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(BQ) Part 2 book Strategic management - Concepts and cases has contents: Strategy generation and selection, strategy implementation, strategy implementation, strategy implementation.
Source: © motorlka/fotolia 246 Strategy Generation and Selection leArning obJeCtiveS After studying this chapter, you should be able to the following: 8-1 Describe the strategy analysis and choice process 8-2 Diagram and explain the three-stage strategy-formulation analytical framework 8-3 Diagram and explain the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix 8-4 Diagram and explain the Strategic Position and Action Evaluation (SPACE) Matrix 8-5 Diagram and explain the Boston Consulting Group (BCG) Matrix 8-6 Diagram and explain the Internal-External (IE) Matrix 8-7 Diagram and explain the Grand Strategy Matrix 8-8 Diagram and explain the Quantitative Strategic Planning Matrix (QSPM) 8-9 Discuss the role of organizational culture in strategic analysis and choice 8-10 Identify and discuss important political considerations in strategy analysis and choice 8-11 Discuss the role of a board of directors (governance) in strategic planning ASSUrAnCe oF leArning exerCiSeS The following exercises are found at the end of this chapter: exerCiSe 8A exerCiSe 8b exerCiSe 8C exerCiSe 8d exerCiSe 8e exerCiSe 8F exerCiSe 8g exerCiSe 8h exerCiSe 8i exerCiSe 8J exerCiSe 8K Should Unilever Penetrate Southeast Asia Further? Perform a SWOT Analysis for Unilever’s Global Operations Prepare a BCG Matrix for Unilever Develop a SWOT Matrix for Nestlé S.A Develop a SPACE Matrix for Nestlé S.A Develop a BCG Matrix for Nestlé S.A Develop a QSPM for Nestlé S.A Develop a SPACE Matrix for Unilever Develop a BCG Matrix for Your College or University Develop a QSPM for a Company That You Are Familiar With Formulate Individual Strategies 247 www.ebook3000.com 248 Strategic ManageMent S trategy analysis and choice largely involve making subjective decisions based on objective information This chapter introduces important concepts that can help strategists generate feasible alternatives, evaluate those alternatives, and choose a specific course of action Behavioral aspects of strategy formulation are featured, including politics, culture, ethics, and social responsibility considerations Modern tools for formulating strategies are described, and the appropriate role of a board of directors is discussed As showcased next, Unilever Plc launched the Unilever Sustainable Living Plan, a part of the company’s larger goal to double the size of its business while reducing our environmental footprint, and increasing its positive social impact The Strategy Analysis and Choice Process As indicated by Figure 8-1 with white shading, this chapter focuses on generating and evaluating alternative strategies, as well as selecting strategies to pursue Strategy analysis and choice seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives The firm’s present strategies, objectives, vision, and mission, coupled with the external and internal audit information, provide a basis for generating and evaluating feasible alternative strategies This systematic approach is the best way to avoid an organizational crisis Rudin’s Law states, “When a crisis forces choosing among alternatives, most people choose the worst possible one.” Unless a desperate situation confronts the firm, alternative strategies will likely represent incremental steps that move the firm from its present position to a desired future position Alternative strategies not come out of the wild blue yonder; they are derived from the firm’s vision, mission, objectives, external audit, and internal audit; they are consistent with, or build on, past strategies that have worked well The Process of Generating and Selecting Strategies Strategists never consider all feasible alternatives that could benefit the firm because there are an infinite number of possible actions and an infinite number of ways to implement those actions Therefore, a manageable set of the most attractive alternative strategies must be developed, examined, prioritized, and selected The advantages, disadvantages, trade-offs, costs, and benefits of these strategies should be determined This section discusses the process that many exempLAry compAny sHowcAseD Unilever Plc (UL) The Anglo–Dutch Unilever is the world’s third-largest consumer goods company behind Procter & Gamble and Nestlé, offering a product portfolio that ranges from food and beverages to personal care products While operating as a single business entity and under the same directors, Unilever is a dual listed company comprising Unilever N.V based in Rotterdam, Netherlands, and Unilever Plc, London Of its 450 brands, some of Unilever’s best selling products include Aviance, Ben & Jerry’s, Dove, Knorr, Lipton, Heartbrand ice creams, Hellmann’s, Sunsilk, and PG Tips In an effort to help the marine environment, the use of microplastics in all personal care products was phased out by Unilever Their strategies focus on sustainable and ethical activities After selling selling its Slim-Fast brand to Kainos Capital, Unilever recently acquired Talenti Gelato & Sorbetto, a Minneapolis-based packaged gelato company in the United States Unilever acquired Procter & Gamble’s Zest brand outside of North America and the Caribbean, and it also acquired Camay and its global operations, which resulted in $225 million turnover for Unilever in the most recent fiscal year For the fourth year in a row, Unilever received an ‘A’ for Performance by global NGO CDP (formally the Carbon Disclosure Project) and was included in ‘The A List: The CDP Climate Performance Leadership Index 2015’ (CPLI) The company also achieved the maximum disclosure score of 100, up from 99 in 2014 and 85 in 2013 Only 11 companies received an ‘A’ in the Consumer Staples sector, and only 113 (5%) participating companies have ever been awarded an ‘A’ Performance Band rating Also, Unilever was recently included among CDP’s elite UK FTSE 350 Climate Performance Leadership companies Unilever’s Chief Sustainability Officer, Jeff Seabright, was featured in a short film marking the release of the CDP Climate 2015 results Source: Based on company documents CHAPTER8 • STRATEgygEnERATionAnd SElECTion Chapter 2: Outside-USA Strategic Planning The Internal Audit Chapter Vision and Mission Analysis Chapter Types of Strategies Chapter Strategy Generation and Selection Chapter Strategy Implementation Chapter Strategy Execution Chapter 10 Strategy Monitoring Chapter 11 The External Audit Chapter Chapter 3: Ethics, Social Responsibility, and Sustainability Strategy Formulation Strategy Implementation Strategy Evaluation Figure 8-1 A Comprehensive Strategic-Management Model Source: Fred R David, adapted from “How Companies Define Their Mission,” Long Range Planning 22, no (June 1988): 40, © Fred R David firms use to determine an appropriate set of alternative strategies Recommendations (strategies selected to pursue) come from alternative strategies formulated Identifying and evaluating alternative strategies should involve many of the managers and employees who previously assembled the organizational vision and mission statements, performed the external audit, and conducted the internal audit Representatives from each department and division of the firm should be included in this process, as was the case in previous strategy-formulation activities Involvement provides the best opportunity for managers and employees to gain an understanding of what the firm is doing and why and to become committed to helping the firm accomplish its objectives All participants in the strategy analysis and choice activity should have the firm’s external and internal audit information available This information, coupled with the firm’s vision and mission statements, will help participants crystallize in their own minds particular strategies that they believe could benefit the firm most Creativity should be encouraged in this thought process Alternative strategies proposed by participants should be considered and discussed in a meeting or series of meetings Proposed strategies should be listed in writing When all feasible strategies identified by participants are given and understood, the strategies should be individually ranked in order of attractiveness by each participant, with = should not be implemented, www.ebook3000.com 249 250 Strategic ManageMent = possibly should be implemented, = probably should be implemented, and = definitely should be implemented Then, collect the participants’ ranking sheets and sum the ratings given for each strategy Strategies with the highest sums are deemed the best, so this process results in a prioritized list of best strategies that reflects the collective wisdom of the group The Strategy-Formulation Analytical Framework Important strategy-formulation techniques can be integrated into a three-stage decision-making framework, as shown in Figure 8-2 The tools presented in this framework are applicable to all sizes and types of organizations and can help strategists identify, evaluate, and select strategies Stage of the strategy-formulation analytical framework consists of the External Factor Evaluation (EFE) Matrix, the Internal Factor Evaluation (IFE) Matrix, and the Competitive Profile Matrix (CPM) Called the input stage, Stage summarizes the basic input information needed to formulate strategies Stage 2, called the matching stage, focuses on generating feasible alternative strategies by aligning key external and internal factors Stage techniques include the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix Stage 3, called the decision stage, involves a single technique, the Quantitative Strategic Planning Matrix (QSPM) A QSPM uses input information from Stage to objectively evaluate feasible alternative strategies identified in Stage It reveals the relative attractiveness of alternative strategies and thus provides an objective basis for selecting specific strategies The QSPM is a more robust way to determine the relative attractiveness of strategies than the 1) summed ranking method described above, or the 2) individual vs group ranking method described on pages 394–395 in Appendix) All nine techniques included in the strategy-formulation analytical framework require the integration of intuition and analysis Autonomous divisions in an organization commonly use strategy-formulation techniques to develop strategies and objectives Divisional analyses provide a basis for identifying, evaluating, and selecting among alternative corporate-level strategies Strategists themselves, not analytic tools, are always responsible and accountable for strategic decisions Lenz emphasized that the shift from a words-oriented to a numbers-oriented planning process can give rise to a false sense of certainty; it can reduce dialogue, discussion, and argument as a means for exploring understandings, testing assumptions, and fostering organizational learning.1 Strategists, therefore, must be wary of this possibility and use analytical tools to facilitate, rather than to diminish, communication Without objective information and analysis, personal biases, politics, prejudices, emotions, personalities, and halo error (the tendency to put too much weight on a single factor) oftentimes play a dominant role in the strategy-formulation process, undermining effectiveness Thus, an analytical approach is essential for achieving maximum effectiveness in strategic planning STAGE 1: THE INPUT STAGE External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM) Internal Factor Evaluation (IFE) Matrix STAGE 2: THE MATCHING STAGE Strengths-Weaknesses- Strategic Position and Opportunities-Threats Action Evaluation (SWOT) Matrix (SPACE) Matrix Boston Consulting Group (BCG) Matrix Internal-External (IE) Matrix STAGE 3: THE DECISION STAGE Quantitative Strategic Planning Matrix (QSPM) Figure 8-2 The Strategy-Formulation Analytical Framework Grand Strategy Matrix CHAPTER8 • STRATEgygEnERATionAnd SElECTion The Input Stage Procedures for developing an EFE Matrix, an IFE Matrix, and a CPM were presented in Chapters and Information derived from the EFE Matrix, IFE Matrix, and CPM provides basic input information for the matching and decision stage matrices described in this chapter The input tools require strategists to quantify subjectivity during early stages of the strategyformulation process Making small decisions in the input matrices regarding the relative importance of external and internal factors allows strategists to more effectively generate, prioritize, evaluate, and select among alternative strategies Good intuitive judgment is always needed in determining appropriate weights and ratings, but keep in mind that a rating of 3, for example, is mathematically 50 percent more important than with a rating of 2, so small differences matter The Matching Stage Strategy is sometimes defined as the match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors.2 The matching stage of the strategy-formulation framework consists of five techniques that can be used in any sequence: the SWOT Matrix, the SPACE Matrix, the BCG Matrix, the IE Matrix, and the Grand Strategy Matrix These tools rely on information derived from the input stage to match external opportunities and threats with internal strengths and weaknesses Matching external and internal key factors is the essential for effectively generating feasible alternative strategies For example, a firm with excess working capital (an internal strength) could take advantage of the cell phone industry’s 20 percent annual growth rate (an external opportunity) by acquiring Cellfone, Inc This example portrays simple one-to-one matching In most situations, external and internal relationships are more complex, and the matching requires multiple alignments for each strategy generated Successful matching of key external and internal factors depends on those underlying key factors being specific, actionable, and divisional to the extent possible The basic concept of matching is illustrated in Table 8-1 The Decision Stage As indicated above, participants could individually rate strategies on a 1-to-4 scale as to desirability, and then sum the ratings from all participants, so that a prioritized list of the best strategies could be achieved However, the QSPM, described later in this chapter, offers a more robust procedure to determine the relative attractiveness of alternative strategies The SWOT Matrix The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix is an important matching tool that helps managers develop four types of strategies: SO (strengths-opportunities) strategies, WO (weaknesses-opportunities) strategies, ST (strengths-threats) strategies, and WT (weaknessesthreats) strategies.3 Matching key external and internal factors is the most difficult part of developing a SWOT Matrix, as it requires good judgment—and there is no one best set of matches Note in Table 8-1 that the first, second, third, and fourth strategies are SO, WO, ST, and WT strategies, respectively SO strategies use a firm’s internal strengths to take advantage of external opportunities All managers would like their organization to be in a position in which internal strengths can be used to take advantage of external trends and events Organizations generally will pursue WO, ST, Table 8-1 Matching Key External and Internal Factors to Formulate Alternative Strategies Key internal Factor Key external Factor resultant Strategy Excess working capital (an internal strength) Insufficient capacity (an internal weakness) Strong research and development expertise (an internal strength) Poor employee morale (an internal weakness) + Annual growth of 20 percent in the cell phone industry (an external opportunity) + Exit of two major foreign competitors from the industry (an external opportunity) + Decreasing numbers of younger adults (an external threat) + Rising health-care costs (an external threat) = Acquire Cellfone, Inc www.ebook3000.com = Pursue horizontal integration by buying competitors’ facilities = Develop new products for older adults = Develop a new wellness program 251 252 Strategic ManageMent or WT strategies to get into a situation in which they can apply SO strategies When a firm has major weaknesses, it will strive to overcome them and make them strengths When an organization faces major threats, it will seek to avoid them to concentrate on opportunities WO strategies aim at improving internal weaknesses by taking advantage of external opportunities Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from exploiting those opportunities For example, there may be a high demand for electronic devices to control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto parts manufacturer may lack the technology required for producing these devices (weakness) One possible WO strategy would be to acquire this technology by forming a joint venture with a firm having competency in this area An alternative WO strategy would be to hire and train people with the required technical capabilities ST strategies use a firm’s strengths to avoid or reduce the impact of external threats This does not mean that a strong organization should always meet threats in the external environment head-on An example ST strategy occurred when Texas Instruments used an excellent legal department (a strength) to collect nearly $700 million in damages and royalties from nine Japanese and Korean firms that infringed on patents for semiconductor memory chips (threat) Rival firms that copy ideas, innovations, and patented products are a threat in many industries WT strategies are defensive tactics directed at reducing internal weakness and avoiding external threats An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position In fact, such a firm may have to fight for its survival, merge, retrench, declare bankruptcy, or choose liquidation A schematic representation of the SWOT Matrix is provided in Figure 8-3 Note that a SWOT Matrix is composed of nine cells As shown, there are four key factor cells, four strategy cells, and one cell that is always left blank (the upper-left cell) The four strategy cells, labeled SO, WO, ST, and WT, are developed after completing four key factor cells, labeled S, W, O, and T The process of constructing a SWOT Matrix can be summarized in eight steps, as follows: List the firm’s key external opportunities List the firm’s key external threats List the firm’s key internal strengths List the firm’s key internal weaknesses Match internal strengths with external opportunities, and record the resultant SO strategies in the appropriate cell Match internal weaknesses with external opportunities, and record the resultant WO strategies Match internal strengths with external threats, and record the resultant ST strategies Match internal weaknesses with external threats, and record the resultant WT strategies Some important aspects of a SWOT Matrix are evidenced in Figure 8-3 For example, note that both the internal and external factors and the SO, ST, WO, and WT strategies are stated in quantitative terms This is important! For example, regarding the second SO number and ST number strategies, if the analyst just said, “Add new repair and service persons,” the reader might think that 20 new repair and service persons are needed Actually only are needed So, with strategies, as with the underlying key external and internal factors, be specific, actionable, and divisional to the extent possible It is also important to include the “S1, O2” type notation after each strategy in a SWOT Matrix This notation reveals the rationale for each alternative strategy Strategies not appear out of the blue Note in Figure 8-3 how this notation reveals the internal and external factors that were matched to formulate desirable strategies For example, note that this retail computer store business may need to “purchase land to build new store” because a new Highway 34 will make its location less desirable The notation (W2, O2) and (S8, T3) in Figure 8-3 exemplifies this matching process The purpose of SWOT analysis and each Stage matching tool is to generate feasible alternative strategies, not to select or determine which strategies are best Not all of the strategies developed in the SWOT Matrix will be selected for implementation No firm has sufficient capital or resources to implement every strategy formulated The strategy-formulation guidelines provided in Chapter can enhance the process of matching key external and internal factors For example, when an organization has both the capital and human resources needed to distribute its own products (internal strength) and distributors are unreliable, costly, or incapable of meeting the firm’s needs (external threat), forward integration can be an attractive ST strategy When a firm has excess production capacity (internal weakness) CHAPTER8 • STRATEgygEnERATionAnd SElECTion Strengths Inventory turnover up 5.8 to 6.7 Average customer purchase up $97 to $128 Employee morale is excellent In-store promotions = 20 percent increase in sales Newspaper advertising expenditures down 10 percent Revenues from repair and service in store up 16 percent In-store technical support persons have MIS degrees Store’s debt-to-total-assets ratio down 34 percent Opportunities Population of city growing 10 percent Rival computer store opening one mile away Vehicle traffic passing store up 12 percent Vendors average six new products a year Senior citizen use of computers up 8 percent Small business growth in area up 10 percent Desire for websites up 18 percent by realtors Desire for websites up 12 percent by small firms Threats Best Buy opening new store in one year nearby Local university offers computer repair New bypass Hwy 34 in year will divert traffic New mall being built nearby Gas prices up 14 percent Vendors raising prices percent WO Strategies Add four new in-store promotions monthly (S4, O3) Add two new repair and service persons (S6, O5) Send flyer to all seniors over age 55 (S5, O5) ST Strategies Hire two more repair persons and market these new services (S6, S7, T1) Purchase land to build new store (S8, T3) Raise out-of-store service calls from $60 to $80 (S6, T5) Weaknesses Software revenues in store down 12 percent Location of store hurt by new Hwy 34 Carpet and paint in store in disrepair Bathroom in store needs refurbishing Total store revenues down percent Store has no website Supplier on-time-delivery up to 2.4 days Customer checkout process too slow Revenues per employee up 19 percent WO Strategies Purchase land to build new store (W2, O2) Install new carpet, paint, and bath (W3, W4, O1) Up website services by 50 percent (W6, O7, O8) Launch mailout to all realtors in city (W5, O7) WT Strategies Hire two new cashiers (W8, T1, T4) Install new carpet, paint, and bath (W3, W4, T1) Figure 8-3 A SWOT Matrix for a Retail Computer Store and its basic industry is experiencing declining annual sales and profits (external threat), related diversification can be an effective WT strategy Although the SWOT Matrix is widely used in strategic planning, the analysis does have some limitations.4 First, SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself The matrix should be the starting point for a discussion on how proposed strategies could be implemented as well as cost/benefit considerations that ultimately could lead to competitive advantage Second, SWOT is a static assessment (or snapshot) in time A SWOT Matrix can be like studying a single frame of a motion picture where you see the lead characters and the setting but have no clue as to the plot As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix Third, SWOT analysis www.ebook3000.com 253 254 Strategic ManageMent may lead the firm to overemphasize a single internal or external factor in formulating strategies There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies Fourth, there are no weights, ratings, or numbers in a SWOT analysis Finally, the relative attractiveness of alternative strategies is not provided The Strategic Position and Action Evaluation (SPACE) Matrix The Strategic Position and Action Evaluation (SPACE) Matrix, another important Stage matching tool, is illustrated in Figure 8-4 Its four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization The axes of the SPACE Matrix represent two internal dimensions (financial position [FP] and competitive position [CP]) and two external dimensions (stability position [SP] and industry position [IP]) These four factors are perhaps the most important determinants of an organization’s overall strategic position.5 It is helpful here to elaborate on the difference between the SP and IP axes The term SP refers to the volatility of profits and revenues for firms in a given industry Thus, SP volatility (stability) is based on the expected impact of changes in core external factors such as technology, economy, demographic, seasonality, and so on The higher the frequency and magnitude of changes in a given industry, the more unstable the SP becomes An industry can be stable or unstable on SP, yet high or low on IP The smartphone industry, for instance, would be unstable (–6 or –7) on SP yet high growth on IP, whereas the canned food industry would be stable (–1 or –2) on SP yet low growth on IP Depending on the type of organization, numerous variables could make up each of the dimensions represented on the axes of the SPACE Matrix Factors that were included in the firm’s EFE FP • • • • +7 Conservative Market penetration Market development Product development Related diversification Aggressive Backward, forward, horizontal integration • Market penetration • Market development • Product development • Diversification (related or unrelated) +6 • +5 +4 +3 +2 +1 CP IP –7 –6 –5 –4 –3 –2 –1 +1 +2 +3 +4 +5 +6 +7 –1 • • • Defensive Retrenchment Divestiture Liquidation Competitive Backward, forward, horizontal integration • Market penetration • Market development • Product development –2 • –3 –4 –5 –6 –7 SP Figure 8-4 The SpACE Matrix Source: Based on H Rowe, R Mason, and K Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co Inc., © 1982), 155 CHAPTER8 • STRATEgygEnERATionAnd SElECTion and IFE Matrices should be considered in developing a SPACE Matrix Other variables commonly included are given in Table 8-2 For example, return on investment, leverage, liquidity, working capital, and cash flow are commonly considered to be determining factors of an organization’s financial position (FP) Like the SWOT Matrix, the SPACE Matrix should be both tailored to the particular organization being studied and based on factual information to the extent possible The process of developing a SPACE Matrix can be summarized in six steps, as follows: Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP) Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and IP dimensions Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the variables that make up the SP and CP dimensions On the FP and CP axes, make comparisons to competitors On the IP and SP axes, make comparisons to other industries On the SP axis, know that a –7 denotes highly unstable industry conditions, whereas –1 denotes highly stable Compute an average score for FP, CP, IP, and SP by summing the values given to the variables of each dimension and then by dividing by the number of variables included in the respective dimension Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix Add the two scores on the x-axis and plot the resultant point on X Add the two scores on the y-axis and plot the resultant point on Y Plot the intersection of the new (x, y) coordinate Draw a directional vector from the origin of the SPACE Matrix (0,0) through the new (x, y) coordinate That vector, being located in a particular quadrant, reveals particular strategies the organization should consider Some example strategy profiles that can emerge from SPACE analysis are shown in Figure 8-5 The directional vector associated with each profile suggests the type of strategies to pursue: aggressive, conservative, defensive, or competitive Specifically, when a firm’s directional vector is located in the Aggressive Quadrant (upper right) of the SPACE Matrix, an organization is in an excellent position to use its internal strengths to (1) take advantage of external opportunities, (2) overcome internal weaknesses, and (3) avoid external threats Therefore, market penetration, market Table 8-2 Example Factors That Make Up the SpACE Matrix Axes internal Strategic Position external Strategic Position Financial Position (FP) Stability Position (SP) Return on investment Leverage Liquidity Working capital Cash flow Inventory turnover Earnings per share Price earnings ratio Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry into market Competitive pressure Ease of exit from market Risk involved in business Competitive Position (CP) Industry Position (IP) Market share Product quality Product life cycle Customer loyalty Capacity utilization Technological know-how Control over suppliers and distributors Growth potential Profit potential Financial stability Extent leveraged Resource utilization Ease of entry into market Productivity, capacity utilization Source: Based on H Rowe, R Mason, & K Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co Inc., © 1982), 155–156 www.ebook3000.com 255 676 Subject Index G GAAP, 373 GAAS, 373 Gain sharing, 342 Generic Strategies, 134–138 Cost leadership, 135–136 Differentiation, 136–137 Focus, 137–138 Glass ceiling, 344 Global challenge, 73–74 Global/International Issues (Chapter 2), 68–88 Advantages and disadvantages, 72–73 Business Climate Across Countries/Continents, 82–87 African Countries, 83–84 China, 84 India, 85–86 Mexico, 86–87 Business Culture Across Countries/Continents, 79–82 China – Business Culture, 81–82 India – Business Culture, 82 Japanese Culture, 80–81 Mexican Culture, 79–80 Communication differences across countries, 78–82 Corporate Tax Rates Globally, 74–76 Cultural pitfalls, 77 Global challenge, 73–74 Global competition, 73–74 Multinational organizations, 70–71 USA vs foreign business cultures, 76–79 Global strategy, 69 Globalization, 69 Goals See objectives 40, 120–129, 324–326 Goodwill, 263, 305 Governance, 271–275 Governmental forces, 224–226 Variables, 224–226 Governmental organizations (strategic planning), 145 Grand Strategy Matrix, 265–266 Growth ratios, 194 Guanxi, 76 Guidelines for case analysis, 386–387 H Halo error, 250 Heroes/heroines, 182, 349 Horizontal consistency of objectives, 326 Horizontal integration, 127–128 Hostile takeover, 140 Human resource concerns when implementing strategies, 341–352 Human resource management, 186, 341–352 I IE Portfolio Matrix, 261–262 IFRS, 373 Implementing Strategies: Management/Operations (Chapter 10), 322–352 Implementing Strategies: Marketing/Finance (Chapter 9), 286–313 Implications for Strategists Chapter 1, 48–49 Chapter 2, 88 Chapter 3, 111–112 Chapter 4, 146–147 Chapter 5, 169–170 Chapter 6, 206–207 Chapter 7, 239–240 Chapter 8, 274–275 Chapter 9, 312–313 Chapter 10, 351–352 Chapter 11, 378 Implications for Students Chapter 1, 49 Chapter 2, 88 Chapter 3, 112 Chapter 4, 147 Chapter 5, 170 Chapter 6, 208 Chapter 7, 240 Chapter 8, 274–275 Chapter 9, 313 Chapter 10, 352 Chapter 11, 378 India, 82, 85–86 Industrial Organization (I/O) View, 221 Industry Growth Rate (BCG axis), 258, 259 Industry Position (IP), in SPACE, 255 Information technology, 226 Inhwa, 76 Initial Public Offering (IPO), 308 Input stage, 251 Institute of Business Ethics, 96 Integration strategies, 124–128 Backward integration, 126–127 Forward integration, 125–126 Horizontal integration, 127–128 Vertical integration, 124 Internal-External (IE) Matrix, 261–262 Intensive strategies, 128–129 Market development, 138 Market penetration, 128 Product development, 129 Internal assessment (Chapter 6), 178–213 Benchmarking, 202 Breakeven analysis, 195–197, 206 Cost/Benefit analysis, 190–191 Cultural pitfalls, 77 Cultural products, 182–183 Finance/accounting functions, 191–197 Financial ratio analysis, 180, 192–194 IFE Matrix, 204–206 Initial Public Offering (IPO), 308 Integrating strategy and culture, 182–184 Internal factor evaluation matrix, 204–206 Internal forces, 179–180 Management, 184–188 Management Information Systems, 200 Marketing, 188–191 Nature of an internal audit, 178–182 Process of performing an internal audit, 180 Production/operations, 197–198 Research and development, 199–200 Research and development audit, 199–200 Resource-Based View (RBV), 181–182 Value chain analysis (VCA), 201–204 Internal audit See internal assessment, 178–213 Subject Index Internal factor evaluation matrix, 204–206 Internal forces, 179–180 Internal strengths and weaknesses, 39–40, 178–179 International financial reporting standards (IFRS), 373 International firms, 70–71 International Issues (Chapter 2), (See Global Issues), 68–88 International operations, 68–88 Advantages and disadvantages, 72–73 Internet, 36, 226, 289–290 Intuition (vs analysis), 34–36 Inventory (production/operations function), 197 Inversion, 76 Investment decision, 191–192 ISO 14000 and 14001 Certifications, 108–109 J Japanese culture, 76, 79 Joint venture/partnering, 138–139 Joint venture in India, 85–86 Just-in-time (JIT), 340 L Labor unions, 225 Late mover, 142 Leadership, 186 Learning from the partner, 138 Legal forces/variables, 224–225 Legend, 182–183, 348 Leverage ratios, 194 Leveraged buyout, 141 Liquidation, 133 Liquidity ratios, 194 Linking pay-performance, 341–343 Bonus system, 341 Gain sharing, 342 Profit sharing, 342 Lobbying, 39 Long-range, planning, 33 Long-term objectives, 40, 120–122 M Making assumptions, 233–234 Management, 184–188, 322–353 Controlling, 187 Functions of management, 184–188 Management audit checklist of questions, 188 Motivating, 186 Organizing, 185 Planning, 184 Staffing, 186–187 Management audit checklist of questions, 187 Management by wandering around, 363 Management Information Systems (MIS), 200, 269, 311–313 Managing by Crisis, 122 Managing by Extrapolation, 122 Managing by Hope, 122 Managing by Subjectives, 122 Managing conflict, 329 Managing resistance to change, 339–340 Managing the natural environment, (See Natural Environment), 96, 106–107 Market capitalization, 265, 307 Market development, 128 Market penetration, 128 Market segment, 251, 293 Market segmentation, 247, 289–292 Market value, 265, 307 Marketing, 188–191, 286–289 Advertising media, 188 Cost/benefit analysis, 190 Distribution, 190 Functions of marketing, 188–191 Implementation issues, 286–292 Market segmentation, 289–292 Marketing audit checklist of questions, 191 Marketing research, 190 New principles of marketing, 289 Perceptual mapping, 292–295 Pricing, 189 Product and service planning, 189 Product positioning, 292–295 Selling products/services, 188–189 Marketing mix, 290 Place, 290 Price, 290 Product, 290 Promotion, 290 Marketing research, 190 Markets, 165 Matching stage, 250–251 Matching structure and strategy, 329–335 Matrix structure, 334–335 Measuring organizational performance, 364–368 Medical organizations, 145 Merger/acquisition, 140–141 Benefits of, 140 Friendly merger 140 Hostile takeover, 140 Why many fail, 140 Merit pay, 341–343 Mexican culture, 79 Mexico Business Climate, 86–87 Military strategy (vs business strategy), 46–47 MIS issues, 311–313 Mission, 38, 147–171 Mission statements, 38, 147–171 Characteristics of, 164–165 Components, 165–166 Definition, 160 Evaluating, 167 Examples, 167–168 Importance (Benefits) of, 162–163 Mission versus vision, 158, 162 Process of developing, 161–162 Writing and evaluating, 166–170 Motivating, 186 Multidimensional scaling, 292 Multinational corporations, 70–71 Myths, 182–183, 348 N Natural environment, 96, 106–107 Nemaswashio, 78 www.ebook3000.com 677 678 Subject Index Nestlé S.A (Cohesion case), 54–63 Balance sheets, 58 Competitors, 59–60 Income statements, 57 Organizational structure, 55–56 Nonprofit and governmental organizations, 145 Not Managing by Objectives, 122 Notable Quotes (see www.strategyclub.com website) O Objectives, 40, 120–122, 324–326 Annual, 40–41, 324–326 Benefits of, 40, 121 Characteristics of, 40, 121 Financial versus strategic objectives, 121–122 Long-term, 40, 120–121 Not managing by objectives, 122 Purpose and characteristics, 40–41, 120–121 Office of Civil Rights (OCR), 103 Operations (See Production/Operations Function), 197–198, 339–340 Opportunities, 38, 219–221 Oral case analysis, 387, 389–390 Oral presentation, 387, 389–393 Organizational change, 35, 359, 368 Organizational charts, 329–337 Do’s and Don’ts, 335–337 Organizational culture, 182–184 Cultural products, 182–184 Definition, 182 India culture, 82 Japanese culture, 80–81 Mexican culture, 79–80 U.S vs foreign, 76–82 Ways and means for altering, 183 Organizational structure, 329–330 Advantages/disadvantages of divisional, 331–333 Advantages/disadvantages of functional, 330–331 Advantages/disadvantages of matrix, 334–335 Do’s and Don’ts, 335–336 Symptoms of ineffectiveness, 330 Organizing, 185 Outsourcing, 142–143 Outstanding shares method to value a firm, 307 P Partnering and partnerships, 138–139 Pay-Performance issues, 341–343 Perceptual mapping, 292–296 Personal ethics, 96–100 Personal selling, 290 Personnel management, 186 Philosophy, 166 Pitfalls in strategic planning, 46 Planning, 33, 184–185 Policies, 41–42, 327 Political, governmental and legal forces/variables, 224–225 Politics of strategy choice, 270–271 Porter’s Five-Forces Model, 229–232 Bargaining power of consumers, 230, 232 Bargaining power of suppliers, 230, 231 Potential development of substitute products, 230, 231 Potential entry of new competitors, 231 Rivalry among competing firms, 230 Porter’s five generic strategies Cost leadership (Type and 2), 134–138 Differentiation, 136 Focus (Type and 5), 137 Portfolio of businesses, 258–261 Potential development of substitute products, 231 Potential entry of new competitors, 231 Premium, 307 Prepare and present a case analysis, 387–395 Preparing a case for class discussion, 385–387 Preparing a written case analysis, 385–387 Price, 189, 290 Price earnings ratio method to value businesses, 307–308 Pricing, 189–190 Private-equity acquisitions, 141–142 Process (production/operations function), 197–198, 338 Product, 165, 290 Product and service planning, 189 Product development, 129 Product positioning, 292–295 Product positioning maps, 292–295 Production/Operations function, 197–198 Audit checklist of questions, 198 Production/Operations concerns when implementing strategies, 197–198 Production/Operations functions, 197 Profitability ratios, 194 Projected financial statement analysis, 300 Promotion, 290 Protectionism, 73 Public image, 165 Publicity, 290 Q QSPM, 266–270 Quality (production/operations function), 197 Quantitative Strategic Planning Matrix (OSPM), 266–270 Question marks, 258–261 R Ratings, 204, 235 Ratio analysis, 192–194 Rational change strategy, 339 Reconciliatory, 164 Reengineering, 338–339 Related diversification, 129 Relative deficiency or superiority, 39 Relative market share position (RMSP), 258–261 Research and development, 199–200, 309–310 Research and development audit, 200 Research and development issues, 199–200 Reshoring, 143 Resistance to change, 339, 368 Resource allocation, 34 Resource-Based View (RBV), 181–182 Empirical indicators, 181 Restructuring, 338–339 Retreats, 43 Retrenchment, 131–132 Subject Index Revised EFE (and IFE) Matrix, 364–368 Rightsizing, 338–339 Rites, 182–183 Rituals, 182–183 Rivalry Among Competing Firms, 230 Robinson-Patman Act, 189 Rumelt’s Criteria for Evaluating Strategies, 362–363 S Sales promotion, 290 Sample case analysis outline, 391–395 Sarbanes-Oxley Act, 275 Secondary buyouts, 142 Self-concept (distinctive competence), 166 Self-interest change strategy, 339 Selling products/services, 188–189 Sexual harassment, 102 Six Sigma, 338 SO Strategies, 251–254 Social, cultural, demographic and environmental forces, 223 Variables, 224 Social policies on retirement, 104 Social policy, 104 Japan versus the world, 104 Social responsibility, 96, 103–105 Society of Competitive Intelligence Professionals (SCIP), 228 Software, (See Strategy Club or www.strategyclub.com) Songbirds and coral reefs in trouble, 110 Sources of external information, 232 SPACE Matrix, 254–258 ST Strategies, 251–254 Stability Position (SP), in SPACE, 254–258 Staffing, 186 Standard & Poor’s Industry Surveys, 64 Standards, 107–108 Stakeholders, 164 Stars, 258–261 Statement of beliefs, 160 Statement of philosophy, 160 Statement of purpose, 160 Stock financing, 296–297 Story, 182–183 Strategic Business Unit (SBU) structure, 330, 333–334 Strategic objectives, 121 Strategic management, 33 Art vs Science Issue, 374 Benefits, 43–45 Case analysis, 387–393 Challenges, 374–375 Definition, 33 Guidelines for effective strategic management, 376–377 In nonprofit and governmental organizations, 144–147 In small firms, 145 Levels of your own health, 349–351 Model, 42–43, 69, 97, 123, 161, 219, 239, 286, 361 Process, 33, 42–43 Secret vs open discussion, 375 Stages, 33–34 Terms, 36–41 Visible vs hidden issue, 374 Strategic-management model, 43 679 Strategic objectives, 121 Strategic planning, 33 Art vs Science Issue, 374 Challenges, 374–375 Pitfalls, 46 Process of generating and selecting strategies, 248–283 Quotes, (See Notable Quotes) Software, (see Strategy Club at www strategyclub.com) Why some firms no strategic planning, 45 Strategic Position and Action Evaluation (SPACE) Matrix, 254–258 Strategies in Action, 119–155 Backward integration, 126–127 Bankruptcy, 132 Combination, 123 Diversification, 129–131 Divestiture, 132 Forward integration, 125–126 Franchising, 125 Generic, 134–138 Geographic expansion, 128 Horizontal integration, 127–128 Levels of, 124 Liquidation, 133 Market development, 128 Market penetration, 128 Means for achieving, 138–142 Product development, 128 Related diversification, 130 Retrenchment, 131–132 Types of, 122–134 Unrelated diversification, 130–131 Vertical integration, 124 Strategists, 36 Strategos, 46 Strategy-structure relationship, 330 Strategy-supportive culture, 270, 348–349 Strategy and culture, 270, 348–349 Cultural products, 182–183 Strategy analysis and choice, 248–283 Analytical framework, 250 BCG Matrix, 258–261 Cultural aspects, 270 Decision stage, 266 Governance issues, 271–275 GRAND Matrix, 265–266 IE Matrix, 261–264 Input stage, 250–251 Matching stage, 250–251 Nature of analysis and choice, 248–250 Politics of, 270–271 QSPM, 266–270 SWOT Matrix, 254–258 Strategy Evaluation, 34, 42, 359–383 Activities, 360, 364–368 Art vs Science Issue, 374 Auditing, 373–374 Balanced scorecard, 369–370 Challenges, 374–375 Characteristics of an effective evaluation system, 371–372 Contingency planning, 372–373 Framework, 364–368 www.ebook3000.com 680 Subject Index Strategy Evaluation (continued) Measuring organizational performance, 34, 369–370 Published sources, 371 Questions to address, 366 Strategy Monitoring, 34, 359–383 Taking corrective actions, 34, 364–368 Top-Down or Bottom-Up strategic planning, 376 Visible vs hidden issue, 375–376 Strategy Execution, 321–356 Allocate Resources, 327–329 Annual objectives, 324–326 Balancing work life and home life, 343–344 Benefits of a diverse workforce, 344–345 Chandler’s strategy/structure relationship, 330 Corporate wellness programs, 349–352 Creating a strategy-supportive culture, 348–349 Divisional structure, 331–333 Do’s and dont’s in developing organization charts, 335–337 Employee stock ownership plans (ESOPs), 340–341 Functional structure, 330–335 Human resource concerns when implementing strategies, 341–352 Linking performance and pay to strategies, 341–343 Management and operations issues, 321–357 Managing conflict, 329 Managing resistance to change, 339 Managing structure, 329–330 Matching structure with strategy, 329–330 Matrix structure, 334–335 Policies, 327 Restructuring and reengineering, 338–339 Strategic business unit (SBU) structure, 330, 333–334 Versus strategy formulation, 322 Strategy formulation, 33, 42, 248–283 Analytical framework, 250 Cultural aspects, 270 Decision stage, 266 Framework, 250 Governance issues, 271–275 Input stage, 251 Matching stage, 251 Politics of, 270–271 Versus strategy implementation, 322 Strategy implementation, 34, 42, 285–315, 322–324 Business analytics, 234 Corporate evaluation, 304–308 Current marketing issues, 286–295 Finance/Accounting issues, 295–308 Market segmentation, 289–292 Marketing issues, 286–295 MIS issues, 311–313 New principles of marketing, 289 Product positioning/Perceptual mapping, 292–295 Projected financial statement analysis, 300–304 Research and development issues, 309–311 Strategy profiles, 254–258 Strategy review, evaluation, and control (Chapter 9), 359–383 Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, 251–254 Strengths, 39–49 Structure and strategy, 329, 335–336 Sum Total Attractiveness Scores (TAS) (in a QSPM), 266–270 Survival, growth, and profitability, 166 Sustainability, 106–107 Sustainability Report, 107 Sustained competitive advantage, (See Special Notes To Students), 36, 37, 190, 202 SWOT Matrix/Analysis, 251–254 Synergy, 185 T Take Corrective Actions, 364–368 Tax rates, 74–76 Technological forces, 226–227 Test marketing, 189 Threats, 38, 219–221 Top-Down or Bottom-Up strategic planning, 376 Total Attractiveness Scores (TAS) (in a QSPM), 266–270 Total costs, 195–197 Treasury stock, 254 Tumbler, 36 Turnaround strategy, 131 Tweet, 246, 288 U Unionized states, 225 Unrelated diversification, 130–131 Upstream activities, 207 Utility of mission statements, 164 V Vacant niche, 292 Value chain analysis (VCA), 201–204 Value of the dollar, 222–223 Values, 182–183 Variable costs (VC), 195–197 Vertical consistency of objectives, 326 Vertical integration, 124 Visible vs hidden strategies, 374 Vision Statements, 38, 157–175 Definition, 38 Examples, 159, 160 Importance (Benefits) of, 162–163 W Wa, 76, 80 Weaknesses, 39–40, 177–215 Weights vs ratings, 204, 235 Wellness programs, 350 Whistle-blowing, 100–101 Wikis, 288 Wildlife, 110–111 WO Strategies, 251–254 Women, 343–344 Workforce (production/operations function), 197 Workplace romance, 102–103 Worth of a business, 304–308 WT Strategies, 251–254 Y YouTube, 36 Comprehensive Model of the Strategic-Management Process Chapter Outside-USA Strategic Planning SIMPLE AND STRAIGHTFORWARD APPROACH TO STRATEGIC PLANNING Chapter The Internal Audit Chapter Vision and Mission Analysis Chapter Types of Strategies Chapter Strategy Generation and election Chapter Strategy Implementation Chapter 10 Strategy Execution Chapter 11 Strategy Monitoring Chapter The External Audit Chapter Ethics, Social Responsibility, and Sustainability Strategy Formulation Strategy Implementation USED WIDELY AMONG BUSINESSES AND ACADEMIA WORLDWIDE Strategy Evaluation USED TO INTEGRATE AND ORGANIZE ALL CHAPTERS IN THIS TEXT www.ebook3000.com This page intentionally left blank This page intentionally left blank www.ebook3000.com This page intentionally left blank This page intentionally left blank www.ebook3000.com This page intentionally left blank This page intentionally left blank www.ebook3000.com This page intentionally left blank www.ebook3000.com Types of Strategies Chapter Strategy Evaluation Strategy Implementation Chapter USED TO INTEGRATE AND ORGANIZE ALL CHAPTERS IN THIS TEXT Strategy Implementation Strategy Generation and Selection Chapter Strategy Formulation The External Audit Chapter Strategy Monitoring The Internal Audit Chapter SIMPLE AND STRAIGHTFORWARD APPROACH TO STRATEGIC PLANNING Strategy Execution Strategic-Management Process Chapter 11: Vision and Mission Analysis Chapter USED WIDELY AMONG BUSINESSES AND ACADEMIA WORLDWIDE Outside–USA Strategic Planning Chapter Ethics, Social Responsibility, Sustainability Chapter Chapter 10: Comprehensive Model of the MyManagementLab : Improves Student Engagement Before, During, and After Class ® BREAKTHROUGH To better results Prep and Engagement OUGH KTHR BREA • NEW! VIDEO LIBRARY – easy-to-assign assessments, the ability for instructors to add YouTube or other sources, the ability for students to upload video submissions, and the ability for polling and teamwork • Decision-making simulations – NEW and improved feedback for students Place your students in the role of a key decision-maker! Simulations branch based on the decisions students make, providing a variation of scenario paths Upon completion students receive a grade, as well as a detailed report of the choices and the associated consequences of those decisions • Video exercises – UPDATED with new exercises Engaging videos that bring business concepts to life and explore business topics related to the theory students are learning in class Quizzes then assess students’ comprehension of the concepts covered in each video • Learning Catalytics – A “bring your own device” student engagement, assessment, and classroom intelligence system helps instructors analyze students’ critical-thinking skills during lecture • Dynamic Study Modules (DSMs) – UPDATED with additional questions Through adaptive learning, students get personalized guidance where and when they need it most, creating greater engagement, improving knowledge retention, and supporting subject-matter mastery Also available on mobile devices Decision Making Critical Thinking • Writing Space – UPDATED with new commenting tabs, new prompts, and a new tool for students called Pearson Writer A single location to develop and assess concept mastery and critical thinking, the Writing Space offers automatic graded, assisted graded, and create your own writing assignments, allowing you to exchange personalized feedback with students quickly and easily Writing Space can also check students’ work for improper citation or plagiarism by comparing it against the world’s most accurate text comparison database available from Turnitin • Additional Features – Included with the MyLab are a powerful homework and test manager, robust gradebook tracking, Reporting Dashboard, comprehensive online course content, and easily scalable and shareable content http://www.pearsonmylabandmastering.com ... Sales 25 .0 50.0 12. 5 12. 5 100.0 Profits Percent Profits IFE Scores EFE Scores $10 $20 50 25 20 100 3.6 2. 1 3.1 1.8 3 .2 3.5 2. 1 2. 5 Figure 8-1 1 An Example IE Matrix www .ebook3 000.com 26 3 26 4 Strategic. .. Matrix 8-5 Diagram and explain the Boston Consulting Group (BCG) Matrix 8-6 Diagram and explain the Internal-External (IE) Matrix 8-7 Diagram and explain the Grand Strategy Matrix 8-8 Diagram and. .. K Dickel, Strategic Management and Business Policy: A Methodological Approach (Reading, MA: Addison-Wesley Publishing Co Inc., © 19 82) , 155–156 www .ebook3 000.com 25 5 25 6 Strategic ManageMent