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.
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
Mission:
 A clear statement of why
the business exists, what
it seeks to do, and often
highlights the core values
of the business.
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Competences and
Competitive Advantages
Core Competence
A strength; anything that we do very well.
Distinctive Competence
A unique core competence; something
that we do better than everyone else.
Competitive Advantage
A distinctive competence that customers
value and that we have the resources to
exploit.
Sustainable Competitive
Advantage
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A competitive advantage that we can continue to exploit over time.
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Foundations of
Business Strategy

Competitive Strategy:


The specific approach a
business chooses to
pursue for addressing its
environment.



Low-cost Leadership
Strategy:

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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.
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Keys to Competitive Success

Production Process:


Differentiation Strategy:


Allows managers to provide
products or services at the
lowest possible price.
Managers pay attention to
how they can improve the
product.
Focus Strategy:
 Attention given to better
serving a special set of
customers.
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© 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.
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© 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.
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Cooperative Strategies
Cooperative strategies exist when two
or more businesses decide to work
together for their mutual benefit.
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
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.
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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.
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
The Healthy Global
Business must:
 Adopt an attitude of
relentless improvement.

Deliberately seek
pressures for
innovation.

Monitor industry
change.
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Global Entry Strategies
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.
Licensing:
An arrangement where a U.S. business allows its
products to be produced and distributed in other
countries by a foreign company.
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Global Entry Strategies
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.
Joint Venture:
A cooperative strategy where companies from
different countries join together to form
a new business.
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Strategic Planning

Strategic Planning:
 A systematic way of analyzing and
responding to a competitive
environment.
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Overview of the Strategic
Planning Process
Environmental
Awareness and
Impact
Vision and
Mission
Distinctive
Competence
Business/Internal
Profile
Strategy
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Objectives
Action
Review
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