MGMT 386 Lecture Notes - Lecture 14: Market Segmentation, Strategic Management, Capital Market
A company or division of a company that focuses on a single product offering or market segment
-by focusing on this we can isolate the effects of management decisions - policies and strategies - on the
profitability of the single line of businesss
ex. school bus company
corporate strategy
once a company begins to diversify away from a single line of business, it becomes necessary for
management to consider strategy of the whole corporation, and how to coordinate activities among the
business units to serve the purpose of the overall corporation
ex. what other businesses might a school bus company expand into naturally
strategy
integrated and coordinated set of commitments and actions designed to exploit core competencies and
gain a competitive advantage
- companies will typically NOT be able to maintain their competitive advantage indefinitely
strategic competitiveness
when a firm successfully formulates and implements a value creating strategy and uses its comp adv as
basis for competing in individual product markets
comp advantage - unable to be duplicated
strategic management process
full set of commitments, decisions, and actions that can lead a firm to achieve strategic competitiveness
and earn above average returns
Industrial Organization Model
views the external environment as the primary determinant of a firm's strategic actions
external environment --> an attractive industry --> strategy formulation --> assets and skills --> strategy
implementation --> above average returns
Resource based model
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views the internal capabilities and unique resources of an organization as the primary determinant of a
firm's strategy, and hence returns
-model views a company as a collection of capabilities
resources --> capability --> competitive advantage --> an attractive industry --> strategy formulation and
implementation --> above average returns
core competency
resources and capabilities that serve as a source of competitive advantage for a firm over its rivals
a company uses this to satisfy customer needs
primary stakeholders
individuals, groups, and organizations
-can affect development of the firm's vision and mission
-are affected by the strategic outcomes achieved by the firm
-can have enforceable claims on the firm's performance
-are influential when in control of critical or valued resources
classification of stakeholders
1. Capital Market Stakeholders
2. Product Market Stakeholders
3. Organizational Stakeholders
conflicting expectations of shareholders and lenders
-preservation of investment
-risk/return
-influence
-enhanced wealth
capital market stakeholders
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find more resources at oneclass.com
equity shareholders
debt holders (creditors)
large equity shareholders have a strong influence on the strategy of the firm
debt holders are critical to appease due to their ability to put a firm into bankruptcy for default
product market stakeholders
customers - demand reliable products at lowest possible prices
suppliers - desire loyal customers who will pay the highest prices for the goods and services they can
provide
host communities - national, state, and local governments
union - demand secure jobs and desirable working conditions for the workers they represent
organizational stakeholders
consist of all the employees of the firm
directly involved in the process of formulating and implementing the vision, mission, and strategy of the
firm
these parties are also the ones most immediately affected by the firm's change in strategy
profit pool
consists of total profits earned in an industry at all points along the value chain
- by mapping this a strategic leader can anticipate possible outcomes of different decisions and focus on
overall profitability
organizational culture
complex set of ideologies, symbols, and core values that are shared throughout the firm and influence
how the firm conducts business
market segmentation
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
A company or division of a company that focuses on a single product offering or market segment. Industrial organization model views the external environment as the primary determinant of a firm"s strategic actions external environment --> an attractive industry --> strategy formulation --> assets and skills --> strategy implementation --> above average returns. Resource based model views the internal capabilities and unique resources of an organization as the primary determinant of a firm"s strategy, and hence returns. Can affect development of the firm"s vision and mission. Are affected by the strategic outcomes achieved by the firm. Can have enforceable claims on the firm"s performance. Are influential when in control of critical or valued resources classification of stakeholders: capital market stakeholders, product market stakeholders, organizational stakeholders conflicting expectations of shareholders and lenders. Profits increase by: using a differentiation strategy. Adding value to a product so that customers are willing to pay more for it: using a low cost strategy.
