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MGM101H5 (354)
Chapter 7

Chapter 7 Notes.docx

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University of Toronto Mississauga
Dave Swanston

Chapter 7 Notes – Developing a Business Strategy The Concept of Business Strategy - One of the most important responsibilities of senior management team - Crucial for long term success - Long term success predicated on two principles o Ability to define and create a strategic direction and market position for the organization (strategic plan) o Ability to execute the plan Strategy Made Simple - Business strategy all about understanding what opportunities exist in marketplace and which ones should be pursued - Based on this; managers decide upon path of action to capitalize on opportunity chosen - “Where do we want to play” - “How do we plan to win” - Called intended or Deliberate Strategy Core Elements for Assessing Business Strategy - Development of business strategy means making decisions and determining factors in areas o Purpose o Markets o Products and services o Resources o Business system configuration o Responsibility and accountability Purpose - Purpose; refers to mission of organization and vision its managers have for business - Mission; defines organization’s purpose or reason for existence o Usually identify broad goals around which company was formed - Mission statements + ethics, policies and statements = direction and activities of business - Vision; forward thinking statement that defines what company wants to become and where it is going - Managers revisit mission and vision statements to ensure they are still applicable Markets - Managers need to assess their success in existing markets and evaluate potential new markets - Markets assessed in terms of current and future profitability and growth potential - Markets that are no longer profitable o Harvesting; strategy that reflects reduced commitment to particular market given its weak future growth or profitability potentials Products and Services - Refer to products/services offered by business - Over time, products become obsolete o Result of technological innovation, change in consumer needs and tastes, new direct substitutes - Critical part of strategy to determine which products and related services are to remain part of business, which ones need more R&D, and which new ones are to be added Resources - Refers to allocation of business’s resources in support of strategic decisions - Decide where to locate limited resources such as; o Amount of products businesses can produce o Amount of money that can be committed to projects o Variety of tasks their workforce can handle - May acquire external expertise Business System Configuration - Refers to modifying organization’s infrastructure to ensure success of plan - Make changes to organization’s distribution outlets, warehousing, or product delivery - Good example is e-commerce based Web site Responsibility and Accountability - Refers to identifying who is responsible for what in organization - SMAC principles; specific, measureable, actionable, and controllable - SMART; specific, measureable, actionable, realistic, and time sensitive o Can be used to see which consumer market is considered o How much money will be provided for promotional purposes o How staff involved will be rewarded after success of initiative - Strategic plans must identify o Who is responsible for each element within the plan o How accountability of success of plan will be measured o Identifies where and how organization will interact with customers o Provides benchmarks to measure success along the way The Strategic Planning Process - Steps associated with development of strategic plan o Revisit our purpose  Who are we and where do we want to go o Undertake an Internal/External analysis to understand environment  What changes or shifts are occurring that threaten us or provide opportunities o Assess our view of world  Based on what we know, what are our choices o Choose a direction  Given 3C advantages, and resources, which strategic choices should we pursue  What threats must be respond to o Implement strategy  How do we develop strategy to achieve objectives and execute plan Internal/External Analysis - About assessing business risk and change in four key areas o Macroeconomics o Industry o Competition o Company - PESTEL used to analyze broad market environment and external influences - Porter’s Five Forces used to analyze at industry level in which we compete o Rivalry among existing competitors o Threat of new entrants o Threat of substitute products o Bargaining power of suppliers o Bargaining power of buyers - Businesses anticipate and react to new initiatives and cha
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