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Chapter 7 - Strategy and Strategic Management
Competitive advantage - the ability to do something so well that one outperforms competitors
Typical sources of competitive advantage:
(i) cost and quality - where strategy drives an emphasis on operating efficiency and product or
service quality
(ii) knowledge and speed - where strategy drives an emphasis on innovation and speed of
delivery to market for new ideas
(iii) barriers to entry - where strategy drives an emphasis on creating a market stronghold that
is protected from entry to others
(iv) financial resources - where strategy drives an emphasis on investments or loss absorption
that competitors can't match
Sustainable competitive advantage - the ability to outperform rivals in ways that are difficult or
costly to imitate
Strategy and Strategic Intent
Strategy - a comprehensive plan guiding resource allocation to achieve long-term organization
goals(sustainable competitive advantage).
Strategic intent - focuses and applies organizational energies on a unifying and compelling goal;
all energies directed toward accomplishing a long term target or goal
Levels of Strategy
Corporate level strategy - sets long term direction for the total enterprise; directs the organization
as a whole toward sustainable competitive advantage
answers the question "what businesses are we in and what industries and markets should
we compete in"
corporate strategic decisions include acquisitions, expansions and cutbacks
Business level strategy - identifies how a division or strategic business unit will compete in its
product or service domain
answers the question "how are we going to compete for customers in this industry and
market?"
business strategic decisions include choices about product and service mix, facilities
locations, new technologies.
strategic business unit(SBU) is often used to describe a single business firm within a
larger enterprise
Functional strategy - guides activities within one specific area of operations
answers the question "how can we best utilize resources within a function to implement
our business strategy?"
functional strategic decisions include choice of management practices to improve
operating efficiency, product or service quality, customer service, marketing, finance etc
The Strategic Management Process
Strategic management - the process of formulating and implementing strategies
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The components in the strategic management process:
Strategic analysis - the process of analyzing the organization, the environment, and the
organization's competitive position and current strategies
Strategy formulation - developing a new or revised strategy with the goal of sustainable
competitive advantage
Strategy implementation - the process of putting strategies into action and evaluating
results
Analysis of Mission, Values, and Objectives
strategic management process begins with a review and clarification of mission, values
and objectives
Mission
statement expresses the organization's reason for existence in society; should represent
what the strategy or underlying business model is trying to accomplish.
Stakeholders - are individuals and groups directly affected by the organization and its strategic
accomplishments
Strategic constituencies analysis - assesses interests of stakeholders and how well the
organization is responding to them . ( refer to pg 193 for the chart )
Core Values
broad beliefs about what is or is not appropriate behaviour; sets standards for
accomplishing the mission statement
Organization culture - the predominant value system for the organization as a whole
in the strategic management process, core values and the organizational culture should be
assessed to determine how well they align with and support the organization's mission
presence of strong core values helps build organizational identity, gives a sense of
character to the organization in the eyes of its employees and external stakeholders
Objectives
Operating objectives - direct activities toward key performance areas; specific results that
organizations try to accomplish
Typical operating objectives of a business:
profitability - operating with a net profit
financial health - acquiring capital; earning positive returns
cost efficiency - using resources well to operate at a 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 possible 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 internal analysis of organizational strengths and weaknesses as well as
the external analysis of environmental opportunities and threats
Organizational strengths and weaknesses
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