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management Ch.8 (TEST #2)

Decisions and actions used to formulate and execute strategies that will provide competitively superior fit between the organization and its environment to achieve organizational goals
Facebook took over instagram to help keep it #1 in social media.
Explicit strategy is the plan of action

Competitive advantage is the organization’s distinctive edge for meeting customer needs

Strategies should
Exploit Core Competencies
Build Synergy
Deliver Value
Target Customers
Functional-level strategy: How do we support business-level strategy?
Finacne, marketing, manufacturing.
Business-level strategy: How do we compete?
consumer products unit, biotechnology unit, media unit
Assessing the external environment and internal problems to create goals and strategy
the use of managerial and organizational
tools to direct
resources toward accomplishing
strategic results
SWOT Analysis
Formulating strategy often begins with an audit of internal and external factors
Internal Strengths and Weaknesses
External Opportunities and Threats
Strategic Business Units (SBUs) have a unique mission, products, and competitors
Portfolio strategy pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation. Corporations like to have a balanced mix of business divisions called
An SBU has a unique business mission, product line, competitors, and markets relative to other SBUs in the corporation. Senior corporate managers generally define the grand strategy and then bring together a portfolio of SBUs to achieve the strategy
The BCG Matrix
Organizes business along two dimensions
Business growth rate
Market share
Four categories for corporate portfolio
The combination of high/low market share and high/low business growth
Star. The star has a large market share in a rapidly growing industry.
The star is important because it has additional growth potential and profits should be reinvested for future growth and profits. It will generate a positive cash flow as industry matures and market growth slows.
Cash Cow.
The cash cow exists in a mature, slow-growth industry but has a large market share. The cash cow has a positive cash flow and can be milked to feed riskier businesses.
Question Mark
The question mark exists in a new, rapidly growing industry but only has small market share. The question mark is risky. It could become a star or it could fail.
The dog is a poor performer with small market share in a slow- growth industry. A dog provides little profit and may be targeted for divestment or liquidation
The strategy of moving into new lines of business is called
The purpose of diversification is to expand the firm’s business operations to produce new kinds of valuable products and services. When the new business is related to the company’s existing business activities, the organization is implementing a strategy of related diversification. Unrelated diversification occurs when an organization expands into a totally new line of business
Vertical integration
means the company expands into businesses that either produce the supplies needed to make products or that distribute and sell those products to customers.
Formulating Business-Level Strategy
Strategy within the business units: How do we compete?
Business-level strategies are developed by Porter’s Five Forces
Web technology is impacting all industries in positive and negative ways
Porters 5 focuses
Differentiation. The differentiation strategy is an attempt to distinguish the firm’s products or services from others in the same industry. The organization may use advertising, distinctive product features, exceptional service, and new technology to achieve a product perceived as unique. The differentiation strategy can be profitable because customers are loyal and will pay high prices for the product. Companies that pursue differentiation need strong marketing abilities, a creative flair, and a reputation for leadership. This strategy can reduce rivalry with competitors if buyers are loyal.

Cost Leadership. With a cost leadership strategy, the organization seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors. A cost leadership position means the company can undercut competitors’ prices and still offer comparable quality and earn a reasonable profit.

Focus. With a focus strategy, the organization concentrates on a specific regional market or buyer group. The firm may use a differentiation or cost leadership approach but only for a narrow target market.

Globalization Strategy
In a strategy of globalization, product design and advertising strategies are standardized throughout the world. This is based on the theory that people everywhere want to buy the same products and live the same way. A globalization strategy can help an organization reap efficiencies by standardizing product design and manufacturing, using common suppliers, introducing products around the world faster, coordinating prices, and eliminating overlapping facilities.
Multidomestic Strategy
In a multidomestic strategy, product design, marketing, and advertising are modified to suit the specific needs of each country. Many companies reject the idea of a single global market.
Transnational Strategy
A transnational strategy seeks to achieve both global standardization and national responsiveness. This is difficult to achieve, as one goal requires close global coordination while the other goal requires local flexibility. Although most multinational companies want to achieve some degree of global integration to hold costs down, even global products may require some customization to meet government regulations in various countries or some tailoring to meet customer preferences.
companys core cometence
something that the organization does especially well in comparison to its competitors.
organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone.
SWOT analysis
includes a careful assessment of strengths, weaknesses, oportunities, and threats that affect organizational performance.
Strategic business units (SBU;s)
unique business mission, product line, competitors.
related diversification
new business is related to the companys exsisting activities. Ex. Nestles moved into pet foods.
unrelated diversification
organization expands into a totally new line of business ex. Sara Lee- food company to intimate apparel.
vertical integration
company expands into businesses that either produce the supplies needed to make products and services.
thinks out of the box
strong marketing abilities
rewards innovaion
Cost leadership
strong central authority,
highly efficient
close supervision
Focused differentiation
pushes empowerment to employees with customer contact.
Focused cost leadership
detailed control reports
measures cost of providing products or service and maintaining cusomer loyalty
programmed decisions
situations that have occurred often enough to enable decision rules to be developed and applied in the future.
Ex. order new paper when inventory gets to certain place
nonprogrammed decisions
made in response to situations that are unique are poorly defined and largly unconstructured, and have important consequences for the organization. Ex. Spring carrying iphones for 20 billion.
that all the information the decision maker needs is fully available.
managers know which goals they wish to achieve, but information about alternatives and future events is incomplete.
means that the goals to be achieved or the problem to be solved is unclear, alternatives are difficult to define, and info about outcome is unavailable.
classical model
based on rational economic assumptions and manager beliefs about what ideal decision making should be.
how a decision maker should make decisions.
administrative model
descriptive, descibes how managers actually make decisions in complex situations rather than dictating how they should make decisions according to a theoretical ideal.
Bounded rationality
people have limits, or boundaries on how rational they can be.
political model
info is limited and there are manger conflicts about what goals to pursue or what course of action to take.
informal alliance among managers who support a specific goal.

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