Chpter 4 management Flashcards
(53 cards)
A prerequisite to effective strategic planning is identifying-
the unit or level for that planning is to be done
The planning could be at the
the corporate level, the business unit level, or the product level
A strategic business unit (SBU) meets the following criteria:
- It has a clearly defined market.
- It faces identifiable competitors in an external market (as opposed to being an internal supplier).
- As a separate, distinct, and identifiable unit whose assets do not depend on the existence of another SBU, its manager has control over planning and decision areas that determine success of the business
creates opportunities for employees to advance in the organization, creates a bigger impact in the market and may increase an organization’s profitability
Growth
Product/market expansion strategies involve growth through;
(1) penetration of existing markets with existing products,
(2) development of new products aimed at existing markets,
(3) development of new markets for existing products and finally,
(4) development of new products aimed at new markets.
In a market penetration strategy, management has the advantage of both
product knowledge and knowledge of existing markets.
The obvious disadvantage is the fact that the products will eventually pass through various
product life-cycle stages ending with sales decline and extinction
is a strategy that involves growth through increasing sales of existing products in existing markets
Market penetration
This expansion of sales can come about by:
(l) altering purchase patterns of existing customers—getting them to buy more when they purchase or to purchase more frequently,
(2) attracting nonusers to purchase the product, and
(3) attracting purchasers of competitors’ products to switch, thereby increasing market share
Alternative 1 and 2 involve increasing the
total size of the market
While alternative 3 involves increasing
market share
is a strategy of increasing sales through the introduction of new products/services to existing markets
Service/product development
Product development involves altering existing products/services by:
adding new features,
(2) offering different quality levels, or
(3) offering different sizes of the product
is a strategy which entails offering existing products to new markets
Market development
These markets can be:
(l) new geographical markets such as foreign countries or
(2) new market segments not currently using the product
may be used to supplement or complement the basic strategy chosen
diversification strategies
Integration strategies take two basic forms
horizontal integration and vertical integration
Horizontal integration strategies take the form of
alliances, acquisitions, or mergers between providers of similar products, such as hotel groups
more formalized versions of strategic alliances, a firm seeks to combine strengths and overcome the weaknesses of their respective organizations, often with some exchange or pooling of management control of the venture
For example, a company may seek distribution of its products in foreign markets and form a joint venture with a company already operating in those markets
Joint Ventures
Here, as in the joint venture, two organizations seek to do better
together what they had been doing alone
Merger
separate organizations become a single entity through some exchange of ownership
Typically, the conditions driving such a major ownership change portend dramatic, often
negative consequences
are often threatened without some major operational changes
Market share, profitability, and organizational viability
are why mergers don’t work out sometime
differences in organizational cultures
