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Chapter 9

Chapter 9 - Strategic Management

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Global Management Studies
GMS 200
Shavin Malhotra

Chapter 9 – Strategic Management STRATEGIC COMPETITIVENESS Competitive advantage — operating with an attribute or set of attributes that allows an organization to outperform its rivals Sustainable Competitive Advantage - One that is different for a competitor to imitate What is strategy? Strategy - a comprehensive action plan guiding resource allocation to achieve long term plans Strategic Intent - focusing all organizational energies on a unifying and compelling goal Strategic Management Strategic management - the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage. Looking ahead, understanding the external environment (consumers), effectively positioning the company for competitive advantage Strategic management goals Ultimate goal for any business should be superior profitability; Creates above- average returns for investors (based on the competitive environment of the company) Monopoly (specialty company) o Only one player and no competition. o Creates absolute competitive advantage. Oligopoly (breakfast cereals – Kellogg’s, General Mills and Quaker Oats) o Few players not directly competing against each other. o Long-term competitive advantage in defined market segment. Hypercompetition (fast food chains) o Several players directly competing against each other. o Any competitive advantage is only temporary. THE STRATEGIC MANAGEMENT PROCESS Strategic management process has two responsibilities: 1. Strategy Formulation o The process of creating strategy. o Involves assessing existing strategies (mission, objectives), organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage. 2. Strategy Implementation o The process of allocating resources and putting strategies into action. o All organizational and management systems must be mobilized to support and reinforce the accomplishment of strategies. www.notesolution.com o Identify organizational mission and objectives, asses current performance vis- à-vis mission and objectives, create strategic plans to accomplish purpose and objectives, implement the strategic plans, evaluate results; change strategic plans and/or implementation processes as necessary. Analysis of Mission, Values and Objectives Mission: Reason for an organization’s existence. o Good mission statements identify: customers, products and/or services, location, underlying philosophy o An important test of the mission is how well it serves the organization’s stakeholders. Core Value: Values are broad beliefs about what is or is not appropriate. o Strong core values for an organization helps build institutional identity, gives character to an organization, and it backs up the mission statement. o Organizational culture reflects the dominant value system of the organization as a whole. o Through organizational culture the values of managers and other members are shaped and pointed in common directions Objectives: Operating objectives direct activities toward key and specific performance results. o Typical operating objectives (allows for progress and continuous improvement): Profitability – net profit Market share – gaining and holding a specific market share Human talent – recruiting and maintain high- quality workforce Financial health – earning positive returns Cost efficiency – using resources to operate at a lower cost Product quality – producing high-quality goods Innovation – developing new products Social responsibility – positive contributions to society Analysis of Organizational Resources and Capabilities SWOT Analysis Strengths, Weaknesses, Opportunities, Threats Analysis of Industry and Environment Porter’s model of five strategic forces affecting industry competition: o Industry competitors: intensity of rivalry among firms in the industry o New entrants: threats of new competition o Suppliers – bargaining power of suppliers o Buyers – bargaining power of buyers o Substitutes – threats of substitute products or services *if the industry is unattractive (a lot of competition) five forces are **if the industry is unattractive (minimal competition) five forces are STRATEGIES USED BY ORGANIZATIONS www.notesolution.com Strategies are formulated and implemented at the organizational or corporate level, business level and functional level. Levels of strategy Corporate Strategy o Sets long-term direction for the whole enterprise o How the company intends compete across multiple industries and Business Strategy o Identifies how a division or strategic business unit will compete in its product of service domain o For smaller companies the business strategy is the corporate strategy Functional Strategy o Guides activities within specific area of operations Growth and Diversification Strategies Growth Strategies: Seek an increase in size and the expansion of current opeoaticoncentration strategies (growth within the same business area – fast food chains) o Diversification strategies (growth through investment in new business ares) Related diversification: entering business area that are related in what they do (Tropicana and Pepsi, both expertise in the beverage industry) Unrelated diversification: entering business areas different from what one already does Vertical integration: acquiring suppliers (backwards) or distributors (forward) Restructuring and Divestiture Strategies Retrenchment Strategy: Change of operations to correct weaknesses o Most extreme form - Liquidation: business ceases and assets are sold to creditors o Less extreme and more common - Restructuring: making major changes to reduce the scale and/or mix of operations (gain short term efficiency and gain time in preparing in strategies) Downsizing: decreases the size of operations, reduces cost and improves operating efficiency. Downsizing with a strategic focus is called rightsizing Divestiture: selling off parts of the organization to refocus attention of core business areas (for those organizations that become over-diversified and find problems in managing these operations) Global Strategies www.notesolution.com Globalization Strategy: World is one large market; standardize products and
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