Mgc1 Study Guide

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Strategic Management
(Chapters 4 & 9)
1. Identify elements of the external environment and internal resources of the firm to analyze before formulating a strategy. a. External Environment: Industry and market analysis (industry profile, growth, and forces), Competitor analysis, Political and Regulatory analysis, Social analysis, Human Resources analysis, Macroeconomics analysis, and Technological analysis. Also forecasting future trends b. Internal Resources: Financial analysis, marketing audit, operations analysis, other internal resources analysis (such as research and development, management information systems, engineering and purchasing.), human resources assessment. 2. Define core competencies and explain how they provide the foundation for business strategy. a. Core Competencies: A unique skill and/ or knowledge an organization possesses that gives it an edge over competitors. A core competence is something a company does especially well relative to its competitors. b. Think of core competencies as the roots of competitiveness and products as the fruits. c. It can provide a sustainable advantage if it is valuable, rare, difficult to imitate, and well organized. 3. Summarize the types of choices available for corporate strategy. a. Concentric

i. focuses on a single business competing in a single industry. b. Vertical Integration
i. involves expanding the domain of the organization into supply channels or to distributors. Vertical integration generally is used to eliminate uncertain-ties and reduce costs associated with suppliers or distributors. c. Concentric Diversification

i. involves moving into new businesses that are related to the company’s original core business. ii. Often companies such as Marriott pursue a strategy of concentric diversification to take advantage of their strengths in one business to gain advantage in another. Because the businesses are related, the products, markets, technologies, or capabilities used in one business can be transferred to another. Success in a concentric diversification strategy requires adequate manage-ment and other resources for operating more than one business. d. Conglomerate Diversification

i. a corporate strategy that involves expansion into unrelated businesses. For example, General Electric Corporation has diversified from its original base in electrical and home appliance products to such wide- ranging industries as health, finance, insurance, truck and air transportation, and even media, with its ownership of NBC. Typically, companies pursue a conglomerate diversification strategy to minimize risks due to market fluctuations in one industry. 4. Discuss how companies can achieve competitive advantage through business strategy. a. Two different business strategies generally lead to gaining a competitive advantage: Low Cost Strategies and Differentiation Strategies b. Low Cost Strategy: Businesses using a low- cost strategy attempt to be efficient and offer a standard, no- frills product. (i.e. Walmart and Southwest Airlines). To succeed, an organization using this strategy generally must be the cost leader in its industry or market segment. However, even a cost leader must offer a product that is acceptable to customers compared with competitors’ products. c. Differentiation Strategy: With a differentiation strategy, a company attempts to be unique in its industry or market segment along some dimensions that customers value. This unique or differentiated position within the industry often is based on high product quality, excellent marketing and distribution, or superior service. (i.e. Nordstrom’s commitment to quality and customer service). The most competitive strategy is one that competitors are unwilling or unable to imitate. 5. Describe the keys to effective strategy...
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