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Strategies are the decisions and actions that determine the long-run performance of the
organization. A business model is a strategic design for how a company intends to profit
how well organizations perform. Second, it’s important for helping managers cope with
divisions, departments, functions, and work activities, and keeps all focused on achieving
the organization’s goals. Finally, it’s important because it’s involved in many of the
The six steps in the strategic management process are: (1) identify the current
mission, goals, and strategies; (2) do an external analysis; (3) do an internal analysis –
steps 2 and 3 collectively are known as SWOT analysis; (4) formulate strategies; (5)
During an internal analysis, managers assess the organization’s resources (assets) and
capabilities (how work is done). The major value-creating skills and capabilities are the
organization’s core competencies. Any activities the organization does well or any unique
resources it has are its strengths. Activities the organization doesn’t do well or resources
it needs but doesn’t have are its weaknesses. During an external analysis, managers
assess the specific and general environments to determine opportunities (positive trends)
The three major types of corporate strategies are growth, stability, and renewal. (See
Exhibit 8-4.) A growth strategy is used when an organization wants to grow its business
and does so by expanding the number of products offered or markets served. The types of
when an organization stays as it is; that is, it makes no significant change in what it’s
performance declines. The two types of renewal strategies are retrenchment and
turnaround.
analysis is based on a business’s market share and its industry’s anticipated growth rate.
The four categories of the BCG matrix are cash cows, stars, question marks, and dogs.
Porter’s five forces model assesses the five competitive forces that dictate the rules of
competition in an industry. These five forces are threat of new entrants, threat of
(organization competes on the basis of having the lowest costs in the industry);
differentiation (organization competes on the basis of having unique products that are
widely valued by customers); and focus (organization competes in a narrow segment with
either a cost advantage or a differentiation advantage). The rule of three concept explains
emerge to dominate the market. An industry also has the highly-focused super-niche
players. Any firm that doesn’t fit into one of these categories is “in the ditch.”
changes, to quickly commit resources, and to recognize when a strategic decision isn’t
working—is important because managers oftentimes face highly uncertain and changing
products and services, or to target (focus on) specific customer groups or to lower costs
customers what they want, communicating effectively with them, and having a culture
that emphasizes customer service. Strategies managers can use to become more
research, product development, or process development) and its innovation timing (first