Chapter 1 - Analytical thinking and intuitive thinking

Strategic management focuses on integrating complement each other.

1. management, - Operating from the "I've-already-made-up-my-
2. marketing, mind-don't- bother-me-with-the-facts" mode is
3. finance and accounting, not management by intuition; it is management
4. production and operations, by ignorance.
5. research and development, and - Drucker says, "I believe in intuition only if you
6. information systems discipline it. '
to achieve organizational success - Hunch' artists, who make a diagnosis but don't
check it out with facts, are the ones in medicine
Forces that influence the formality of the strategic- who kill people, and in management kill
management process. businesses."
1. more formal in larger and well-established - In a sense, the strategic-management process is
organizations. an attempt both to duplicate what goes on in the
2. Formality refers to the extent that participants, mind of a brilliant, intuitive person who knows
responsibilities, authority, duties, and approach the business, and assimilates and integrates that
are specified. knowledge using analysis to formulate effective
3. Smaller businesses tend to be less formal. strategies.
4. Firms that compete in complex, rapidly changing
environments, such as technology companies, Strategists
tend to be more formal in strategic planning. - individuals who are most responsible for the
5. Firms that have many divisions, products, success or failure of an organization. T
markets and technologies also tend to be more - help gather, analyze and organize information.
formal in applying strategic-management a. Track industry and competitive trends,
concepts. b. develop forecasting models and scenario
6. Greater formality in applying the strategic- analyses,
management process is usually positively c. identify business threats
associated with organizational success. d. develop creative action plans.
- serve in a support or staff role
Strategy implementation - usually found in higher levels of management,
- most difficult stage in the strategic-management they typically have considerable authority for
process decision making in the firm.
- requires personal discipline, commitment and
sacrifice. CEO
- hinges upon managers' ability to motivate - most visible and critical strategic manager.
employees, which is more of an art than a - Any manager who has responsibility for a unit or
science. division, responsibility for profit and loss
- Interpersonal skills are especially critical outcomes, or direct authority over a major piece
of the business is a strategic manager (strategist
Value of integrating intuition and analysis
- Choosing an intuitive or analytic approach to chief strategy officer (CSO)
decision making is not an either-or proposition. - emerged as a new addition to the top
- Managers at all levels in an organization inject management ranks of many organizations
their intuition and judgment into strategic- - recognition of the growing importance of
management analyses. strategic planning in business
Nonfinancial benefits 5. top managers making many intuitive decisions
1. increased discipline; that conflict with the formal plan
2. improved coordination; 6. top managers not actively supporting the
3. enhanced communication strategic-planning process
4. reduced resistance to change 7. failing to use plans as a standard for measuring
5. increased forward thinking performance
6. improved decision-making 8. delegating planning to a "planner" rather than
7. increased synergy involving all managers
8. more effective allocation of time and resources 9. failing to involve key employees in all phases of
planning
Gaining and Maintaining Competitive Advantage 10. failing to create a collaborative climate
1. continually adapting to changes in external supportive of change
trends and events and internal capabilities, 11. viewing planning to be unnecessary or
competencies and resources, and by unimportant
2. effectively formulating, implementing and 12. becoming so engrossed in current problems that
evaluating strategies that capitalize upon those insufficient or no planning is done
factors 13. being so formal in planning that flexibility and
creativity are stifled
Reasons for No Strategic Management
1. no formal training in strategic management business and military strategy
2. no understanding of or appreciation for the - to gain competitive advantage
benefits of planning - try to use their own strengths to exploit
3. no monetary rewards for doing planning competitor's weaknesses.
4. no punishment for not planning - Success is not the happy result of accidental
5. too busy "firefighting" (resolving internal crises) strategies in either business or military
to plan ahead organizations.
6. to view planning as a waste of time, since no - The element of surprise provides great
product/service is made competitive advantages in both military and
7. laziness; effective planning takes time and effort; business strategy.
time is money - Information systems that provide data on
8. content with current success; failure to realize opponents' or competitors' strategies and
that success today is not a guarantee for success resources are also vitally important.
tomorrow; even Apple Inc. is an example - Finally, both business and military organizations
9. overconfident must adapt to change and constantly improve to
10. prior bad experience with strategic planning be successful.
done sometime/somewhere

Pitfalls in Strategic Planning

1. using strategic planning to gain control over
decisions and resources
2. doing strategic planning only to satisfy
accreditation or regulatory requirements
3. too hastily moving from mission development to
strategy formulation
4. failing to communicate the plan to employees,
who continue to work in the dark
Chapter 2 1. to make sure all employees/managers
Vision vs Mission understand the firm's purpose or reason for
Vision statement should be established first and being
foremost. Whereas the mission statement answers the 2. to provide a basis for prioritization of key
question, "What is our business?" the vision statement internal and external factors utilized to
answers the question, "What do we want to become?" formulate feasible strategies
Campbell and Yeung differentiate between the terms 3. to provide a basis for the allocation of
vision and mission, saying that vision is "a possible and resources
desirable future state of an organization" that includes 4. to provide a basis for organizing work,
specific goals, whereas mission is more associated with departments, activities, and segments
behavior and the present. around a common purpose

Why a mission statement is so important in the Customer Orientation

strategic-management process? - The mission statement should reflect the
a. establishing objectives anticipations of customers.
b. formulating strategies - operating philosophy of organizations should be
c. what an organization wants to be to identify customers' needs and then provide a
d. whom it wants to serve product or service to fulfill those needs
e. foundation for priorities, strategies, plans and - identify the utility of a firm's products to its
work assignments customers
f. starting point for the design of managerial jobs - to attract customers who give meaning to an
g. design of managerial structures organization

Process Of Developing A Mission Statement Major Components of an Effective Mission Statement

1. select several articles about mission statements 1) Customers
and then to ask all managers to read these as 2) Products or services
background information. 3) Markets:
2. Then managers themselves are asked to prepare 4) Technology
a mission statement for the organization. 5) Survival, growth, and profitability
3. A facilitator or committee of top managers 6) Philosophy
should then merge these statements into a 7) Self-concept (Distinctive Competence)
single document and distribute this draft mission 8) Public image
statement to all managers. 9) Employees
4. A request for modifications, additions and
deletions is needed next, along with a meeting to
revise the document.
- To the extent that all managers have input into
and support the final mission statement
document, organizations can more easily obtain
managers' support for other strategy
formulation, implementation and evaluation
activities.

Benefits of Written Mission

Chapter 3 c. change the relative competitive cost positions in
an industry,
Process of Performing an External Audit d. render existing products and services obsolete,
1. gather competitive intelligence and information about and/or
economic, social, cultural, demographic, environmental, e. create new competitive advantages that are
political, governmental, legal, and technological trends. more powerful than existing advantages
2. Once information is gathered, it should be assimilated 5) competitive forces
and evaluated. a. potential moves a competitor could make,
3. A meeting or series of meetings of managers is needed changes to the strengths or weaknesses of
to collectively identify the most important opportunities competitors
and threats facing the firm. b. vulnerability of competitors to a firm's
4. A prioritized list of these factors must be obtained. All alternative strategies
managers could individually rank the factors identified,
from 1 (for the most important opportunity/threat) to 20 Nature Of Competitiveness
(for the least important opportunity/threat) or managers 1) Rivalry among competing firms
could simply place a checkmark by their most important 2) Potential entry of new competitors
"top 10 factors." 3) Potential development of substitute products
5. Then, by summing the rankings, or the number of 4) Bargaining power of suppliers
checkmarks, a prioritized list of factors is revealed. 5) Bargaining power of consumers.
Rivalry among competing firms is usually the most
External Forces powerful of the five competitive forces.
1) economic forces - The strategies pursued by one firm can be
a. level of disposable income successful only to the extent that they provide
b. availability of credit competitive advantage over the strategies
c. interest rates pursued by rival firms.
d. value of the dollar in world markets - Changes in strategy by one firm may be met with
e. foreign countries' economic conditions retaliatory countermoves, such as lowering
2) social, cultural, demographic and natural environment prices, enhancing quality, adding features,
forces providing services, extending warranties, and
a. immigration and emigration rates increasing advertising.
b. regional changes in tastes and preferences - The intensity of rivalry among competing firms
c. life expectancy rates tends to increase as the number of competitors
d. attitudes toward customer service increases, as competitors become more equal in
e. social responsibility issues size and capability, as demand for the industry's
3) political, governmental and legal forces products declines, and as price cutting becomes
a. equal employment laws common.
b. unionization trends - Rivalry also increases when consumers can
c. antitrust legislation switch brands easily; when barriers to leaving
d. tariffs the market are high; when fixed costs are high;
e. political conditions in foreign countries when the product is perishable; when consumer
4) technological forces demand is growing slowly or declines such that
a. technological advancements that could create rivals have excess capacity or inventory; when
new markets, the products being sold are commodities (not
b. result in a proliferation of new and improved easily differentiated, such as gasoline); when
products, rival firms are diverse in strategies, origins, and
 culture; and when mergers and acquisitions are that affect the firm and its industry; 2) assign to each
common in the industry. factor a weight that ranges from 0.0 (not
- As rivalry among competing firms intensifies, important) to 1.0 (very important) - the sum of all
industry profits decline, in some cases to the weights assigned to the factors must equal 1.0;
point where an industry becomes inherently 3) assign a 1 to 4 rating to each key external factor to
unattractive. indicate how effectively the firm's current
Competitive Intelligence as formally defined by the strategies respond to the factor, where 4 = the response
Society of Competitive is superior, 3 = the response is above
Intelligence Professionals (SCIP), is a systematic and average, 2 = the response is average, and 1 = the
ethical process for gathering and analyzing response is poor; 4) multiply each factor's
information about the competition's activities and weight by its rating to determine a weighted score; and
general business trends to further a business's 5) sum the weighted scores for each
own goals (SCIP website). Students should also list three variable to determine the total weighted score for the
of the following: 1) hire top executives organization.
from rival firms, 2) reverse engineer rival firms' products,
3) use surveys and interviews of The Competitive Profile Matrix (CPM) identifies a firm's
customers, suppliers, and distributors, 4) conduct drive- major competitors and its
by and on-site visits to rival firm particular strengths and weaknesses in relation to a
operations, 5) search online databases, 6) contact sample firm's strategic position. The weights
government agencies for public information and total weighted scores in both a CPM and an EFE have
about rival firms, 6) systematically monitor relevant the same meaning. However, critical
trade publications, magazines, and success factors in a CPM include both internal and
newspapers. external issues; therefore, the ratings refer to
strengths and weaknesses, where 4 = major strength, 3 =
"Planning would be impossible without assumptions." minor strength, 2 = minor weakness,
Answer: By identifying future occurrences that could and 1 = major weakness. The critical success factors in a
have a major effect on the firm and by CPM are not grouped into opportunities
making reasonable assumptions about those factors, and threats as they are in an EFE. In a CPM, the ratings
strategists can carry the strategicmanagement and total weighted scores for rival firms
process forward. Assumptions are needed only for future can be compared to the sample firm.
trends and events that are
most likely to have a significant effect on the company's
business. Assumptions can serve as
checkpoints on the validity of strategies. If future
occurrences deviate significantly from
assumptions, strategists know that corrective actions
may be needed. Without reasonable
assumptions, the strategy-formulation process could not
proceed effectively. Firms that have the
best information generally make the most accurate
assumptions, which can lead to major
competitive advantages.
The EFE Matrix can be developed in five steps: 1) list key
external factors as identified
in the external-audit process with a total of 20 factors,
including both opportunities and threats
Chapter 4 4. span of control
Resource-Based View (RBV) 5. coordination
- internal resources are more important than external 6. job design
factors for a firm in achieving and sustaining competitive 7. job analysis
advantage, in contrast to the I/O theory.
a. physical resources c. Motivating
b. human resources - involves efforts directed toward shaping human
c. organizational resources. behavior.
- help a firm exploit opportunity and neutralize threats. 1. Leadership
- maintain a competitive advantage, a resource must 2. Communication
either be rare, not easily substitutable, or hard to imitate 3. work groups
4. behavior modification
Cultural products 5. delegation of authority
- levers that strategists can use to influence and direct 6. job enrichment
strategy formulation, implementation, and evaluation 7. job satisfaction
activities. 8. needs fulfillment
1. Rites 9. organizational change
2. Ceremonies 10. employee morale
3. Rituals 11. managerial morale
4. Myths
5. Sagas d. Staffing
6. Legends - refers to human resource (HR) activities, such as
7. Stories 1. wage and salary administration
8. Folktales 2. employee benefits
9. Symbols 3. interviewing
10. Language 4. hiring
11. Metaphors 5. firing
12. Values 6. training
13. Beliefs 7. management development
14. Heroes/heroines 8. employee safety
9. equal employment opportunity
Five Basic Functions of Management 10. union relations.
a. Planning
- consists of all those managerial activities related e. Controlling
to preparing for the future, such as - refers to all those managerial activities directed toward
1. forecasting ensuring that actual results are consistent with planned
2. establishing objectives results
3. devising strategies 1. quality control
4. developing policies 2. financial control
3. sales control
2. Organizing 4. inventory control
- all those managerial activities that result in a structure 5. expense control
of task and authority relationships, such as 6. analysis of variances
1. organizational design 7. rewards
2. job specialization 8. sanctions
3. job descriptions
Controlling consists of four basic steps:
1) establishing performance standards; five basic functions or decision areas in production are:
2) measuring individual and organizational performance; 1) Process: These
3) comparing actual performance to planned decisions include choice of technology, facility layout,
performance standards; and process flow analysis, facility location,
4) taking corrective actions line balancing, process control, and transportation
Seven Basic Functions of Marketing analysis. Distances from raw materials to
1. customer analysis production sites to customers are a major consideration;
2. selling products and services 2) Capacity: These decisions include
3. product and service planning forecasting, facilities planning, aggregate planning,
4. pricing scheduling, capacity planning, and queuing
5. distribution analysis. Capacity utilization is a major consideration; 3)
6. marketing research Inventory: These decisions involve
7. opportunity analysis managing the level of raw materials, work-in-process,
and finished goods, especially considering
Five major stakeholders that affect pricing decisions what to order, when to order, how much to order, and
1. consumers materials handling; 4) Workforce: These
2. governments decisions involve managing the skilled, unskilled, clerical,
3. suppliers and managerial employees by caring
4. distributors for job design, work measurement, job enrichment, work
5. competitors standards, and motivation techniques;
and 5) Quality: These decisions are aimed at ensuring
Three Basic Functions of Finance that high-quality goods and services are
1. Investment Decision produced by caring for quality control, sampling, testing,
- allocation and reallocation of capital and resources to quality assurance, and cost control
projects, products, assets, and divisions of an
organization Four common approaches to determine R&D budget
2. Financing Decision allocations are: 1) finance as many
- determines the best capital structure for the firm and project proposals as possible; 2) use a percentage-of-
includes examining various methods by which the firm sales method; 3) budget for R&D about
can raise capital what competitors spend; or 4) decide how many
3. Dividend Decisions successful new products are needed and work
- concern issues such as the percentage of earnings paid backwards to estimate the required R&D investment.
to stockholders, the stability of dividends paid over time
and the repurchase of stock five steps involved in performing an Internal Factor
Evaluation (IFE) Matrix.
Three Fronts of Analyzing Financial Ratios Answer: The first step is to list 20 internal factors,
1. How has each ratio changed over time? including strengths and weaknesses, using
2. How does each ratio compare to industry norms? percentages, ratios and comparative numbers. The
3. How does each ratio compare with key competitors? second step is to assign a weight that ranges
from 0.00 (not important) to 1.0 (all-important) to each
Limitations of Financial Ratio Analysis. factor based on its relative importance to
1. Based on accounting data being successful in the firm's industry. The third step is to
2. seasonal factors assign a 1 to 4 rating to each factor to
3. departures from industry averages do not always indicate whether that factor represents a major
indicate a firm is doing especially well or badly weakness, a minor weakness, a major strength, or
a minor strength. Next, multiply each factor's weight by
its rating to determine a weighted score
for each variable. Finally, sum the weighted scores for
each variable to determine the total
weighted score for the organization.
Chapter 5 6. wider geographic coverage than rivals
Long-term objectives 7.achieving technological leadership
- results expected from pursuing certain 8. consistently getting new or improved products to
strategies. market ahead of rivals
Objectives
- direction 1. Managing by Extrapolation -“If it ain’t broke, don’t fix
- organizational synergy it.”
• Managing by Crisis —Based on the belief that the true
Eight Desired Characteristics of Objectives measure of a really good strategist
1. Quantitative is the ability to solve problems. Because there are plenty
2. Measurable of crises and problems to go
3. Realistic around for every person and organization, strategists
4. Understandable ought to bring their time and creative
5. Challenging energy to bear on solving the most pressing problems of
6. Hierarchical the day. Managing by crisis
7. Obtainable is actually a form of reacting, letting events dictate the
8. Congruent across departments what and when of management
decisions.
Ten Benefits of Having Clear Objectives • Managing by Subjectives —Built on the idea that there
1. Provide direction by revealing expectations is no general plan for which way
2. Allow synergy to go and what to do; just do the best you can to
3. Assist in evaluation by serving as standards accomplish what you think should be
4. Establish priorities done. In short, “Do your own thing, the best way you
5. Reduce uncertainty know how” (sometimes referred to
6. Minimize conflicts as the mystery approach to decision making because
7. Stimulate exertion subordinates are left to figure out
8. Aid in allocation of resources what is happening and why).
9. Aid in design of jobs • Managing by Hope —Based on the fact that the future
10. Provide basis for consistent decision making is laden with great uncertainty
and that if we try and do not succeed, then we hope our
Financial Objectives second (or third) attempt will succeed.
1. growth in revenues Decisions are predicated on the hope that they will work
2. growth in earnings and that good times are just
3. higher dividends around the corner, especially if luck and good fortune are
4. larger profit margins on our side
5. greater return on investment
6. higher earnings per share Three Integrative Strategies
7. a rising stock price 1. Forward integration - distributors or retailers
8. improved cash flow 2. Backward integration – suppliers
3. Horizontal integration – competitors
Strategic Objectives
1 larger market share Guidelines for Forward Integration
2. quicker on-time delivery than rivals, 1) when an organization's present distributors are
3. shorter design-to-market times than rival especially expensive, unreliable, or incapable of
4. lower costs than rivals meeting the firm's distribution needs
5. higher product quality than rivals
2) when the availability of quality distributors is so 4. The correlation between dollar sales and dollar
limited as to offer a competitive advantage to those marketing expenditures historically has been high.
firms that integrate forward 5. Increased economies of scale provide major
3) when an organization competes in an industry that is competitive advantages
growing and is expected to continue to grow markedly;
4) when an organization has both the capital and human Market development
resources needed to manage the new business of 1) when new channels of distribution are available that
distributing its own products are reliable, inexpensive, and of good quality
5) when the advantages of stable production are 2) when an organization is successful at what it does
particularly high 3) when new untapped or unsaturated markets exist
(6) when present distributors or retailers have high profit 4) when an organization has the needed capital and
margins human resources to manage expanded operations
5) when an organization has excess production capacity;
Guidelines for Horizontal Integration 6) when an organization's basic industry is rapidly
1) An organization can gain monopolistic characteristics becoming global in scope
in a particular area or region without being challenged
by the federal government for "tending substantially" to Product Development
reduce competition; 1. An organization has successful products that are in the
2) An organization competes in a growing industry; maturity stage of the product life cycle; the idea here is
3) Increased economies of scale provide major to attract satisfied customers to try new (improved)
competitive advantages; products as a
4) An organization has both the capital and human result of their positive experience with the organization’s
talent needed to successfully manage an expanded present products or services.
organization; and 2. An organization competes in an industry that is
5) Competitors are faltering as a result of a lack of characterized by rapid technological
managerial expertise or a need for particular resources developments.
that an organization possesses, but not as a result of a 3. Major competitors offer better-quality products at
decline in overall industry sales comparable prices.
4. An organization competes in a high-growth industry.
Intensive Strategies 5. An organization has especially strong research and
1. Market penetration - greater marketing efforts in an development capabilities
attempt to increase market share for present products or
services, in present markets Two Types Of Diversification Strategies
2. Market development - new geographic areas 1. Related Diversification - value chains possess
3. Product development - increased sales through new competitively valuable cross-business strategic fits
or improved products or services 2. Unrelated Diversification - value chains are so
dissimilar that no competitively valuable cross-business
Market Penetration relationships exist
1. Current markets are not saturated with a particular
product or service. • Transferring competitively valuable expertise,
2. The usage rate of present customers could be technological know-how, or other capabilities
increased significantly. from one business to another
3. The market shares of major competitors have been • Combining the related activities of separate
declining while total industry sales have businesses into a single operation to achieve
been increasing. lower costs
 • Exploiting common use of a well-known between related and unrelated diversification is
brand name that the former should be based on some
• Cross-business collaboration to create commonality in markets, products, or
competitively valuable resource technology, whereas the latter is based more on
strengths and capabilities profit considerations.)
9. Existing markets for an organization’s present
Guidelines for Related Diversification products are saturated.
1. when an organization competes in a no-growth 10. Antitrust action could be charged against an
or a slow-growth industry organization that historically has concentrated
2. when adding new, but related, products would on a single industry
significantly enhance the sales of current
products Guidelines on Retrenchment
3. when new, but related, products could be 1. An organization has a clearly distinctive
offered at highly competitive prices competence but has failed consistently to meet
4. when new, but related, products have seasonal its objectives and goals over time.
sales levels that counterbalance an 2. An organization is one of the weaker competitors
organization's existing peaks and valleys in a given industry.
5. when an organization's products are currently in 3. An organization is plagued by inefficiency, low
the declining stage of the product's life cycle profitability, poor employee morale, and
6. when an organization has a strong management pressure from stockholders to improve
team performance.
4. An organization has failed to capitalize on
Guidelines for Unrelated Diversification external opportunities, minimize external
1. Revenues derived from an organization’s current threats, take advantage of internal strengths,
products or services would increase significantly and overcome internal weaknesses over time;
by adding the new, unrelated products. that is, when the organization’s strategic
2. An organization competes in a highly managers have failed (and possibly will be
competitive or a no-growth industry, as replaced by more competent individuals).
indicated by low industry profit margins and 5. An organization has grown so large so quickly
returns. that major internal reorganization is needed.
3. An organization’s present channels of
distribution can be used to market the new Guidelines for Divestiture
products to current customers. 1. An organization has pursued a retrenchment
4. New products have countercyclical sales strategy and failed to accomplish needed
patterns compared to an organization’s present improvements.
products. 2. To be competitive, a division needs more
5. An organization’s basic industry is experiencing resources than the company can provide.
declining annual sales and profits. 3. A division is responsible for an organization’s
6. An organization has the capital and managerial overall poor performance.
talent needed to compete successfully in a new 4. A division is a misfit with the rest of an
industry. organization; this can result from radically
7. An organization has the opportunity to purchase different markets, customers, managers,
an unrelated business that is an attractive employees, values, or needs.
investment opportunity. 5. A large amount of cash is needed quickly and
8. Financial synergy exists between the acquired cannot be obtained reasonably from other
and acquiring firm. (Note that a key difference sources.
 6. Government antitrust action threatens an 1. Perform value chain activities more efficiently than
organization rivals and control the factors that drive the costs of value
chain activities
Guidelines for Liquidation 2. Revamp the firm’s overall value chain to eliminate or
1. An organization has pursued both a bypass some cost-producing activities.
retrenchment strategy and a divestiture
strategy, and neither has been successful. Type 1 or Type 2 cost leadership strategy
2. An organization’s only alternative is bankruptcy. 1. Price competition among rival sellers is
Liquidation represents an orderly and planned especially vigorous.
means of obtaining the greatest possible amount 2. Products of rival sellers are essentially identical
of cash for an organization’s assets. A company and supplies are readily available from any of
can legally declare bankruptcy first and then several eager sellers.
liquidate various divisions to raise needed 3. There are few ways to achieve product
capital. differentiation that have value to buyers.
3. The stockholders of a firm can minimize their 4. Most buyers use the product in the same ways.
losses by selling the organization’s assets. 5. Buyers incur low costs in switching their
purchases from one seller to another.
Porter’s Generic Strategies 6. Buyers are large and have significant power to
- allow organizations to gain competitive bargain down prices.
advantage 7. Industry newcomers use introductory low prices
to attract buyers and build a customer base
1. Cost leadership
- emphasizes standardized products producing at a very Type 3 differentiation strategy
low per-unit cost for consumers who are price sensitive. 1. There are many ways to differentiate the
product or service and many buyers perceive
a. Low-cost strategy that offers products or these differences as having value.
services to a wide range of customers at the 2. The buyer’s needs and uses are diverse.
lowest price available on the market. 3. Few rival firms are following a similar
differentiation approach.
b. Best-value strategy that offers products or 4. Technological change is fast-paced and
services to a wide range of customers at the best competition revolves around rapidly evolving
price value available on the market. product features
- aims to offer customers a range of products or
services at the lowest price available compared low-cost (Type 4) or best-value (Type 5) focus strategy
to a rival's products with similar attributes. 1. The target market niche is large, profitable,
and growing.
2. Differentiation - producing products and services 2. Industry leaders do not consider the niche to
considered unique industry-wide and directed at be crucial to their own success.
consumers who are relatively price insensitive. Focus 3. Industry leaders consider it too costly or
means producing products and services that fulfill the difficult to meet the specialized needs of the
needs of small groups of consumers target market niche while taking care of their
mainstream customers.
3. Low- cost focus strategy, offers products or services 4. The industry has many different niches and
to a small range of customers at the lowest price segments, thereby allowing a focuser to pick
available on the market. a competitively attractive niche suited to its
own resources.
 5. Few, if any, other rivals are attempting to 3. Gain market share and position in the best locations.
specialize in the same target segment. 4. Establish and secure long-term relationships with
customers, suppliers, distributors, and
Four Common Problems That Cause Joint Ventures To investors.
Fail 5. Gain customer loyalty and commitments.
1) managers who must collaborate daily in operating the
venture are not involved in forming or shaping the Thirteen Potential Benefits of Outsourcing
venture. 1. Cost savings: Access lower wages in foreign countries.
2) venture benefits the partnering companies, but does 2. Focus on core business: Focus resources on developing
not benefit customers who then complain about poorer the core business rather than being
service or criticize the companies in other ways distracted by other functions.
3) venture is not supported equally by both partners 3. Cost restructuring: Outsourcing changes the balance of
4) venture may begin to compete more with one of the fixed costs to variable costs by
partners than the other moving the firm more to variable costs. Outsourcing also
makes variable costs more
Nine Reasons Why Many Mergers and Acquisitions Fail predictable.
1. Integration difficulties 4. Improve quality: Improve quality by contracting out
2. Inadequate evaluation of target various business functions to specialists.
3. Large or extraordinary debt 5. Knowledge: Gain access to intellectual property and
4. Inability to achieve synergy wider experience and knowledge.
5. Too much diversification 6. Contract: Gain access to services within a legally
6. Managers overly focused on acquisitions binding contract with financial penalties and
7. Too large an acquisition legal redress. This is not the case with services performed
8. Difficult to integrate different organizational cultures internally.
9. Reduced employee morale due to layoffs and 7. Operational expertise: Gain access to operational best
relocations practice that would be too difficult or time
consuming to develop in-house.
Eleven Potential Benefits of Merging with or Acquiring 8. Access to talent: Gain access to a larger talent pool and
Another Firm a sustainable source of skills, especially
1. To provide improved capacity utilization science and engineering.
2. To make better use of the existing sales force 9. Catalyst for change: Use an outsourcing agreement as
3. To reduce managerial staff a catalyst for major change that cannot be
4. To gain economies of scale achieved alone.
5. To smooth out seasonal trends in sales 10. Enhance capacity for innovation: Use external
6. To gain access to new suppliers, distributors, knowledge to supplement limited in-house capacity
customers, products, and creditors for product innovation.
7. To gain new technology 11. Reduce time to market: Accelerate development or
8. To gain market share production of a product through additional
9. To enter global markets capability brought by the supplier.
10. To gain pricing power 12. Risk management: Manage risk by partnering with an
11. To reduce tax obligations outside firm.
13. Tax benefit: Capitalize on tax incentives to locate
Five Benefits of a Firm Being the First Mover manufacturing plants to avoid high taxes in
1. Secure access and commitments to rare resources. various countries.
2. Gain new knowledge of critical success factors and
issues. seven benefits of reshoring back into the
United States are as follows:
1. Stable wages
2. Reduced gas and electricity costs
3. Excellent security to protect designs from overseas
copycats
4. Enable closer tabs on quality control and supply chains
5. Excellent economy with consumers purchasing more
6. Less shipment costs with consumers nearby
7. Excellent human rights, education, legal, and political
systems that promote freedom and
opportunity for citizens