MGM101H5 Lecture Notes - Strategic Business Unit, Strategic Management, Swot Analysis
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MGM Chapter 9 Notes
•Goal of business is to achieve a sustainable competitive advantage – one that is perpetually
difficult for imitators to imitate.
•A strategy is a plan guiding resource allocation to achieve long-term organizational goals.
•Strategic intent focuses and applies organizational energies on a unifying, compelling goal.
•Today, strategies have to adapt to a constantly shifting world. “Long-term” aspect of strategy is
becoming shorter. Also, strategies have to change to deal with copycats.
•Strategic management is the process of formulating and implementing strategies.
•Ultimate goals of every business is “above-average returns”, which means profits that exceed what
could be earned from alternative investments of equivalent risk.
•Global economy has created an environment of hypercompetition, where at least a several players
compete with each other. In hypercompetition, any competitive advantage is temporary and
quickly imitated, strategies have to continuously change. Customer benefits from hypercompetition
due to lower prices and better service.
The Strategic Management Process
•Strategic management have two responsibilities: strategy formulation and strategy
•Five strategic questions: (1) What is our business mission? (2) Who are our customers? (3) What
do our customers value? (4) What have been our results? (5) What is our plan?
•Mission of an organization is the organization's reason for existence in society. A good mission
statement communicates the underlying philosophy that will guide all employees in their
operations. In fact, a good mission statement serves all stakeholders well. Stakeholder test is
called a strategic constituencies analysis.
•Core values guide a company by stating what is and what is not appropriate. Strong core values
help organization build institutional identity.
•Operating objectives are specific performance results that contribute to longer strategic goals.
They are short term targets such as “10% increase in net income compared to last quarter”
•To help analyze organizational resources and capabilities, a SWOT analysis can be used. This is
strengths, weaknesses, opportunities, and threats to a business' operations. A major goal is to
identify the “core competency, which is the special strength that gives an organization a competitive
•Opportunities and threats from external sources also have to be analyzed. Michael Porter's model
of five strategic forces. Companies that do well in these five categories are known as “attractive”
•Industry competitors – intensity of rivalry among firms in the industry
•New entrants – threats of new competitors entering the market
•Suppliers – bargaining power of suppliers
•Customers – bargaining power of buyers
•Substitutes – threats of substitute products and services.
•Three levels of Strategy:
•Corporate Strategy: What businesses do we pursue? What direction are we headed?
•Business Strategy: How do we compete in each of our major businesses?
•Strategic business unit is a major business area that operates with some autonomy.
•Functional Strategy: How do we best support each of our business strategies?
•These includes strategies in finance, marketing, manufacturing, etc.
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