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strategic
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84
Management
Undergraduate 4
09/17/2012

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Term
organizational analysis
Definition
identifying and developing and organization's competencies and resources
Term
Resources
Definition

an organization's assets and are thus the basic building blocks of the organization; include:

  • tangible assets: such as its plant, equipment, finances, and location
  • human assets: number of employees, their skills, and motivations
  • intangible assets: such as technologies (patents/copyrights), culture, reputation
Term
Capabilities
Definition

a corporations ability to exploit it resources; processes and routines to turn inputs into outputs; is functionally based and is resident in a particular function...marketing capabilities, manufacturing capabilities and HR management capabilities...

**when constantly being changed and reconfigured to make them more adaptive to an uncertain environment, they are called dynamic capabilities

Term
Competency
Definition
cross-functional integration and coordination of capabilities
Term
Core competency
Definition

a collection of competencies that crosses divisional boundaries, is widespread within the coporation, and is something that the corporation can do exceedingly well. Product development=ex.

**a company must continually reinvest in a core competency or risk its becoming a core rigidity or deficiency, that is , a strength that over time matures and may become a weakness. 

Term
distinctive competencies
Definition
when core compentencies are superior to those of the competition
Term
Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm's competencies:
Definition

1. Value: does it provide customer value and competitive advantage

2. Rareness: Do no other competitors possess it?

3. Imitability: Is it costly for other to imitate?

4. Organization: Is the firm organized to exploit the resources?

 

**if all answers are yes=distinctive compentence

Term
To ascertain whether they are internal strategic factors must look at three factors:
Definition
  • the company's past performance
  • the company's key competitors
  • the industry as a whole
Term
where do competencies come from?
Definition
  • It may be an asset endowment such as key patent
  • it may be aquired from someone else
  • it may be shared with another business unit or alliance partner
  • it may be carefully built and accumulated over time within the company
Term
Grant proposes five step resource-based approach
Definition
Term
clusters
Definition
geographic concentrations of interconnected companies and industries; provide access to employees, suppliers, specialized information, and complementary products; capabilities may thus be formed externally through a firm's network resources
Term
two characteristics determine the sustainability of a firm's distinctive competency:
Definition

1. Durability: the rate at which a firm's underlying resources, capabilities, or core competencies depreciate or become obsolete (due to new technologies)

2. Imitability: the rate at which a firm's underlying resources, capabilities, or core competencies can be duplicated by others. competitors range from reverse engineering to hiring employees from the competitor to outright patent infringements. Can be:

  • Transparency-speed which other firms can understand the relationship of resources and cap supporting a successful firm's strategy.
  • Transferability-the ability of competitors to gather the resources and capabilities necessary to support a competitive challenge
  • Replicability-the ability of competitors to use duplicated resources and capabilities to imitate the other firm's success
Term
explicit knowledge
Definition
knowledge that can be easily articulated and communicated; this is the type of knowledge that competitive intelligence activities can quickly identify and communicate
Term
Tacit knowledge
Definition
knowledge that is not easily communicate because it is deeply rooted in employee experience or in a corporations culture; more valuable and more likely to lead to a sustainable competitive advantage than is explicit knowledge bc it is much harder for competitors to imitate; subject to a paradox. 
Term
continuuum of resource sustainability
Definition
high (hard to imitate-strong patents, brand name, shielded)---------------low (easy to imitate-easily duplicated, idea driven)
Term
business model
Definition

a company's method for making money in the current business environment. Includes the key structural and operational characteristics of a firm--how it earns revenue and makes a profit; composed of 5 elements:

  • who it serves
  • what is provides
  • how it makes money
  • how it differntiates and sustains competitive advantage
  • how it provides its products/services
Term
Value Chain
Definition

linked set of value-creating activites that begin with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marketing a product/service, and ending with distributors getting the final goods into the handsor the ultimate consumer

>raw materials

>primary manufacturing

>fabrication

>distributor

>retailer

Term
value chain split into two segments
Definition

-upstream

-downstream

 

**can be analyzed in terms of the profit margins available at any point along the value chain

Term
center of gravity
Definition
is the part of the chain that is most important to the company and the point where its greatest expertise and capabilities lie--its core competencies. Point at which the company started
Term

value chain analysis

(Porter)

Definition

manufacturing a firm's primary activities usu begins with inbound logistics (raw materials/handling/warehouse), go through an operations process in which a product is manufactured, and continue on to outbound logistics (warehousing/distribution), to marketing/sales, and finally to service (installation, repair, sale of parts). 

 

**support activities: procurement (purchasing), technology development, hr management, and firm infrastructure (accounting, finance, strategic planning)

Term
corporate value chain analysis involves 3 steps:
Definition
  • examine each product line's value chain in terms of the various activities involved in producing that product or service: which are core competencies or core deficiencies
  • examine the "linkages" within each product line's value chain
  • examine the potential synergies among the value chains of different product lines or business units: economies of scale; economies of scope-the value chains of two separate products or services share activities, such as the same marketing channels or manufacturing facilities. 
Term
Organizational structures
Definition
  • simple structure: stage 1 company; owner is jack of all trades; has no functional or product categories and is appropriate for small, entrepreneur-dominated company with one or two product lines that operates in a reasonably small easily identifiable market niche
  • functional structure: medium sized firm w several product lines in one industry. employees specialized in marketing, financing, HR; stage 2 company
  • divisional structure: large corportaion many product lines in several industries; functional specialists according to product/market distinctions; Stage 3 company
  • SBU: Modifications of the divisional structure; groups composed of independent product segments that are given primary responsibility for their own functional areas. May be of any size/level but must 1. unique mission 2. identifiable competitors 3. an external market focus 4. control of its business functions
  • Conglomerate structure: large company with many product lines in several unrelated industries; holding company is usually an assemblage of legally independent firms operating under one corporate umbrella
Term
corporate culture
Definition
collection of beliefs, expectations, and values learned and shared by a corporations members and transmitted from one generation of employees to anothe. reflects values of the founder, and the mission of the firm. sense of identity. often includes a number of work rules. Two distinct attributes: INTENSITY (depth) and INTEGRATION (breadth)
Term
corporate culture fulfills serveral functions:
Definition

-conveys sense of identity for employees

-helps generate employee commitment to something greater than themselves

-adds to the stability of the organizaiton as a social system

-serves as a frame of reference for employees to use to make sense of organizational activities and to use as a guide for appropriate behavior

Term
marketing position
Definition
deals with "who are our customers"? 
Term
marketing mix
Definition
refers to the particular combination of key variable under a corporation's control that can be used to affect demand and to gain competitive advantage. product place price promotion
Term
corporate reputation
Definition

1) stakeholders perceptionsof a corportations ability to product quality goods

2) a corporations prominence in the minds of stakeholders

Term
financial leverage
Definition
the ratio of total debt to total assets; describing how debt is used to increase the earnings available to commmon shareholders. 
Term
captial budgeting
Definition

is the analyzing and ranking of possible investments in fixed assets such as land, building, and equipment in terms of the additional outlays and additional receipts that will result from each investment

 

**hurdle rate: years to pay back investment, rate of return, or time to break-even point

Term
R&D Intensity
Definition
its spending on R&D as a percentage of sales revenue is a principal means of gaining market share in global competition. 
Term
Manufacturing can be intermittent or continuous
Definition

-Intermittent systems, the item is normally process sequentially, but the work and sequence of the process vary (Auto boyd repair shop)

-Continuous systems, laid out as lines on which products can be continuously assemebled or processed (assembly line)...reap benefits of economies of scale

Term
Operating leverage
Definition
the impact of a specific change in sales volume on net operating income. High leverage-once the firm reaches break-even, its profits rise faster than do those of less automed firms having lower operating leverage
Term
experience curve
Definition
learning curve, unit production costs decline by some fixed percentage each time the total accmulated volume of production in units doubles. Management uses in estimating the production costs of 1. a product never before made with the present techniques and processes 2. current products produced by newly introduces techniques/processes. 
Term
supply chain managment
Definition
the forming of netowrks for sourcing raw materials, manufacturing products or creating services, storing and distributing the goods, and delivering them to customers and consumers...significant impact on firms performance. 
Term
*Strategy formulations
Definition

strategic/long-term planning, is concerned with developing a corportaions mission, objectives, strategies, and policies; begins with situation analysis

strategy= opportunity/capacity

Term
propitious niche
Definition

an extremely favorable niche that is so well suited to the firm's internal/external environment that other corporationss are not likely to challenge or dislodge it; may also be called a strategic sweet spot--satisfying customers' needs in a way that rivals cannot.

 

*management must always be looking for a strategic window--unique market opportunity available only for a particular time

Term
common thread
Definition
a unifying theme
Term
TOWS Matrix
Definition
illustrates how ethe external opportunities and threats facing a particular corportaion can be matched with the company's internal strengths and weaknesses to result in four sets of possible strategic alternatives
Term
Business strategy
Definition
focuses on imporving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves. Strategy can be competitive/cooperative
Term
Porter's two generic competitive strategies
Definition

1. lower cost strategy-design, produce, and market a comparable product more efficiently than its competitors

2. Differentiation strategy- provide unique/superior value to the buyer in terms of product quality, special features, or after-sale service

 

*porter proposes firm's competitive advantage in an industry is determined by its competitive scope, the breadth of a company's units target market

Term
By combining Porter's two generic strategics...end up with four factors:
Definition
  • cost leadership: lower-cost competitive strategy that aims at the broad mass market and requires "aggressive construction of efficient-scale facilities, vigorous pursuit of cost reductions from experience, tigth cost and overhead control, avoidance or marginal customer accounts and cost minimization; McDonalds, Wal-Mart
*most likely to generate increase in market share.
  • differentiation : aimed at the broad mass makret and involves the creationof a product/service that is perceived throughout its industry as unique; may charge a premium for this product as a result
  • cost focus : low-cost comp strategy that focuses on a particular buyer group or geopgraphic market and attempts to serve only this niche; seek cost adv in its target segment 
  • differentiation focus: concentraes on particular buyer group, product line segment, or geographic market; valued by those who believe that a company or unit that focuses its efforts is better able to serve the spicail needs of a narrow strategic target more efficiently
Term
eight dimensions of quality that provide a competitive advantage
Definition

performance

features

reliability

conformace

durability

serviceability

aesthetics

perceived quality

Term
in fragmented society, which strategic is best?
Definition
focus strategies
Term
strategic rollup
Definition
  • they involve large numbers of firms
  • the acquied firms are typically owner operated
  • the objective is not to gain incremental advantage, but to reinvent an entire industry
Term
Porter lists some of the required skills and resources, as well as organizational requirements
Definition
  • competitive tactics: specific operating plan that details ow a strategy is to be put into action; link bt the formulation and implementation of strategy.
  • Timing tactics: when to compete-When to implement,  *first mover/late mover
  • Market location tactics: where to compete--offensively (takes place in an established competitors market locations) frontal assault, flanking maneuver, bypass attack, encirclement, guerrilla warfare or defensively (takes place in the firm's own current market position as a defense aga possible attack by rival) raise structural barriers, increase expected retaliation, lower the inducement for attack
Term
cooperative strategics
Definition

to gain competitive advantage by working with other firms. Two general types:

collusion: the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. can be explicit or tacit

Term
strategic alliance
Definition

long-term cooperative arrangement bt two or more independent firms or business units that engage in business activitites for mutual economic gain. Mave have to:

  • obtain or learn new capabilities
  • obtain access to specific markets
  • reduce financial risk
  • reduce political risk
Term
mutual service consortia
Definition
partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone, such as access to advanced technology.
Term
joint venture
Definition
"cooperative business activity" formed by two or more separate organizations for strategic purposes, that creates an independent business entitity allocates ownership, operational responsibilities, and financial risks/rewards to each member,w hile preserving their separate identity/autonomy. Most popular form
Term
licensing arrangements
Definition
an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product..gains technical expertise
Term
value-chain partnerships
Definition
strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage
Term
lower cost strategy
Definition
is the ability of a comany or a business unit to design, product, and market a comparable product more efficiently than its competitors
Term
differentiation strategy
Definition
the ability of a company to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service
Term
corportate strategy deals with three key issues facing the corporation as a whole
Definition
  1. The firm's overall orientation toward growth, stability, or retrenchment (directional strategy)
  2. The industries or markets in which the firm competes through its products and business units (portfolio analysis)
  3. The manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units (parenting strategy)
Term
Corporate strategy
Definition
about the choice of direction for a firm as a whole and the management of its business or product portfolio
Term

Directional strategy

(orientation toward growth)

Definition

composed of three general orientations

  • Growth strategies: expand the company's activities
  • Stability strategies: make no change to the company's current activities
  • Retrenchment strategies: reduct the company's level of activity
Term
Growth Strategies:
Definition

1. Concentration: on current product lines in one industry

-Vertical Growth>by taking over a function previously provided by a supplier or by a distributor. 

 

        -Horizontal Growth

2. Diversification: into other product lines in other industries

        -Concentric

        -Conglomerate

Term
Vertical integration
Definition
the degree to which a firm operates vertically in multiple locations o an industry's value chain from extracting raw materials to manufacturing to retailing
Term
backward integration
Definition
assuming a function previosly provided by a supplier
Term
Forward integration
Definition
assuming a function previously provided by a distributor (forward in the industry's value chain). 
Term
Transaction cost economies 
Definition
proposes that vertical integratio nis more efficient than contracting for goods and services in the marketplace when the transactio costs of buying goods on the open market become too great
Term
full integration
Definition
a firm internally makes 100% of its key supplies and completely controls its distributors. Ex;BP
Term
taper integration
Definition
(aka concurrent sourcing), a firm internally produces less than half of its own requirements and buys the rest form outside suppliers  (backward tapering)
Term
quasi-integration
Definition
a company that does not make any of its ey supplies but purchases most of its requirements from outside suppliers that are under its partial control (backward
Term
long term contracts
Definition
are agreements between two firms to provide agreed upton goods and services to each other for a specified period of time. Not really considered to be vertical integration unless it is an exlusive contract 
Term
horizontal growth
Definition

by expanding its operations into other geographic locations and/or by increasing the range of its products and services offered to the current markets...high survival rates

 

**Can be achieved through internal development or externally through acquistions and strategic alliances ith other firms in the same industry. Being achieved today through international expansion

Term
horizontal integration
Definition
the degree to which a firms operates in multople geographic locations at the same pint on an industry's value chain
Term
options for international entry:
Definition

Exporting

licensing

franchising

joint ventures

acquistions

Green-field developments

production sharing-outsourcing

turnkey operations

BOT Concept: build, operate, transfer

Term
diversification strategies
Definition
when growth has plateaued and opportunities for growth in the original business have been depleted. when an industry consolidates, matures 
Term
concentric related diversification
Definition
when a firm has a strong competitive advantage but idustry attractiveness is low. The search is for synergy--the concept that two businesses will generate more profits together than they separately. 
Term
conglomerate unrelated diversification
Definition

when management realizes that the current industry is unattractive and that the firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries.

 

diversifying into an industry unrelated to it current one. Emphasis is on sound investment and value-oriented management

Term
Stability strategies
Definition
a corportaion may choose stability over growth by continuing its current activities without any significant change in direction. More or so short-term strategy.
Term
Pause/proceed-with-caustion strategy
Definition
is in effect a timeout--an opportunity to rest before continuing a growth or retrenchment strat. make only incremental improvement until environmental changes become better. 
Term
No-change strategy
Definition
a decision to do something new--a choice to continue current operations and policies for the foreseeable future
Term
Profit strategy
Definition
a decision to do nothing new in a worsening situation but instead to act as though the company's problems are only temporary; attempt to artifically support profits when a company's sales are declinging by reducing investment and short term discretionary expenditures. 
Term
retrenchment strategies
Definition
when it ahs a weak competitive position in some or all of its product lines resulting in poor performance
Term
turnaround strategy
Definition
emphasizes the importance of operational efficiency and is probably most appropriate when a corporation's problems are pervasive but not yet critical. improve performance by cutting costs and expenses and by selling off assets. Contraction initial step to "stop the bleeding". the second phase...consolidation, implements a program to stabilize the now-leaner corporation. 
Term
captive strategy
Definition
involves giving up indepenence in exchange for security
Term
Portfolio Analysis
Definition
top management views its product lines and business units as a series of incestments from which it expects profitable return. 
Term

BCG

(boston consulting group)

growth share matrix

Definition

Question marks--are new products with the potential for success but they need alot of cash for delopment

Stars--market leaders that are typically at the peak of their product life cycle and are able to generate enough cash to maintin their high share of the market and usually contribe to company profits

Cash cows--bring in far more money than is needed to maintain their market share. in decline stage and are "milked" for cash hat will be invested in question marks

Dogs--have low market share and do not have the potential to bring in much cash. should either be sold off or managed carefully for the small amount of cash they can cause the company wanted to 

Term
corporate parenting
Definition
in contrast, views a corporation in terms of resources and capabilities that can be used to build business unit value as well asgenerate synergies across business units
Term
horizontal strategy
Definition
is a corporate strategy that cuts across business unit boundaries to build synergy across business units and to improve the competitive position of one or more business units. 
Term
multipoint competition
Definition
large multi-business corporation competes against other large multi-business firms in a number of markets. 
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