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Ch. 6 Management

An offensive strategy is a grand strategy that involves reduction in the organization’s efforts.
T/F

False

A defensive strategy, or a retrenchment strategy, is a grand strategy that involves reduction in the organization’s efforts.

Strategy implementation is putting strategic plans into effect, which means dealing with roadblocks within the organization’s structure and culture and seeing if the right people and control systems are available to execute the plans.
True
Fred, who is starting a painting business, was advised by a friend, a successful business owner, to write down the purpose of his painting business and why he believes his company will exist. Fred was writing his ____.
Mission Statement
Sue and Jane Smith are writing the vision for their new consignment shop. Because they want their employees and business to grow and reach goals, like all organization visions, it should be positive and inspiring, pushing their organization and the workers to achieve goals that they believe are not possible.
T/F

True

A vision should be positive and inspiring, and it should stretch the organization and its employees to achieve a desired future state that appears beyond its reach.

Johnson’s Fruit Farm is one of several stores in the county where customers can purchase locally grown fruits and vegetables. However, Mrs. Johnson also offers weekly workshops in her store on topics such as canning, healthy eating, and how to grow a garden, which no other store in the county does. By offering these unique workshops, the Johnsons are engaging in strategic positioning.
T/F

True

Strategic positioning means performing different activities from rivals, or performing similar activities in different ways.

Gathering information about your competitors’ activities so that you can anticipate their moves and react appropriately is known as ____.

Competitive Intelligence

Practicing competitive intelligence means gaining information about one’s competitors’ activities so that you can anticipate their moves and react appropriately.

A projection for the future is a ——-

Forecast

Forecast is a vision or projection of the future

The organizational-management process consists of seven steps: (1) doing research, (2) establishing the mission and vision, (3) assessing the current reality, (4) formulating the grand strategy, (4) implementing the strategy, (6) maintaining strategic control, and (7) maintaining the feedback loop.
T/F

False

Five steps, Plus a feedback loop.

See PPT for Five Steps.

A stability strategy is a grand strategy that involves little or no significant organizational change.
T/F
True
In the BCG matrix, stars are _____.
organizations with high growth and high market share which are definite keepers
Many customers have visited Sally’s Diner for decades because of their friendly service. Most customers feel that Sally’s is the friendliest placed around. The friendly service at Sally’s is an example of a company _____.

Strength

Strengths are inside matters. Strengths could be work processes, organization, culture, staff, product quality, production capacity, image, financial resources and requirements, service levels, and other internal matters.

Strategic position emerges from three sources: ____.
few needs, many customers; broad needs, few customers; broad needs, many customers
A sustainable competitive advantage is the ability of an organization to perform the tasks it normally does well in the same way each time to perfect those activities.
T/F

False

A sustainable competitive advantage is the ability of an organization to produce goods or services more effectively than its competitors do, thereby outperforming them. It means performing different activities from rivals, or performing similar activities in different ways.

So the owners of a computer repair shop can better formulate strategies, they are doing a SWOT analysis to understand the strengths and weaknesses within their company and the opportunities and threats of the external environment. These are some of the benefits of doing a SWOT analysis.
T/F

True

SWOT analysis should provide a realistic understanding of the organization in relation to its internal and external environments so that you can better formulate strategy in pursuit of the firm’s mission.

An organization’s vision is its long-term goal describing _____.

what the company wants to become, its long-term direction and strategic intent

An organization’s vision is its long-term goal describing what it wants to become, and it is expressed in a vision statement, which describes its long-term direction and strategic intent.

Dave and his partner are studying the strengths and weaknesses of their construction business, as well as researching the opportunities and threats in the external environment. This process by Dave and his partner is the development of a _____.
SWOT analysis
(Situational Analysis)
Know that it’s called both.SWOT analysis, also known as a situational analysis, is a search for the strengths, weaknesses, opportunities, and threats affecting the organization.

Developing a comprehensive program for long-term success is the focus of ____.
strategic planning
Jeff, the owner of a toy store, is interested in developing a sustainable competitive advantage. To do this he needs to be responsive to customers and to stay ahead in ____.

responsiveness, innovating, quality, and effectiveness

Sustainable competitive advantage occurs when an organization is able to get and stay ahead in four areas: (1) in being responsive to customers, (2) in innovating, (3) in quality, and (4) in effectiveness.

Strategic planning is a type of planning used exclusively by the government to develop short-term strategies to compete globally.
T/F

False

Strategic planning is concerned with developing a comprehensive program for long-term success.

Several studies found that strategic planning does not benefit smaller companies, as they very seldom see improvements in financial performance from this type of planning.
T/F

False

Smaller companies (under 500 employees) account for about half of private-sector employment and two-thirds of net new jobs in recent years. One analysis of several studies found that strategic planning was appropriate not just for large firms—indeed, companies with fewer than 100 employees could benefit as well, although the improvement in financial performance was small. Nevertheless, the researchers concluded that “it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very competitive industry where small differences in performance may affect the firm’s survival potential.”

The owners of Smith’s Yard Mart, a family-owned garden center in a rural community, is concerned over the news that a large retailer with a garden center is building a new store on the other side of town. This new retailer is a(n) ____ for Smith’s.

Threat

Threats are outside matters. Threats could be in the same categories as stated for opportunities: market segment analysis, etc. A competitor’s new product may be a threat if it is likely to capture market share.

Delux Technology has a reputation of reliability and winning customer service, building this highly respected name brand over the last 15 years. As a speaker at a business conference, Steve, the CEO of Delux, told his audience that “We have built our reputation by changing little over the last several years, but consistently helping customers with great, caring service and a reliable product.” Delux Technology utilizes a ____.

stability strategy

A stability strategy is a grand strategy that involves little or no significant change.

Pedro, CEO of a successful IT company, is constantly reading press releases, ads, and news articles about his competition, and he regularly checks information about new competitive products and visits trade shows to study his competition. Pedro is involved in ____.

Competitive Intelligence

Gaining competitive intelligence isn’t always easy, but there are several avenues and, surprisingly, most of them are public sources including the public prints and advertising, investor information, and informal sources. A competitor’s customer records are not available publicly, nor would they yield much information about upcoming plans.

Access Office Equipment has shifted to sales and service of laptops and PCs, and is no longer offering repairs on older types of office equipment because the demand for service on this equipment is low, costly, and the profits have dropped significantly. This is an example of an organization implementing a ______.

growth strategy

A growth strategy is a grand strategy that involves expansion, as in expanding sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served. In a variation of this strategy, it can acquire similar or complementary businesses.

When an organization operates several businesses to spread the risk, such as a landscaping company that offers not only landscaping services but also lawn care, snow removal, and other services, that business is utilizing a ____ strategy.

Diversification

A diversification strategy means operating several businesses to spread the risk. A grocery store sells food, toiletries, pharmaceuticals, cards, flowers, and often more.

Successful controlling within an organization, according to Bossidy and Charan, demands that managers build a foundation of controlling using the three core processes of _____.

people, strategy, and operations

Bossidy and Charan outline how organizations and managers can improve the ability to execute. Effective execution requires managers to build a foundation for execution within three core processes found in any business: people, strategy, and operations.

When organizations endeavor to keep their costs, and hence prices, of their products or services below those of competitors and to target a wide market this is a _____ strategy.

Cost-leadership

The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market.

The BCG matrix is a means of evaluating strategic business units on the basis of their _____.
business growth rates and share of the market
Tom and his family have developed a successful business selling a liquid spray fertilizer to other farmers in his area, consisting of rich, organic compost material. Recently ABC Seed, a national seed company, has been marketing a powdered chemical fertilizer to his customers that is less expensive than Tom’s product. ABC’s efforts are an example of ___ in Porter’s model for industry analysis.
threats of substitute products and services
George, a chef and owner of a popular restaurant, is always visiting his competition to observe how they are doing things in their restaurants. He told one of his managers that “I do this because I want to know what is going on. I am always concerned that one of our competitors will surprise us with a new service or menu item like us, but better.” George is utilizing ___.
competitive intelligence
Porter’s competitive strategies of cost-leadership and differentiation focus on ____ markets, and the cost-focus and focused-differentiation strategies focus on ____ markets.

wide; narrow

Porter’s Four Competitive Strategies are on PPT and Book. Learn them.

One report reads that big companies, such as Amazon, Google, or Apple, “are no longer content simply to enhance part of your life. The new strategy is to build a device, sell it to consumers, and then ____.”

sell them the content to play on their device

With big companies, especially big-tech companies such as Amazon, Google, or Apple, the strategy is to get consumers tied not just to a brand or device or platform but to make them captive of the company’s ecosystem and to get them connected “as tightly as possible so they and their content are locked into one system,” says analyst Michael Gartenberg.

Sales this year at Donna’s Pawn Shop have been high, and based on several factors, Donna projects next year’s sales to also be good. However, even with her forecast of continued strong sales, Donna and her partner need to develop a plan in case sales drop unexpectedly. This type of planning for alternative future conditions is known as ____.
contingency planning
(also known as Scenario Planning and Scenario Analysis)Note: Learn all optional names for terms.

Contingency planning, also known as scenario planning and scenario analysis, is the creation of alternative hypothetical but equally likely future conditions.

Who are our customers? What are our major products or services? In what geographic areas do we compete? These are all questions that are answered in a good _____.

mission statement

Good mission statements should answer these questions: 1. Who are our customers? 2. What are our major products or services? 3. In what geographic areas do we compete? 4. What is our basic technology? 5. What is our commitment to economic objectives? 6. What are our basic beliefs, values, aspirations, and philosophical priorities? 7. What are our major strengths and competitive advantages? 8. What are our public responsibilities, and what image do we wish to project? 9. What is our attitude toward our employees? (See Table 6.1.)

Rashid, the CEO of Top Productions, was telling his new vice president of accounting that “In the past I had resistance to new ideas by people who felt that one of our plans threatens their influence or jobs. So when you tell your collections department that we just hired a collection agency to handle bad debt, you may have to sell your collections manager and his supervisors on using the agency and that nobody is going to be laid off.” Selling middle and supervisory managers on changes to overcome their resistance is often a necessary part of _____.

strategy implementation

Often strategy implementation means overcoming resistance by people who feel the plans threaten their influence or livelihood. Thus, top managers can’t just announce the plans; they have to actively sell them to middle and supervisory managers.

To provide direction and momentum, encourage new ideas, and develop a sustainable competitive advantage are reasons why an organization should adopt _____.

strategic management and strategic planning

An organization should adopt strategic management and strategic planning for three reasons: They can (1) provide direction and momentum, (2) encourage new ideas, and above all (3) develop a sustainable competitive advantage.

Christopher’s Restaurant and Catering serves delicious vegetarian and vegan dishes. So when the local community became interested in eating a healthier diet, Christopher’s benefited. The changing community attitudes are an example of a(n) _____ for Christopher’s.

opportunity

Opportunities are outside matters. Opportunities could be market segment analysis, industry and competition analysis, impact of technology on organization, product analysis, governmental impacts, and other external matters.

Quality Services is an organization that operates several companies that market food products, restaurant equipment, and paper and plastic products, and it even has a division that counsels restaurant owners, helping them become established. Quality Services is involved in a _____ strategy.
diversification
Developing a comprehensive program for long-term success is the focus of ____.

strategic planning

strategic palnning is concerned with developing a comprehensive program for long-term success.

Doug is the CEO of Johnson Motors, a business consisting of Chevrolet, Buick, Cadillac, and Mercedes-Benz dealerships. He also sells Fleetwood and American Coach RVs. Doug mentioned to his sales manager that “there is economic value in having many related businesses managed by one ownership group. They are worth more than if they are separate companies.” This is an example of ____.

synergy

Synergy is the economic value of separate, related businesses under one ownership, and management is greater together than the businesses are worth separately. Example: PepsiCo can apply its marketing muscle not only to Pepsi Cola but also to 7-Up and Mountain Dew, which it also owns. When a company has special strengths in one business, it can apply those to its other related businesses.

Michael Porter proposed that business-level strategies originate with the primary competitive forces in the firm’s environment; these forces are _____.

threats of new entrants and substitute products or services, bargaining power of suppliers and buyers, and competitive rivalries

Strategic-management expert Michael Porter suggested in his Porter’s model for industry analysis that business-level strategies originate in five primary competitive forces in the firm’s environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers, (4) threats of substitute products or services, and (5) rivalry among competitors.

More important than profit growth, stimulating innovation, customer loyalty, and finding qualified employees, global CEOs desire ____.

excellence in execution

How important is execution to organizational success in today’s global economy? A survey of 769 global CEOs from 40 countries revealed that “excellence in execution” was their most important concern, more important than “profit growth,” “customer loyalty,” “stimulating innovation,” and “finding qualified employees.”

With small businesses in very competitive industries, small differences in performance may affect that company’s survival. So in this case, it is worth the effort to implement _______.

strategic planning

Researchers conclude that “it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very competitive industry where small differences in performance may affect the firm’s survival potential.”

Sue keeps a close eye on her company’s internal and external environment to discover possible opportunities for new products and threats from competition, as soon as possible. This is an example of ____.

environmental scanning

Environmental scanning is 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.

ABC Office Supply in Dayton sells high-quality, unique pens that are a real value to executives in the area. No other company in its area markets pens of such quality and value. By offering this type of product, ABC Office Supply is an example of a company utilizing a _____ strategy.

focused-differentiation

The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.

Read about benefits of environmental scanning

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