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GMS Chapter 7.docx

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Ryerson University
Global Management Studies
GMS 200
Tsogbadral Galaabaatar

GMS Chapter 7 Strategic Management  Competitive Advantage: is the ability to do something so well that one outperforms competitors. - Typical sources of competitive advantage include: o Cost and quality: where strategy drives an emphasis on operating efficiency and product or service quality. o Knowledge and speed: where strategy drives an emphasis on innovation and speed of delivery to market for new ideas. o Barriers to entry: where strategy drives an emphasis on creating a market stronghold that is protected from entry by others. o Financial resources: where strategy drives and emphasis on investments or loss absorption that competitors cant match. - Sustainable competitive advantage: Is the ability to outperform rivals in ways that are difficult or costly to imitate.  Strategy and strategic intent - Strategy: is a comprehensive plan guiding resource allocating to achieve long-term goals. - Strategic intent: Focuses and applies organizational energies on a unifying and compelling goal. - There are three levels of strategy in organizations corporate, business and functional strategies. o Corporate strategy: sets long-term direction for the total enterprise. Ask questions like “In what industries and markets should we compete?” o Business strategy: identifies how a division or strategic business unit will complete in its product or service domain. Asks questions like “ How are we going to compete for customers in this industry or market?” o Functional Strategy: guides activities within one specific area of operations. Focuses on activities within a specific functional area such as marketing, human resources, finance etc. Ask questions like “ How can we best utilize resources within a function ot implement our business strategy?”  The Strategic Management Process - Strategic management: is the process of formulating and implementing strategies. - Strategic analysis: is the process of analyzing the organization, the environment, and the organization’s competitive position and current strategies. - Strategy formulation: is the process of crafting strategies to guide the allocation of resources. o revise objectives and select new staregies (corporate, business, and functional strategies) - Strategy implementation: is the process of putting strategies into action. Essentials Of Strategic Analysis  Analysis od mission, values and objectives - Mission and Stakeholders o Mission: statement expresses the organizations reason for existence in society. o Stakeholders: are individuals and groups directly affected by the organization and its strategic accomplishments. o Strategic constituencies analysis: assesses interests of stakeholders and ho well the organization is responding to them. - Core values: are broad beliefs about what is or is not appropriate behavior. - Organizational culture: is the predominant value system for the organization as a whole. - Objectives o Operating objectives: are specific results that organizations try to accomplish. o Typical operating objectives include:  Profitability- operating with a net profit.  Financial Health- acquiring capital; earning positive returns.  Cost efficiency- using resources well to operate at low cost  Customer service- meeting customer needs and maintaining loyalty  Product quality- producing high quality goods or services.  Market Share- gaining a specific share of possicle customers  Human Talent- recruiting and maintaining a high quality workforce  Innovation- developing new products and processes.  Social responsibility- making a positive contribution to society.  SWOT Analysis of Organization and Environment - SWOT analysis: examines organizational strengths and weaknesses and environmental opportunities and threats. - Internal Assessment of the organization: strengths and weaknesses. o Core competencies: is a special strength that gives an organization a competitive advantage. - External Assessment of the environment: opportunities and threats. - What are our strengths? o Manufacturing efficiency? o Skilled workforce? o Good market share? o Strong financing? o Superior reputation? - What are our weaknesses? o Outdated facilities? o Inadequate R&D? o Obsolete technologies? o Weak management? o Past planning failures? - What are our opportunities? o Possible new markets? o Strong economy? o Weak market rivals? o Emerging technologies? o Growth of existing market? - What are our threats? o New competition? o Shortage of resource? o Changing market tastes? o New regulations? o Substitute products?  Analysis of Rivalry and Industry Attractiveness - Monopoly: only player in the industry - Oligopoly: facing a few competitors - Hyper competition: facing several direct competitors such as the fast food industry - Porters Five Forces Model: model of 5 strategic forces affecting industry competition 1) Industry competition: The intensity of rivalry among firms in the industry and the ways they behave competitively towards one and other. 2) New entrants: the threat of new competitors entering the market, based on the presence or absence of barriers to entry. 3) Substitute products or services: the threat of substitute products or services based on the ability of consumers to find what they want from other sellers. 4) Bargaining power of suppliers: the ability of resource suppliers to influence the price that one has to pay for their products or services. 5) Bargaining power of customers: the ability of customers to influence the price that they will pay for the firms products or services. Corporate- Level Strategy Formulation The CEO and senior management team in a business focus on corporate level strategy formulation. The goal at this level of strategic analysis is to plot the overall direction of the organization in the competitive setting of its industry.  Grand or Master Strategies - Growth strategy: involves expansion of the organization’s current operations. - Stability strategy: maintains current operations without substantial changes. - Renewal strategy: tries to solve problems and overcome weaknesses that are hurting performance. o Liquidation: business operations cease and assets are sold to pay creditors. - Combination Strategy: pursues growth, stability, and/ or retrenchment in some combination.  Growth and Diversification Strategies - Concentration: one approach to grow is through concentration, where expansion in within the same business area. - Diversification: where expansion takes place in new and different areas. Growth by acquisition of or investment in new and different business areas. - Related diversification: pursues growth by acquiring new b
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