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Mgmt ch. 6

planning
identifying and selecting appropriate goals and courses of action; one one the four principle tasks of management
strategy
a cluster of decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals
mission statement
a broad declaration of an organization’s purpose that identifies the organization’s products and customers and distinguishes the organization from its competitors.
corporate level plan
top management’s decisions pertaining to the organization’s mission, overall strategy, and structure
corporate level strategy
a plan that indicates in which industries and national markets an organization intends to compete
business-level plan
divisional managers’ decisions pertaining to divisions’ long-term goals, overall strategy, and structure
business-level strategy
a plan that indicates how a division intends to compete against its rivals in an industry
functional-level plan
functional managers’ decisions pertaining to the goals that they propose to pursue to help the division attain its business-level goals
functional-level strategy
a plan of action to improve the ability of each of an organization’s functions to perform its task specific activities in ways that add value to an organization’s goods and services.
time horizon
the intended duration of a plan
strategic leadership
the ability of the CEO and top managers to convey a compelling vision of what they want the organization to achieve to their subordinates
strategy formulation
the development of a set of corporate, business, and functional strategies that allow an organization to accomplish its mission and achieve its goals
SWOT analysis
a planning exercise in which managers identify organizations strenghts, weaknesses, and environmental opportunities, and threats
hypercompetition
permanent, ongoing, intense comp. brought about in an industry by advancing technology or changing customer tastes.
low-cost strategy
driving the organization’s costs down below the costs of its rivals
differentiation strategy
distinguishing an organization’s products from the products of competitors on dimensions such as product design, quality, or after-sales service
focused low-cost strategy
serving only one segment of the overall market and trying to be the lowest cost organization serving that segment
focused differentiation strategy
Serving only one segment of the overall market and trying to be the most differentiated organization serving that segment.
concentration on a single industry
reinvesting a company’s profits to strengthen its competitive positions in its current industry.
vertical integration
expanding a company’s operations either backward into an industry that produces inputs for its products or forward into an industry that uses, distributes, or sells its products.
diversification
expanding a company’s business operations into a new industry in order to produce new kinds of valuable goods or services
related diversification
entering a new business or industry to create a competative advantage in one or more of an organization’s existing divisions or businesses.
synergy
performance gains that result when individuals and departments coordinate their actions.
unrelated diversification
Entering a new industry or buying a company in a new industry that is not related in any way to an organization’s current businesses or industries.
global strategy
selling the same standardized product and using the same basic marketing approach in each national market
multidomestic strategy
customizing products and marketing strategies to specific national conditions
exporting
making products at home and selling them abroad
importing
sellng products at home that are made abroad
licensing
allowing a foreign organization to take charge of manufacturing and distributing a product in its country or world region in return for a negotiated fee.
franchising
selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits
strategic alliance
An agreement in which managers pool or share their organization’s resources and know-how with a foreign company, and the two organizations share the rewards and risks of starting a new venture.
joint venture
a strategic alliance among two or more companies that agree to jointly establish and share the ownership of a new business
wholly owned foreign subsidiary
Production operations established in a foreign country independent of any local direct involvement.
three steps in planning
1. determine the organizations mission and goals
2. Formulate strategy
3. Implement strategy
why is planning important
1. planning gives the organization a sense of direction and purpose
2. planning is a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization
3. A plan helps coordinate managers of the different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve its desired future state
4. A plan can be used as a device for controlling managers within an organization
Different time horizons
long term- 5 of more years

intermediate- 1 to 5 years

short term- horizon of one year or less

corporate and business level time horizons
strategies require long and intermediate plans
functional level goals
strategies require intermediate and short term plans
rolling plan
corporate or business level that extends over seven years
They allow managers to plan flexibly without losing sight of the need to plan for the long term.

they are essential because of the high rate of change in the environment and the difficulty of predicting competitive conditions five years in the future

standing plans
used in situations in which programmed decision making is appropriate. When the same situation occurs repeatedly, managers develop policies, rules, and standard operating procedures to control the way employees perform their tasks.
single-use plans
developed to handle non-programmed decision making in unusual or one-of a kind situations. example. programs and projects
five forces model 1
The level of rivalry among organizations in an industry:
The more companies that compete against one another, the lower the level of industry profits
five forces model 2
The potential for entry into an industry:
the easier it is to enter an industry, the greater the chances of having lower industry profits
five forces model 3
The power of large suppliers:
if there are only a few large suppliers, then they can drive up prices resulting in lower profits for the companies
five forces model 4
If only a few large customers are available to buy an industry’s output, they can bargain to drive down the price of that output. Industry producers then make lower profits.
five forces model 5
The threat of substitute products:
When a substitute for products exist, companies cannot demand high prices for it or customers will switch to the substitute, and this constraint keeps their profits low
backward vertical integration
company expands its business operations into a new industry that produces inputs for the company’s products.
forward vertical integration
joins a new industry that uses, distributes, or sells the company’s products

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