Study Guide over all of the Strategic Tools
Study Guide over all of the Strategic Tools BUS-J 375
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This 11 page Study Guide was uploaded by Stephanie Notetaker on Thursday January 7, 2016. The Study Guide belongs to BUS-J 375 at Indiana University taught by Rene Bakker in Winter 2016. Since its upload, it has received 20 views. For similar materials see Strategic Management in Business at Indiana University.
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Date Created: 01/07/16
Strategic Management Study Guide Analysis without Paralysis: Chapter 1 successful analysts generate actionable, relevant, and timely insights and give that sense (sensegiving) to others, who act on it to create a more desirable future for their organization in essence an analyst defines and produces a better future reality (insights) for clients (executives) whose decisions will create it a competitive advantage is the distinct way in which an organization is positioned in the market to obtain an edge over its competitors status is most commonly evidenced by the organization’s ability to generate and maintain sustained levels of profitability above the industry average management decisions in the strategy development process are concerned with the following: o the scope of the organization’s activities where to operate who to target which competitors to avoid versus take on what value chain will we do or outsource o aligning an organization’s activities with its environment finding a strategy that creates a desirable level of “fit” o matching an organization’s activities to its resource capability working within means while wining customers and generating profits o implications of change throughout the organization o allocating and reallocating an organization’s significant resources seek resource optimization in using our assets where they can be most highly valued o values, expectations, and goals of those influencing strategy o the direction in which the organization will move in the long run strategic decisions support the organization’s vision, mission, values, and have significant resource allocation impact o they set precedents or the tone for decisions further down in the organization o occur infrequently o may be irreversible o have a material effect on the organization’s competitiveness within its marketplace o made by top managers and affect the organization’s business direction tactical decisions are less allencompassing than strategic ones; they involve formulating and implementing policies for the organization o they are usually made by midlevel managers o often materially affect functions such as marketing, accounting, production, or a business unit/product as opposed to the entire organization o generally have fewer resource implications than strategic decisions operational decisions support the daytoday decisions needed to operate the organization; they take effect over a few days or weeks o typically made by lowerlevel managers o differ from tactical and strategic decisions in that they are made frequently and often on the fly o tend to be highly structured o often with welldefined procedure manuals or within readily understood parameters sustaining a competitive advantage requires companies to uniquely gather and apply data and information, to create order out of chaos and complexity, and to leverage and transfer knowledge while striving to acquire expertise knowledge is the capacity to act converting knowledge into business insights and action requires competence in analysis, sensemaking, and sensegiving the new economy is characterized by increasing imitability, whereby competitors have a greater ability than ever before to quickly replicate and copy most facets of a new product or service offering innovation is more important than ever, and analysis complements and supports it Chapter 2 The Analysis Process analysis is difficult for most people hardly anybody analyzes their analysis few people have publicly recognized or established analysis expertise few frameworks exist for understanding how the analysis component can be managed as an integral part of the larger decisionmaking process symptoms that suggest why analysis is not managed properly o tool rut people keep using the same analytical tools repeatedly overusing the same tools counter to the principle that, in addressing the complexity of this dynamic world, business people need to look at and effectively apply numerous models to provide value o bschool recipe too rigid teachings without competitive analysis experience o ratio blinders most perform analysis based on historical data and financial ratios this can only provide comparison and tell them the size of the gap between 2 organizations on a particular data point/set does not help explain the reasons for why the gap exists or how to close it ratios point to the past but analysis must always point to the future o convenience shopping individuals frequently perform analysis on the basis of the data they have as opposed to the data that they should have analysis is a multifaceted, multidisciplinary combination of scientific and nonscientific processes by which an individual interprets the data or information to provide meaningful insights it is used to derive correlations, evaluate trends and patterns, identify performance gaps, and above all, identify and evaluate opportunities available to organizations generic approach to analysis o analytical framework (define the decision and purpose) collection (what are the facts) analysis (what do the facts mean) implications (what does it mean for the decision) being extremely clear about what and how the decisionmaking client will use the results of your analysis researchers have identified a variety of common biases that can enter into the process of analysis o escalating commitment where executives commit more and more resources to a project even when they receive evidence that it is failing it would be more rational to cut losses and run but they have feelings of personal responsibility and inability to admit mistake o groupthink team embarks on a poorly determined course of action without thoroughly questioning the decision’s underlying assumptions o illusion of control individual’s tendency to overestimate their ability to control events o prior hypothesis bias individuals who have strong beliefs about the relationships between variables tend to make decisions on the basis of these beliefs, even when presented with analytical evidence that contradicts them o simplification use simple examples to make sense of not so simple problems o representativeness tendency to generalize from small samples (such as their larger experience) to explain a larger phenomenon or population Chapter 3 BCG Growth/Share Portfolio Matrix purpose designed to help the analyst better understand the attractiveness or potential of a portfolio of distinct business units in a multiunit business provides an analytical framework to determine the optimal product or business portfolio prescribes a set of strategies to guide resource allocation across the portfolio provides a framework for analyzing competing business portfolios allows a multi business company to evaluate the merits of its individual business units to determine the appropriate market strategies for each business experience curve sequence o increased market share increased cumulative volume decreased costs by experience effects superior competitive position and profitability also includes the product life cycle Star Problem Child Earnings: high, stable,Earnings: low, growing unstable, growing High Cash generation: Cash generation: neutral negative Strategy: invest for Strategy: analyze growth Cash Cow Dog Real Earnings: high, stable Earnings: low, unstable Cash generation: high, Cash generation: Market Low stable neutral or negative Growth Strategy: milk (cash trap) Strategy: divest High Low Relative Market Share the simplicity of the BCG matrix may be its greatest strength presents a great deal of information visually in one diagram how to do it o divide the company into its SBUs or business product lines/segments o measure the growth rate of each SBU or SBL market o measure the relative market share of each SBU or SBL o position each SBU or SBL along the matrix dimensions o construct a matrix for all competitors o assign optimal generic strategies to each business o further disaggregate the analysis o introduce analytical dynamics o iteration Chapter 4 Competitor Analysis provide a comprehensive picture of the strengths and weaknesses of current and potential competitors to identify opportunities and threats for your organization 4 main objectives o identify competitors’ future plans and strategies o predict competitors’ likely reactions to competitive initiatives o determine the match between a competitor’s strategy and its capabilities o understand a competitor’s weaknesses has the competitor response in the middle then on the outskirts are drivers (future goals and strategies), can do/is doing, management assumptions, and current capabilities how to do it o determine who your competitors are and who they may be in the future o decide what info you need about these competitors o organize the gathered information into 4 categories future goals current strategy capabilities assumptions o present your analytical insights to decision makers in an appropriate format and in a timely manner o develop a strategy based on the analysis o continually monitor competitors and scan for potential competitors Chapter 5 Driving Forces Analysis driving forces analysis is a way of understanding and accounting for change at the industry level drivers are clusters of trends that collectively influence changes to an industry’s structure and a rival’s competitive conduct force suggests that the drivers can materially impact the firm’s future forces that push toward change are called driving or helping forces forces that resist change are called restraining or hindering forces how to do it o identify an industry’s driving forces o assess the impact that the driving forces will have on the industry o rank them low importance; high uncertainty lesser priority DFs that should be monitored for unfolding development low importance; low uncertainty require little to no subsequent inclusion in strategy development high importance; high uncertainty critical priority DFs for decision making, planning, and strategy high importance; low uncertainty inevitable or predetermined DFs easier to plan for and need to be included in planning and strategy some common DFs include: o changes in the longterm industry growth rate o changes in who purchases the product and the manner in which it is used o changing societal concerns, attitudes, and lifestyles o diffusion of expertise across more firms and locations o election or political trends, government decisions, or shifting regulatory influences o growing use of social media, mobile interactivity, and webbased applications o important firms that enter or exit the industry o increasing globalization of the industry o innovation in communication and marketing; processes and products o major changes in customer needs and preferences o prominent changes in production costs and efficiencies o significant changes in uncertainty and business risk o technological change and manufacturing process innovation Chapter 6 Financial Ratios and Statement Analysis helps managers understand a company’s financial performance, competitive situation, and future prospects gives insight into the company’s financial decisionmaking and operating performance ratio analysis provides insights into the relationships between two or more amounts in a company’s financial statements financial statements include: o income statement o balance sheet o position statement (cashflow statement) o statement of changes in owners’ equity shows the gap between the amount of owners’ equity at the beginning and end of a period 3 principal benchmarks are used to assess the appropriateness of ratios o company’s performance history o compare a company to specific competitors o industrywide comparison weakness is that financial ratios are based on historical accrual accounting data how to do it o choose the appropriate ratios to analyze o locate the appropriate sources to provide the raw data with which to calculate the ratios o calculate the ratios and compare them o check for opportunities and problems Chapter 7 Five Forces Industry Analysis developed and popularized by Michael Porter designed to help you understand an industry and its participants identify an industry’s profit potential or “attractiveness” so that you can bridge the gap between a firm’s external environment and internal resources classifies the five forces into rules of industry competition o threat of new entrants o bargaining power of suppliers o bargaining power of buyers o threat of substitute products or services o degree of rivalry among existing competitors Chapter 8 Issue Analysis aids companies’ strategic, regulatory, and competitive intelligence efforts helps them anticipate changes in their external environment and become more proactive in shaping it through their influence on public policy o public policy – is a goalfocused course of action generated within an established political process in response to issues experienced by stakeholders looks at the macroenvironmental STEEP/PEST analysis 4 degrees of public policy o formative – highest degree of managerial direction o politicized o legislative o regulation/litigation – starts to cost the organization o public attention climbs and then falls like a curve Chapter 9 Product Life Cycle Analysis describes how sales of a product evolve as a function of time products pass through 4 stages during life o introduction o growth o maturity o decline helps to recommend specific marketing strategies for each stage to maximize profitability over the product’s lifetime revenue is the highest at maturity, but it also increases and then declines like a curve how to do it o estimate potential demand o determine the price range o forecast sales for a range of possible prices o consider the risk associated with competitive price cuts o determine the fundamental market strategy for the growth stage skimming strategy unique product market demand is small demand is priceinelastic crosselasticity of demand is low promotional elasticity is high penetration strategy product shares many qualities with established products o price elasticity of demand is high o total market demand is expected to be large o risk of competition is high o define the level of aggregation o forecast turning points o modify the strategy for each stage o remain watchful for a new product life cycle Chapter 10 Scenario Analysis a scenario is a detailed description of what the future may look like develops multiple scenarios to help executives address two common decision making errors o underprediction o overprediction methods for generating scenarios o quantitative method o qualitative methods intuitive method delphi method crossimpact analysis improves a company’s ability to respond nimbly in rapidly changing environments because it o ensures that a company does not focus on a catastrophe to the exclusion of opportunity o helps a company allocate resources more prudently o preserves a company’s options o ensures the companies look forward, not backward o allows companies to rehearse the future how to do it o define the scope of the analysis o identify the major stakeholders o identify the basic trends o identify the uncertainties o construct initial scenario themes o check for consistency and plausibility o develop learning scenarios o identify research needs o develop learning scenarios o identify the research needs o develop quantitative models o evolve toward decision scenarios Chapter 11 Macroenvironmental (STEEP/PEST) Analysis focuses on the social technological economic ecological and political/legal (STEEP) aspects of the environment that can affect the competitiveness of industries and companies political economic social and technological is also what it is sometimes referred to as macro environment – general – STEEP o broad in scope o has long term implications for the organization and its strategies operating environment – customers, suppliers, competitors, and partners internal environment how to do it o understand the segment of the environment being analyzed o understand interrelationships between trends o relate trends to issues o forecast the future direction of issues o derive implications Chapter 12 SWOT Analysis swot strengths weaknesses opportunities and threats common technique for analyzing and exploring a company’s situation and is often popularly referred to as a situation analysis evaluates the fit between a company’s internal resources and capabilities (its strengths and weaknesses) and external possibilities (its opportunities and threats) can be the most misused and poorly understood analysis method companies have greater control over the internal environment how to do it o list and evaluate SWOT elements o analyze and rank factors Chapter 13 Value Chain Analysis used to identify a company’s potential sources of economic advantage and to achieve an optimal allocation of resources the full range of sequential organizational activities that are needed to take products and services from the original idea through the different stages of production primary activities o inbound logistics – activities in which resources are acquired for later processing by the business (inventory warehousing and handling) o operations – activities that transform gathered inputs into the final product or service o outbound logistics – distribution oriented activities such as logistics and shipping o marketing and sales o services – post sale support activities support activities o firm infrastructure – administrative support activities covering the range of primary activities o human capital management o procurement – funding, subcontracting, supplier management and specification o systems and technology how to do it o define the company’s strategic business units o identify the company’s critical valuecreating activities o conduct an internal cost analysis o conduct an internal differentiation value advantage analysis o map the industry profit pool Chapter 16 Win/Loss Analysis cost effective insightful ethical method for gathering and analyzing information about your market, customers, and competitors identifies customer’s perceptions of specific sales situations and how you compare to competitors warning about why a customer is or isn’t buying your products provides info about the performance of both your organization and your competitors to be most effective, needs to be established as an ongoing process conducted on a regular basis how to do it o preparation determine target segments and identify prospects understand internal cultural issues develop questionnaire preparation for interviews o opportunity conducting interview analysis and interpretation o close dissemination
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