Management 2010 Chapter 6
Management 2010 Chapter 6 Management 201
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This 3 page Class Notes was uploaded by Eliza Barrett on Tuesday February 9, 2016. The Class Notes belongs to Management 201 at Clemson University taught by Katherine Clark in Fall 2015. Since its upload, it has received 66 views. For similar materials see Management 2010 in Business, management at Clemson University.
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Date Created: 02/09/16
Chapter 6: Strategic Management Strategic Positioning & Its Principles • Strategic positioning: attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company • 3 Key Principles o 1. Strategy is the creation of a unique and valuable position § Few needs, many customers. Ex- Jiffy Lube only provides lubricants but serves all kinds of customers § Broad needs, few customers. Ex- wealth management and investment advisory firm Bessemer Trust focuses on high net worth clients § Broad needs, many customers. Ex- National movie theater chains o 2. Strategy requires trade-offs in competing § Company has to choose not only what strategy to follow but what strategy not to follow o 3. Strategy involves creating a “fit” among activities • Strategic management works for small and large firms • Five steps of the Strategic-Management Process o 1. Establish the mission and the vision o 2. Assess the current reality § current reality assessment- look where the organization stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organizations mission o 3. Formulate the Grand Strategy § Grand strategy: after the assessment of the current reality, explains how the organization’s mission is to be accomplished. 3 common grand strategies are growth, stability, and defensive. § Strategy formulation: process of choosing among different strategies and altering them to best fit the organization’s needs o 4. Implement the strategy § putting them into effect o 5. Maintain strategic control: the feedback loop § strategic control: monitoring and execution of strategy and making adjustments • Characteristics of a good mission statement o Long term goal of what it wants to become o Does it answer these questions? Who are our customers, what are our major products or services, in what geographical areas do we compete, what is our basic technology, what is our commitment to economic objectives, what are our basic beliefs, values, aspiration, and philosophical priorities, what are our major strengths and competitive advantages, what are our public responsibilities, what image do we wish to project, what is our attitude toward our employees • Characteristics of a good vision statement o Long term goal of what it wants to become, long term direction and strategic intent o Short, positive and inspiring o Is it appropriate for the organization and for the times, does it set standards of excellence and reflect high ideals, does it clarify purpose and direction, does it inspire enthusiasm and encourage commitment, is it well articulated and easily understood, does it reflect the uniqueness of the organization, its distinctive competence, what it stands for, what its able to achieve, is it is ambitious • Competitive intelligence: gaining information about one’s competitor’s activities so that you can anticipate their moves and react appropriately. o Public prints and advertising o Investor information o Informal sources • SWOT analysis: situational analysis, which is a search for the Strengths, Weaknesses, Opportunities, and Threats affecting the organization o Environmental scanning: careful monitoring of an organization’s internal and external environment’s to detect early signs of opportunities and threats that may influence the firm’s plans § Analysis of internal strengths and weaknesses • Organizational strengths: the skills and capabilities that give the organization special competencies and competitive advantage sin executing strategies in pursuit of its vision § Analysis of external opportunities and threats • Organization opportunities: environmental factors that the organization may exploit for competitive advantage • Organizational threats: environmental factors that hinder an organization’s achieving a competitive advantage • Forecasting- predicting the future o Forecast: vision or projection of the future o Trend analysis: hypothetical extension of a past series of events into the future o Contingency planning: also known as scenario planning/analysis, is the creation of alternative hypothetical but equally likely future conditions o Benchmarking: process by which a company compares its performance with that of high-performing organizations o Porter’s model for industry analysis: business level strategies originate in five primary competitive forces in the firm’s environment § 1. Threats of new entrants § 2. Bargaining power of suppliers § 3. Bargaining power of buyers § 4. Threats of substitute products or services § 5. Rivalry among competitors • Three common grand strategies o 1. Growth strategy § involves expansion, as in sales revenues, market share, number of employees, or number of customers o 2. The Stability Strategy § involves little or no significant change o 3. Defensive Strategy § retrenchment strategy, involves reduction in the organizations efforts • Porter’s Four Competitive Strategies o 1. Cost Leadership Strategy: Keeping cots and prices low for a wide market § keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market o 2. Differentiation Strategy: offering unique and superior value for a wide market § offer products or services that are unique and superior value compared with those of competitors but to target a wide market • ex: Ritz-Carlton hotels o 3. Cost Focus Strategy: keeping cots and prices low for a narrow market § ex: low end products sold in discount stores o 4. Focused-Differentiation Strategy: offering unique and superior value for a narrow market § ex: luxury cars • Single product strategy: focused but vulnerable o Company makes and sells only one product within its market § Benefit: focus § Risk: vulnerability • Diversification Strategy: operating different businesses to spread the risk o Operating several businesses in order to spread the risk o Unrelated diversification: operating several businesses under one ownership that are not related to one another o Related diversification: an organization under one ownership operates separate businesses that are related to one another § Advantages: reduced risk because more than one product, management efficiencies- administration spread over several businesses, synergy- the sum is greater than the parts • Synergy: economic value of separate, related businesses under one ownership and management is greater together than the businesses are worth separately • BCG Matrix: means of evaluating strategic business units on the basis of their business growth rates and their share of the market • Maintaining strategic control o Engage people o Keep it simple o Stay focused o Keep moving • Execution: getting things done o A central part of any company’s strategy. It consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised • Three core processes of business: o People: you need to consider who will benefit you in the future o Strategy: need to consider how success will be accomplished o Operations: you need to consider what path will be followed
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