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Chapter 6

by: Stephanie De Angelis
Stephanie De Angelis

GPA 3.1

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Strategic Management
Managerial and Organizational Concepts
Professor Bhandari
Class Notes
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Popular in Managerial and Organizational Concepts

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This 7 page Class Notes was uploaded by Stephanie De Angelis on Friday February 19, 2016. The Class Notes belongs to MGT 250 at Pace University - New York taught by Professor Bhandari in Winter 2016. Since its upload, it has received 47 views. For similar materials see Managerial and Organizational Concepts in Business, management at Pace University - New York.


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Date Created: 02/19/16
Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design Vocab BCG Matrix­ a means of evaluating strategic business units on a basis of their business growth  rates and their share of the market Benchmarking­ a process by which a company compares its performance with that of high­ performing organizations Competitive Intelligence­ gaining information about one’s competitor’s activities so that you can anticipate their moves and react appropriately Contingency Planning­ (scenario planning) the creation of alternative hypothetical but equally  likely future conditions Cost­focus Strategy­ to keep the costs, and hence prices, of a product or service below those of  competitors and to target a narrow market Cost­leadership Strategy­ to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market Current Reality Assessment­ (organizational assessment) to look at where the organization  stands and see what is working and what could be different so as to maximize efficiency and  effectiveness in achieving the organization’s mission Defensive Strategy­ (retrenchment strategy) a grand strategy that involves reduction in the  organization’s efforts Differentiation Strategy­ is to offer products or services that are unique and superior value  compared with those of competitors but to target a wide market Diversification­ operating several businesses in order to spread the risk Environmental Scanning­ careful monitoring of an organization’s internal and external  environments to detect early signs of opportunities and threats that may influence the firm’s  plans Execution­ it is a central part of any company’s strategy; consists of using questioning analysis  and follow­through to mesh strategy with reality, align people with goals, and achieve results  promised Focused­differentiation Strategy­ to offer products of services that are of unique and superior  value compared to those of competitors and to target a narrow market Forecast­ a vision or projection of the future Grand Strategy­ explains how the organization’s mission is to be accomplished Growth Strategy­ a grand strategy that involves expansion Organizational Opportunities­ environmental factors that the organization may exploit for  competitive advantage Organizational Strengths­ the skills and capabilities that give the organization special  competencies and competitive advantages in executing strategies in pursuit of its vision Organizational Threats­ environmental factors that hinder an organization’s achieving a  competitive advantage Organizational Weaknesses­ the drawbacks that hinder an organization in executing strategies in  pursuit of its vision Porter’s Four Competitive Strategies­ (four generic strategies) cost­leadership, differentiation,  cost­focus, and focused­differentiation Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design Porter’s Model for Industry Analysis­ business­level strategic originate in five primary  competitive forces in the firm’s environment: threats of new entrants, bargaining power of  suppliers, bargaining power of buyers, threats of substitute products or services, and rivalry  among competitors Related Diversification­ in which an organization under one ownership operates separate  businesses that are related to one another Scenario Analysis­ the creation of alternative hypothetical but equally likely future conditions Single­product Strategy­ a company makes and sells only one product within its market Stability Strategy­ a grand strategy that involves little or no significant change Strategic Control­ monitoring the execution of strategy and making adjustments, if necessary Strategic Positioning­ attempts to achieve sustainable competitive advantage by preserving what  is distinctive about a company Strategy Formulation­ the process of choosing among different strategies and altering them to  best fit the organization’s needs Strategy Implementation­ putting strategic plans into effect SWOT Analysis­ a search for the Strengths, Weaknesses, Opportunities and Threats affecting the organization Synergy­ the economic value of separate, related businesses under one ownership and  management is greater together than the businesses are worth separately Trend Analysis­ a hypothetical extension of a past series of events into the future Unrelated Diversification­ operating several businesses under one ownership that are not related  to one another Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design 6.1 What Is Effective Strategy? Strategic Positioning & Its Principles o Strategic positioning according to porter means performing different activities  from rivals or similar activities in different ways o There are three key principals that underline strategic positioning  o Strategy is the creation of a unique & valuable position; position comes  from three sources  Few needs, many customers  Broad needs, few customers  Broad needs, many customers o Strategy requires Trade­offs in competing o Strategy involves creating a “Fit” among activities Does Strategic Management Work for Small as Well as Large Firms? o “One analysis of several studies found that strategic planning was appropriate not  just for large firms – indeed, companies with fewer than 100 employees could  benefit as well, although the improvement in financial performance was small.”  Meaning it may not be worth the effort for smaller companies 6.2 The Strategic­Management Process The Five Steps of the Strategic­Management Process o Has five steps plus a feedback loop (Figure 6.1) 1. Establish the mission and the vision  Mission  Mission statement  Vision  Vision statement 2. Assess the current reality  SWOT analysis  Forecasting  Benchmarking  Porter’s model for industry analysis 3. Formulate the grand strategy  Grand strategy  Strategy formulation   Strategy must be translated into more specific strategic  plans 4. Implement the strategy  Strategy implementation Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design 5. Maintain strategic control  Strategic control  Feedback  Revise actions, if necessary, based on feedback 6.3 Establishing the Mission & the Vision Characteristics of a Good Mission Statement o The organization’s purpose or reason for being is clearly stated Characteristics of a Good Vision Statement o Clear, long­term goal of what it wants to become o Can be short but should be positive and inspiring o Make the organization and its employees to achieve a desired future state that is  beyond its reach Table 6.1 6.4 Assessing the Current Reality Competitive Intelligence o As a manager, one of the worst nightmares is a competitor surprising your with a  service or product they didn’t have before and it forces you to play catch­up o Several ways to gain competitive intelligence include o The public prints and advertising o Investor information o Informal sources SWOT Analysis Figure 6.2 Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design  Inside Matters: Analysis of Internal Strengths & Weaknesses  Outside Matters: Analysis of External Opportunities & Threats Forecasting: Predicting the Future o Two types of forecasting are o Trend analysis o Contingency planning: predicting alternative futures Benchmarking: Comparing with the Best o Professional sports team benchmark all the time o So do nonprofits Porter’s Five Competitive Forces o Threats of new entrants o New competitors o Bargaining power of suppliers o Bargaining power of buyers o Threats of substitutes products or services o Rivalry among competitors 6.5 Formulating the Grand Strategy Three Common Grand Strategies o The growth strategy o The stability strategy o The defensive strategy Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design Porter’s Four Competitive Strategies o Cost­leadership strategy:  keeping costs & prices low for a wide market o Differentiation strategy: offering unique & superior vale for a wide market o Cost­focus strategy: keeping costs & prices low for a narrow market o Focused­differentiation strategy: offering unique & superior value for a narrow  market Single­Product Strategy versus Diversification Strategy o The single­product strategy: focused but vulnerable o The benefit: the focus o The risk: vulnerability o The diversification strategy: operating different businesses to spread the risk o Unrelated diversification: independent business lines o Related diversification related business lines  Reduced risk – because more than one product  Management efficiencies – administration spread over several  businesses  Synergy – the sum is greater than the parts o The BCG Matrix 6.6 Implementing & Controlling Strategy: Execution Chapter 6 : Strategic Management How Exceptional Managers Realize a Grand Design Implementing the Strategy o Strategy implementation is putting strategic plans into effect o It means overcoming resistance by people who feel the plans threaten their  influence or livelihood Maintaining Strategic Control o Strategic control consists of monitoring the execution of strategy by taking  corrective action, if necessary o To keep a strategic plan on track, you need to o Engage people o Keep it simple o Stay focused o Keep moving The Three Core Processes of Business: People, Strategy & Operations o The first core process – people: “you need to consider who will benefit you in the  future” o The second core process – strategy: “you need to consider how success will be  accomplished” o The third core process – operations: “you need to consider what path will be  followed How Execution Helps Implement & Control Strategy o There are many organizational obstacles to effective execution, and many of these are associated with organization culture; a system of shared beliefs and values  within an organization that guides the behavior of its members


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