Chapter Six Strategic Management

How Star Managers Realize a Grand Design

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, All Rights Reserved.

The Dynamics of Strategic Planning

Strategy
large-scale action plan that sets the direction for an organization

Strategic management
process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals

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The Strategic Management Process

Figure 6.1
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Common Grand Strategies

Growth strategy
involves expansion

Stability
involves little or no significant change

Defensive
involves reduction in the organizations efforts

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SWOT Analysis

Figure 6.2

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Porters Five Competitive Forces

1. 2. 3. 4. Threat of new entrants Bargaining power of suppliers Bargaining power of buyers Threat of substitute products or services 5. Rivalry among competitors

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Porters Four Competitive Strategies

Cost-leadership strategy
keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market

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Porters Four Competitive Strategies

Differentiation strategy
offer products that are of unique and superior value compared to those of competitors but to target a wide market

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Porters Four Competitive Strategies

Cost-focus strategy
keep the costs of a product below those of competitors and to target a narrow market

Focused-differentiation
offer products that are of unique and superior value compared to those of competitors and to target a narrow market

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The Product Life Cycle

Stage 1: Introduction
the new product is introduced into the marketplace

Stage 2: Growth
most profitable stage period in which customer demand increases, the products sales grow, and competitors may enter the market

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The Product Life Cycle

Stage 3: Maturity
period in which the product starts to fall out of favor and sales and profit begin to fall off

Stage 4: Decline
period in which the product falls out of favor and the organization withdraws from the marketplace

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Single-Product versus Diversification

Single-product strategy
company makes and sells only one product within its market Benefit-focus Risk-vulnerability

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Single-Product versus Diversification

Diversification
operating several businesses under one ownership that are not related to one another Related, unrelated

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Competitive Intelligence
Competitive intelligence
gaining information about ones competitors activities so that you can anticipate their moves and react appropriately

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Execution: Getting Things Done

Execution
consists of using questioning, analysis, and follow-through in order to mesh strategy with reality, align people with goals, and achieve results promised central part of any companys strategy

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REVISION
Q1:(p. 176) A growth strategy is a grand strategy that involves expansion. TRUE OR FALSE ANSWER:
TRUE
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Q2. (p. 172) Zach manages a small video rental store. In order to determine if strategic planning will be likely to help his business, Zach should primarily assess A. how many competitors he has. B. foot traffic by his location. C. his profitability in the prior six months. D. industry trends. A. how many competitors he has.

Strategic planning is not likely to result in a significant improvement unless Zach is in a highly competitive industry.
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Q3:103. (p. 180) A vision or projection of the future is called a A. trend. B. forecast. C. contingency. D. strategy.

B. forecast.

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 Q4: (p. 186) During the growth stage of the product life cycle, managers would advance their attack by A. changing to a cost leadership strategy. B. changing to a cost-focus strategy. C. changing to a focused differentiation strategy. D. continuing with the strategy used in the introduction stage. D. continuing with the strategy used in the introduction stage.

During the growth stage, managers would advance their attack, probably continuing introduction stage strategy.
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 Q5: (p. 189) Keeping track of what competitors are doing is called A. forecasting. B. contingency planning. C. strategic control. D. competitive intelligence.

D. competitive intelligence.

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