MGM101 CH4 Flashcards
What are some questions to ask, regarding the strategic intentions of a business?
- Goals: How will you measure success year over year? For example, what are the
aims with respect to growth, profitability, and risk? - Product/Service Market Focus: What are the products and/or services that the busi-ness offers, and to what specific markets, both in terms of segments and location,
whether geographic or virtual? - Value Proposition: What bundle of benefits constitutes its “offer” or “value propo-sition” to its clients and customers?
Simpler def: what benefits does the company promise to give to customers - Core Activities: What are the primary value-adding activities that the business
intends to perform and how does it intend to perform them?
In what ways does strategy play a prospective role?
Strategy provides a starting point for analyzing and debating choices that affect a business’s future direction, making it crucial for both new and established businesses.
How does strategy provide a link to actionable business decisions?
Strategy translates broad ideas about direction and performance into clear, actionable terms.
What is a Strategic Business Unit (SBU), and how does it differ from a stand-alone business?
An SBU is a distinct unit within a larger corporation that sells a specific set of products or services to an identifiable customer group. It is accountable for its own revenues, costs, and investments. A stand-alone business, on the other hand, is an independent entity.
What is the primary focus of business strategy compared to corporate strategy?
Business strategy focuses on how a company competes within a specific industry or sector, while corporate strategy deals with the portfolio of business strategies and determines in which industries or sectors a company should compete.
How do the four components of business strategy relate to one another?
The four components (vision/mission, goals, value proposition, and core activities) must be aligned for a successful strategy. Changes in one component can impact the others, requiring iteration and adjustment to maintain alignment.
Which two strategy components are often easier entry points when developing a business strategy?
The vision or mission, and the value proposition, are often easier entry points. The goals of the business may develop naturally from the vision/mission, while the value proposition focuses on how value is created for the customer.
What should a goal structure represent
a goal structure should represent, in scope and balance, the important aims of the organization.
What is the potential risk of having a simple list of goals without a goal structure?
Without a clear goal structure, conflicts between goals may arise, such as between market share growth and profitability, leading to confusion and a lack of coherent strategy.
What are the three generic goal structures commonly used to describe business strategies?
The three generic goal structures are:
Growth: Focuses on investments to grow the business, even at the expense of short-term profitability.
Harvest: Prioritizes extracting profits and cash, minimizing investments.
Divest: Prepares and initiates the sale of the business.
What are the two types of forces that can influence the development of a goal structure?
External forces, such as competitive pressures and shareholder demands, and internal forces, like employee expectations and organizational capabilities, both influence goal structure development.
Why is it necessary for organizations to adapt their goal structures as circumstances change?
Organizations must adapt their goal structures as circumstances change to remain competitive and aligned with new market realities. Changing environments may introduce new challenges or opportunities, requiring shifts in priorities to sustain success.
What does the product/service market focus component of strategy define for an organization?
The product/service market focus component defines the nature of the products or services an organization offers and the characteristics of the markets it competes in.
What strategic decision does a penetration strategy focus on?
A penetration strategy focuses on increasing market share for existing products and services in current markets or leveraging growth within those markets.
What is a market development strategy?
A market development strategy involves offering existing products or services to new markets, typically through geographic expansion or targeting new customer segments.
What does the concept of competition mean for organizations in both the for-profit and not-for-profit sectors?
In both sectors, competition refers to the allocation of scarce resources (e.g., time, money) to achieve the best outcomes.
What is upstream competition?
Upstream competition refers to the competitive dynamics that occur earlier in the supply chain, typically concerning the acquisition of raw materials or resources needed for production. In industries like oil, gas, timber, or minerals, upstream competition focuses on securing access to and continuity of supply for these essential resources.
For example, in the oil industry, upstream competition involves companies competing for drilling rights, leases, or access to natural resources like oil reserves. Success in upstream competition can significantly affect a company’s ability to operate efficiently and maintain a competitive advantage.
What is a product/service market matrix?
A product/service market matrix is a tool used to visualize and categorize the relationships between a company’s products or services and the market segments it serves. It helps to analyze where emphasis is placed by mapping products/services against market segments, enabling strategic decisions such as resource allocation, market focus, or product discontinuation.
Why are market segments important in a product/service market matrix?
Market segments are important because they reflect differences in product requirements, buying processes, and competition. This segmentation allows a company to tailor its offerings and strategies to different groups, such as retail customers, residential contract buyers, or commercial developers.
What is a value proposition in business strategy?
A value proposition is a statement of the benefits a business offers to its customers in the marketplace. It reflects how the company intends to create value for its customers through its products or services.
What are Michael Porter’s two generic strategies for value propositions?
Michael Porter’s two generic strategies are:
- Low cost strategy: Competing by providing products or services at a lower cost than competitors, allowing for price competition.
- Differentiation strategy: Competing by offering unique products or services that set the company apart from competitors, based on features like quality, service, or innovation.
What is the Blue Ocean Strategy, as proposed by Kim and Mauborgne?
it involves breaking away from the traditional trade-off between low cost and differentiation by creating new market space (a “blue ocean”) where competition is irrelevant. This strategy aims to align low cost and differentiation simultaneously, opening up new opportunities.
What is the key to a useful expression of a value proposition?
The key is to focus on stuff that customers find valuable. The value proposition should express benefits such as price, features, service, and execution, not internal business goals like low cost production.
Why is it not enough for businesses to just list customer benefits in their value propositions?
Merely listing customer benefits does not provide differentiation. To create competitive advantage, businesses must focus on the benefits that are unique, important to the customer, and difficult for competitors to match. Execution and credibility behind these promises are what truly set businesses apart.
What are core activities in the context of a business strategy?
the primary functions or tasks that are essential to a business’s operations and directly contribute to its success, such as production, marketing, and customer service. These activities form the foundation of what the company does best.
What are core competencies?
Core competencies, on the other hand, are activities that the company performs exceptionally well and provide a competitive advantage.
What role do partnerships and joint ventures play in determining an organization’s core activities?
they blur organizational boundaries. Critical activities that are performed with some degree of control or influence, even through external collaborations, may still be considered core activities.
How do businesses analyze core activities at the intermediate level?
the emphasis is on describing the basic activities that a business has chosen to perform and less so on how it intends to link and perform them
