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Terms in this set (38)
RBV
1. The RBV approach to competitive advantage contends that internal resources are more important than external factors for a firm in achieving and sustaining competitive advantage.
Liquidity ratios
a. measure a
firm's ability to meet maturing short-term obligations.
i. Current ratio
ii. Quick (acid-test) ratio
Leverage ratios
a. measure the extent to which a firm has been financed by debt.
i. Debt-to-total assets ratio
Debt-to-equity ratio
Activity ratios
a. measure how effectively a firm is using its resources.
i.
Inventory turnover
Profitability ratios
a. measure a management's overall effectiveness as shown by returns generated on sales and investment.
i. Net profit margin
ii. Return on total assets
iii. Return on stockholders' equity
Growth ratios
a. measure the firm's ability to maintain its economic position in the growth of
the economy and industry.
i. Sales
ii. Net income
1. The IFE Matrix
A summary step in conducting an internal strategic-management audit.
A strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among these areas.
-not all powerful approach
1. The total
weighted score can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Scores well below 2.5 characterize organizations that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position.
5 steps of IFE matrix
1. List key internal factors as identified in the internal-audit process. Use a total of from 10 to 20 internal factors including both strengths
and weaknesses.
2. Assign a weight ranging from 0 (not important) to 1.0 (very important) to each factor. The sum of all the weights must equal 1.0.
3. Assign a 1-4 rating to each factor to indicate whether that factor represents a major weakness (1), minor weakness (2), minor strength (3), or major strength (4).
4. Multiply each factor's weight by its rating to determine a weighted score for each variable.
5. Sum the weighted scores for each variable to determine the total weighted
score for the organization.
Forward Integration
1. Forward integration involves gaining ownership or increased control over distributors or retailers.
Backward Integration
1. Backward integration is a strategy of seeking ownership or increased control of a firm's suppliers. This strategy can be especially appropriate when a firm's current suppliers are unreliable, too costly, or cannot meet the firm's needs.
Horizontal Integration
Horizontal integration refers to a strategy of seeking ownership of or increased control over a firm's competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers among competitors allow for increased economies of scale and enhanced transfer of resources and competencies.
Market Penetration
1. A market-penetration strategy seeks to increase market share for present products or services in present markets through greater marketing efforts.
Market Development
1.Market development involves introducing present products or services into new geographic areas.
Product Development
1. Product development is a strategy that seeks increased sales by improving or modifying present products or services. Product development usually entails large research and development expenditures.
2 types of diversification
related and unrelated
3 types of Intensive Strategies
market penetration, market development, product development
related diversification
1. Businesses are said be related when their value chains possess competitively valuable cross-business strategic fits.
unrelated diversification
1.
Businesses are said to be unrelated when their value chains are so dissimilar that no competitively valuable cross-business relationships exist.
1. An unrelated diversification strategy favors capitalizing upon a portfolio of businesses that are capable of delivering excellent financial performance in their respective industries.
Retrenchment
occurs when an organization regroups through cost and asset
reduction to reverse declining sales and profits
1. is designed to fortify an organization's basic distinctive competence.
can entail selling off land and buildings, pruning product lines, closing marginal businesses, closing obsolete factories, automating processes, reducing the number of employees, and instituting expense control systems
bankruptcy can be an effective retrenchment strategy.
Chapter 7 Bankruptcy
a. a liquidation procedure used only when a corporation sees no hope of being able to operate successfully or to obtain the necessary creditor agreements.
3 defensive strategies
retrenchment, divesture, liquidation
divestiture
1. Selling a division or part of an organization is called divestiture. Divestiture often is used to raise capital for further strategic acquisitions or investments.
2. Divestiture can be used to rid an organization of businesses that are unprofitable, that require too much capital, or that do not fit well with the firm's other activities.
Liquidation
1. Selling all of a company's assets, in parts, for their tangible worth is called liquidation. Liquidation is recognition of defeat and consequently can be an emotionally difficult strategy.
MICHAEL PORTER'S GENERIC STRATEGIES
1. Cost leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive.
2. differentiation, a strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive.
3. Focus means producing products and services that fulfill the needs of small groups of consumers.
2 types of Cost leadership
Type 1 is a low-cost strategy that offers products to a wide range of customers at the lowest price available on the market.
b. Type 2 is a best-value strategy that offers products to a wide range of customers at the best price-value available on the market.
2 types of focus strategies
a. Type 4 is a low-cost focus strategy that offers products or services to a small range (niche) of customers at the lowest price available on the market.
b. Type 5 is a best-value focus strategy that offers products to a small range of customers at the best price-value available on the market. This is sometimes called focused differentiation.
3 stages of COMPREHENSIVE STRATEGY-FORMULATION FRAMEWORK
Stage 1: The Input Stage
b. Stage 2: The Matching Stage
c. Stage 3: The Decision Stage
The input stage
summarizes the basic input information needed to formulate strategies. It consists of the EFE Matrix, the IFE Matrix, and the CPM
Making small decisions in the input matrices regarding the relative importance of external and internal
factors allows strategists to generate and evaluate alternative strategies more effectively.
Matching Stage
focuses upon generating feasible alternative strategies by aligning key external and internal factors. It includes the SWOT Matrix and BCG Matrix.
The decision stage
uses the QSPM to reveal the relative attractiveness of alternative strategies.
SWOT matrix
is an important matching tool that helps managers develop four types of strategies:
a. SO strategies—use a firm's internal strengths to take advantage of external opportunities.
b. WO strategies—are aimed at improving internal weaknesses by taking advantage of external opportunities.
c. ST strategies—use a firm's strengths to avoid or reduce the impact of external
threats.
d.WT strategies—are defensive tactics directed at reducing internal weaknesses and avoiding external threats
BCG matrix
1. graphically portrays differences among divisions (of a firm) in terms of relative market share position and industry growth rate.
question marks
stars
cash cows
dogs
question marks
Divisions in Quadrant I have a low relative market share position, yet compete in a high-growth industry. Generally these firms' cash needs are high and their cash generation is low.
stars
Quadrant II businesses represent the organization's best long-run opportunities for growth and profitability. These businesses have a high relative market share and compete in high growth rate industries.
cash cows
Divisions positioned in Quadrant III have a high relative market position, but compete in a low-growth industry. They are called Cash Cows because they generate cash in excess of their needs.
dogs
Quadrant IV divisions of the organization have a low relative market share position and compete in a slowed or no-growth industry; they are Dogs in a firm's portfolio.
QSPM
only analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions, Other than ranking strategies to achieve the prioritized list
This technique objectively indicates which alternative strategies are best.
Six steps to developing a QSPM
a.
Make a list of the firm's key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM.
b. Assign weights to each key external and internal factor.
c. Examine the Stage 2 matrices and identify alternative strategies that the organization should consider implementing.
d. Determine the Attractiveness Scores (AS).
e. Compute the total AS.
f. Compute the sum Total AS.
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