Lesson #5 - Strategic Management

Question 1

What is strategy?

Answer 1

• A comprehensive action plan
• Provides long-term direction
• Goals are to create sustainable competitive advantage and above average returns (exceeding what could be earned) for investors

Question 2

What is competitive advantage?

Answer 2

• Operating in a successful way that is difficult for competitors to imitate
• Ex: price, quality, promotion, benefits, customer loyalty, niche
• Example: Amazon
• Example: Starbucks experience

Question 3

What are the 2 steps in the strategic management process?

Answer 3

1. Strategic formulation
2. Strategic implementation

Question 4

Strategic formulation

Answer 4

• The process of creating a strategy by assessing existing strategies, organization, and environment to develop new strategies capable of delivering future competitive advantage
  ​​- what is our business mission?
• who are our customers?
• what do our customers consider “value”?
• what have been our results?
• what is our plan?

Question 5

What is strategic implementation?

Answer 5

The process of allocating resources and putting strategy into action

Question 6

What are the levels of strategy?

Answer 6

• Corporate Strategy—directs the organization as a whole towards LT competitive advantage
  In what industry or market should we compete in? (sets direction and guides resource allocation)
• Business Strategy—sets the strategic direction for a single business unit or product line.
  How are we going to compete for customers in this industry and market?
• Functional Strategy—Focuses on activities within a specific area of operations.
  How can we best utilize resources to implement our business strategy?

Question 7

What are the three types of strategies used by organizations?

Answer 7

• Growth and diversification strategies
• Restructuring and divestiture
• E-business strategies

Question 8

Growth and diversification strategies

Answer 8

• Growth strategies—seek an increase in size and the expansion of current operations.
• Diversification strategies—growth occurs through acquisition of or investment in new and/or different business areas.

Question 9

Restructuring and Divestiture Strategies

Answer 9

• Liquidation—operations cease due to sale of assets or bankruptcy. (i.e. Sears)
• Retrenchment Strategy – changes operations to correct weaknesses
• Restructuring—changes in the scale and/or mix of operations to gain efficiency and improve performance. (aka downsizing…decreasing size of operation/staff such as automobile makers)
• Divestiture—selling off parts of the organization to refocus on core competencies. (i.e. Ford sells Lincoln to decrease costs)

Question 10

E business strategies

Answer 10

• The strategic use of the Internet to gain competitive advantage.
• Popular e-business strategies
• Business-to-business (B2B) strategies (i.e. Walmart’s suppliers linked to inventory management system)
• Business-to-customer (B2C) strategies (i.e. EBay, Amazon)