Chapter 12 Thinking Strategically About the Business Operation

Vision and Mission Vision: A desirable and possible future that the business believes in and strives to attain. Vision: A desirable and possible future that the business believes in and strives to attain. Mission: A clear statement of why the business exists, what it seeks to do, and often highlights the core values of the business. Mission: A clear statement of why the business exists, what it seeks to do, and often highlights the core values of the business. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Competences and Competitive Advantages McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. Core CompetenceA strength; anything that we do very well. Distinctive CompetenceA unique core competence; something that we do better than everyone else. Competitive AdvantageA distinctive competence that customers value and that we have the resources to exploit. Sustainable Competitive AdvantageA competitive advantage that we can con- tinue to exploit over time.

Foundations of Business Strategy Competitive Strategy: The specific approach a business chooses to pursue for addressing its environment. Low-cost Leadership Strategy: Finding ways to reduce the cost of providing a product or service and pass the savings on to customers. Differentiation Strategy: Providing a product or service that has some unique feature. Focus Strategy: Positioning a business to serve the needs of some unique or distinct customer segment that is not being fully served by the competition. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Keys to Competitive Success Production Process: Allows managers to provide products or services at the lowest possible price. Differentiation Strategy: Managers pay attention to how they can improve the product. Focus Strategy: Attention given to better serving a special set of customers. Production Process: Allows managers to provide products or services at the lowest possible price. Differentiation Strategy: Managers pay attention to how they can improve the product. Focus Strategy: Attention given to better serving a special set of customers. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Other General Strategic Considerations Diversification: Branching out into an additional area (or areas) of business. Economies of Scale: A firm lowering its average cost of production by increasing the size of its production facilities and its overall volume of production. Diversification: Branching out into an additional area (or areas) of business. Economies of Scale: A firm lowering its average cost of production by increasing the size of its production facilities and its overall volume of production. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Other General Strategic Considerations Acquisition: The activity where one company buys another company. Experience Curve (or Learning Curve): A business can lower costs as a result of increasing efficiencies gained from experience in making the product. Acquisition: The activity where one company buys another company. Experience Curve (or Learning Curve): A business can lower costs as a result of increasing efficiencies gained from experience in making the product. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Cooperative Strategies Strategic Alliance: Two or more organizations decide to share resources or competencies so they can better achieve their business purposes. Joint Venture: Two or more organizations combine their strengths to create a new business. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. Cooperative strategies exist when two or more businesses decide to work together for their mutual benefit.

Global Strategic Thinking The difference between global and domestic competitiveness is that in of global competition the firm’s performance is measured against international standards. The Healthy Global Business must: Adopt an attitude of relentless improvement. Deliberately seek pressures for innovation. Monitor industry change. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Global Entry Strategies McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. Licensing: An arrangement where a U.S. business allows its products to be produced and distributed in other countries by a foreign company. Export Management Firms: A firm located in the United States that sells products abroad for another business. Foreign Sales Office: A special operation in a foreign country that sells and services products that were made domestically.

Global Entry Strategies McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. Joint Venture: A cooperative strategy where companies from different countries join together to form a new business. Manufacturing Abroad: A U.S. or foreign business decides to manufacture and sell its products in another foreign country. Wholly Owned Subsidiary: A business that is owned as part of a larger business; may be a foreign subsidiary of a domestic firm.

Strategic Planning Strategic Planning: A systematic way of analyzing and responding to a competitive environment. Strategic Planning: A systematic way of analyzing and responding to a competitive environment. McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.

Overview of the Strategic Planning Process McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. Strategy Review Objectives Action Environmental Awareness and Impact Environmental Awareness and Impact Vision and Mission Vision and Mission Distinctive Competence Distinctive Competence Business/Internal Profile Business/Internal Profile