pg 1 Chapter 6 How Star Managers Realize a Grand Design The Dynamics of Strategic Planning Strategy a broad action plan that points an organization in a particular direction ex financial strategy marketing strategy etc ex Budweiser s overseas strategy Strategic management in this process managers from all parts of the company top management middle management first line management create and implement strategies The Strategic Management Process 1 Establish the mission and the vision 2 Establish the grand strategy a Do this by translating the broad mission and vision statements by assessing the company s current organizational performance and then describe how the mission will be achieved i Step 1 analyze the organization s current situation to see where it is presently headed ii Step 2 determine where the company should be headed in the future 3 Formulate Strategic Plans a Translate the grand strategy determined in step 2 into more specific strategic plans Strategic plans include long term goals about growth and profits and details about how to accomplish these goals 4 Carry Out the Strategic Plans a This is done by dissecting the strategic plan into smaller plans that other levels of management usually lower levels can follow pg 2 5 Maintain Strategic Control a Monitor how the strategy is executed and make changes if necessary Common Grand Strategies See slide 11 in chapter 6 power point Growth strategy Stability Defensive How Companies Can Implement Grand Strategies See slide 12 in chapter 6 power point Growth strategy improve increase expand merge acquire Stability strategy no change strategy or little change strategy Defensive strategy reduce sell off gradually phase out go bankrupt sell a division or subsidiaries or try to do a turnaround Competitive Intelligence See slide 13 in chapter 6 power point Competitive intelligence the process of gathering information about your competitors SWOT Analysis S strengths W weaknesses O opportunities T threats pg 3 A SWOT analysis is a very honest look at the company to find strengths and weaknesses internally and opportunities and threats externally Pair them Learn how to maximize strengths and opportunities and learn how to neutralize threats and weaknesses Environmental scanning scan monitor both the internal and external aspects of a company to spot potential opportunities and threats Internal matters strengths and weaknesses External matters opportunities and threats QUESTION 1 When analyzing the W in SWOT analysis Roberta the manager might be assessing A Possible challenges in the market B Competitors actions C High turnover of employees D Good financial resources of the firm answer at bottom of pg Forecasting Predicting the Future Managers do this after a SWOT analysis to create a vision of the future Two types of forecasting Trend analysis the basic idea that a company s current status can be projected into the future Contingency plan a k a scenario planning scenario analysis alternative hypothetical future situations that get managers thinking strategically and prepare managers for emergency situations Porter s Five Competitive Forces 1 Threats of new entrants pg 4 The higher the barriers to entry are for your competitors the more profit you can make assuming you re already in the market 2 Bargaining power of suppliers If there are 50 suppliers then you have the ability find one that will keep you profitable If one raises the price then you can switch to a different one 3 Bargaining power of buyer If you only have one or two customers and the ask you to lower the price you ll do it If you have many customers then you don t have to do business with the one that wants to lower the price 4 Threat of substitutes products or service 5 Rivalry amount competitors Porter s Four Competitive Strategies After you determine if you ll be profitable determine your strategy 4 different types of competitive strategies wide market 1 Cost leadership wide market 2 Differentiation narrow market 3 Cost focus narrow market 4 Focused differentiation Cost leadership strategy keep costs and prices of a product or service lower than the competition Differentiation strategy make unique or better products services available Cost focus strategy make unique or better products services available pg 5 Focused differentiation strategy make products services that are unique and of greater value each market has a different cost low high etc and is either in a wide or narrow market Ex Put low price with wide market Walmart Single product vs Diversification Single product strategy all eggs are in one basket everything is focused on doing that one product extremely well risk of competition Diversification spreading out risk several products or several business in an industry if I have 5 products in 5 industries then I m spreading out my risk can be less focused on one product than another The BCG Matrix BCG stands for Boston Consulting Group in general the goal is to grow your profits The BCG Matrix is a method used to evaluate areas of a business based on 1 Market growth their business growth rates how fast the industry is growing 2 Market share their share of the market the business unit s share of the market in comparison to its competitors See chart on slide 32 of the chapter 6 PowerPoint Market growth and market share are both dived into high and low pg 6 stars are business units that are very desirable with a high growth rate and a high market share dogs are not so desirable and have a low growth rate and a low market share From this you can determine which product service to take money from and move it around to invest in another product service A business in a fast growing market with a high market share will be more successful A business in a slow growing market with a low market share will be less successful The Three Core Processes of Business 1 People think about what people will benefit you in the future 2 Strategy think about how to accomplish success 3 Operations think about the path you should take Answer bank Q1 C pg 7
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