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Business Plan:

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A document that outlines a proposed firm's goals, the strategy for achieving them, and the standards for measuring success.

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Strategy:

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A large-scale action play that sets the direction for an organization.

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Strategic Management:

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A process that involves managers from all parts of the organization in the formulation and the implementation of strategies and strategic goals.

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Three reasons why organizations should adopt strategic management and strategic planning:

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They can (1) provide direction and momentum, (2) encourage new ideas, and above all (3) develop a sustainable competitive advantage.

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Sustainable competitive advantage occurs when an organization can stay ahead in four areas:

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(1) Being responsive to customers, (2) Innovating, (3) Quality, and (4) Effectiveness.

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Michael Porter:

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Harvard Business School professor who is said to be "the single most important strategist working today, and maybe of all time," by Kevin Coyne of consulting firm McKinsey & Co.

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Strategic Positioning:

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Attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company.

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Three key principles underlying Strategic Positioning:

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(1) Strategy is the creation of a unique & valuable product, (2) Strategy requires trade-offs in competing, and (3) Strategy involves creating a "fit" among activities.

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The first step of the Strategic-Management Process:

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Establish the mission and the vision.

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The second step of the Strategic-Management Process:

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Establish the grand strategy with environmental scanning.

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The third step of the Strategic-Management Process:

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Formulate the strategic plans.

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The fourth step of the Strategic-Management Process:

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Carry out the strategic plans.

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The fifth step of the Strategic-Management Process:

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Maintain strategic control.

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Grand Strategy:

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After an assessment of current organizational performance, explains how the organization's mission is to be accomplished. Three common grand strategies are growth, stability, and defensive.

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Growth Strategy:

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A grand strategy that involves expansion--as in sales revenues, market share, number of employees, or number of customers or (for nonprofit) clients served.

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Stability Strategy:

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A grand strategy that involves little or no significant change.

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Defensive Strategy (AKA Retrenchment Strategy):

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A grand strategy that involves reduction in the organization's efforts.

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Strategy Formulation:

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The process of choosing among different strategies and altering them to best fit the organization's needs.

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Strategy Implementation:

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Putting strategic plans into effect.

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Strategic Control:

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Consists of monitoring the execution of strategy and making adjustments, if necessary.

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Four things that must be done to keep a strategic plan on track:

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(1) Engage people, (2) Keep it simple, (3) Stay focused, and (4) Keep moving.

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Competitive Intelligence:

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Gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately.

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Environmental Scanning:

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Careful monitoring of an organization's internal and external environments to detect early signs of opportunities and threats that may influence the firm's plans.

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SWOT Analysis (AKA Situational Analysis):

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A search for the (S)trengths, (W)eaknesses, (O)pportunities, and (T)hreats affecting the organization.

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Organizational Strengths:

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The skills and capabilities that give the organization special competencies and competitive advantages in executing strategies in pursuit of its mission.

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Organizational Weaknesses:

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The drawbacks that hinder an organization in executing strategies in pursuit of its mission.

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Organizational Opportunities:

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Environmental factors that the organization may exploit for competitive advantage.

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Organizational Threats:

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Environmental factors that hinder an organization's achieving a competitive advantage.

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Forecast:

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A vision or projection of the future.

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Trend Analysis:

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A hypothetical extension of a past series of events into the future.

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Contingency Planning (AKA Scenario Planning & Scenario Analysis):

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The creation of alternative hypothetical but equally likely future conditions.

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Porter's Model for Industry Analysis:

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Suggests that business-level strategies originate in five primary competitive forces in the firm's environment: (1) Threats of New Entrants, (2) Bargaining Power of Suppliers, (3) Bargaining Power of Buyers, (4) Threats of Substitute Products or Services, and (5) Rivalry Among Competitors.

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Porter's Four Competitive Strategies:

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(1) Cost-Leadership, (2) Differentiation, (3) Cost-Focus, and (4) Focused-Differentiation.

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Cost-Leadership Strategy:

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To keep costs, and hence prices, of a product or service below those of competitors and to target a wide market.

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Differentiation Strategy:

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To offer products or services that are of unique and superior value compared with those of competitors but to target a wide market.

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Cost-Focus Strategy:

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To keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow market.

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Focused-Differentiation Strategy:

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To offer products or services that are of unique and superior value compared to those of competitors and to target a narrow market.

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Single-Product Strategy:

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A company makes and sells only one product within its market.

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The benefit of a Single-Product Strategy:

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Focus.

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The risk of a Single-Product Strategy:

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Vulnerability.

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Diversification:

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Operating several businesses in order to spread the risk.

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Unrelated Diversification:

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Operating several businesses under one ownership that are not related to one another.

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Related Diversification:

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An organization under one ownership operates separate businesses that are related to one another.

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Synergy:

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The economic value of separate, related businesses under one ownership and management is greater together than the businesses are separately.

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BCG Matrix:

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A means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the market.

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Stars:

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Have high growth rate, high market share--definite keepers.

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Question Marks:

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Risky new ventures--some will become stars, some dogs.

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Cash Cows:

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Have slow growth but high market share--income finances stars and question marks.

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Dogs:

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Have low growth, low market share--should be gotten rid of.

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Execution:

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Consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve results promised.

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The three core processes of business:

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People, Strategy, and Operations.

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The first core process--People:

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Consider who will benefit you in the future.

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The second core process--Strategy:

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Consider how success will be accomplished.

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The third core process--Operations:

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Consider what path will be followed.

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