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Chapter 7

MGM101 Chapter 7 and 8 summaries (Midterm #2)

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Dave Swanston

MGM101 Chapter 7 – Developing a business strategy The long-term success of an organization, and its ability to evolve and grow, is predicated on two fundamental principles 1. the ability to define and create a strategic direction and market position for the organization (strategic plan); and 2. the ability to execute the core tactical initiatives within the plan in a manner that ensures the organization’s success. Business growth and profitability: 1. Well directed and positioned strategy 2. Efficient effective tactics execution For business managers, the development of a business strategy means making decisions and determining direction in six key areas (see Figure 6.3): 1. Purpose 2. Markets 3. Products and services 4. Resources 5. Business system configuration 6. Responsibility and accountability Mission defines an organization’s purpose or reason for existence. Vision is a forward-thinking statement that defines what a company wants to become and where it is going. Harvesting is a strategy that reflects a reduced commitment to a particular market given its perceived weak future growth or profitability potential. A general overview of the steps associated with the development of a strategic plan (see Figure 6.4): •Revisit our purpose: Who are we and where do we want to go? •Undertake an I/E (internal/external) analysis to understand our environment: What changes or shifts are occurring that threaten us or that provide us with opportunities? •Assess our view of our world: Based on what we know, what are our choices? •Choose a direction: Given our capabilities, competencies, competitive advantages, and resources, which strategic choices should we pursue (where will we play)? What threats must we respond to? •Implement our strategy: How do we develop the strategic thrusts and tactics to achieve our objectives and successfully execute the plan (how we will win)? SWOT stands for strengths, weaknesses, opportunities, and threats. Pestel: Guides us in developing an understanding of the macro-economic environment— political, economic, societal, technological, environmental, legal Porters five forces: Guides us in understanding the dynamics of the industry within which we compete— Porter’s five forces are: • Intensity of rivalry within the industry • Threat of new entrants into the industry • Threat of new product/service substitutes within the industry • Power or control of suppliers within the industry • Power or control of buyers within the industry Types of competition: Guides us in understanding the nature of the industry’s competitive landscape: • Perfect competition • Monopolistic competition • Oligopoly • Monopoly SWOT analysis: Strengths, weaknesses, opportunities, threats Competitive SWOT to size up competition Company SWOT to define company strengths, weaknesses, opportunities, and threats 3C analysis: An assessment of our competencies, capabilities, and capacity with respect to the resources that we possess Corporate-Level Strategy: defines what the organization intends to accomplish and where it plans to compete. Business-Level Strategy: outlines specific objectives the organization hopes to achieve for each of its identified business initiatives and/or business units. Operating Plan is a detailed, immediate-term set of objectives and corresponding tactics designed to achieve a specific business initiative. Key components of the operating plan development process include: a) Specifics as to how to compete (for each business initiative or business unit) b) Identification of the key revenue drivers and an assessment of the total potential revenue forecasts the business can expect from a particular initiative c) Identification of the upfront and ongoing cost commitments necessary to develop the market opportunity that the business has decided to focus on. d) Id
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