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MGT455 Strategic Management CH8
Strategic choice
68
Management
Undergraduate 4
10/30/2011

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Term
Functional strategy
Definition
Approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.
Term
Marketing strategy
Definition
Deals with pricing, selling & distributing a product.
Term
Market development strategy
Definition
Allows a company or business unit to;
1) capture a larger share of an existing market for current products through market saturation and markt penetration.
2) develop new uses and/or markets for current products.
Term
Product development strategy
Definition
Allows a company or unit to;
1) develop new products for existing markets.
2) develop new products for new markets
Term
Line extension
Definition
Using a successful brand name to to market other products.
Term
Push strategy
Definition
Marketing strategy where a lot of money is spent on trade promotion in order to gain or hold shelf space in retail outlets.
Term
Pull strategy
Definition
Marketing strategy in which advertising pulls the products through the distribution channels.
Term
Skim pricing
Definition
Using a high price for newer products while the product is novel and the competitors are few. "Skim the cream" from the top of the demand curve.
Term
Penetration pricing
Definition
attempts to hasten market development and allows the pioneer to gain market share with a low price and then dominate the industry by using the experience curve.
Term
Dynamic pricing
Definition
Where prices vary frequently based upon demand, market segment & product availability.
Term
Financial strategy
Definition
examines the financial implications of corporate and business level strategic options and identifies the best financial course of action attempting to maximize the the financial value of a firm.
Term
Leveraged buyout
Definition
When a company is acquired in a transaction financed largely by debt, usually obtained from a third party, such as an insurance company or an investment banker.
Term
Reverse stock splits
Definition
an investor's shares are split in half for the same total amount of money.
Term
R&D strategy
Definition
Deals with product & process innovation/improvement and the appropriate mix of such. Also deals with the question of how new technology should be accessed.
Term
Technological leader/follower
Definition
Either pioneering an innovation or imitating the products of competitors.
Term
Open innovation
Definition
when a firm uses alliances and connections with corporate, government, academic labs, or consumers to develop new products and processes.
Term
Technology scouts
Definition
Using people to search beyond the company for promising innovations.
Term
Operations strategy
Definition
How/Where a product/service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers.
Term
Job shop
Definition
one-of-a-kind production using skilled labor.
Term
Connected line batch flow
Definition
Components are standardized; each machine functions as a job shop but is positioned in the same order as the parts are processed.
Term
Flexible manufacturing systems
Definition
parts are grouped into manufacturing families to produce a wide variety of mass-produced items.
Term
Dedicated transfer lines
Definition
Highly automated assembly lines making one mass-produced product using little human labor.
Term
Mass production
Definition
system with an excellent method to produce a large number of low cost, standard goods and services. Employees worked on narrowly defined, repetitious tasks under close supervision.
Term
Continuous improvement
Definition
empowered cross-functional teams to strive constantly to improve the production process. Managers are more like coaches than bosses.
Term
Modular manufacturing
Definition
Where preassembled subassemblies are delivered as they are needed to a company's assembly-line workers, who quickly piece the modules together into a finished product.
Term
Mass customization
Definition
Requires that people, processes, units & technology reconfigure themselves to give customers exactly what they want, when they want it.
Term
Purchasing strategy
Definition
Deals with obtaining the raw materials, parts, and supplies needed to perform the operations function.
Term
Multiple sourcing
Definition
A purchasing company orders a particular part from several vendors. This 1) forces suppliers to compete for the business of an important buyer, reducing purchasing costs & 2) if one supplier cannot deliver, another usually can.
Term
Sole sourcing
Definition
Relies on one supplier for a particular part while working closely with the supplier at all stages. This leading to improved quality and lowering product design cost and time.
Term
Just-In-Time
Definition
Having purchased parts arrive at the plant just when they are needed rather than keeping inventories.
Term
Parallel sourcing
Definition
two suppliers are sole suppliers of two different parts, but they are also backup suppliers for each other's parts.
Term
Logistics strategy
Definition
Deals with the flow of products into and out of the manufacturing process. Three related trends: Centralization, Outsourcing & the use of the Internet.
Term
HRM strategy
Definition
Addresses the issue of whether to hire a large number of low-skilled/paid employees who perform repetitive tasks or skilled, highly-paid workers that are cross-trained.
Term
Self-managing work teams
Definition
As work increases in complexity, the more suited it is for teams. Leads to increased quality/productivity as well as employee satisfaction and commitment.
Term
360-degree appraisal
Definition
Evaluation technique in which inputs are gathered from multiple sources.
Term
Diverse workforce
Definition
Can be a competitive advantage.
Term
Information technology strategy
Definition
Using information systems technology to provide competitive advantage.
Term
Follow-the-sun management
Definition
Project team managers living in one country can pass their work to team members in another country in which the work day is just beginning.
Term
Outsourcing
Definition
Purchasing grom someone else a product or service that has been previously provided internally.
Term
Offshoring
Definition
The outsourcing of an activity or a function to a wholly owned company or an independent provider in another country.
Term
7 outsourcing errors to be avoided
Definition
1) Outsourcing activities that should not be outsourced 2) Selecting the wrong vendor 3) Writing a poor contract 4) Overlooking personnel issues 5) Losing control over the outsourced activity 6) Overlooking the hidden costs of outsourcing 7) Failing to plan an exit strategy
Term
Strategies to avoid (STA)
Definition
Follow the leader, Hit another home run, Arms race, Do everything & Losing hand.
Term
Follow the leader (STA)
Definition
Imitating a leading competitor's strategy ignores a firm's particular strengths and weaknesses and the possibility that the leader might be wrong.
Term
Hit another home run (STA)
Definition
A company that is successful because it pioneered an extremely successful product trying to search for another "super" product.
Term
Arms race (STA)
Definition
Entering into a battle with another firm for increased market share might increase sales revenue, but that increase will most likely be offset by increases in advertising, promotion, R&D, and manufacturing costs.
Term
Do everything (STA)
Definition
When faced with several interesting opportunities, management might tend to leap at all of them. The initial resources might seem like enough until the developing projects deplete said resources.
Term
Losing hand (STA)
Definition
A corporation may have invested so much in a particular strategy that top management is unwilling to accept its failure. Continuing to throw "good money after bad."
Term
Corporate scenarios
Definition
balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.
Term
Corporate scenario construction steps
Definition
1. Use industry scenarios to develop a set of assumptions about the task environment. List optimistic, pessimistic & most likely assumptions.
2. Develop common-size financial statements for previous years to serve as a basis. Use a "Scenario Box"
3. Construct detailed pro forma financial statements for each strategic alternative.
Term
Scenario box
Definition
Use the historical common-size percentages to estimate levels of different financial statement categories. Develop for each strategic alternative Optimistic, pessimistic & most likely assumptions about the impact of key variables. Forecast three sets of sales & cost of goods sold figures for at least 5 years. Analyze historical data for environmental assumptions and other figures. Consider other variables such as programs needed to implement strategy.
Term
Risk
Definition
Composed of the probability that the strategy will be effective, the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses.
Term
Real-options approach
Definition
when the future is highly uncertain, it pays to have a broad range of options open. Management initiates multiple projects, monitors their development, and then cancels the projects that aren't successful.
Term
Net present value approach
Definition
Using the NPV to calculate the value of a project by predicting its payouts, adjusting them for risk, and subtracting the amount invested. Doesn't provide any flexibility in case circumstances change.
Term
Stakeholder priority matrix
Definition
Stakeholders can be categorized by the amount of interest in the corporation's activities and their relative power to influence these activities.
Term
Political strategy
Definition
Plan to bring stakeholders into agreement with a corporation's actions.
Term
Corporate culture pressure
Definition
Incompatibility of a strategy and corporate culture tends to lead to a very low success probability. Decisions on how much attention to pay the culture, alternating the strategy and attempting to change the culture need to be made.
Term
Corporate culture pressure
Definition
Incompatibility of a strategy and corporate culture tends to lead to a very low success probability. Decisions on how much attention to pay the culture, alternating the strategy and attempting to change the culture need to be made.
Term
Strategic choice
Definition
Evaluation of alternative strategies and selection of the best alternative.
Term
Strategic decision making faults
Definition
1) manager's desire for speedy actions leads to a rush to judgement 2) they apply failure-prone decision- making practices 3) they make poor use of resources by investigating only one or two options.
Term
Consensus
Definition
the best strategic decisions are NOT made when everyone agrees on one alternative. "Programmed conflict" is encouraged creating task-orientated conflict rather than personal.
Term
Devil's advocate
Definition
A person or group is assigned to identify potential pitfalls and problems with a proposed alternative strategy in a formal presentation. Better than a consensus decision making method especially in a dynamic environment.
Term
Dialectical inquiry
Definition
Combining two conflicting views, thesis & antithesis, into one, synthesis. Both sides are presented to decision makers and either one is chosen or a compromise alternative is made. Better than a consensus decision making method especially in a dynamic environment.
Term
Mutual exclusivity (SAC)
Definition
Doing any one alternative would preclude doing any other.
Term
Success (SAC)
Definition
It must be feasible and have a good probability of success.
Term
Strategic alternatives criteria (SAC)
Definition
Four criteria that an alternative must meet.
Mutual exclusivity, success, completeness, internal consistency.
Term
Completeness (SAC)
Definition
It must take into account all the key strategic issues.
Term
Internal consistency (SAC)
Definition
It must make sense on its own as a strategic decision for the entire firm and not contradict key goals, policies, and strategies currently being pursued by the firm or its units.
Term
Effective policy
Definition
Accomplishes three things 1) It forces trade-offs between competing resource demands 2) It tests the strategic soundness of a particular action 3) It sets clear boundaries within which employees must operate while granting them freedom to experiment within those constraints.
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