Final Exam Review Notes Essay

1: Strategic Management: set of managerial decisions and actions that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long-range planning), strategy implementation and evaluation and control. Emphasize the monitoring and evaluating of external opportunities and threats in light of a corporations strengths and weaknesses. 2: 4 phases of strategic management: Phase 1- basic financial management- managers initiate serious planning when they are requested to propose the following years budget. Projects are proposed on the basis of very little analysis, with most information coming from within the firm. The sales force usually provides the small amount of environmental information. Phase 2: forecast- based planning- as annual budgets become less useful at stimulating long-term planning, managers attempt to propose five-year plans. At this point they consider projects that they may take more than one year. In addition to internal information managers gather any available environmental data- usually on an ad hoc basis and extrapolate current trends five years into the future. This phase is also time consuming, often involving a full month of managerial activity to make sure all the proposed budgets fit together. Phase 3: externally oriented planning- frustrated with highly political yet ineffectual five-year plans, top management takes contr9ol of the planning process by initiating strategic planning. The company seeks to increase its responsiveness to changing markets and competition by thinking strategically. Planning is taken out of the hands of lower-level managers and concentrated in a planning staff whose task is to develop strategic plans for the corporation. Phase 4: strategic management- realizing that even the best plans are worthless without input and commitment of lower-level managers, top management forms planning groups of managers and key employees at many levels, from various departments and work groups. They develop and integrate a series of strategic plans aimed at achieving the company’s primary objectives. 3: 4 basic elements of strategic management- 1: environmental scanning: the monitoring, evaluating and disseminating of information from the external and internal environments to key people within the corporation. Its purpose is to identify strategic factors- those external and internal elements that will determine the future of the corporation. 2: strategy formulation- is the development of long-range plans for the effective management of th4e environment opportunities and threats in light of corporate strengths and weaknesses (SWOT). It includes defining the corporate mission, specifying achievable objectives, developing strategies and setting policy guidelines. 3: strategy implementation- is a process by which strategies and policies are put into action through the development of programs, budgets and procedures. This process might involve changes within the overall culture, structure and/or the entire organization. 4: evaluation and control- is a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance managers at all levels use the resulting information to take corrective action and resolve problems. 4: Define strategy: a corporation forms a comprehensive master plan that states how the corporation will achieve its mission and objectives. 5: 5 forces that shape competitions as described by Porter- Threat of new entrants: industry typically bring to it new capacity a desire to gain market share, and substantial resources. Rivalry among existing firms – corporations are mutually dependent. A competitive move by one firm can be expected to have a noticeable effect on on it competitors and thus may cause retaliation. Threat of substitution products or service- a product that appears to be different but can satisfy the same need as another product Bargaining power of buyers – affect an industry through their ability to force down prices, bargain for higher quality or more services and play competitors against each other Bargaining power of suppliers- can affect an industry through their ability to raise prices or reduce the quality of purchased good and services. 6: competitive advantage- a firm uses it resources, capabilities and competencies to develop a competitive advantage 7: 3 directional strategies- Growth strategies- designed to achieve growth in sales, assets, profits ot some combination. Most widely pursued. Continuing growth means increasing sales and a chance to take advantage of the experience curve to reduce the per-unit cost of products sold, thereby increasing profits. Stability strategies- corporation may choose stability over growth by continuing its current activities without any significant change in direction Retrenchment strategies – a company may pursue retrenchment strategies when it a weal competitive position in some or all its product lines resulting in poor performance- sales are down and profits are becoming losses. 8: 5 stages of international development: Stage 1: (domestic company) the primary domestic company exports some of its products through local dealers and distributors in the foreign countries. The impact on the organization’s structure is minimal because an export department at corporate headquarters handles everything Stage 2: (domestic company with export division) success in stage 1 leads the company to establish it’s own sales company with offices in other countries to eliminate the middle man and to better control marketing. Because exports have now become more important the company establishes an export division to oversee foreign sales office. Stage 3-(Primarily domestic company with international division) success in earlier stages its own sales company to establish manufacturing facilities in addition to sales and service offices in key countries. The company now adds an international division with responsibilities for most of the business functions conducted in other countries Stage 4: (multinational corporation with multidomestic emphasis)- now a full-fledged MNC, the company increases its investment in other countries. The company establishes a local operating division or company in the host country such as Ford of Britain, to better serve the market. The product line is expanded and local manufacturing capacity is established. Managerial functions (product development, finance, marketing and so on) are organizes locally. Stage 5: (MNC with global emphasis) – the most successful MNC move into a fifth stage in which they have worldwide human resources, R&D and financing strategies. Typically operating in a global industry, the MNC denationalizes its operations and plans product design, manufacturing and marketing around worldwide consideration.