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Strategic Management Mid-Term
CEO level strategic manegement decisions
36
Management
Post-Graduate
10/27/2014

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Term
Triple Bottom Line
Definition
 Management of traditional profit and loss
 Management of the company’s social responsibility
 Management of the company’s environmental responsibility
Term
Mission
Definition
the purpose or reason for an organizations existence.
o Announces what the company provides to society.
o Defines fundamental unique purpose that sets a company apart from other firms of its type and identifies the scope or domain of the company’s operations.
Term
Objectives
Definition
end results of planned activity.
o Action verbs that tell what is to be accomplished by when and quantified if possible.
o Achievement of the objectives should result in fulfillment of a corporation’s mission.
o What society gives back to a corporation from doing a good job?
o Goal- open ended statement of what one wants to accomplish, with no quantification of what is to be achieved and no time criteria for completion.
Term
strategy
Definition
• Strategy- comprehensive approach that states how the corporation will achieve its mission and objectives.
Term
corporate strategy
Definition
company’s overall direction in terms of its general attitude towards growth and the management of tis various business and product lines.
 Fit three types of strategies generally
• Stability
• Growth
• Retrenchment
Term
Business Strategy
Definition
 Occurs at the business unit or product level
 Emphasizes improvement of the competitive position of a corporation’s products or services in the specific industry or market segment served by that business unit.
 Two general categories
• Competitive
o differentiation
• cooperative
o Strategic alliances.
Term
functional strategy
Definition
 Approach taken by a functional area to achieve corporate and business unit objectives and strategy by maximizing resource productivity.
 A specific R&D strategy for example
Term
3 methods of strategy implementation
Definition
o Programs
o Budgets
o Procedures
Term
3 characteristics of strategic decisions
Definition
 Rare- unusual type of decision
 Consequential- have big consequences
 Directive- set a precedent for lesser decisions.
Term
Hoffman's version of PESTEL
Definition
• Legal/political
o Anti-trust
• Economic
o BRIC countries
 Brazil, Russia, India, China
• Sociocultural
o Increasing environmental awareness
o Growing health consciousness
o Growing senior market
o Impact of millennials
o Declining mass market.
• Technological
o I know all this shit
• Environmental/sustainability
o Regulatory risk
o Supply chain risk
o Product and technology risk
o Litigation risk
o Reputational risk
o Physical risk
• Global
o Unique rules/regulations in each country
Term
Hoffman's 6th force for PORTER
Definition
 Relative power of other stakeholders
• sixth force should be added to porter's list.
• governments, communities, creditors
• complementors- something hosted on Microsoft OS

Also, companies should not focus on erecting barriers to entry. It is not effective and instead should use capital for innovation
Term
Strategy Types
Definition
 Prospectors- companies with broad product lines that focus on product innovation and market opportunities.
 Analyzers - corporations that operate in at least two different product-market areas, one stable and one variable. in stable areas, efficiency is emphasized, in variable, innovation is emphasized.
 reactors- corporations tat lack a consistent strategy-structure-cultural relationship. reaction to changing environment is through small strategy changes.
 defenders- companies with a limited product line that focus on improving the efficiency of their existing operations.
Term
Evaluate Competencies through VRIO
Definition
• valuable- does it provide customer value and competitive advantage?
• rareness- do other competitors possess it?
• Imitability- is it costly for others to imitate?• transparency
• transferability
• replicability

• Organization- is the firm organized to exploit the resource?
Also - Durability for sustainable
Term
Types of Structures
Definition
 simple structure- no product or functional categories. Appropriate for small, entrepreneur dominated company. Employees are generalists
 Functional structure- appropriate for medium firms with several product lines in one industry. Employees are specialists.
 Divisional structure- appropriate for large firms with many product lanes in several related industries. Employees tend to be functional specialists organized according to product/market distinctions.\
 Strategic Business Units (SBU's)- modification of divisional structure. Divided into business groups who are given primary responsibility and authority for the management of their functional areas.
• must have unique mission
• identifiable competitors
• external market focus
• control of biz functions
 conglomerate structure-large corps with many product lines in several unrelated industries. Holding company
Term
Competitive Business Strategy
Definition
 cost leadership- the ability of a company or busines to make a product more efficientyly than competitors
 differentation- provide a unique and superior value
 focus- niche strategy
 Firm's competitive advantage is determined by its competitive scope- breadth of the firms target market.
Term
Cooperative Business Strategies
Definition
 collusion- active cooperation of firms within an industry to reduce output and raise prices.
• tacit or explicit
 Strategic alliances- long term cooperative arragement between two or more independent firms or business units.
• enter into strategic alliances for:
o to obtain new capabillits
o access to specific markets
o reduce financial risk
o reduce political risk
 mutualservice consortia- partnership of similar companies in similar industries that pool resources to gain benefit that is to expensive to develop alone.
 Joint Ventures- creates an independent business entity with ownership, operations, financial risks/rewards to each member.
• most popular form of strategic alliances
 licensing agreements
 value chain partnership
Term
Directional Strategy (corporate Strategy)
Definition
 firms overall orientation towards growth, stability, or retrenchment. (directional strategy)
• growth strategies (M+A)
o Concentration
 vertical growth
 Horizontal integration
o Diversification
 concentric diverisification (related industry)
 conglomerate (unrelated) diversification
• stability strategies
o pause/proceed-with-caution
o no-change
o profit strategy
• retrenchment strategies
o turnaround
o captive company
o sell-out/divestment
o bankruptcy/liquidation
Term
Portfolio Analysis (corporate strategy)
Definition
 Industries or markets in which the firm competes through its products and business unites (porfolio analysis)
• most popular portfolio analysis techniques:
o BCG growth-share matrix
 market growth rate on Y axis, market share on x axis
 question marks- new products with potential for success, but need lots of cash for development
• high growth rate, low market share
 Stars- market leaders that are typically nearing the peak of their product life cycle
• high growth rate high market share
 Cash Cows- declining stage of life cycle, product is milked for cash. cost cutting
• low growth, high market share
 Dogs- sold of or managed carefully
• low growth, low market share
o GE business screen
• Managing strategic alliance portfolio
o dev/implement portfolio strategy
o monitoring
o coordinating to obtain synergies and avoid conflicts
o establishing alliance management system
Term
Parenting Strategy (corporate strategy)
Definition
 manner in which management coordinates activities and transfers resources (parenting strategy)
• views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generating synergies across business units.
• developing parenting strategy
o examine each biz unit in terms of strategic factors
o examine biz unit in terms of areas in which performance can be improved
o analyze how well a parent corporation fits with biz unit.
Term
Strategies to avoid
Definition
 follow the leader
 hit another home run
 arms race
 do everything
 losing hand
Term
Offensive competitive tactics
Definition
o frontal assault
o flanking maneuver
o bypass attack
o encirclement
o guerrilla warfare
Term
Defensive Competitive Tactics
Definition
o raise structural barriers
o increse expected retailiation
o lower inducement for attack
Term
Achieve Synergy
Definition
 share know-how
 coordinated strategies
 shared resources
 economics of scale/scope
 pooled negotiating power
 new business creation
Term
China + India are so important because they have 4 stories rolled into one.
Definition
 Megamarkets-
• as a fast growing megamarket, they provide some of the largest growth opportunities for every product or service
• Most important factors for market size: population size and buying power
o C+I account for 40% of world pop and 10% of world GDP, and 20% or growth in GDP
 Cost efficiency platform-
• lowest wage rates, they have the potential to dramatically reduce a company’s global cost structure
• C+I provide some of the lowest labor costs in the world.
• If you don’t invest here, your rival will.
• Managers that don’t invest will be fired and replaced by mangers who speed up c+I investment.
 Innovation platform
• As producers of the largest annual pools of scientists and engineers in the world, they can enable a quantum leap in a company’s technological and innovation capabilities
• Dramatically boost a company’s global technology and innovation base.
• Based on two opportunities
o The large, well-trained and low cost pool of scientific and engineering talent within C+I that is ready for challenge, career advancement and better creature comforts. Leveraging this can extend R&D capabilities for almost any firm
 One of the largest R&D talent in the entire world, growing rapidly, and low cost.
 GE used Bengalore location to do R&D for niche product that would have been impossible elsewhere.
 Microsofts largest research center outside of Redmond is in Bejing
• Used for risky, innovative shit.
o Innovation demanded by the unique needs of the C+I markets such as low buying power, energy and raw material scarcity, environmental degradations, large populations and high population densities.
 Designing new product, services and even tire business models to cater to these unique needs can yield innovation that can serve as competitive advantages
 Impact of cheap hospital equitment.
 Launching pads for new global competitors
• As home base of large rapidly growing and very capable companies that are eager to play of the global stage.
• While Japan and Korean giants grew naturally, C+I appears to be much more acquisition driven.
• Capital markets are much more accessible, as well as I-banks, consulting firms.
Term
External Challenges for multinational corporations
Definition
 Vast and diverse societies
• Geographical, sociological, demographics, political
 Rapid pace of change
• economic, political, social, technological changes are occurring so rapidly that it is hard to get a read on the markets
 More global and more demanding capital markets
• Shareholders are located all over the world. They are rational and allocate investments where they an get the highest ROI and gains.
o CEO tenure has declined steadily over the last 10 years.
 Other unique difficulties
• China- entrenched dominance of state owned enterprises
Term
Internal Challenges for multinational corporatiosn
Definition
 Cognitive insularity
• Executives rule companies through filtered reports and abstract numbers rather than exposing themselves directly to ground-level reality.
 Legacy mindsets
 Hubris
• Exaggerated self pride
Term
Basic Function of strategy
Definition
Resource aqusition and reasource allocation
Term
Porter's generic business strategies
Definition
• Low Price
• Must have low costs to charge low prices (have low prices to take customers from competition)
• Differentiation
• Premium price for value/ utility (Perceived Differentiation)
• Focus
• Specific market segment - niche
Term
Strategic Philosophy (attitude towards innovation)
Definition
Prospectors: Want new everything (Apple, Google, HP, 3M -> First Movers)
Analyzers: Look for new everything cautiously (Coke, McDonald's)
Defenders: Carve out narrow product niche; guard it (Goodyear, Levi, Heinz, Campbell)
Reactors: Don't do anything until existence is threatened (GM, Ford vs. Toyota lean approach)
Term
7 factors of financial analysis
Definition
1,2 - Sales and Net Income
3. Ebita/ Operating margin
4,5 - cash, LTD/Equity <1 (your ability to survive a recession)
6,7 - A/R, Inventory move w/ sales.
Term
stock price
Definition
EPS*P/E multiple
Term
Types of competition
Definition
1. Market Risk
2. competitison
3. Historical/Geopolitical events
Term
organization
Definition
place where people come together to accomplish goals they otherwise could not have accomplished themeses

resource>transformation>outpus
Term
functional strategy vs. business strategy s corporate strategies
Definition
functional is about product
business about competitive advantages, managing portfolio/overall direction of business
Term
Strategic Philosophy, miles and snow typology
Definition
• Proactive
• Reactive – ford, GM, and all the companies that were selected out
• Defenders – companies that carve out a narrow market niche and guard it and defend it. Example: good year tires, Heinz ketchup, Levy Jeans, Kodak Film, etc.
• Prospectors: Apple, Intel, Merck, companies that invest in R&D and invent new products.
• Analyzers: Hybrid between defenders and prospectors, they look for new products constantly and cautiously.
Term
Product lifecycle
Definition
1. Development – Invest heavy on R&D. Eventually, you move to the growth phase.
2. Growth – one of the biggest resources on the growth phase? Manufacturing and capacity.
3. Maturity – disc players, DVD players, Camcorders > High profit
4. Decline – black and white TVs
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