FSU MAN 4720 Exam 1 Part 2

Strategic Management

The ongoing process companies use to form a vision, analyze their external environment and their internal environment, and select one or more strategies to use to create value for customers and other stakeholders, especially shareholders

Vision

is the IDEAL description of the organization. A picture of what the firm wants to be and ultimately achieve.

Mission

specifies the business or businesses in which the firm competes and the customers it intends to serve.

I/O Model (Industrial Organization Model)

Used to identify threats and opportunities in the firms external environment that may help/hinder the firm reach its vision

Resource-based view of the Firm

The internal environment is the set of conditions (such as strengths, resources, capabilities, and so forth) inside the firm affecting the choice and use of strategies.
Firms have direct control.

Core Competencies

are capabilities the firm emphasizes and performs especially well while pursuing its vision.

Distinctive Competencies

are core competencies that differ from those held by competitors.

Competitive Advantage

when the firm's core competencies allow it to create value for customers by performing a key activity better than competitors or when a distinctive competence allows it to perform an activity that creates value for customers that competitors can't perform

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats.
Internal Analysis
Resource based view
External Analysis
Industrial Org Model

Strategic Leaders

Individuals who practice strategic leadership - making sure that decisions are made that will ensure their firm's success.

Organizational Culture

is the set of values and beliefs that are shared throughout the firm. Values reflect what is important, while beliefs speak to how things should be done.

Stakeholders

Individuals and groups who have an interest in a firm's performance and an ability to influence its actions.

Primary Stakeholders

Firm relies on for continuous survival and prosperity.

Secondary Stakeholders

• Not engaged in direct transactions or essential to firm survival, but are still impacted by and have the power to influence and affect the firm.

Ethics

are concerned with the standards for deciding what is good or bad, right or wrong as defined by most members of a particular society

Strategic Leadership

involves developing a vision for the firm, designing strategic actions to achieve this vision, and empowering others to carry out those strategic actions.

Strategic Leadership Styles

Transformational (generally the best…)
Transactional
Laissez-Faire

Board of Directors

Monitor (oversight), advice and council (advisory), access to social network/resources (social capital), legitimacy/ prestige (reputation)

How long are strategic plans designed for? Vision?

Strategic Plans = 3-5 yrs
Vision= 10-20 yrs

Top Management Team

the group of managers charged with the responsibility to develop and implement the firm's strategies.
VP and higher

management Succession

Strategic leaders must develop people who can succeed them.
Succession planning becoming more important
40 percent of firms have no succession plan
50 percent of directors rate own plan as ineffective

Balanced Scorecard

Stakeholder perspective
Uses performance measures from:
-Customer perspectives
-Internal perspectives
-Innovation and learning perspectives
-Financial perspectives

Financial Ratio Analysis

-Cash flow, ROE, ROA
-Outcome focused
-Historical comparison
-Comparison with industry norms
-Comparison with key competitors

Three parts of a firm's external environment

-The general environment

• The industry environment
• The competitor environment

The general Environment (external environment)

trends in the broader society that influence an industry and the firms in it.
Demographic factors
Economic factors
Political/legal factors
Sociocultural factors
Technological factors
Global factors
Physical trends

Demographic trends

changes in population size, age structure, geographic distribution, ethnic mix, and income distribution.

Economic Trends (external environment)

concern the direction of the economy in which a firm competes or may choose to compete.

Political/Legal Trends (external environment)

pertaining to laws and regulations that guide interactions among firms and nations.

Sociocultural trends (external enviro)

deal with changes in a society's attitudes and cultural values.

Technological Trends (external enviro)

concern changes related to creating new knowledge and translating that knowledge into new products, processes, and materials.

Global trends

concern changes in relevant emerging and developed country global markets, important international political events, and critical changes in cultural and institutional characteristics of global markets.

Physical environment trends

refer to the changes in the physical environment and business practices that are intended to sustain it

5 force model of competition

Potential Entrants
Substitute Products
Bargaining Power of Suppliers
Bargaining Power of Buyers
Rivalry among Existing Firms

Differentiation

Over time, customers may decide that an established firm's product uniquely meets their needs. Such perceptions of uniqueness are defined as

Barriers to Entry

Economies of scale
Financial Capital
Switching Costs
Differentiation
Distribution Channels
Government Policy

Competitive Rivalry

-Degree of product differentiation among competitors.
-Competitors can attract customers by lowering buyers' switching costs.
-In industries in which competing firms are of similar size and have similar competitive capabilities rivalries are intense.
-Rivalry usually increases when markets are slow to grow or don't grow.

Barriers to exiting from an industry include the following:

-Specialized assets
-Fixed costs of exit (such as labor agreements)
-Strategic interrelationships (shared facilities and access to financial markets)
-Emotional barriers
-Government and social restrictions

FORCES GO UP, PROFITS GO DOWN =

Industry loses attractiveness
:(

Internal Analysis

To develop strategy must understand resources, capabilities, and core competencies.
(Strengths & Weaknesses)

Intangible Resources

Human Resources
Social Resources
Innovation Resources
Reputational Resources
Organizational Culture

Resource Portfolio

The full set of resources a firm holds

Capabilities

when the firm integrates several different resources in a way that allows it to effectively and efficiently complete a task or series of tasks.

A core competence must satisfy what 4 characteristics to be a relatively sustainable competitive advantage?

Valuable, Rare. Difficult to imitate, Substitutable

The Value Chain

the structure of activities the firm uses to implement its strategy.
Primary and secondary activities.

What are the 5 different types of generic business level strategies?

-Cost leadership
-Differentiation
-Focused cost leadership
-Focused differentiation
-Integrated cost leadership/differentiation

Differentiation Strategy

Action plan the firm develops to produce goods or services that customers perceive as being unique in ways that are important to them.

Focused Cost Leadership Strategy

Action plan the firm develops to produce goods or services for a narrow market segment at the lowest cost

Focused Differentiation Strategy

Action plan the firm develops to produce goods or services that a narrow group of customers perceive as being unique in ways that are important to them

Sabanes Oxley Act

Attempts to strengthen corporate oversight and improve internal controls.