MGM Test 3 Review
The Concept of Business Strategy
-The development of an organizations business strategy is fundamentally one of ehte most important
responsibilities of a senior management team or in the case of a small business , the business owner.
1. The ability to define and create a strategic direction and market position for the organization
2. The ability to execute the core tactical initiatives within the plan in a manner that ensures the
-For a business managers, the development of a business strategy means making decisions and
determining direction in six key areas:
3. Products and services
5. Business System Configuration
6. Responsibility and accountability
-Purpose refers to the mission of the organization and the vision its managers or owners have for the
-Defines an organizations purpose or reason for existence.
-Is a forward-thinking statement that defines what a company wants to become where its going.
-Refers to the specific markets segments the business sees itself competing in. As part of the strategy
development process, managers and owners need to assess their success in existing markets and
evaluate the potential new markets. Markets that have become unprofitable or marginally profitable
and lack significance future growth will be evaluated in terms of market exit strategies or harvesting
-Is a strategy that reflects a reduced commitment to particular market given its perceived weak future
growth or profitability potential.
Resources -Refers to the allocation of a business's resources in support of its strategic decisions.
Business System Configuration
-Refers to modifying the organization's infrastructure and the way it does business to ensure the success
of the plan.
Responsibility and Accountability
-Refers to identifying who within the business will be responsible for each aspect of the strategic plan.
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?
Chooses 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)?
I/E (Internal/External) Analysis
-The I/E analysis is all about assessing business risk and change in four key areas.
Stage of Strategic Planning Process Focus
Revisiting Our Purpose Assessing the fit of the current mission and vision
of the organization.
I/E Analysis Understanding the external and interval
External - PESTEL, Porter's five forces, competitor
Internal-Company SWOT, 3C analysis-
Customer - Changes in attitudes, behaviour,
Our View of Our World Given what we know about ourselves, our
customers, our competitors, and the overall
environment, what are our options? What is/are
our competitive advantage(s)?
Strategic Choices Which opportunities make the most sense, given
our market position, resources, and
environmental dynamics? What threats must we
Strategy Implementation Develop the plan. Define the key performance
indicators for monitoring it. Execute it. Business Model Focus of Analysis
PESTEL Guides us in developing an understanding of the
economic, societal, technological, environmental,
Porter's Five Forces Guides us in understanding the dynamics of the
industry within which we compete— Porter’s five
• 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
• 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
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
-For Managers, the next step after completing the I/E analysis and identifying the organizations
competitive advantages is to make decisions as to which opportunities.
The Corporate-level strategy
-defines what the organization intends to accomplish and where it plans to compete
-Outlines specific objectives the organization hopes to achieve each of its identified business initiatives
and/or business units.
-is a detailed, immediate-term set of objectives and corresponding tactics designed to achieve a specific
business initiative. Strategic Execution
-The final phase of the strategic planning process is the strategy execution phase. It is this proportion of
the process where management shifts its emphasis from what it wants to do, and hopes to achieve, to
actively engaging the business into executing the desired strategic thrusts and tactics.
-is the level of financial and operational commitment an organization incurs as a result of implementing
the organization's strategies.
Mission Balance: Maintain the balance between the need to create an effective economic base for the
NFP while ensuring that the social mission and goals of the NFP are met.
Vitality: Enhance the vitality of the organization through maintenance and growth of its membership or
community support base.
Collective entrepreneurship: ensures that the involvement of the community where an organization is
located and the population that it serves are reflected in the formulation and implementation of the
Rootedness: refers to the extent to which the NFP is interwoven into the fabric of the community that it
serves and is supported by broad representation of its organizations, businesses, and citizens.
Operational Effectiveness: Operate in a manner that demonstrates the product and services offered by
the NFP are priced at levels that ensure their accessibility by the targeted social audience, and provide
mechanisms for support for those who are in need yet truly unable to pay.
The Management Function of Organization
Organization Architecture - The totality of a firm's organization, including formal organization structure,
control systems. incentive systems. organizational culture, and people.
The location of decision-making responsibilities in the firm, the formal division of the organization into
subunits, and the establishment of integrating mechanisms to coordinate the activities of subunits. Control - Metrics used to measure the performance of subunits and to judge how well managers are
Incentives - Devices used to encourage desired employees behaviour.
Organizational Culture - Values and assumptions that are shared among the employees of an
People - The employees of an organizations: the strategy used to recruit, compensate, motivate, and
retain those individuals: and the type of their skills, values and orientation
Vertical Differentiation: The location of decision making responsibilities within a structure.
Horizontal Differentiation - The formal division of the organization into subunits.
Integrating Mechanisms - Mechanisms for coordinating subunits.
Centralization - The concentration of decision-making authority at a high level in a management
Centralization can facilitate coordination
Centralization can help ensure that decisions are consistent with organizational objectives
Centralization can avoid duplication of activities by various subunits within the organization
By concentrating power and authority in one individual or a management team, centralization
can give top-level managers the means to bring about needed major organizational changes
Decentralization - Vesting decision-making authority in lower-level managers or other employees.
Top management can become overburden when decision making authority is centralized.
(increases amount of info senior managers are required to process)
Motivational research favours decentralization. (people are willing to give more to their job
when they have greater degree of individual freedom and control over their work)
Decentralization permits greater flexibility more rapid response to environmental changes. (In
cen. the need to run decisions buy the higher managers can significantly slow down decision
making and making it unable to adapt to rapid environmental changes)
Decentralization can result in better decisions. In a decen. structure decisions are made closer to
the spot by individuals who have better information than managers several levels up the
Decentralization can increase control. Decen can establish relatively autonomous, sekf-
contained subunits within an organization.
-A unit that has all the resources and decision-making power required to run it operation daily. Decentralization or Centralization
Decisions regarding overall for strategy, major financial expenditures, financial objectivs and
legal issues are all centralized at the senior manager level.
When the realization of economics of scale is an important factor , there ten