ch 7 Dstrategy and strategic management Exploring management

Ch 7. Strategy and Strategic Management Strategy is a comprehensive plan for achieving competitive advantage: Strategy: A comprehensive plan that allocates resources to achieve long-term organizational goals. Strategic Intent: focuses organizational energies on achieving a compelling goal. Competitive Advantage: Ability to outperform rivals. Sustainable Competitive Advantage: Achieving in a way that is difficult to imitate. Organizations use corporate, business, and functional strategies Corporate: Top level: sets the log-term direction for the whole organization. Provides Direction and guides the allocation of resources Strategic Question??: In what industries and markets should we compete in? Business: Identifies how a division or strategic business unit will compete in its product or service domain. Focuses on Strategic intent: for a single unit or product line Strategic Question??: how are we going to compete for customers within this industry and in this market? Business strategies include: choice about product or service mix, facilities locations, new technologies. For Smaller Single-business enterprises, business strategy is the corporate strategy. Functional: guides the activities within one specific area of operations. Implements higher-=level business and corporate strategies unfolds in specific functional areas such as marketing, finance, manufacturing ect. Strategic Question??: How can we best utilize resources within the function to support implementation of the business strategy? involves initiatives to improve things such as operating efficiency, product quality, customer service, or innovativeness. Growth Strategies focus on expansion: Growth Strategies: Involves expansion of the organizations current operations. Increase Size and scope Many Executives believe growth is necessary for long-run profitability. Concentration Strategies: Growth in area of existing business McDonalds opening more stores vs opening a bookstore Diversification Strategies: Expansion occurs by entering into a new business area. Involves some risk because firm may be moving outside existing areas of competency. To lower risk pursue related diversification, expanding into similar or complementary new business areas. Vertical integration strategies: when a business acquires is supplier or distributors. 2 types Backward vertical integration: buying suppliers Apple for example bought out microchip company to make their technology more private Forward vertical integration: buying distributors Cocacola and Pepsi bought its major bottlers Restructuring and divestiture strategies focus on consolidation Retrenchment strategy: seeks to correct weaknesses by making radical changes to current ways of operating. Liquidation is the most extreme form of retrenchment Restructuring is a less extreme and more common form of retrenchment Liquidation happens when a business closed down or sell its assets to pay creditors. Restructuring involves making major changes to cut cost, gain short-term efficiencies, and buy time to try new strategies to improve future success. Chapter 11 bankruptcy: when a firm unable to pay its bills (desperate financial condition) it can file for this. Protect the firm from creditors during a period of reorganization to restore profitability The goal is to emerge from bankruptcy as a stronger and profitable business. Downsizing: restructuring approach, it cuts the size of operations and reduces size of organization the workforces Divestiture: involves selling parts of the organization to refocus attention on core business areas. Can involve selling parts of the organization, cut cost, and improve operating efficiency Global strategies focus on international business initiatives Globalization strategy: takes standard products and advertises around the world. View the world as one large market Multidomestic strategy: customize product and advertising to fit local cultures and needs Transitional strategy: tries to operate globally without having a strong national identity Firms seek a balance between efficiency in global operations and responsiveness to local market They hope to blend with the global economy Cooperation strategies focus on alliances and partnerships Strategic alliance: two or more organizations join together in preparation to pursue an area of mutual interest. Commonly happens by outsourcing alliances, contracting to purchase specialized from another organization Supplier alliances: guarantees a smooth and timely flow of quality supplies among partners. Distribution alliances: firms join together to accomplish product or services sales and distribution. Strategic alliances: (co-operation or revolution mindset) working with competitors or rivals on a project for mutual benefit some cooperation strategies involve these E-business strategies focus on using the Internet for business success E-business strategy: strategically using the Internet to gain comparative advantages. B2B business strategy: uses IT and web portals to link organizations vertically in supply chain B2C business strategy: business to customer. Uses IT web portals to link businesses with customers. Social media strategy: using social media to better reach and engage with customers, clients and external audiences Crowdsourcing: uses the Internet to engage customers and potential customers in providing opinions and suggestions on products and their designs.