midterm multiple choice
saud64
chp_8.pptxPowerPoint Presentation by Charlie Cook The University of West Alabama
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© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–1
Management 11e Griffin
Discuss the components of strategy, the types of strategic alternatives, and the distinction between strategy formulation and strategy implementation.
Describe how to use SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis in formulating strategy.
Identify and describe various alternative approaches to business-level strategy formulation.
Describe how business-level strategies are implemented.
8–2
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Learning Objectives
8–2
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Management 11e Griffin
Identify and describe various alternative approaches to corporate-level strategy formulation.
Describe how corporate-level strategies are implemented.
Discuss international and global strategies.
8–3
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Learning Objectives (cont’d)
8–3
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Management 11e Griffin
The Nature of Strategic Management
Strategy
Is a comprehensive plan for accomplishing an organization’s goals.
Strategic Management
Involves formulating and implementing strategies to take advantage of business opportunities and meet competitive challenges.
Effective Strategies
Promote superior alignment between an organization, its environment, and its goals.
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8–4
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8–4
Management 11e Griffin
Components of Strategy
Distinctive Competence
Competitive Scope
Resource Deployment
Components of Effective Strategies
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8–5
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8–5
Management 11e Griffin
Strategic Alternatives
Business-level strategy
Functional-level strategy
Operations-level strategy
Corporate-level strategy
Business-level strategy
Functional-level strategy
Operations-level strategy
Market A
Market B
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8–6
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8–6
Management 11e Griffin
Types of Strategic Alternatives
Business-Level Strategy
The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market.
Corporate-Level Strategy
The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.
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8–7
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8–7
Management 11e Griffin
Strategy Formulation and Implementation
Strategy Formulation
The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies.
Strategy Implementation
The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.
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8–8
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8–8
Management 11e Griffin
Management Challenge
If it is important that all employees be involved in strategy implementation, then what are the most important responsibilities for managers in helping them participate?
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8–9
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8–9
Management 11e Griffin
Types of Strategies
Deliberate Strategy
A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.
Emergent Strategy
A pattern of action that develops over time in the absence of goals or missions, or despite goals and missions.
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8–10
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8–10
Management 11e Griffin
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8–11
8.1 SWOT Analysis
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8–11
Management 11e Griffin
SWOT Analysis and Strategy
Evaluating Organizational Strengths
Organizational strengths
are skills and abilities enabling an organization to conceive of and implement strategies.
Common organizational strengths
are organizational capabilities possessed by numerous competing firms.
Distinctive competencies
are useful for competitive advantage and superior performance.
Imitation of distinctive competencies
removes the competitive advantage of the competency.
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8–12
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8–12
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating Organizational Strengths (cont’d)
Sustained competitive advantage
occurs when a distinctive competence cannot be easily duplicated.
is what remains after all attempts at strategic imitations cease.
Strategic imitation of a distinctive competence is difficult when:
it is based on unique historical circumstances.
it is difficult for competitors to understand its nature or character.
it is based on a complex phenomenon (e.g., organizational culture).
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8–13
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8–13
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating Organizational Weaknesses
Organizational weaknesses
Skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.
Weaknesses can be overcome by:
investments to obtain the strengths needed.
modification of the organization’s mission so it can be accomplished with the current workforce.
Competitive disadvantage
occurs when an organization fails to implement strategies being implemented by competitors.
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8–14
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8–14
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating an Organization’s Opportunities and Threats
Organizational opportunities
are areas in the organization’s environment that may generate high performance.
Organizational threats
are areas in the organization’s environment that make it difficult for the organization to achieve high performance.
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8–15
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8–15
Management 11e Griffin
Formulating Business-Level Strategies
Overall cost leadership strategy
Focus strategy
Differentiation strategy
Porter’s Generic Strategies
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8–16
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8–16
Management 11e Griffin
Formulating Business-Level Strategies
Porter’s Generic Strategies
Differentiation strategy
An organization seeks to distinguish itself from competitors through the quality of its products or services.
Overall cost leadership strategy
An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.
Focus strategy
An organization concentrates on a specific regional market, product line, or group of buyers.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–17
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8–17
Management 11e Griffin
| Strategy Type | Definition | Examples |
| Differentiation | Distinguish products or services | Rolex (watches) Godiva (chocolate) Mercedes-Benz (automobiles) Nikon (cameras) Cross (writing instruments |
| Overall cost leadership | Reduce manufacturing and other costs | Timex (watches) Hershey (chocolate) Kia (automobiles) Kodak (cameras) BIC (writing instruments) |
| Focus | Concentrate on specific regional market, product market, or group of buyers | Tag Heuer (watches) Vosges (chocolate) Fiat, Alfa Romeo (automobiles) Hasselblad (cameras) Waterman (writing instruments) Fisher-Price (handheld calculators) |
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8–18
8.1 Porter’s Generic Strategies
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8–18
Management 11e Griffin
Implementing Porter’s Generic Strategies
Differentiation
Marketing and sales emphasize high-quality, high-value image of the organization’s products or services.
Overall Cost Leadership
Marketing and sales focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner.
Focus
Either differentiation or cost leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group buyers.
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8–19
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8–19
Management 11e Griffin
Miles and Snow’s Strategy Types
Prospectors
Defenders
Analyzers
Reactors
Strategic Types of Organizations
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8–20
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8–20
Management 11e Griffin
Miles and Snow’s Strategy Types
Prospector
Encourages creativity to seek out new market opportunities and to take risks.
Develops the flexibility to meet changing market conditions by decentralizing its organizational structure.
Defender
Focuses on defending its current markets by lowering its costs and/or improving the performance of its current products.
Analyzer
Incorporates elements of both the prospector and the defender strategies to maintain business and to be somewhat innovative.
Reactor
Has no clear strategy, reacts to changes and events.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–21
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8–21
Management 11e Griffin
| Strategy Type | Definition | Examples |
| Prospector | Is innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking | Amazon.com 3M Rubbermaid |
| Defender | Protects current markets, maintains stable growth, serves current customers | BIC eBay Mrs. Fields |
| Analyzer | Maintains current markets and current customer satisfaction with moderate emphasis on innovation | DuPont IBM Yahoo! |
| Reactor | No clear strategy, reacts to changes in the environment, drifts with events | International Harvester (now doing business as Navistar) Joseph Schlitz Brewing Co. Kmart Montgomery Ward (no longer in business) |
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8–22
8.2 The Miles and Snow Typology
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8–22
Management 11e Griffin
Introduction
Maturity
Growth
Time
Decline
Sales Volume
Stages
High
Low
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8–23
8.2 The Product Life Cycle
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8–23
Management 11e Griffin
Management Challenge Questions
Which of Porter’s generic strategies are best suited for which stages of the product life cycle?
Which of the Miles and Snow’s types of effective strategic organizations are most appropriate for which stage of the product life cycle?
Do your answers support the concept that structure must follow strategy?
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–24
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8–24
Management 11e Griffin
Formulating Corporate-Level Strategies
Strategic Business Units
Each business or group of businesses within an organization is engaged in serving the same markets, customers, or products.
Diversification
The number of businesses an organization is engaged in and the extent to which these businesses are related to one another
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8–25
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8–25
Management 11e Griffin
Corporate-Level Strategies
Related diversification (synergy)
Unrelated diversification (risk/return)
Single-product strategy (simplicity)
Strategic Choices
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8–26
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8–26
Management 11e Griffin
Corporate-Level Strategies
Single-Product Strategy
An organization manufactures one product or service and sells it in a single geographic market.
Related Diversification
A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
Avoids the disadvantages and risks of a single-product strategy.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–27
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8–27
Management 11e Griffin
| Basis of Relatedness | Examples |
| Similar technology | Philips, Boeing, Westinghouse |
| Common distribution and marketing skills | Kraft Foods, Philip Morris, Procter & Gamble |
| Common brand name and reputation | Disney, Universal |
| Common customers | Merck, IBM, AMF-Head |
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8–28
8.3 Bases of Relatedness in Implementing Related Diversification
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8–28
Management 11e Griffin
Advantages of Related Diversification
Reduces economic risk by avoiding dependence on a specific business or activity.
Reduces overhead costs through economies of scale and economies of scope.
Increases overall economic value through complementary strengths and capabilities synergies gained by managing the set of businesses together rather than separately.
8–29
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8–29
Management 11e Griffin
Unrelated Diversification
Unrelated Diversified Organization
Operates multiple businesses that are not logically associated with one another.
Advantages
Stable performance over time due to business cycle differences among the multiple businesses.
Allocation of resources to areas with the highest return potentials to maximize corporate performance.
Disadvantages
Poor performance due to the complexity of managing a diversity of businesses.
Failing to exploit key synergies puts the firm at a competitive disadvantage to firms with related diversification strategies.
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8–30
Firms that pursue an unrelated diversification strategy operate multiple businesses that are not logically associated with one another.
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8–30
Management 11e Griffin
Becoming a Diversified Firm
Development of new products
Vertical integration
Merger with another firm
Acquisition of another firm
Diversification Alternatives
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8–31
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8–31
Management 11e Griffin
Becoming a Diversified Firm
Replacement of Suppliers And Customers
Backward vertical integration
Beginning a business that furnishes resources previously handled by a supplier.
Forward vertical integration
Beginning a business previously handled by an intermediary and selling more directly to customers.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–32
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8–32
Management 11e Griffin
Becoming a Diversified Firm (cont’d)
Purposes of Mergers and Acquisitions
To diversify through vertical integration.
To acquire complementary products or services linked by a common technology and common customers.
To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–33
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8–33
Management 11e Griffin
Managing Diversification
Major Tools for Managing Diversification
Organization structure
A detailed discussion of organization structure is contained in Chapter 12.
Portfolio management techniques
Methods used by diversified firms to make decisions about what businesses to engage in and how to manage these businesses to maximize corporate performance.
Two important portfolio management techniques
The BCG Matrix
The GE Business Screen
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–34
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–34
Management 11e Griffin
Managing Diversification (cont’d)
BCG Matrix
Evaluates a portfolio of businesses on the growth rate of their respective markets and each business’s relative share of its market.
Classifies the types of businesses in a diversified firm’s portfolio as:
“Dogs” have small market shares and no growth prospects.
“Cash cows” have large shares of mature markets.
“Question marks” have small market shares in quickly growing markets.
“Stars” have large shares of rapidly growing markets.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–35
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8–35
Management 11e Griffin
Stars
Question marks
Cash Cows
Relative Market Share
Dogs
Market Growth Rate
High
Low
High
Low
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8–36
8.3 The BCG Matrix
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8–36
Management 11e Griffin
Managing Diversification (cont’d)
GE Business Screen
A method of evaluating businesses in a diversified portfolio along two dimensions, each of which contains multiple factors:
Industry attractiveness.
Competitive position (strength) of each firm in the portfolio.
In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–37
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–37
Management 11e Griffin
Winner
Average business
Loser
Profit producer
Loser
Loser
Winner
Winner
Question mark
Competitive Position
Industry Attractiveness
Good
Medium
Poor
Medium
High
Low
Competitive Position
Market share
Technological know-how
Product quality
Service network
Price competitiveness
Operation costs
Industry Attractiveness
Market growth
Market size
Capital requirements
Competitive intensity
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8–38
8.4 The GE Business Screen
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8–38
Management 11e Griffin
International and Global Strategies
Multimarket flexibility
Worldwide learning
Global efficiencies
Developing International and Global Strategies
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–39
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8–39
Management 11e Griffin
International and Global Strategies
Developing International and Global Strategies
Global efficiencies
Location efficiencies—seeking lower input cost locations
Economies of scale—larger facilities result in lower costs
Economies of scope—broadening product lines
Multimarket flexibility
International businesses may respond to a change in one country by implementing a change in another country.
Worldwide learning
The diverse operating environments of multinational corporations (MNCs) contribute to organizational learning that can be transferred to other operating environments.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–40
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–40
Management 11e Griffin
8–41
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strategic Alternatives for International Businesses
Home replication
Multi-domestic strategy
Global strategy
Transnational strategy
Strategic Alternatives
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8–41
Management 11e Griffin
Strategic Alternatives for International Businesses
Home Replication
Utilizing a core competency or a firm-specific advantage developed at home as a main competitive weapon in foreign markets.
Multi-Domestic Strategy
Managing a corporation as a collection of independent operating subsidiaries frees a firm to customize its products, its marketing campaigns, and operating techniques to meet local customer needs.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–42
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–42
Management 11e Griffin
Strategic Alternatives for International Businesses (cont’d)
Global Strategy
Viewing the world as a single marketplace and having as a primary goal the creation of standardized goods and services that will address the needs of customers worldwide.
Transnational Strategy
Attempting to combine the benefits of scale efficiencies pursued by a global corporation, with the benefits and advantages of local responsiveness of a multi-domestic corporation.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–43
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–43
Management 11e Griffin
KEY TERMS
strategy
strategic management
distinctive competence
scope
resource deployment
business-level strategy
corporate-level strategy
strategy formulation
strategy implementation
deliberate strategy
emergent strategy
SWOT
organizational strength
common strength
strategic imitation
sustained competitive advantage
organizational weaknesses
competitive disadvantage
organizational threat
organizational opportunity
8–44
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–44
Management 11e Griffin
KEY TERMS (cont’d)
differentiation strategy
overall cost leadership strategy
focus strategy
prospector strategy
defender strategy
analyzer strategy
reactor strategy
product life cycle
diversification
single-product strategy
related diversification
unrelated diversification
backward vertical integration
forward vertical integration
merger
acquisition
BCG matrix
GE Business Screen
home replication strategy
multidomestic strategy
global strategy
transnational strategy
8–45
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Key terms for Chapter 8, continued.
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8–45
Management 11e Griffin
