Chapter 1 what is strategy and the strategic management process
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CHAPTER1 the Strategic Management Process
Why is it important to view strategic management as a process? What are the four steps of the strategic management process? How is chess relevant to the study of strategic management? What other games might help teach strategic thinking?
Art and Science 1. Evaluating the External Environment 3. Managing Firm Resources 4.
Other Views on Firm Performance 4. Selecting Business-Level Strategies 5. Supporting the Business-Level Strategy: Competitive and Cooperative Moves 6. The risk of entry by potential competitors is a function if the height of barriers to entry — factors that make it costly for companies to enter an industry. Sources of economies of scale: Industry competitive structure Competitive structure of an industry refers to the number and size distribution of companies in it.
Summary - Book "Strategic Management" - Chapter 1-9
Exit barriers Exit barriers — economic, strategic, and emotional factors that prevent companies from leaving an industry. If exit barriers are high, companies become locked into an unprofitable industry where overall demand is static or declining.
Buyers are most powerful in the following circumstances: Suppliers are most powerful in the following situations: Strategic groups within industries Strategic groups - groups of companies within an industry that follow a similar strategy e.
The closest competitors for a company are those in its strategic group.
The most immediate threat to profitability comes from rivals within the strategic group. Each strategic group may face a different set of opportunities and threats. Within- industry factors that inhibit movement between strategic groups e. It is important for managers to pay close attention to external forces on their industry due to their direct impact.
Efficiency Efficiency is the quantity of inputs that it takes to produce a given output. The more efficient a company is, the fewer inputs are required to produce a given output. It is important to identify which product attributes are the most valuable to customers and then to design products and associated services to satisfy customer needs. Reasons for Innovation failures: Positioning Strategy- the specific set of option a company adopts for a product on four main dimensions: Team members should have an ability to contribute functional expertise and willingness to share responsibility for team results and an ability to put functional advocacy aside.
Team strategies should be co-located and have a clear plan and set of goals Heavyweight Project Manager-a project manager who has status within the organization and the power to and authority required to get the financial and HR that a team needs to succeed. Increasing Customer Responsiveness Superior efficiency, process, innovation and all part of achieving superior customer responsiveness. Product can be differentiated by customization, which refers to varying the features of a good or service to tailor to the needs and tastes of groups of customers; and reducing the time it takes to respond to or satisfy customer strategic.
Customer Needs- Desires, wants, or cravings that can be satisfied by means of the chapters of a product or service Product Differentiation- the process of creating a what advantage by designing goods or services to satisfy customers needs.
The greater the differentiation, the more money a customer will pay for the product Customer Groups Market Segmentation- the way a company decides to group customers, based on important differences in their needs or preferences Alternatives to Market Segmentation: Wal-Mart and Midas International managements this strategy.
This creates a barrier to entry because potential competitors now find it harder to break into an industry in which all niches are filled.
Toyota Price Cutting- Most evidence suggests that companies first skim the market and charge high prices during the growth stage, maximizing short-run profits. Then they can more to increase their market share and charge a lower price to expand the market rapidly; develop a reputation; and obtain economies of scale, driving down costs and barring entry. As competitors do enter, incumbent companies reduce prices to retard entry and give up market share to create a stable industry context- one in which they can use nonprice competitive tactics, such as product differentiation, to maximize long-run profits.
Then companies move to Tit-for-Tat strategy if one company starts to cut prices more aggressively Tit-for-Tat Strategy- a form of market signaling in which one company starts to cut prices aggressively, and then competitors respond in a similar way; when this occurs, nobody gains Price Leadership- the process by which one company informally takes the responsibility for setting industry prices.
Chapter 1 What is Strategy & the Strategic Management Process?
Although price leadership can stabilize industry relationships by preventing head-to-head competition and thus raise profitability within an industry, it ha s a problem of helping companies with higher costs by allowing them to survive what becoming more the and more efficient, this can be dangerous in the long run.
Market Penetration- a strategy in which a company concentrates on expanding market share in its existing product markets. Involves heavy advertising to promote and build product differentiation. In consumer goods industries market penetration becomes a way of strategic for many products e. Company will be most likely to loose market share but it might improve cash flow, however, ultimately strategy flow will decline. The formulation step in the strategic management process seeks to a. Which of the following statements is. Strategic decisions are generally short term in nature.