Principles of Management Ch. 6 Vocab

Strategic Positioning

Strategy that attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company

Three Key Principles of Strategic Positioning

Strategy is the creation of a unique and valuable position. Strategy requires trade-offs in competing; strategy involves creating a “fit” among activities

Corporate-level strategy

Focuses on the organization as a whole

Business-Level Strategy

Focuses on individual business units or product/service lines

Functional-Level Strategy

Plan of ­action by each functional area of the organization to support higher level strategies

Step One of the Strategic-Management Process

Establish the mission, vision, and values statement

Step Two of the Strategic-Management Process

Assess the current reality

Step Three of the Strategic-Management Process

Formulate the strategies and plans

Step Four of the Strategic-Management Process

Implement the strategies and plans

Step Five of the Strategic-Management Process

Maintain Strategic Control

Current Reality Assessment

Assessment to look at where the organization stands and see what is working and what could be different so as to maximize efficiency and effectiveness in achieving the organization’s mission

Strategy Formulation

The process of choosing among different strategies and altering them to best fit the organization’s needs

Strategy Implementation

The implementation of strategic plans

Strategic Control

Monitoring performance to ensure that strategic plans are being implemented and taking corrective action as needed

Sustainable competitive Advantage

Exists when other companies cannot duplicate the value delivered to customers

SWOT Analysis

Also known as a situational analysis, the search for the Strengths, Weaknesses, Opportunities, and Threats affecting the organization

Organizational Strengths

The skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission

Organizational Weaknesses

The drawbacks that hinder an organization in executing strategies in pursuit of its mission

Organizational Opportunities

Environmental factors that the organization may exploit for competitive advantage

Organizational Threats

Environmental factors that hinder an organization’s achieving a competitive advantage

VRIO

Is a framework for analyzing a resource of capability to determine its competitive strategic potential by answering four questions about its Value, Rarity, Imitability, and Organization

Forecast

A vision or projection of the ­future

Trend Analysis

A hypothetical extension of a past series of events into the future

Scenario Analysis

The creation of alternative hypothetical but equally likely future conditions

Benchmarking

A process by which a company compares its performance with that of high-performing organizations

Growth Strategy

One of three grand strategies, this strategy involves expansion—as in sales revenues, market share, number of employees, or number of customers or (for nonprofits) clients served

Innovation Strategy

Grows market share or profits by improving existing products and services or introducing new ones

Stability Strategy

One of three grand strategies, this strategy involves little or no significant change

Defensive Strategy

Also called retrenchment strategy, one of three grand strategies, this strategy involves reduction in the organization’s efforts

BCG Matrix

A management strategy by which companies evaluate their strategic business units on the basis of (1) their business growth rates and (2) their share of the market

Diversification

Strategy by which a company operates several businesses in order to spread the risk

Related Diversification

When a company purchases a new business that is related to the company’s existing business portfolio

Unrelated Diversification

Occurs when a company acquires another company in a completely unrelated businesses

Vertical Integration

Diversification strategy where a firm expands into businesses that provide the supplies it needs to make its products or that distribute and sells its products

Porter’s Model for Industry Analysis

Threat of new entrants, bargaining power of supplies, bargaining power of buyers, threats of substitute products/services, and rivalry among competitors.

Porter’s Four Competitive Strategies

Also called four generic strategies; (1) cost leadership, (2) differentiation, (3) cost-focus, and (4) focused-differentiation. The first two strategies focus on wide markets, the last two on narrow markets

Cost-leadership strategy

One of Porter’s four competitive strategies; keeping the costs, and hence prices, of a product or service below those of competitors and to target a wide market

Differentiation Strategy

One of Porter’s four competitive strategies; offering products or services that are of unique and superior value compared with those of competitors but to target a wide market

Cost-focus Strategy 

One of Porter’s four competitive strategies; keeping the costs, and hence prices, of a product or service below those of competitors and to target a narrow market

Focus-Differentiation Strategy

One of Porter’s four competitive strategies; offering products or services that are of unique and superior value compared to those of competitors and to target a narrow market

Execution

Using questioning, analysis, and follow-through in order to mesh strategy with reality, align people with goals, and achieve the results promised

First Core Process: People

“You need to consider who will benefit you in the future”

Second Core Process: Strategy

“You need to consider how success will be accomplished.”

Third Core Process: Operations

“You need to consider what path will be followed.”

Execution Roadblocks

Misaligned organizational structure, poor performance management and leadership, conflicting functional objectives, and employees’ resistance to change.

Performance Management

A set of processes and managerial behaviors that involve defining, monitoring, measuring, evaluating, and providing consequences for performance expectations

The Planning/Control Cycle

Formulate the strategic plan, implement the strategic plan, monitor progress, and take action.