Chapter 6 Notes PDF

Preview

Summary

Thompson Lecture notes + text book notes for chapter 6...

Description

6.1: What is Effective Strategy Strategic Positioning and Its Principles Strategic Positioning: Attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. Three key principles underlie strategic positioning 1. Strategy Is the Creation of a Unique and Valuable Position a. Strategic Position emerges from three sources i. Few Needs, Many Customers ii. Broad Needs, Few Customers iii. Broad Needs, Many Customers 2. Strategy Requires Trade-Offs in Competing a. A company has to choose not only what strategy to follow, but what strategy not to follow 3. Strategy Involves Creating a “Fit” among Activities a. “Fit” has to do with the ways a company’s activities interact and reinforce one another 6.2: The Strategic-Management Process The Five Steps of the Strategic-Management Process Step 1: Establish the Mission, Vision, and Values Statements Step 2: Assess the Current Reality - Current Reality Assessment (aka 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 Step 3: Formulate the Grand Strategy - Grand Strategy: Explains how the organization’s mission is to be accomplished. Three common grand strategies are growth, stability, and defensive. - Strategy Formulation: The process of choosing among different strategies and altering them to best fit the organization’s needs Step 4: Implement the Strategy - Strategy Implementation: Putting strategic plans into effect Step 5: Maintain Strategic Control: The Feedback Loop - Strategic Control: Consists of monitoring the execution of strategy and making adjustments, if necessary 6.3: Establishing the Mission, Vision, and Values Statements Characteristics of a Good Mission Statement Characteristics of a Good Vision Statement - Should be positive and inspiring Characteristics of a God Values Statement - Should not be hollow statements, they must be ingrained, inherent, and sacrosanct 6.4: Assessing the Current Reality

An assessment helps to create an objective view of everything the organization does: its sources of revenue or funding, its work-flow processes, its organizational structure, client satisfaction, employee turnover, and other matters. Competitive Intelligence: Competitive Intelligence: Gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately - Isn’t always easy, but there are several avenues to find them - The public prints and advertising - Investor Information - Informal Sources SWOT Analysis 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 (aka Situational Analysis): The process for doing such planning and stands for Strengths, Weaknesses, Opportunities, and Threats affecting the organization. - Divided into two parts: Inside matters (Strengths and Weaknesses) and outside matters (Opportunities and Threats) - Organizational Strengths: The skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its vision - Organizational Weaknesses: The drawbacks that hinder an organization in executing strategies in pursuit of its vision - Organizational Opportunities: Environmental factors that the organization may exploit for competitive advantage - Organizational Threats: Environmental factors that hinder an organization’s achieving a competitive advantage Forecasting: Predicting the Future Forecast: A vision or projection of the future (2 types) - Trend Analysis: A hypothetical extension of a past series of events into the future - Contingency Planning: Predicting Alternative Futures (aka Scenario Planning/Scenario Analysis) - The creation of alternative hypothetical but equally likely future conditions Benchmarking: Comparing with the Best Benchmarking: A process by which a company compares its performance with that of a highperforming organizations

Porter’s Five Competitive Forces: 1. Threats of New Entrants

2. 3. 4. 5.

Bargaining Power of Suppliers Bargaining Power of Buyers Threats of Substitute Products or Services Rivalry among Competitors

6.5: Formulating the Grand Strategy Three Common Grand Strategies 1. The Growth Strategies a. A grand strategy that involves expansion - as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served b. Often takes the form of an innovation strategy, growing market share or profits by innovating improvements in products or services 2. The Stability Strategies a. A grand strategy that involves little or no significant change 3. The Defensive Strategies (aka Retrenchment Strategy) a. A grand strategy that involves reduction in the organization’s efforts Porter’s Four Competitive Strategies Wide Market Strategies 1. Cost-Leadership Strategies: Keeping Costs and Prices Low for a Wide Market a. Keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market 2. Differentiation Strategy: Offering Unique and Superior Value for a Wide Market a. Offer products or services that are of unique and superior value compared with those of competitors but to target a wide market Narrow Market Strategies 3. Cost-Focus Strategy: Keeping Costs and Prices Low for a Narrow Market - Keeps the costs, and hence prices, of a product or service below those of competitors and to target a narrow market 4. Focused-Differentiation Strategy: Offering Unique and superior Value for a Narrow Market - Offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market Single-Product Strategy versus Diversification Strategy: The Single-Product Strategy: Focused but Vulnerable A company makes and sells only one product within its market - The benefit: focus - The risk: vulnerability The Diversification Strategy: Operating Different Businesses to Spread the Risk Diversification: Operating several businesses in order to spread the risk - One kind of diversification strategy: Vertical Integration, in which a firm expands into

businesses that provide the supplies it needs to make its products or that distribute and sell its products The Blue Ocean Strategy W. Chan Kim and Renee Mauborgne define a “blue ocean” as a completely new market 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 to create - Invent a completely new industry - Create a blue ocean within a red ocean, expands 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 - How fast the entire industry is growing - 2. Their share of the market - Business unit’s share of the market in relation to competitors Stars: High growth, High market Shares Question Marks: High Growth, Low market shares Cash Cows: Slow growth, High market shares Dogs: Low growth, Low market shares 6.6: Implementing and Controlling Strategy: Execution Implementing the Strategy Often implementation means overcoming resistance by people who feel the plans threaten their influence or livelihood Maintaining Strategic Control To keep a strategic plan on track Engage People: Need to actively engage people in clarifying what your group hopes to accomplish and how you will accomplish it Keep It Simple: Keep your planning simple, unless there’s a good reason to make it more complex Stay Focused: Stay focused on the important things Keep Moving: Keep moving towards your vision of the future, adjusting your plans as you learn what works Execution: Getting Things Done Execution: it is a central part of any company’s strategy. Consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised

The Three Core Processes of Business: People, Strategy, and Operations...