Term
| why shouldn't profit maximization be a goal? |
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Definition
• It is literally impossible to measure the best way to earn the greatest profit possible.
• This favors owners (shareholders) and ignores the other concerns in an organization. |
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Term
| 3 types of markets that organizations participation and their key players |
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Definition
capital market: public stakeholders
product market: customers
factor market: employees, suppliers, communities |
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Term
| constituencies to consider when developing strategies to achieve goals |
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Definition
shareholders
customers
employees
suppliers
communities |
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Term
| what is the measure of profitability to use? |
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Definition
| ROI, or profit/investment. when your margin isn't as high as your competitors', you should focus on cost control to improve profitability. |
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Term
| process of developing strategies |
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Definition
1. consider internal (strengths and weaknesses) and external environments (opportunities and threats).
2. mesh core competencies (strengths) with opportunities.
3. mesh |
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Term
| 2 levels where strategy development takes place |
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Definition
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Term
| 2 broad questions to ask when developing strategy at the corporate level |
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Definition
1. are we in the right mix of industries?
2. which ones should we be in? |
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Term
| 2 broad questions to ask when developing strategy at the business unit level |
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Definition
1. what should our mission be?
2. how can we accomplish/fulfill that mission? |
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Term
| 3 generic approaches to corporate strategy (and their ranking regarding performance) |
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Definition
(#2) single industry (McDonalds)
(#1) related diversified firms (P&G)
(#3) unrelated business firms (GE) |
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Term
| how do the 3 types of firms grow (with corporate strategy)? |
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Definition
unrelated: acquisitions and mergers
related diversified: leverage core competancies in other applications for other aspects of the business.
single industry: use core competencies to pursue growth within the industry. |
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Term
| what comes first: mgmt control system or strategy? |
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Definition
| mgmt control system. it should be designed to match the different types of strategy that have been developed for the company. the system must match the goals and strategies that have been developed. |
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Term
| Boston Consulting Group's growth-share matrix |
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Definition
| puts all of its eggs in the "industry experience" basket, which depends on longevity in the market & economies of scale. |
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Term
| limitations of the BCG growth share matrix |
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Definition
doesn't consider differentiation.
improvements in process technology may have more impact than cumulative volume on per-unit cost.
solely trying to reduce cost reduces flexibility in the marketplace.
experience isn't the only cost drive.
commitment to the cause can be a disadvantage if new technologies emerge. |
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Term
| two generic approaches for fulfilling mission at the business unit level |
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Definition
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Term
| 5 forces used to analyze an industry |
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Definition
new entrants
suppliers
customers
substitutes
industry competitors |
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Term
| missions used in BCG & GE/McKinsy matrices |
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Definition
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Term
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Definition
| question mark; increase market share even at the expense of short-term earnings and cash flow |
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Term
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Definition
| star; protect market share & competitive position |
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Term
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Definition
| cash cow; maximize short-term earnings & cash flow, even at the expense of market share |
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Term
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Definition
| dog; withdraw through slow liquidation or outright sale |
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Term
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Definition
| linked set of value-added activities from concept & design to development, production, marketing, distribution and post-sales services (if offered). |
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Term
| questions to ask for each value-added activity |
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Definition
can we reduce costs & hold value constant?
can we increase value & hold costs constant?
can we reduce assets & hold costs/value constant?
can we do 1, 2, and 3 simultaneously? |
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