Chapter 6.docx

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21 Apr 2012
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Chapter 6 + Strategy!
Management- is the process of planning, organizing, controlling and leading an enterprises financial,
physical, human and information resources to achieve the organizations goals of supplying various
products and services.
Efficiency, is achieving the greatest level of output with a given amount of input
Effectiveness- achieving the organizational goals that have been set
Planning- the process of determining a firms goals and developing a strategy to achieve it
Prediction market- creating a market where people can buy shares in various answers to important
questions that need to be answered
Competitive Adv Derived From
Differentiating characteristics
Not easily duplicated
Economic benefits
Source of Competitive Advantage
Product or process technology
Protected markets
Economies of scale
Financial resources
Management of work force
Porter’s Five competitive advantage points
Rivalry amongst competitors
Substitute products
Potential new entrants
Bargaining power of suppliers
Bargaining power of buyers
Rivalry will be high when
High fixed costs
Demand has steadied
Lots of firms
High storage costs
Customers can easily switch
Corporate Strategy types
• Concentration (eg. Southwest airlines)
• Growth (eg. RIM)
Integration (eg. Tribune Corp.)
• Diversification (eg. MLSE)
• Investment reduction (eg. GM)
Competitive Strategy
• Cost leadership (eg. Lincoln Electric)
• Differentiation (eg. Dell)
• Price focus
Low cost within a niche (eg. Suzuki Auto)
• Differentiation focus
Differentiating features within a niche (eg.
Prada, Singapore Airlines)Functional Strate
Basic characteristics:
Shorter timelines
Greater specificity
Primary involvement of operational
eg. marketing strategy, financial strategy,
R&D, HR strategy
Marketing strategy
• Product/service choices
• Pricing
• Targeting, segmentation
• Distribution
• Promotion
• Market research
• Customer relations Operation
Operations strategy
• Purchasing
• Manufacturing and delivery
• Inventory management ($)
• Technology decisions
Financial strategy
• Sources of capital
• Resource allocation
• Hurdle rates
• Cash management
• Borrowing instruments
• Reporting mechanisms
• Ownership structures
Human Resources strategy
Better people to choose from
• Selecting the best people
• Ensuring they know what to do and how to
do it
• Reward them, develop them
• Foster a positive culture
Line Authority
• The chain of command is direct and is indicated by a
solid line in the organization chart
Authority flows in a straight line
Authority flows from top to bottom
• Line departments
departments linked directly to the production and sale of a
product whose success is vital to the firm
• Line employees
the “doers” in a department who must make the right
decisions in order make the firm a success
Staff Authority
• Staff that advise or provide support to line
do not have line authority to make decisions
assist line managers in doing their jobs more
• Staff authority is indicated by a dotted line
in the organization chart
legal staff, marketing research