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Study Guide over all of the Strategic Tools

by: Stephanie Notetaker

Study Guide over all of the Strategic Tools BUS-J 375

Marketplace > Indiana University > Business > BUS-J 375 > Study Guide over all of the Strategic Tools
Stephanie Notetaker

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These cover everything that is on his exam that comes after approximately 10 weeks of class, right before he starts the case competition.
Strategic Management
Rene Bakker
Study Guide
Strategic Management, strategy, Tools, Indiana University, J375
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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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