Final Exam Study Notes – AMN 232 Ch. 9, 10, 11, 12, 13, 15

Final Exam Study Notes – AMN 232 Ch. 9, 10, 11, 12, 13, 15 Problems with portfolio strategy Portfolio strategy Corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines  Unrelated diversification does not reduce risk  Uses present performance to predict future performance  Assessments of a business’s growth potential are often inaccurate  Cash cows fail to aggressively pursue opportunities and defend themselves from threats  Being labelled a “cash cow” can hurt employee morale  Acquiring firms often treat acquired stars as “conquered foes” Recommendations for making portfolio strategy work  Don’t be so quick to sell dogs or question marks.  Put your “eggs in similar (not different) baskets” by acquiring companies in related businesses  Acquire companies with complementary core capabilities  Encourage collaborations and cooperation between related firms and businesses within the company  “Date before you marry.” Work with a business before deciding to acquire it  When in doubt, don’t acquire new business. Explain the components of sustainable competitive advantage and why it is important.  Components of a sustainable competitive advantage are valuable resources, rare resources, imperfectly imitable resources and non-substitutional resources Describe the steps involved in the strategy-making process. 1. Assess need for strategic change a. Avoid competitive inertia b. Look for strategic dissonance 2. Conduct situational analysis a. Strengths and weaknesses in internal environment b. Opportunities and threats in external environment 3. Choose strategic alternatives a. Strategic reference cue points (risk-avoiding or risk-seeking strategies) Explain the different kinds of corporate-level strategies. 1) Portfolio strategy: is a corporate level strategy that minimizes risk by diversifying investment among various businesses or product lines. a) Managers who use the portfolio strategy are often on the lookout for acquisitions b) Portfolio strategy can reduce risk even more through unrelated diversification c) The best known portfolio strategy is the BCG matrix (Boston consulting group matrix). i) Star-large share of fast growing market ii) question mark-small share of fast growing market iii) cash cow-large share of slow growing market iv) dog-small share of slow growing market 2) Grand strategies: is a broad strategic plan used to help an organization achieve its strategic goals. Grand strategies guide the strategic alternatives that managers of individual businesses or subunits may use. a) Growth strategy b) Stability strategy c) Retrenchment strategy Describe the different kinds of industry-level strategies. 1. Five industry forces: 1 | P a g e Final Exam Study Notes – AMN 232 Ch. 9, 10, 11, 12, 13, 15 a. Character of the rivalry b. Threat of new entrants c. Threat of substitute products or services d. Bargaining power of suppliers e. Bargaining power of buyers 2. Positioning strategies a. Cost leadership b. Differentiation c. Focus strategy 3. Adaptive strategies a. Defenders b. Prospectors c. Analyzers Explain the components and kinds of firm-level strategies. 1. Direct competition 2. Strategic moves of direct competition 3. Entrepreneurship Explain why innovation matters to companies. Technology cycles typically follow an S-curve pattern of innovation. Early in the cycle, technology progress is slow and improvements in technological performance are small. However, as technology matured, performance improves quickly. Finally, small improvements occur as the limits of a technology are reached. At this point, significant improvements in performance must come from new technologies. The best way to protect s competitive advantage is to create a steam of innovative ideas and products. Innovation streams begin with technological discontinuities that create significant breakthroughs in performance of function. Technological discontinuities are followed by an era of ferment, in which customers purchase new technologies (technological substitution) and companies compete to establish a new dominant design (design competition). Discuss the different methods managers can use to effectively manage innovation in their organizations. 1. Managing innovation during discontinuous change 2. Managing innovation during incremental change To fully manage innovation streams, companies must manage the sources of innovation and learn to manage innovation during both discontinuous and incremental change. Since innovation begins with creativity, companies can manage the sources of innovation by supporting a create work environment in which creative thoughts and ideas are welcomed, valued and encouraged. Discuss why change occurs and why it matters. Change is a function of the relative strength of the change forces and resistance forces that occur inside and outside an organization. Change can be nonexistent, sporadic, continuous or discontinuous depending on whether change forces are stronger or weaker than resistant forces. The five stage process or organizational decline begins when organizations don't recognize the need for change. blinded stage inaction stage faulty action stage crisis stage dissolution stage - If companies recognize the need to change early enough, dissolution may be avoided.