Lesson 2

• Mission


  The purpose or reason for the organization's existence. It tells what the company is providing to society—either a service or a product.
• Vision


  What the organization would like to become
• A well-conceived mission statement defines the fundamental, unique purpose that sets a company apart from other firms of its type and identifies the scope or domain of the company's operations in terms of products (including services) offered and markets served
• Research reveals that firms with mission statements containing explicit descriptions of customers served and technologies used have significantly higher growth than firms without such statements
• A mission statement may also include the firm's values and philosophy about how it does business and treats its employees
• Broad mission statement


  Keeps the company from restricting itself to one field or product line, but fails to clearly identify either what it makes or which products/markets it plans to emphasize
• Narrow mission statement


  Very clearly states the organization's primary business, but may limit the scope of the firm's activities in terms of the product or service offered, the technology used, and the market served
• Research indicates that a narrow mission statement may be best in a turbulent industry because it keeps the firm focused on what it does best, whereas a broad mission statement may be best in a stable environment that lacks growth opportunities
• Business strategy


  Focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves
• Business strategy can be competitive (battling against all competitors for advantage) and/or cooperative (working with one or more companies to gain advantage against other competitors)
• Porter's Competitive Strategies


  Lower cost and differentiation
• Lower cost strategy


  The ability of a company or a business unit to design, produce, and market a comparable product more efficiently than its competitors
• Differentiation strategy


  The ability of a company to provide unique and superior value to the buyer in terms of product quality, special features, or after-sale service
• Competitive scope


  The breadth of the company's or business unit's target market
• Cost leadership


  A lower-cost competitive strategy that aims at the broad mass market
• Differentiation


  A strategy aimed at the broad mass market that involves the creation of a product or service that is perceived throughout its industry as unique
• Cost focus


  A low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others
• Differentiation focus


  A strategy that concentrates on a particular buyer group, product line segment, or geographic market, seeking differentiation in a targeted market segment
• Corporate strategy


  Primarily about the choice of direction for a firm as a whole and the management of its business or product portfolio
• Directional strategies


  • Growth strategies
  • Stability strategies
  • Retrenchment strategies
• Vertical growth


  Taking over a function previously provided by a supplier or by a distributor
• Backward integration


  Assuming a function previously provided by a supplier
• Forward integration


  Assuming a function previously provided by a distributor
• Vertical integration continuum


  • Full integration
  • Taper integration
  • Quasi-integration
  • Long-term contracts
• International entry options for horizontal growth


  • Exporting
  • Licensing
  • Franchising
  • Joint ventures
  • Acquisitions
  • Green-field development
  • Production sharing
• Franchising


  The franchiser grants rights to another company to open a retail store using the franchiser's name and operating system. The franchisee pays the franchiser a percentage of its sales as a royalty.
• Joint Ventures


  Forming a joint venture between a foreign corporation and a domestic company to combine resources and expertise to develop new products or technologies.
• Acquisitions


  Purchasing another company already operating in a new international area. Can result in synergistic benefits if the acquired firm has complementary product lines and distribution network.
• Green-Field Development


  Building a company's own manufacturing plant and distribution system instead of purchasing another company's assets.
• Production Sharing


  Combining higher labor skills and technology from developed countries with lower-cost labor from developing countries. Also called outsourcing.
• Turnkey Operations


  Contracts for the construction of operating facilities that are transferred to the host country or firm when complete.
• BOT (Build, Operate, Transfer)


  A variation of turnkey operations where the company operates the facility for a fixed period to earn back its investment plus a profit.
• Management Contracts


  A corporation uses its management talent to assist a firm in a host country for a specified fee and period of time.
• Concentric (Related) Diversification


  Growth into a related industry when a firm has a strong competitive position but the original industry is unattractive. Seeks synergy between the businesses.
• Conglomerate (Unrelated) Diversification


  Diversifying into an industry unrelated to the current one when the firm lacks outstanding abilities to transfer to related products/services.
• Pause/Proceed with Caution Strategy


  A temporary strategy to make only incremental improvements until the environment becomes more hospitable or to consolidate resources after rapid growth.
• No-Change Strategy


  Continuing current operations and policies with only small adjustments, when the firm has a modest competitive position in an industry facing little or no growth.
• Profit Strategy


  Reducing investment and discretionary expenditures to artificially support profits when a company's sales are declining.
• Turnaround Strategy


  Improving operational efficiency through contraction (quick cost-cutting) and consolidation (stabilizing the leaner corporation).
• Captive Company Strategy


  Giving up independence in exchange for security when a company has a weak competitive position.