MGMT 490 Theory Exam Mark Smith

environment

resources

goals of management

social responsibility

What parts make up the formulation part of formulation and implementation?

structure

systems

leadership

Strategy is implemented through?

formulation and implementation of strategy

Model serves as an outline of all the theories and designed to formulate a strategy and then implement it

company level

what level does formulation and implementation of strategy apply to?

environment, resources, goals, responsibility to society, strategy, structure, systems, leadership

what are the 8 parts of formulation and implementation of strategy?

when one of the 8 parts have significantly changed

ex) changed law, people copying it, product kills people

Something in process needs to be addressed

when do you use formulation and implementation of strategy?

industry rivalry

suppliers

buyers

barriers to entry and exit

substitutes

What are the parts of Porter's 5 Elemental Forces of Competition Model?

discussion of power; competition

what is the porter model used for?

Power: if they're noticeable

weak: bc they can be replaced

when do buyers have power? why are they weak?

Want hard to get in and easy to get out

what is the ideal barriers to entry and exit?

introduction: lose $

price umbrella: make $

shakeout: lose $

maturity: make $

What are the parts of the Industry Life Cycle and what happens in each?

Contributes to the BCG model by wanting to be strong enough in price umbrella to skip shake out and go straight to maturity

Want to sell out or make it big

how does the industry life cycle relate to the BCG model?

current ratio

acid/quick ratio

what are the liquidity ratios?

Current Ratio = current assets / current liability

> 2

what is the current ratio and what is the desired number?

Acid/Quick Ratio = Current Assets - Inventory / Current Liability

> 1

what is the acid/quick ratio and what is the desired number?

Ave Days Sales in AR

Ave Day Sales in INV

what are the operating ratios?

AR/AVE

*AVE = Sales/365

< credit terms

what is the Ave Days Sales in AR? What is the desired number?

INV/AVE

*AVE = COGS/365

> support sales

< theft (shrink), spoilage, obsolescence

what is the Ave Days Sales in INV?

Debt Ratio

What is the leverage ratio?

Total Debt / Total Assets

< 100%

At 100% you're bankrupt

Want around 50%

What is the debt ratio? What is the desired number?

Return on Equity

What is the profitability ratio?

Income/Equity

> Gov bond yield

*currently at 4%

What is the formula for return on equity? What is the desired number?

Price Earnings ratio

What is the investor rating ratio?

Price of Stock / Earnings per Share

Below 10 is BAD

20 is good-okay

50 is very high; unsustainable

What is the formula for the price earnings ratio? What is the desired number?

lower interest rates, higher P/E ratio

how do interest rates relate to P/E ratios?

Cost ⇒ production costs ⇒ high volume low price model

- Easy to sell cheap but need to look at cost to turn profit

Differentiation ⇒ Quality/hard to duplicate

- Can you create some quality that is hard to duplicate?

Focus ⇒ narrow target market, local consumers

ex) Black men having skin condition and need special shaving cream

- unknown us not in the market

What are the parts of the Generic Strategy Model?

Organic Growth: start with company and let it grow

Horizontal Growth: buying businesses in same level

Vertical Integration: buying up and down the supply chain

- If you don't add value, you're out of supply chain

Related Diversification: discovered a byproduct or extra use for machine

Unrelated: statistically not a good idea

- Grow when times are good but end up broken up in trouble

Stability

Bankruptcy/withdraw/downsize

What are the parts of the Grand Strategy Model?

Stability,

because you can't grow forever

What is the only reasonable goal in the grand strategy model and why?

Industry Growth

What kind of growth is the BCG model concerned with?

portfolio model

What kind of model is the BCG model?

$ cow

Where should the money for the ? come from in the BCG model?

Business Market Share horizontally across square

- high to low horizontally

Industry Growth vertically

- high low vertically

?, star, $ cow, dog

Describe the labeling of the BCG model

Key Partners - outside company

Key Activities

Key Resources

Value Proposition - to the customer in general

Customer Relationships

Customer Channels

Customer Segments - ex: age, ethnicity

Cost Behavior - timing cash flow

Revenue Streams - advertising sale/no ads

What are the parts of the business model canvas?

Business Model

Outline for what strategy should look like (elevator pitch)

Value Proposition

What is the key for the Business Model?

Left side of VP is how we make it (create value)

Right side is how we deliver it

Bottom is how we make money off of it

Describe the design of the Business Model Canvas

Corporate level model NOT industry; goals and assumptions (approved) long-term plan, 1 year budget, control and evaluate, feedback

System used to put together all other systems (info, reward, allocation, etc.)

Want planning to overlap to always have planning into the future

GE Strategic Planning Model

Direct Foreign Investment

Joint Venture (legal impediments)

Franchising/Licensing (local mgmt/investment)

Import/Export

in order from lowest risk to highest risk

What are the parts of the International Growth Strategy?

Rule of Law

Int'l Growth Strategy;

Do I think I can get my money back?

Raw Materials ==> parts ==> assemble ==> wholesale ==> retail ==> consumer:

total quality mgmt (inventory reduction)

Third Party Logistics - international

Parts of the Supply Chain

Must add value so you're not eliminated

What is needed in the Supply Chain to not be eliminated?

Simple Structure Implementation

Size: small

Product: simple

Decision Making: highly centralized

Evaluation: follow orders

Functional Implementation

Size: medium

Product: highly related

Decision Making: centralized

Evaluation: cost and revenue centers

Divisional Implementation

Size: largest

Product: can be unrelated

Decision Making: decentralized

Evaluation: profit centers

Matrix Implementation

Size: medium

Product: projects, not products

Decision Making: highly decentralized

Evaluation: billable hours

Locus of Control

- internal ex: leadership, religion, sex, race, ethnicity

Leadership