Chapter 6 PDF

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Chapter 6 6.1 – What is Effective Strategy? Strategic positioning: attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company - Performing different activities from rivals - Performing similar activities in different ways The strategy is the creation of a unique and valuable position It emerges from three sources: 1. Few needs, many customers 2. Broad needs, few customers 3. Broad needs, many customers The strategy requires trade-offs in competing The strategy involves creating a “fit among activities 6.2 The Strategic-Management Process The five steps: 1. Establish the mission, vision, and values statement 2. Assess the current reality 3. Formulae the grand strategy 4. Implement the strategy 5. Maintain strategic control -

Mission Statement: “what is our reason for being?” Vision Statement: “what do we want to become?” Values Statement: “what values do we want to emphasize?”

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Current reality assessment or organizational assessment: to look at where the organization stand and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization’s mission

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Grand Strategy: explains how the organization’s mission is to be accomplished; three common grand strategies are growth, stability, and defensive

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Strategy formulation: the process of choosing among different strategies and altering them to best fit the organization’s needs

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Strategic control: consists of monitoring the execution of strategy and making adjustments, if necessary

6.3 – Establishing the mission, vision and values statement Mission Statement - Expresses the purpose of the organization - What is our reason for being? - Why are we here? Values Statement - What the company stands for: its core priorities, the values its employees, and what its products contribute to the world - What values do we want to emphasize? Vision Statement - Is it a clear sense of the future and the actions needed to get there? - What do we want to become? - Where do we want to go? 6.4 – Assessing the current reality Competitive intelligence: means gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately 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 SWOT analysis: a search for the Strengths, Weaknesses, Opportunities and Threats affecting the organization INSIDE MATTERS: - Organizational strengths: the skills and capabilities that give the organization special competencies and competitive advantage in executing strategies in pursuit of its vision - Organizational weaknesses: the drawbacks that hinder an organization in executing strategies in the pursuit of its visions OUTSIDE MATTERS: - Organizational opportunities: environmental factors that the organization may exploit for competitive advantage - Organizational opportunities: environmental factors that hinder an organization achieving competitive advantage

Forecast: vision is a vision or projection of the future Trend analysis: a hypothetical extension of a past series of events into the future Contingency planning/ scenario planning: is the creation of alternative hypothetical but equally likely future conditions Benchmarking: process by which a company compares its performance with that of highperformance organizations Porter’s Five Competitive Forces 1. Threat of new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitute products or services 5. Rivalry among competitors

6.5 - Formulating the Grand Strategy Growth Strategy: a grand strategy that involves expansion – as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served Innovation Strategy: growing market share or profits by innovating improvements in products or services Stability Strategy: a grand strategy that involves little or no significant change Defensive Strategy: a grand strategy that involves reduction in the organization’s efforts

Porter’s Four Competitive Strategies 1. Cost-leadership 2. Differentiation 3. Cost-focus 4. Focused differentiation Cost-leadership strategy: keep the costs, and hence, the prices of a product or service below those of competitors and to a target wide market Differentiation strategy: to offer products or services that are of unique and superior value compared with those of competitors but to target a wide market

Cost- focus strategy: keep the costs, and hence, the prices of a product or service below those of competitors and to target a narrow market Focused- differentiation strategy: to offer products or services that are of unique and superior value compared with those of competitors but to target a narrow market Single-product strategy: a company makes and sells only one product within its market - Benefit: focus - Risk: vulnerability Diversification: operating several businesses in order to spread the risk Vertical Integration: a firm expands into businesses that provide the supplies it needs to makes its products or that distribute and sell its products

The Blue Ocean Strategy Blue Ocean strategy: refers to a company’s creating a new, uncontested market space that makes competitors irrelevant, creates new consumer value, and decreases costs - Two ways: invent a completely new industry; expand the boundaries of an existing industry The BCG Matrix BCG matrix: a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market

6.6 – Implementing and Controlling Strategy: Execution Strategic control: consists of monitoring the execution of strategy and taking corrective action if necessary - Engage people - Keep it simple - Stay focused - Keep moving Execution: consists of using questionings, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised Three Core Processes of Business 1. People: “you need to consider who will benefit you in the future” 2. Strategy: “you need to consider how success will be accomplished” 3. Operations: “you need to consider what path will be followed”...