MGMT Chapters 8-14 Study Guide

Low Cost Strategies

business strategies that seek to establish long-term competitive advantages by emphasizing and perfecting value chain activities that can be achieved at costs substantially below wat competitors are able to match on a sustained basis. This allows the firm, in turn, to compete primarily by charging a price lower than competitors can match and still stay in business

Differentiation:

a business strategy that seeks to build competitive advantage with its product or service by having it be "different" from other available competitive products based on features, performance, or other factors not directly related to cost and price. The difference would be one that would be hard to create and/or difficult to copy or imitate.
o Features and benefits** (Two important words)

Speed-based Strategies

business strategies built around functional capabilities and activities that allow the company to meet customer needs directly or indirectly more rapidly than its competitors

Market focus:

this is a generic strategy that applies a differentiation strategy approach, or a low-cost strategy, or a combination—and does so solely in a narrow (or focused) market niche rather than trying to do so across the broader market. The narrow focus may be geographically defined or defined by product type features, or target customer type, or some combination of these

Emerging Industry:

an industry that has growing sales across all the companies in the industry based on growing demand for the relatively new products, technologies, and/or services made available by the firms participating in this industry

Growth Industry Strategies

Business strategies that may be more advantageous for firms participating in rapidly growing industries and markets

Mature Industry Strategies

strategies used by firms competing in markets where the growth rate of that market from year to year has reached or is close to zero

Declining Industry

an industry in which the trend of total sales as an indicator of total demand for an industry's products of services among all the participating in the industry have started to drop from the last several years with the likelihood being that such a trend will continue indefinitely

Fragmented Industry

an industry in which there are numerous competitors (providers of the same or similar products or services the industry involves) such that no single firm or small group of firms controls any significant share of the overall industry sales

Global Industry

industry in which competition crosses national borders

Grand Strategy Selection Matrix

a four-cell guide to strategies based upon whether the business is 1) operating from a position of strength or weakness and 2) rely on its own resources versus having to acquire resources via merger or acquisition

Vertical acquisition

Acquisition of firms that supply inputs such as raw materials, or customers for its outputs, such as warehouses for finished products

Conglomerate Diversification

Acquiring or entering businesses unrelated to a firm's current technologies, markets, or products

Retrenchment

cutting back on products, markets, operations because the firm's overall competitive and financial situation cannot support commitments needed to sustain or build its operations

Divestiture

the sale of a firm or a major component

Liquidation:

closing down the operations of a business and selling its assets and operations to pay its debts and distribute any gains to stockholders

Concentrated growth

aggressive market penetration where a firm's strong position and favorable market growth allow it to "control" resources and effort for focused growth

Market development

selling present products, often with only cosmetic modifications to customers in related marketing areas by adding channels of distribution or by changing the content of advertising or promotion

Product Development:

the substantial modification of existing products or the creation of new but related products that can be marketed to current customers through established channels

Innovation

a strategy that seeks to reap the initially high products associated with customer acceptance of a new or greatly improved product

Horizontal acquisition:

growth through the acquisition of one or more similar firms operating at the same stage of the production-marketing chain

Concentric diversification

acquisition of businesses that are related to the acquiring firm in terms of technology, markets, or products

Joint Ventures

commercial companies created and operation for the benefit of the co-owners; usually two or more separate companies that form the venture

Strategic Alliances

partnerships that are distinguished from joint ventures because the companies involved do not take an equity position in one another

Grand Strategy Clusters

strategies that may be more advantageous for firms to choose under one of four sets of conditions defined by market growth rate and the strength of the firm's competitive position

Low cost activities

o Low cost advantages that reduce the likelihood of pricing pressure from buyers
o Truly sustained low cost advantages may push rivals into other areas, lessening price competition
o New entrants competing on price must face an entrenched cost leader without the experience to replicate every cost advantages
o Low cost advantages lessen the attractiveness of substitute products
o Higher margins allow low cost producers to withstand supplier cost increases and often gain supplier loyalty over time
o Many cost saving activities are easily duplicated
o Exclusive cost leadership can become a trap
o Obsessive cost cutting can shrink other competitive advantages involving key product attributes
o Cost differences often decline over time

Differentiation

o Rivalry is reduced when a business successfully differentiates itself
o Buyers are less sensitive to prices for efficiently differentiated products
o Brand loyalty is hard for new entrants to overcome
o Initiation narrows perceived differentiation, rendering differentiation meaningless
o Technological changes that nullify past investments or learning

Portfolio Techniques

an approach pioneered by the Boston consulting group that attempted to help managers balance the flow of cash resources among their various businesses while also identifying their basic strategic purpose within the overall portfolio

Market Growth Rate

The projected rate of sales growth for the market being served by a particular business

Relative Competitive Position

The market share of a business divided by the market share of its largest competitor

Stars

Businesses in rapidly growing markets with large market shares

Cash Cows

Businesses with a high market share in low-growth markets or industries

Dogs

Low market share and low market growth businesses

Question marks

Businesses whose high growth rate gives them considerable appeal but whose low market share makes their profit potential uncertain

Volume Businesses

businesses that have few sources of advantage but the size is large—typically the result of scale economies

Stalemate business

Businesses with few sources of advantage, most them small. Skills in operational efficiency, low overhead, and cost management are critical to profitable

Fragmented Business

businesses with many sources of advantage, but they are all small they typically involve differentiated products with low brand loyalty, easily replicated technology, and minimal scale economies.

Specialization Businesses

Businesses with many sources of advantage. Skills in achieving differentiation (product design, branding expertise, innovation, and perhaps scale) characterize winning specialization businesses.

Parenting opportunities framework

The perspective that the role of corporate headquarters in multibusiness companies is that of a parent sharing wisdom, insight, and guidance to help develop its various businesses to excel

Parenting Strategy Approach

An approach to crafting the best corporate role in a multi-business company created by the BCG based on "levers" corporate parents can use to influence business units. Six parenting strategy types identified by BCG based on their emphasis on different levers they influence.

Patching

the process by which corporate executives routinely "remap" their businesses to match rapidly changing market opportunities—adding, splitting, transferring, exiting, or combining chunks of businesses.

Strategic Processes

decision making operation activities, and sales activities that are critical business processes

Strategic Positioning

the way a business is designed and position to serve target markets.

Parenting opportunities framework

o Size and age
o Management
o Business definition
o Predictable errors
o Linkages
o Common capabilities
o Specialized expertise
o External relations
o Major decisions
o Major changes

· Six parenting strategy types

o Hands off owner
o Financial sponsor
o Family builder
o Strategic guide
o Functional leader
o Hands on manager

Short Term Objective

Measurable outcomes achievable or intended to be achieved in one year or less.

Functional Tactics

Detailed statements of the "means" or activities that will be used by a company to achieve short-term objectives and stablish competitive advantage

Outscoring

obtaining work previously done by employees inside the companies from sources outside the company

Empowerment

the act of allowing an individual or team the right and flexibility to make decisions and initiate action

Policies

broad, precedent setting decisions that guide or substitute for repetitive or time-sensitive managerial decision making

Innovation Time Out Policy

Innovation time out policy refers to what is usually an official company guideline, policy, establishing an amount of time during each work week an employee, or specific types of employees can at their choice set aside from their regular assignment to work on innovative new ideas they are thinking about

Stock Options

The right, or "option" to purchase company stock at a fixed price at some future date

Restricted Stock

stock given to an employee who is prohibited or "restricted" from selling the stock for a certain time period and not at all if they leave the company before that time period

Golden Handcuffs

a form of executive compensation where compensation is deferred (either a restricted stock plan or bonus income deferred in a series of annual installments)

Golden Parachute

a form of bonus compensation that guarantees a substantial cash payment if the executive quits, is fired, or simply retires

Organizational Structure

Refers to the formalized arrangements of interaction between and responsibility for the tasks, people, and resources in an organization

Simple Organizational Structure

structure in which there is an owner and a few employees and where the arrangement of tasks, responsibilities, and communication is highly informal and accomplished through direct supervision

Functional Organizational Structure

· Structure in which the tasks, people, and technologies necessary to do the work of the business are divided into separate "functional" groups with increasingly formal procedures for coordinating and integrating their activities to provide the business's products and services

Divisional Organizational Structure

· structure in which a set of relatively autonomous units, or divisions, are governed by a central corporate office but where each operating division has it's own functional specialists who provide products or services different from those of other divisions

Strategic Business Unit

· An adaptation of the divisional structure in which various divisions or parts of divisions are grouped together based on some common strategic elements, usually linked to distinct product/market differences

Holding Company Structure

· structure in which the corporate entity is a broad collection of often unrelated businesses and divisions such that it (the corporate entity) acts as a financial overseer "holding" the ownership interest in the various parts of the company, but has little direct managerial involvement

Matrix Organizational Structure:

· The matrix organization is a structure in which functional and staff personnel are assigned to both a basic functional area and to a project or product manager. It provides dual channels of authority, performance, responsibility, evaluation, and control.

Product-Team Structure

· assigns functional managers and specialists to a new product, project, or process team, that is empowered to make major decisions about their product. Team members are assigned permanently in most cases.

Restructuring

· redesigning an organizational structure with the intent of emphasizing and enabling activities most critical to a firm's strategy to function at max effectiveness

Business Process Reengineering

· a customer-centric restructuring approach. It involves fundamental rethinking and radical redesigning of a business process so that a company can best create value for the customer by eliminating barriers that create distance between employees and customers

Downsizing

· eliminating the number of employees, particularly middle management in a company

Self-Management

· Allowing work groups or work teams to supervise and administer work as a group or team without a direct supervisor exercising the supervisory role. These teams set parameters of their work, make decisions about work-related matters, and perform most of the managerial functions previous done by their direct supervisor.

Virtual Organization

· A temporary network of independent companies—suppliers, customers, subcontractors, and even competitors—linked primarily by information technology to share skills, access to markets, and costs

Agile Organization

a firm that identifies a set of business capabilities central to high profitability operations and then builds a virtual organization around those capabilities

Outsourcing

· obtaining work previously done by employees inside the companies from sources outside the company.

Modular Organization

· an organization structured via outsourcing where the organization's final product or service is based on the combination of several companies' self-contained skills and business capabilities

Business Process Outsourcing:

· Having an outside company manage numerous routine business management activities previously done by employees inside the company such as HR, Supply procurement, finance and accounting, customer care, supply-chain logistics, engineering, R&D, sales and marketing, facilities management, and management/development

Strategic Alliances:

alliances with suppliers, partners, contractors, and other providers that allow partners in the alliance to focus on what they do best, farm out everything else, and quickly provide value to the customer

Boundaryless Organization

· Organizational structure that allow people to interface with others throughout the organization without need to wait for a hierarchy to regulate that interface across functional, business, and geographic boundaries.

Horizontal Boundaries

· : rules of communication, access and protocol for dealing with different departments or functions or processes within an organization

Vertical Boundaries:

· Limitations of interaction, contact, and access between operations and management personnel; between different levels of management; and between different organizational parts like corporate versus divisional units

Geographic boundaries

: limitations on interaction and contact between people in a company based on being at different physical locations domestically and globally

External Interface Boundaries

· formal and informal rules, locations, and protocol that separate and/or dictate the interaction between members of an organization and those outside the organization- customers, suppliers, partners, regulators, associations, and even competitors

Corporate Lattice

· Corporate lattice is a model of how work, careers, and communication get done in twenty-first century organizations up, down and across organizational levels and positions versus a "corporate ladder" tradition that views work, careers, and communications as predominantly hierarchical driven

Lattice

· a metaphor used t describe the reality of the nature & structure of work in organizations today—a 3-dimensional structure extending horizontally, vertically, and diagonally whereby people communicate and work with others anywhere, anytime, to provide answers, ideas, form teams and solve problems

Learning Organization

· organization structured around the idea that it should be set up to enable learning, to share knowledge, to seek knowledge, and co create opportunities to create new knowledge. It would move into new markets to learn about those markets rather than simply to bring a brand to it, or find resources to exploit in it.

Ambidextrous Organization

· Organization structure most notable for its lack of structure wherein knowledge and getting it to the right place quickly are the key reasons for organization. Managers become knowledge "nodes" through which intricate networks of personal relations-inside and outside the formal organization—are constantly, and often informally, coordinated to bring together relevant know-how and successful action

Organizational Leadership

· the process and practice by key executives of guiding and shepherding people in an organization toward a vision over time and developing that organization's future leadership and organization culture

Strategic Intent

· : leaders clear sense of where they want to lead their company and what results they expect to achieve

Leaders Vision

an articulation of a simple criterion or characterization of what a leader sees the company must become in order to establish and sustain global leadership

Leadership Development

· the effort to familiarize future leaders with the skills important to the company and to develop exceptional leaders among the managers employed

Perseverance (of a leader):

· the capacity to see a commitment through to completion long after most people would have stopped trying

Principles (of a leader):

· a leader's fundamental personal standards that guide her sense of honesty, integrity, and ethical behavior

Passion (of a leader):

· a highly motivated sense of commitment to what you do and want to do

Position Power:

· the ability and right to influence and direct others based on the power associated with your formal position in the organization

Reward Power

· the ability to influence and direct others that comes from being able to confer rewards in return for desired actions or outcomes

Information Power:

the ability to influence others based on your access to information and your control of dissemination of information that is important to subordinates and others yet not otherwise easily obtained

Punitive Power

· ability to direct and influence others based on your ability to coerce and deliver punishment for mistakes or undesired actions by others, particularly subordinates

Expert Influence

· : the ability to direct and influence others because they defer to you based on your expertise and or specialized knowledge that is related to the task, undertaking, or assignment in which they are involved

Referent Influence

· the ability to influence others derived from their strong desire to be associated with you, usually because they admire you, gain prestige or a sense of purpose by that association, or believe in your motivations

Peer Influence

· the ability to influence individual behavior among members of a group based on group norms, a group sense of what is the right thing or right way to do things, and the need to be valued and accepted by the group

Organizational Culture

· the set of important assumptions and beliefs (often unstated) that members of an organization share in common

Ethical Standards

· A person's basis for differentiating right from wrong

Strategic Control

· management efforts to track a strategy as it is being implemented, detect problems or changes in its underlying premises and make necessary adjustments

Premise Control

· management process of systematically and continuously checking to determine whether premises upon which the strategy is based are still valid