Chapter 9 MQM 220
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This 8 page Class Notes was uploaded by Lydia on Thursday October 1, 2015. The Class Notes belongs to MQM 220 at Illinois State University taught by Heather Jia in Fall 2015. Since its upload, it has received 24 views. For similar materials see Business Organization and Management in Business, management at Illinois State University.
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Date Created: 10/01/15
Chapter 9: Strategic Management What Is Strategic Management? • Strategic management - what managers do to develop the organization’s strategies. • Strategies - the plans for how the organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. (conscious decision making) • Business model - how a company is going to make money. (What's your strategy? What's your plan to make the company profitable) Why Is Strategic Management Important? (It’s the means by which we take all the information from all different aspects the organization and piece them together for a cohesive understanding)(Because you pull from your accounting clients, marketing managing classes to be able to look at it from this big picture conceptual frame work, like top managers do, to be able to make decisions about your organization) 1. It results in higher organizational performance. 2. It requires that managers examine and adapt to business environment changes. 3. It coordinates diverse organizational units, helping them focus on organizational goals. The Strategic Management Process Strategic management process - a six-step process that encompasses strategic planning, implementation, and evaluation (it’s the overall scope of how an organization is comprised what they're doing and the 6 step process very closely mirrors the decision making process) Step 1: Identifying the organization’s current mission, goals, and strategies – Mission (or vision): a statement of the purpose of an organization (these are basic guiding principles that an organization adopts and uses and rarely ever modifies. It’s the guiding principle you use over the long term) • The scope of its products and services (it answers the question, what are we in business to do? That's the purpose of the mission statement, what are we her for? Why do we matter?) ( a good mission statement is so accurate to what that organization does that you can very easily discern what organization you're talking about just by reading the mission statement) • Examples of some companies mission statements This company's mission is to be the earth's most customer centric company, to build a place where people can come to buy and discover anything they many want to buy online. =Amazon To give people the power to share and make the world more open and more connected. = face book Committed to bringing the best personal computing experience to students and educators and create and creative professional consumers around the world through its innovated hardware, software, and internet operating. = Apple To organize the worlds information and make it universally assessable and useful. = Google To provide fast and easy video access and the ability to share videos. = you tube – Goals: the foundation for further planning • Measurable performance targets Step 2: Doing an external analysis – The environmental scanning of specific and general environments (looking at what's going on outside of the organization and asking ourselves how does this affect me or this organization?, what's going on out there that can either help me or hurt me?) • Focuses on identifying opportunities and threats Step 3: Doing an internal analysis – Assessing organizational resources, capabilities, and activities (what are we doing right? What are we doing wrong?; it's about what's going on inside the organization. What are we doing that helping us? What are we doing that’s hurting us?) • Strengths create value for the customer and strengthen the competitive position of the firm. • Weaknesses can place the firm at a competitive disadvantage. – Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats) SWOT Analysis • SWOT analysis - an analysis of the organization’s strengths, weaknesses, opportunities, and threats. • Resources - an organization’s assets that are used to develop, manufacture, and deliver a product to its customers. (assets that you can draw on to make your organization better; can be money, the collective intelligence of your employees, natural resources, such as things pulled from the earth (gold, diamond, oil)) • Capabilities - an organization’s skills and abilities in doing the work activities needed in its business. (skills and know how that you have that help or these are lacking and that would be a weakness) – Ex. Steve jobs their finances didn't change at all when he was let go but the value of their company plummeted when he was let go, but there is nothing on their financial statements that would "say this is the value of Steve Jobs". Resource are not always assets but assets are always resources) Strengths and Weaknesses • Strengths - any activities the organization does well or any unique resources that it has. • Weaknesses - activities the organization does not execute well or needed resources it does not possess. • Core competencies - the organization’s major value-creating capabilities that determine its competitive weapons. (What you do better. What your organization does better than other organizations) Step 4: Formulating strategies (You recognize your opportunities, your threats, your strengths, your weaknesses and you build on those positive ones and you work on lessening the weaker ones) • Develop and evaluate strategic alternatives. • Select appropriate strategies for all levels in the organization that provide relative advantage over competitors. • Match organizational strengths to environmental opportunities. • Correct weaknesses and guard against threats. • Step 5: Implementing strategies • Implementation - effectively fitting organizational structure and activities to the environment. (You ask yourself now that I've come up with a strategy did it work for me? If it worked great, if it didn’t y not, what do you need to do differently) • The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements. • Step 6: Evaluating results • How effective have strategies been? • What adjustments, if any, are necessary? What Is Corporate Strategy? • Corporate strategy - an organizational strategy that determines what businesses a company is in or wants to be in, and what it wants to do with those businesses. (McDonalds corporate strategies, what do they want their sales worldwide to being the year 2016 and how are they going to achieve that0 • Strategic Business Unit (SBU) - the single independent businesses of an organization that formulate their own competitive strategies. (McDonalds their SBU could be North American Operations, European Operations, Asian Operations)(part of their SBU determines what the menu is going to be) • Ex. Disney has amusement parks, movies the put out, merchandising arm. ABC is owned by Disney) Types of Corporate Strategies • Growth - expansion into new products and markets. (growth) • Stability - maintenance of the status quo. (keep it the same) • Renewal - examination of organizational weaknesses that are leading to performance declines. (get smaller) Types of Organizational Strategies Growth Strategies • Growth strategy - a corporate strategy that’s used when an organization wants to expand the number of markets served or products offered, through either its current business(es) or new business(es). (Looking to expand your business. Let's take McDonalds for example, they can open up more restaurants, they can increase their product offerings, they can buy out there competitors (Boston Market is owned by McDonalds). Let's look at Disney, buying ABC was a growth strategies also in the entertainment business but not necessarily in the cartoon/children video business) Types of Growth Strategies • Concentration - focuses on its primary line of business and increases the number of products offered or markets served in this primary business (expand by offering more products, increasing the number of products you offer, or trying to get more people to buy your product. So the idea is you don’t change what you do, you just do more of it) • Vertical integration (your looking up and down from you) – Backward vertical integration - the organization becomes its own supplier Ex. For McDonalds if you wanted cheaper straws you either negotiate, buy the company, or make them yourself. Acquiring or producing for yourself the inputs to your business – Forward vertical integration - the organization becomes its own distributor Ex. Amazon they will deliver their product themselves, instead of having UPS, Fed-Ex, or the mail system deliver their product, if they had a distribution center in san Diego and somebody within 50 of san Diego orders a product that’s in that distribution center they deliver it themselves instead of hiring out another 3rd party to deliver their product. • Horizontal integration - a company grows by combining with competitors. (buying out your competitors so your competitors are now your customers) • Diversification – Related diversification - when a company combines with other companies in different, but related, industries (when McDonalds started operations with Boston market. Boston market serves a slightly higher socioeconomic clientele. That is still related because it's still within the food industry) – Unrelated diversification - when a company combines with firms in different and unrelated industries (general electric they have light bulbs, appliances, trains, aviation, automotive industry, they do corporate financing, they won't loan you money but they'll loan money to corporate businesses. This is unrelated because they aren't in the same industries) Corporate Strategies (cont.) • Stability strategy - a corporate strategy in which an organization continues to do what it is currently doing. (Continuing to do what you're currently doing. These are not long term forever strategies) • Renewal strategy - a corporate strategy designed to address declining performance. (The idea is you get smaller in order to stabilize, or in order to get stronger in the long run. It’s a strategies to deal with declining performance so you sacrifice a limb for the sake of a whole) • Retrenchment strategy - a short-run renewal strategy used for minor performance problems. (caterpillar just announced that they're going to be laying off 10k people)(it’s a short term strategies to deal with the short term problem) • Turnaround strategy - when an organization’s problems are more serious, more drastic action is needed. (You're going in the wrong direction and you need to turn around. It's much more involved and long term. JC Penny, sears closing down stores, their trying to turn themselves around)(trying to fix a long period of something going on)