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Flashcards in Chapter 8 Deck (61):
1

Nature of Strategic Managment

Strategy
Strategic Management
Effective Strategies

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Strategy

Plan for accomplishing organizations goals.

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Strategic Management

A comprehensive and ongoing managemnet process aimed at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals

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Effective Strategies

Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.

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Components of Strategy

Distinctive Competence
Scope
Resource Deployment

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Distinctive Competence

Something an organization does exceptionally well

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Scope

Range of markets in which an organization will compete

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Resource Deployment

How an organization will distribute its resources across the areas in which it competes

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Types of Strategic Alternatives

Business-level Strategy
Corporate-level Strategy

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Business-level Strategy

The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market.

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Corporate-level Strategy

The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.

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Strategy Formulation and Implementation

Strategy Formulation
Strategy Implementation
Deliberate Strategy
Emergent Strategy

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Strategy Formulation

The set of processes involved in creating or determining the organization's strategies

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Strategy Implementation

The methods by which strategies are operationalized or executed within the organization

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Deliberate Strategy

A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.

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Emergent Strategy

A pattern of action that develops over time, in the absence of goals or missions, or despite goals and missions

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Using SWOT Analysis to Formulate Strategy

Evaluating Organizational Strengths
Evaluating Organizational Weaknesses
Evaluating an Organization's Opportunities and Threats

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Evaluating Organizational Strengths

Organizational Skills
Common organizational strengths
Distinctive competencies
Imitation of distinctive competencies
Sustained competitive advantage
Strategic limitation is difficult

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Evaluating Organizational Weaknesses

Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.
Weaknesses can be overcome by:...
Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.

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Evaluating an Organization's Opportunities and Threats

Organizational opportunities are areas in the organization's environment that may generate high performance.
Organizational threats are areas in the organization's environment that make it difficult for the organization to achieve high performance.

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Types of Business-level Strategies

Porter's Generic Strategies
Miles and Snow's Strategy Types
Product Life Cycle

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Porter's Generic Strategies

Differentiation strategy
Overall cost leadership strategy
Focus strategy

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Differentiation strategy

An organization seeks to distinguish itself from competitors through that quality of its products or services

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Overall cost leadership strategy

An organizations attempts to gain competitive advantage by reducing costs below costs of competing firms.

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Focus Strategy

An organization concentrates on a specific regional market, product line. or group of buyers

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Implementing Porter's Generic Strategies: Differentiation Strategy

Marketing and sales emphasize, high quality, high value image of the organizations products or services

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Implementing Porter's Generic Strategies: Overall Cost Leadership Strategy

To support cost leadership, marketing and sales are likely to focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner.

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Implementing Porter's Generic Strategies: Focus Strategy

This strategy is implemented via the same approaches used for differentiation and cost leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group buyers.

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Miles and Snow's Strategy Types

Prospector
Defender
Analyzer
Reactor

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Prospector

Encourages creativity to seek out new market opportunities and to take risks.
Develops the flexibility to meet changing market conditions by decentralizing its organizational structure.

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Defender

Focuses on defending its current markets by lowering its costs and/or improving the performance of its current products.

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Analyzer

Incorporates elements of both the prospector and the defender strategies to maintain business and to be somewhat innovative.

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Reactor

Has no clear strategy, reacts to changes and events

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Implementing Miles and Snow's Strategies

Prospector Strategy
Defender Strategy
Analyzer Strategy

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Product Life Cycle

Introduction Stage
Growth Stage
Mature Stage
Decline Stage

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Formulating Corporate-Level Strategies

Strategic Business Units
Diverisification
Single Product Strategy

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Strategic Business Units

Each business or group of businesses within an organization engaged in serving the same markets, customers, or products

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Diversification

The number of businesses an organization is engaged in and the extent to which these businesses are related to one another.

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Single Product Strategy

Organizations manufactures one product or service and sells it in a single geographical market.

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Corporate Strategic Choices

Single product strategy (simplicity)
Related diversification (synergy)
Unrelated diversification (risk/return)

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Related Diversification

A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
Avoids the disadvantages and risks of a single product strategy.

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Basis of Relatedness in implementing Related Diversification:

Similar Technology
Common distribution and marketing skills
Common name brand and reputation
Common customers

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Advantages of Related Diversification

Rudices organization's dependence on any one of its business activities and thus reduces economic risk.
Reduces overhead costs associated with managing any one business through economies of scale and economics of scope.
Allows an organization to exploit its strengths and capabilities in more than one business.
Synergy exists among a set of businesses.

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Unrelated Diversification

A strategy in which an organization operates multiple businesses that are not logically associated with one another.

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Advantages of Unrelated Diversification

Stable corporate-level performance over time due to business cycle differences among the multiple businesses.
Allocation of resources to area with the highest return potentials to maximize corporate performance.

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Disadvantages of Unrelated Diversification

Firms with unrelated strategies fall to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies.
Poor performance due to the complexity of managing a diversity of business.

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Becoming a Diversified Firm

Internal Development of New Products
Replacement of Suppliers and Customers
Merger and Acquisitions

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Two types of Replacement of Suppliers and Customers

Backward Vertical Integration
Forward Vertical Integration

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Purpose of Mergers and Acquisistions

To acquire complementary products or services linked by a common technology and common customers.
To create or exploit synergies that reduce the combined organizations' costs of doing business to increase revenues.
To diversify through vertical integration.

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Two important portfolio management techniques

BCG Matrix
GE Business Screen

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BCG Matrix

A method of evaluating businesses relative to the growth rate of their market and the organization's share of the market.
Types of Business:
-Dogs
-Cash Cows
-Question Marks
-Stars

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GE Business Screen

A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors.
In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.

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Developing International and Global Strategies

Global Efficiencies
Multimarket flexibility
Worldwide learning

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Global Efficiencies

Location efficiencies-seeking lower input cost locations.
Economies of Scale-larger facilities result in lower cost.
Economies of scope-broadening product lines.

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Multimarket Flexibility

International businesses may respond to a change in one country by implementing a change in another country

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Worldwide learning

The diverse operating environments of multinational corporations contribute to organizational learning that can be transferred to other operating environments.

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Strategic Alternatives for International Business

Home Replication Strategy
Multidomestic Strategy
Global Strategy
Transnational Strategy

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Home Replication Strategy

Apply the distinctive competences they developed in their home market to the foreign that they enter.
Works best when the firms competences are valuable in many different types of markets.

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Multidomestic Strategy

Used by firms that manage a portfolio of international business as relatively autonomous and independent units.
Works best when national demands for customization are high.

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Global Strategy

Companies doing exactly the opposite of those using a multidomestic strategy. Works best for a commodity-line product or in an industry that demands high efficiency.

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Transnational Strategy

Pursue both centralization and decentralization at the same time, using whichever approach makes more sense in the particular circumstance.
Works best for complex industries and for companies with highly-skilled international managers.