
These typically bring in far more money than is needed to maintain their market share. In this maturing or even declining stage of their life cycle, these products are “milked” for cash that will be invested in new question marks
Cash cows
These have a low market share and do not have the potential to bring in much cash for the company.
Dogs
generates corporate strategy by focusing on the core competencies of the parent corporation and the value created from the relationship between the parent and its businesses.
corporate parenting
Corporate headquarters must establish centers of excellence across the corporation.
Examine each business unit in terms of its strategic factors.
Corporate headquarters must consider
parenting opportunities for the organization.
Examine each business for performance improvement.
Corporate headquarters must
be aware of its own strengths and weaknesses in terms of resources, skills, and capabilities
Analyze how well the parent corporation fits with the business unit.
