CHAPTER 7

Strategy Management
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CHAPTER CONTENTS:

Section 1. Definition & Classification Of Strategy Section 2. SWOT Analysis

Section 3. Resource Allocation Strategy & Company Strategy

Section 4. Business Department Strategy Section 5. Function Level Strategy
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Section 6. Balanced Score Card

(7.1) MANAGERIAL WISDOM : THE THINKING OF

GAIN ADVANTAGE AND AVOID THE DISADVANTAGES IS THE STRATEGY

The farmers car collided with the lawyers car. The lawyer is very proud and took out a business card to the farmer. The farmer saw the layer and then took out a bottle of whiskey from the back of car. The farmer said, Come, you seem to have more frightened, drink, the alcohol can concentrate your attention, the lawyer drank a small mouth. The farmer said, You look very pale, drink a little mouth again, the lawyer drank five and six months under prevailed by farmer. The lawyer suggested the farmer to drink a small mouth, but the farmer refused and said, I am waiting for the traffic police.

REMARK

The strategy is the thinking of gain advantage and avoids the disadvantages and purses of good fortune and avoids the disaster. From time to time carefully, and always on the alert, the business is as fierce as war, and the life may be full of strategy. The contingency strategy of the future plan of farmer is likely for him to obtain an advantageous position in the case.
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STRATEGY

Strategy is an experienced way of thinking and choice gain advantage and avoid the disadvantages (crisis). Thought and chose the best advantage direction of future enterprise, and anticipates uncontrollable changes and solves the potential question (risk) that may occur in the future. The key topic of strategy management is to explore the reason for the success organization and determine how best to do the business.

(7.2) MANAGERIAL WISDOM : THINK HOW TO

COMBINE FAITH AND WISDOM

warn his son who start to work: Faith and wisdom are the key of successful of business, good faith is that if you promise someone delivery even the delivery will make you bankrupt, but you must deliver the freight.
A father Son

said: What is wisdom? said: This is to say not to do such kind of commitment.

Father

Remark

Faith

and wisdom can determine the successful of person. For himself, say you can do, to do what you said, that your action is always consistent with your words. For others, listen their words and watch their action.

STRATEGY CONT.

The managers can be classified as top managers, middle managers and supervisors in accordance with levels. The top managers must understand the strategic management which is also known as western enterprise emperor study. Any enterprise, will consider their environment and their own strengths and weaknesses, and then make biggest advantage decision to their organization. The three main factors that determined the success or failures of enterprise are:

Country of enterprise The business of enterprises and their industries The capacity and strategies of application resources of enterprise

(7.3) MANAGERIAL WISDOM

One day, Mr. Khrushchev came to visit in rural areas. He want to know the party loyalty of the people. He asked a farmer who was badly dressed. If the farmer has two-acre field, can he willingly dedicate one acre to the great party? The farmer answered that he was willing to dedicate it. Mr. Khrushchev then asked him, if the farmer has two buildings, can he willingly dedicate one to the great party? The farmer also answered he would want to do it. Mr. Khrushchev then asked him if the farmer has two cars, whether he will be willing to dedicate one to the great party? The farmers answered is same as before.

(7.3) MANAGERIAL WISDOM CONT.

Mr. Khrushchev then asked him if he has two cattle, whether he will be willing to dedicate one to the great party. The farmer answered: I dont want to do it. Mr. Khrushchev was very surprised by the farmers answer, he asked Why? The farmer told Mr. Khrushchev that he really has two cattle.

Remark

Tightly grasp the resources to create the bright future of enterprises and personal future, the resources that you do not have can be send generously, but when you really have the resources, will you dedicate them easily? Many people do not know what resources they have? Most people cannot not use their own resources, thus cannot breakthrough.

(7.4) MANAGERIAL WISDOM : THE WRONG POLICY IS

MORE TERRIBLE THAN THE CORRUPTION

In August, 1948, ROC government implemented monetary reform in mainland China, issued Gold Yuan, controlled the market price, but a few months later, the reform failed, the financial market disruption and hurts morale heavily, that is the major reason for defeat in Mainland. The issuing of new current must be in gold, silver, and in reserve fund such as foreign exchange. If not, the people will lose the confidence on paper money. If your cannot have adequate reserves, you must have material and control the market prices, so the new currency will not be depreciated.
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(7.4) MANAGERIAL WISDOM CONT.

Completely implemented the price control, not only in bigger city, but China is vast, and if not have conveniently traffic, you cannot control fully. On August 19, 1948, the Current Reform Act has been past by State Council and the Executive Administrative Council, and then issued the Gold Yuan. The November in the same year, the Gold Yuan daily depreciated.ROC government abandoned the limit of market price, and additional announced The Supplemental method to improve the economic control, so the Gold Yuan current system reform failed. The current system failure and the Countrys economic deterioration leaded the chain reaction in political and military affairs.

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REMARK

In 1949, Taiwan wanted to stabilize the currency, once changed 40.000 old Taiwan dollars to 1 new Taiwan dollar. From painful lesson, we think the major financial decisionmaking measures of country should be researched and conducted by expert. If there is wrong policy, even has in other efforts, and probably cannot save defeat. The wrong policy can be more terrible than the corruption. Chaozhou Farmers Association invested farmer training center, cash invested more than NT$1billion.They offered from 2000 to 2010was NT$200 million, but few people interested in this. The investment is making the top 10 Farmers Association, become heavily in debt. The associations land and office buildings were be public sold. And the land of credit department was received by Bank.

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SECTION 1.

Strategy Definition Of Strategies And Classify

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(7.5) MANAGERIAL WISDOM: BUSINESS IS REAL

SWORD COMPETITION

Once, Matsushita chatted with his business friend. His friend said: We do business with victory or defeat are both common in battle. Fails, try to make a comeback on it. After Matsushita listened, he said: When I am running a business always has real sword competitive mood, and not have thought of victory or defeat are both common in battle.

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REMARK

Real sword competition is not same as kendo competition. Backsword used in kendo competition, and have thought of victory or defeat are both common in battle.

But real sword competition should be carefully, if not careful, the head will be cut.
The manager do anything must be taken as real sword competition, such as standing on the edge of abyss and standing on the thin ice. The loss of the company for their own losses and the companys waste for their own waste, the Companys thing is their own things, so the managers who have above thought can wholeheartedly to their work

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1.1 DEFINITION OF STRATEGIES

1)

Alfred Chandler defined the strategy as the long term enterprises objective and determination of objective, and the series actions and resource allocation adopted for achieve these objectives. James B. Quinn defined the strategy as the main objective, policies and actions of organization and integrated into an integrity pattern or plan. William F.Glueck defined the strategy as integrity and comprehensive plan for enterprise to achieve the basic goal. This book defined the strategy as managers thought and selection to promote the favorable and avoid the unfavorable, and write an action plant to achieve important objectives.

2)

3)

4)

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1.2 CLASSIFY OF STRATEGY

a) Intended strategy (intended strategy): Rational planning (Planning, P) as the base of general definition of strategies and the strategy is the formal plan (Standard, S). b) Contingency strategy (contingency strategy): The strategy defined as series decisions and a pattern of action as per Henry Mintberg. This unplanned strategy is the contingency response to the fact environment situation, also known as emergent strategy.

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(7.6)MANAGERIAL WISDOM :

FARMER'S EMERGENT STRATEGY

speak his courtship to farmers daughter. The farmer do not want to promise, but he dare not refuse. Suddenly he has a method to deal with the lions request. The farmer said he willing to marry his daughter to the lion, as long as the lion agreed to his condition, if the lion pulls its teeth and cuts of claws what his daughter very scared. The lion pleased agreed, and implemented the requirements of the farmer. However, when the lion came back to speak his courtship. The farmer was no longer afraid of him, and hit him with sticks. The lion was rushed to the forest.
A lion

Remark
Strategy

can be divided into planned strategy and unplanned strategy. The unplanned strategy can offer make a crisis into a turning point.

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(7.7)MANAGERIAL WISDOM : INTENDED STRATEGY

AND UNPLANNED STRATEGY (CONTINGENCY STRATEGY) OF HONDA

In 1959, Japanese Honda Company set up USA. Branch in Los Angeles, they had intended to sell 250 C.C and 350 C.C. motorcycles to the motorcycle fans in the USA (Intended strategy), rather than very popular 50 C.C Honda Cubs in Japan. Intuition told them, 50 C.C. motorcycles are not suitable for USA market, because everything in United States are large and luxurious than Japanese.
However, 250 C.C and 350 C.C. USA motorcycle sales in United States poor, it seems, Hondas motorcycle sales strategy in the United States will to fail. At this time, due to Hondas manger ridded a 50 C.C. motorcycle to Los Angeles, which caused many peoples attention. One day, they got a call from Sears Company.

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(7.7)MANAGERIAL WISDOM CONT.

Sears Company wants to sell the 50 C.C. motorcycles to the people of United States, not just the motorcycles fan. But the decision maker of Honda have hesitated whether to sell the small cycles, they feared would alienate the true motorcyclists, because Americans might be imaged the Honda to No power. Finally, they were forced to sell the 50 C.C. motorcycles, when the 250 C.C. and 350 C.C. sales program completely failed. The next is to create history. The occasional contract market segments (contingency strategy) which Honda barged into by accident has been proved great, because most Americans have never owned a motorcycle. Honda has found a new distribution channel, from the motorcycles shop to usual retailers. In 1964, motorcycles sold in the USA, each two motorcycles has one is a Honda Motorcycles

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REMARK

The originally planned strategy is to sell 250 C.C. and 350 C.C. motorcycles in the USA. The later to sell 50 C.C. is the emergent strategy, but the emergent strategy successful capture larger market. The United States improves the import tax from 4.3% to 45% due to Honda motorcycles sold better. Because this measure, Harley prevent from bankruptcy and born to be alive. In the 1980s, many enterprises in Taiwan business failures faced the fate of liquidation, at this time, found the plant land property increased several times, and earned a lot of money. The authors once inculcated the management and food marketing in Africa and Central and South American in winter and summer vacation from 2000 to 2001.Inadvertently insight into the magic of African Moringa, and brought hundreds of sees back to Taiwan. A friend, planted the seeds. Accidentally, the Moringa has been widely developed in 2002.This was also an contingency strategy

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TABLE 7.1 STRATEGY MANAGEMENT PROCESS

External environment analysis

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(7.8) MANAGERIAL WISDOM : DO NOT EXECUTE

ONLY FOR THE IMPLEMENTATION

Going to rain, John seen Marry watered the flowers and asked her why, Marry said that she feared that she will be wetted

Remark

If you have wrong goal or to do anything without thinking, you will not do it well, just wasted the time and money. Only clear understood the goal of doing things, not only for work, and for achieve a goal.

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1.3 STRATEGIC MANAGEMENT

1.3.1 Strategic management process: namely basic planning process

a) b)

c)
d) e)

Mission and objectives of corporate The internal and external environmental analysis of corporate Selecting of strategic plan Implementation of strategic plan The evaluation and control of strategic plan:

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(7.9) MANAGERIAL WISDOM : CONCENTRATE ON THE

IMPLEMENTATION
A

professor earnestly encourages students to concentrate to do things on the platform. One concentrated on to do things would have success in the future. In order to detail remark the important of concentration, the professor called a student who came to podium and with a piece of chalk in each hand. The professor told him to draw the square by right hand and draw a circle by left hand, the student did not draw very well. The professor said that the two pictures were not alike due to nonconcentration. Just like chasing two rabbits, but at the end cannot grasp any.

Remark
If

a person should implement two goals would achieve nothing. If you want to succeed, you should implement only one target in one time.

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1.3.2 STRATEGY ON THE MANAGEMENT LEVEL

a) Corporate strategy: The manager in decision-making level of the corporate should be composite of Chairman, CEO, GM and directors. b) Business department strategy: In the enterprises with multi-business department, the manager of business department refers to the profit center, responsibility center or Strategy Business Unit (SBU) in the specific business field. c)

Functional level strategy:

Professional functional managers are responsible for the specific professional functions, such as production managers, sales managers, human resource and administration managers, research and development managers, finance managers, etc.

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(7.10) MANAGERIAL WISDOM : TRIAL AND ERROR IS

THE SOURCE OF SUCCESS SINCE ANCIENT

The scientists performed an experiment of putting a bee and a fly respectively into a transparent glass bottles of which the bottom is towards the light source. It can be seen that the bee rushes to the light space of the bottle bottom. However, it falls due to running into the wall. And immediately it flies again in the same direction. After making the efforts, exhausted, the bee stops in the place not far from the bottleneck, panting over there. The fly at the beginning does the same thing with the bees, it rushed towards the light space. However, after frustrated for a while, it begins to fly in the different directions to attempt to find a way out. The fly flies out from the bottleneck before long.

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REMARK

There is only a very thin dividing line between success and failure. The success is not occasional.

It is achieved by making efforts, thinking, concentrating and accumulating experiences. Success since ancient always comes after many times of try, which is called Try and Error. All the success comes from the accumulation of failure experiences.

The more you are afraid of failure and dare not to do, the farther you are from success.

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29

SECTION 2.

SWOT Analysis

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(7.11)MANAGERIAL WISDOM : STRENGTH CREATES

THE OPPORTUNITY (O) OF ADVANTAGE
A

girl, in an ordinary college and her score is not very satisfactory, but a group of boys always surrounded, because this girl looks very pretty (strength or competitive advantage).
After

she graduated from the college, her father insisted to send her

aboard.
Although

there are third-class universities in the United State agreed to let her direct study the Masters degree, but the girls father chosen a tutorial school which attached to the prestigious university.
Her

father wanted her to study English, not for the degree. Two years later, the girl married. Her husband is the PhD student of this prestigious school (Opportunity). Her father said She is a fascinating girl. I arranged for her the best opportunity.

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REMARK
The

wise man will create the biggest advantages by its own strength, and the development advantage opportunity (O) from create.
The

most intelligent person will use his advantages to export the incidental and then the incidental will create the necessary.
Uses

the strength extension method to expand the good departments and products, reduces the poor performance marketplace.
By

exerting of strength, the company can improve the competitiveness and the person can happy.

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(7.12) MANAGERIAL WISDOM : UTILIZE THE OPPORTUNITIES (O) AND STRENGTH (S) TO CREATE
ACHIEVEMENT

One person in the market claimed that he can cook a delicious soup by putting a stone in a large pot. When he was cooking, a group of curious people gathered next to him to watch his cooking.

He cooked and said: "It will be better to drink by adding some carrots, and the flavor will be more fresh by adding a little beef, further it will look better with green color by adding some chopped green onion".
The crowd of lookers-on provided some carrots, beef, scallions, and etc according to his request. Finally, he asked the audience to taste, and everyone said it is delicious.

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REMARK

Stones never can cook the tasty soup while it can derive materials (opportunities) from the environment, matching with our own moving convincing (advantage), to create a happy outcome. When playing baseball, the swing beat is against a pitcher's good shot (an opportunity), to play strength nice hits or gopher ball, but it may result in strikeouts (threats). You will never have a chance of success for fear of failure and not dare to swing, because the more fear of failure, the farther away from success.
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2.1 THE ANALYSIS OF INTERNAL STRENGTH AND WEAKNESS

2.1.1 Quality improvement and innovation

Improvement is to seek better technology, processing procedure, regulation, structure, market, organization and even better progress while innovation is a breakthrough for enterprise in technology, such as the introduction of the latest management concepts or new production technologies.

2.1.2 Cost and efficiency

Efficiency is defined as "output" divides "input", which is the equivalent of productivity. Enterprise is the "adding additional value" for investing resources, in order to change into products or service. The resources of "input" includes man, money, machine, material and management and so on, while "output" is the products manufactured or the services provided by enterprises

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(7.13) MANAGERIAL WISDOM : WHEN AN

OPPORTUNITY

(O) IS NEGLECTED, IT NEVER COMES BACK

TO YOU

Saw the report on television: Mexican found a case of illness similar to plague. A businessman Ya Moer thought that if plagues did take place in Mexico, it would spread to the United States through California. At that time the meat would be not enough to supply, so meat price will surge heavily. He sent someone to confirm that there actually have the plagues in Mexican. Immediately he focused all the money to buy cattle and pigs for breeding. Really as what he expected, the plague quickly spreading to several states in the western United States. The government of United State gave an order: It was prohibit to import meat from outside (it cannot be exchanged among the states). So meat in the eastern U.S. states was particularly scarce and price surged largely. Ya Moer sold hoarded animals in time with high price, just in a few months, earning millions of dollars.

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REMARK

In the spring of 2003 anti-SARS, a number of tourism-related businesses closed down, while those who master opportunities won a highly profitable market, such as delivery service, online sales, instant noodles and information industries. The key is whether it can seize opportunities. Made preparation at any time, and waited for an opportunity, for the opportunity was for those who had prepared, when the opportunity with hair stretched the head out, you missed it, while the next time it may be skinhead stretched out, and then it was more difficult to grasp the opportunity!

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(7.14)MANAGERIAL WISDOM : BRING INTO PLAY YOUR

POTENTIAL

Bruce Lee, the martial art master of the generation and world superstar, is short-sighted and should wear contact lenses.

He said: "I am short-sighted from childhood! So I started learning from Wing Chun, because it is the most suitable for close combat.

In addition, his feet are not in the same length. The right foot is almost nearly five Inches and (12 cm) shorter than the left foot. Because of this, he can show the most perfect position: left foot can play high, and kick far away, right foot shorter, which will be helpful to close kick and increase the attack power.
T

he famous quote of Bruce Lee is: "I challenge my limits, without any complaints on the physical condition."

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REMARK
People

who can manage the public must do their own master

first.
People who cannot manage themselves well cannot be really successful.
Everything

has its merits and demerits.

Everyone

has his own strength and weakness.

Thinking

more about how to play the strengths of companies and individual.

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2.1.3 Timely delivery and the ability for customer responsiveness

The ability to meet customer demands is, when customers want something, companies can give customers really desirable products or service, making them think customer responsiveness of the value for money. Sometimes "strength" is not so good. If it fails to form a competitive advantage, it is the improper use of resources for enterprises, such as the Taiwan Sugar Corporation with large land in past failed to make full use of them.

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(7.15) MANAGERIAL WISDOM : UTILIZE WEAKNESS

(W) AND CREATE OPPORTUNITIES (O)

The excellent work comes from quiet writing. One time, the French literary giant Victor Hugo forgot food and sleep to finish a work in the rush. There were many visitors, continually asking him to give a speech or go to dinner, which made him annoying. He cannot settle down writing. What was to be done? Hugo came up with a way. He picked up a scissor. Rattle! Rattled! Rattled! He cut half of his hair and beard, changing into a strange look. If anyone came to invite, he said: "Thank you for your kind invitation! But you look at my appearance! I'm sorry!" Inviters just left sulkily. Hugo kept himself away from all invitations with this approach for the time being. When his hair grew same length, a masterpiece had also been completed.

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REMARK

Shortcomings are not necessarily useless, as shortcomings can also be a stepping stone. The stone that make you stumbled also can be put on the puddles as the stepping stone. Benefits may also be blocking stone to success, which depends how to use.

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(7.16)MANAGERIAL WISDOM : EVERYBODY HAS HIS

OWN STRENGTH

(S) AND WEAKNESS (W)

There is an indisputable truth in the world: People powerful enough have weaknesses, and people cowardly enough have strengths.
Remark
Military

Science of Sun Zi said: "Avoid strengths and attack weaknesses".

That

is to avoid enemy strengths and attack enemy weaknesses.

This

is same as SWOT analysis of enterprises.

Knowing

their their own merits and demerits, understanding the enemy's strengths and weaknesses.
To

attack enemys weaknesses with their own strengths and protect their own weakness, to avoid attacks by opponents.

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2.2 THE ANALYSIS OF EXTERNAL OPPORTUNITIES AND THREATS

When the managers face the opportunities and threats existed in external environment, they must analyze their business competitiveness in the industry's environment. Michael E. Porter in Harvard Business School of Management developed a framework of five competitive forces model to help managers analyze opportunities and threats in external environment.

Porter's model focused on five strengths forming competition in an industry, the strength stronger, that is to say the threat to businesses greater, because it will depress the profits of enterprises.

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(7.17) MANAGERIAL WISDOM : THE ANALYSIS OF

EXTERNAL COMPETITIVENESS

According to the legend, it said that before the RussoJapanese War, Dongxiang senior general in Japan went to Russian warship and joined the party, touching the iron chain of Russian warship with white gloves. His gloves were stained by rust. Thus it judged that the Russian navy were incompetent and too weak to stand competition. During the same period, the Dongxiang general saw sailors of Qing navy drying their clothes on the canon, determining that Qing navy was inaction and not in neat formation, which was also not to fear.

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REMARK

A small sign can indicate a great trend. From the first small beginnings one can see how things will develop. Professional managers often infer whether the competitive power of themselves and the opponents strong or weak from the small phenomenon. Japanese dared to blatantly open battlefield in the northeast of China, fighting with Russian enemy, how could they come without preparation? The powerful corps of Japan had with features of wind, forest fire and mountain: As fast as a wind, as slow as a forest, as aggressive as fire, as steady as a mountain; seeing the inaction of Russian military, the Japanese army would not give up so easily. The reason for Japan provoking a war and wining finally was not only depending on itself well-trained, but also another big reason was that the Qing navy and the Russian military had already shown signs of failure.

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FIVE TYPES OF COMPETITIVE MODULES

(MICHAEL E. PORTER):
1) The competitive degree among existing enterprises 2) Threat of substitutes: The products which can meet the needs of customers belong to different industries, such as enterprise operates coffee products, which indirectly competes with tea beverages. 3) Potential competitors: Potential competitors mean they do not compete with the same industry or in same area at present by themselves, but if they want, they have the ability to carry out.

47

FIVE TYPES OF COMPETITIVE MODULES CONT.

4) The bargaining power of buyers: If the buyer has a strong and powerful bargaining power, when they demand higher quality and lower price, it will make the company face the risk of increasing operating cost. 5) Bargaining power of suppliers: When the supplier can ask to raise the price of raw materials or components paid by the enterprise(with patent or monopoly of raw materials), or reduce the quality of the supplied goods, the enterprises will face with the threat of increasing cost and reducing profitability.
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(7.18)MANAGERIAL WISDOM :
ANALYZE AND UNDERSTAND ENVIRONMENT CONDITION
BEFORE MAKING DECISION

One day, a vacuum cleaner salesman, came to the door of a household, and rushed into the house, spread cowpat on the floor first and then said: "Madam, do not worry, our vacuum cleaner absolutely can clean the carpet, otherwise I will eat it! He just saw that the hostess went into the kitchen and took out soy sauce and ketchup, and said: "Which one do you want to add? The salesman said in surprise: "I do not start cleaning, how do you know that I cannot clean it? The hostess said: "We just moved in, actually without electricity. How can you clean?

Remark
Although it is said that, When an opportunity is neglected, it never comes back to you, a manager should deeply understand his own locating environment in order to make the right decision, otherwise it will come up a very embarrassing end like the salesman.

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SECTION 3. Resource allocation strategy and corporate strategy

50

(7.19)MANAGERIAL WISDOM :
RESOURCE UTILIZATION
A very

snobbish rich man had a beautiful daughter. He always thought that only wealthy people were eligible to marry his daughter. One day three men visited for courtship. There was no doubt that the snobbish rich man should certainly cross-examine about their social status.
A said:

"I have deposited US$10 million in the bank." The rich man felt very happy about this, but he would like to know whether the other two men would be in a higher social status or not. B said: "I have three houses and a large company." It appeared to be richer than the first man! He felt very satisfied. But he saw the third man who dressed a little shabby.

Would he have money?" he felt very doubtful in mind, but never judge from appearance, maybe he was the guy with a diamond in the rough! And then he asked the third person. "What do you have?"

51

(7.19)MANAGERIAL WISDOM CONT.

The

third person said in a little shy! "I am a teacher, and I have a child!" upon hearing this, the rich man suddenly grown very angry, and thought the man with child also wanted to marry my daughter and was about to ask someone to kick the bad guy out, but the man continued.

"The child is in the belly of your daughter!

Remark
The

successful route for career and life lies in how you can grasp and apply resources.
Too

many students, managers, and enterprise executives do not fully make use of the existing resources.

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RESOURCE ALLOCATION
In diversified companies or enterprise groups and other large companies, because they have many strategy business units in different industries and each strategy business unit has its own business strategy, so the top level managers often considered two issues:

How many strategy business units (SBU) does the company have?

Which strategy should the company adopt to enter, expand or exit a certain strategy business unit?

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(7.20) MANAGERIAL WISDOM : APPLYING

CONSIDERATION

Wang Rong was very smart and loved to think when he was a child. Once, he and a large group of children in his neighbor ran to outside of the village, walking along the road. Suddenly they saw a plum tree beside the road, the branches bended by heavy fruits, and those plums are crystal ripe and lovely. The kids cheered, scrambling to climb the tree, only Wang Rong standing on the roadside unmoved. The children called him and said: "Come and pick them up! There are many plums Wang Rong said: "I do not eat. This tree grows beside the big street, the plums must be bitter with so many ripe fruits left." The children tasted a few bites, quickly spitting out, really bitter and sour.
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REMARK

It will reduce more threats and increase more successful opportunity for the thing done and the decision made by the person who can apply thinking than the person who does not think. We will be not blind by knowing how to think; we have our own ideas and practices by knowing how to think! At the time of the twenty-first century, it is an imperative matter to culture and train ourselves, our staff, and students with a set of ideas.

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3.1 RESOURCE ALLOCATION STRATEGY

3.1.1 Identified the number of SBU

(SBU) unit can define whether it belongs to a certain separate product market segment or industry. Usually each strategy business unit is independent, and the person in charge of the unit has the power to manage its key business functions, such as production, marketing, design and procurement. Strategy business unit is normally not regarded as a fully independent business unit, only semi-independent unit.

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(7.21) MANAGERIAL WISDOM : PROPERLY USE THE

POWER OF THINKING

During the cold war of the East and West, a new solider of Soviet Union assignment in Berlin border, usually created obstructions of every sort to U.S. military officers who passed through the border.

One day, he actually put the wooden fence on the vehicle roof of a U.S. military, but that officer did not indicate any objection on the spot. After entering into East Berlin, he immediately found to chat with the guarder director of Soviet Union.
Extravagantly in praise of the guarder who defended at the boundary, and said that the guarder was the person most willing to cooperate with the West. The next day, the guard was transferred away

57

REMARK

Resources are not all visible. Face of other people's unreasonable conduct, and you do not have to confront the tough with toughness. Trying to handle with skillful and unprejudiced wisdom, which also achieve to the purpose for punishment.

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3.1.2 Analyzing and determining the status of each SBU

The most simple and commonly method to determine the status of each strategy business unit in individual market is the Matrix Analysis of market growth rate and relevant market share developed by the Boston Consulting Group. A strategy business unit can be classified as high growth rate or low growth rate, and the distinction line of two growth rates subject to 10%. Over 10% higher growth rate, below 10% is lower growth rate.

59

BCG METHOD OF MARKET GROWTH RATE

AND RELATIVE MARKET SHARE MATRIX

Problem

60

The evaluation of strategy business unit in market growth rate and relative market share determines the position of strategy business unit at matrix.

Thus it can classify business unit as problem business, star business, cash cow and dog. Explaining as below:

1) 2) 3) 4)

The problem business Star business Cash cow business Dog Business:

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Introduction stage

Growth rate

Mature stage

Recession stage

Figure 7.4 The model for product life cycle

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(7.22 )MANAGERIAL WISDOM : INVESTOR AND

SPECULATOR

A child saw many people go to pan for gold, but his father was at the plough hard, asking Dad! Will we become rich like those who dig gold?" Father smiled and answered affirmatively: "No! But we will be richer than those who do not obtain gold!"

Remark

Seek benevolence and get benevolence. Seek virtue and acquire virtue. You get the desired object. Some people are speculator wish to have a fortune overnight, while others one step at a time, which strategy should you adopt to build your own career for your life?

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(7.23)MANAGERIAL WISDOM : WHOLEHEARTEDNESS

Once

upon a time there was a king, told the country that he would like to buy swift horses with a thousand of gold.
After

three years, without finding anyone. one minister said to the king: "Let me try!
So

the king agreed to let him search. The minister finally found a swift horse after going out for half a year, but it was already dead.
He

spent 500 gold pieces on buying the horse for submitting a report.
The

king cannot help but furious after seeing it: "I want a live horse, why do you buy a dead horse? It is 500 gold for nothing!"

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The

minister replied: "You are willing to spend 500 gold pieces on dead horse, let alone live horse? From now on the people in the whole country will believe that you are sincere to buy swift horse.
A good

horse will appear very soon!" Sure enough, he bought three swift horses no more than a year.
Remark

Throw

a long line to catch big fish, with long-term wiring, and you can harvest when necessary. Buy swift horse like finding good staff, telling your resolution to the world with the practical action, and a large number of outstanding people will come forward.

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3.1.3 Finally determine the strategy of resource allocation

a) Building strategy

Building strategy can be applicable to star business and problem business.SBU considered with great potential, which requires reinvesting all the excess cash (if any) of income in this strategy business unit.

b) Holding strategy Holding strategy is often used to cash cow. Its idea is to maintain the position of this SBU in the existing market, and make the cash "squeezed" out by cash cow. c) Harvesting strategy Harvest strategy can apply to dog or question business with risk in future investment.

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(7.24) MANAGERIAL WISDOM: MAKE USE OF THE

WISDOM TO APPLY RESOURCE

In three states period, the senior general Guan Gong of Han, ever surrendered a brigand a man named Zhou Cang to be his bodyguard. Zhou Cang had enhanced strength, unfortunately careless by nature, who did not like to use mind. One day, Guan Gong riding, with Zhou Cang walking, the two of them came to rest under a tree shade. Seeing a group of ants crawling in the small trench under a tree, then Guan said to Zhou Cang: "Zhou Cang, you try to strike the ants. Zhou Cang outstretched his fists, beating with force, a piece of recess on the ground, but the ants were all right. Then beating forcibly again, crying loudly by hand pain, ants still acted as if nothing had happened. His face flushed red with anxiety seeing that he could not kill the small ants.

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(7.24) MANAGERIAL WISDOM CONT.

Guan said "Look at me!" he just stretched out his index finger, gently rubbing. Several ants were dead immediately. Zhou Cang watched it with mouth wide open. Guan Gong said to him "Not only with a lot of courage and strength, but also knowing how to use wisdom and strategy, you can do great things and will turn out something."

Remark

If you want to do a good job, you should use mind, not just relying on brute force, otherwise the effect would have a big discount.
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3.2 THE BASIC TYPES OF THE CORPORATE STRATEGY

3.2.1 Growth strategy It is the strategy choice when the business organization wants to expand and develop.

Concentration strategy

In concentration strategy, business organizations focus on the increase of sales quantity and amount in existing products or service.

Vertical integration strategy

When the company enters into the field of upstream suppliers or into customer field of downstream products or services.

Diversification strategy

In the diversification strategy, the fields of business investment industry are also diversified, and this method is the fastest way to pursue growth

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(7.25)MANAGERIAL WISDOM:
COURAGE CHALLENGES SUCCESS, AND CAUTIOUSNESS
REDUCES FAILURE

A professor in medical school, said to his students at the beginning of the term: "To be a doctor should be courage and cautious. Now a glass of urine on the table of everyone, please watch clearly what I do, then following.

Putting a finger into the cup of urine after saying, and then put a finger into his mouth. Students tasted the urine. At this time the Professor condemned: "Should I tell you to be courage and cautious?" Then he put his index finger into the cup of urine, and then put the middle finger into the mouth.

Remark
"Courage"

and "cautious" supplement each other, which cannot do things well only with courage, and only with cautiousness it also lack the courage to challenge new things. With a cautious mind, adding courage and boldness, then nothing will be unsuccessful.

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3.2.2 Stability Strategy

When enterprise satisfies with their current process and achievement, stability strategy will be used to handle the enterprise. Generally speaking, this strategy will go in for maintaining stability of enterprise position. When enterprise organization runs smoothly, many mangers will stubbornly resist any change. Stability strategy not means doing nothing, but doing the same thing. Growth is possible under the stability strategy, but it is slow, methodical and patient. Enterprise use stability strategy, its managers will think slow growth and stable operation is more appropriate.
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3.2.3 Retrenchment or defensive strategy

a) Turnaround strategy: That means going with reversal situation for searching the best possible profit for enterprise, not an inevitable measure; turnaround strategy usually means to lower operation costs, reduce operation items or objectives for customers. b) Divestiture strategy: It means enterprise organization selling or giving up the operation of all (walking away) or partial SBU. c) Liquidation strategy: When the whole enterprise organization sells all of his business departments, but the problem is still being solved, so the liquidation strategy forms. d) Combination strategy: When an enterprise organization use different strategy specific to different business units owned, this is the usage of combination strategy.

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(7.26) MANAGERIAL WISDOM : CHICKEN GAME

Chicken game is that two men drive a car separately, drive from two sides of the road opposite to each other, both try to adopt strategy regardless of collision. Make the other think that he is hard to predict and an irrational radical, and make him has to concede and turn around, the part who turned is the chicken.

Remark

Have the determination of no fear of death, he will win the game. If both of the part have the determination of no fear of death, hurt is inevitable. Managers should not and be inappropriate to adopt this strategy. The United States has a war with Iraq, which made numerous casualties. North Korea war used edge strategy. They didnt compromise with USA, stressed the strategy. If both sides dont strength communication, its easy to go into the tragedy of extremely dangerous war.

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SECTION 4. Strategy Of Business Department

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(7.27)MANAGERIAL WISDOM : THE MORE FRUSTRATED,

THE BRAVER HE WILL BE

In 80s, AT&T and IBM all experienced antitrust litigation in America. AT&T was forced to be divided into 10 telephone companies because of losing an appeal. IBM won the antitrust litigation, so it could maintain its monopoly capability in computer market. Therefore, its situation was excellent at that time, stock prices went up continuously. But after a short decade, situation changed greatly, the performance of AT&T made people applauded and praised about it. The divided ten companies, each was bigger than the original AT&T, but IBM had total loss more than US$8 billion during 1993 and 1994. It was in the nightmare.

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REMARK
Confucius said:A nation shall die out if it doesnt have enemy and foreign aggression.

Have a frustration just like iron change into steel after experience thoroughly Tempered.

China glares Taiwan like a tiger eyeing its prey, there are exceeding 1500 missiles targeting at Taiwan.

It makes Taiwan keep alert. Once loose it will disperse, and the dispersion will lead to quickly overthrown

Is China the motivation inspiring Taiwanese to fight up bravely?

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4.1 OVERALL COST LEADERSHIP STRATEGY (LOW COST STRATEGY)

The concept of overall cost leadership strategy is to use when compared with competitors. The strategy can produce two advantages:

Because of a lower cost, as long as this business department or strategy SBU use profitability at the same level with its competitor, so the SBU who adopts overall cost leadership strategy can own a lower price than its competitor. If competition increases in a industry, enterprises will start with competition of lowering price.

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Low cost

Specialty

Nationality

Overall cost leadership strategy

Differentiation strategy

Only aim at special market or small company

Focus strategy

Figure 7.5 Three kinds of business strategy Resources:

Michael E. Porter, Competitive Strategy: Technique for Analyzing Industries (New York: the Free Press, 1980), p.39
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4.2 DIFFERENTIATION STRATEGY OF PRODUCT OR SERVICE (UNIQUE STRATEGY)

Differentiation strategy is to make the product or service of SBU has specialty in the industry. It can be completed by quality image, brand image or other similar perceived advantages.

It can get an extra price higher than industry average, so obtain profit higher than average.
The more different with opponent, have tangible benefit, intangible benefit and value management with more features, the more it can protect itself from competition.
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(7.28) MANAGERIAL WISDOM: FISHING

Ming sees Hua standing at the edge of a lake with a mirror, so he asks, Hua, What are you doing here? Hua says: Im fishing. Xiao Ming says: With a mirror? Hua says: Yes, it is a new kind of fishing, Im going to make a big fortune! Ming says: Can you tell me about the method? Hua syas: Ok! Ill tell you if you give me one US$100 he gives him the money obediently Hua says: The method is: you let the mirror face with the water, once you see a fish come here, scare it with the reflection of the mirror, when it falls into a faint, you can catch it. Ming says: Nonsense! How can you do fishing like that! How many fishes do you catch? Hua says: You are the forth today!

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REMARK

There are many people in society defrauded of money. It origins in the curiosity and greed of victims. There is no getting without any labor in the world.

We should do things modestly and steadfastly.

Do not let ignorance, no-judgment and greed became the obstacle of competition.

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4.3 CENTRALIZATION STRATEGY OR FOCUS STRATEGY

The last mode of business strategy is to focus on single market segmentation. This kind of market segmentation may be a part of definite buying group, regional market or product line. Business department adopt focus strategy can be seen aiming at a market segmentation which as very specific, professional, special. Its situation may be better than competitors in a extensive market.
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(7.29) MANAGERIAL WISDOM : DEPENDS ON

SUPERNATURAL POWER

Diqing was an famous general in Bei Song. A bad idea thought out, in order to avoid soldiers escaping at that time, all soldiers got a tattoo on their faces. Diqing was birth as a small soldier, he was tattooed when he was a soldier; but he made grand contributions for several times. He was promoted and praised by his supervisors, finally he became a general.

As a general with a tattoo, it was really not nice. When the emperor met him, he persuaded him to sweep it with medicine, but he refused. He thought he could inspire soldiers because of the tattoo. Let the soldiers have a sense that a man without any background had an opportunity to being a general and make contributions.
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(7.29) MANAGERIAL WISDOM CONT.

One time, Diqing was assigned to crusade the south. He only led hundreds ride guards there, the others drawn on local resources, and combined by local army. People in local knew the enemy were not easy to deal with, and add to the lack of troops. They all didnt have confidence and atmosphere of failure permeated, Diqing thought: If I want to win the war, I must have the determination of win and confidence. It is no use to inspire soldiers at the mouth, and it is also hard, he is in the inferior situation obviously. He heard the south people were superstitious, and there was an extremely efficacious temple at local, so he led soldiers to burn incense and pray there

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(7.29) MANAGERIAL WISDOM CONT.

. After back from the temple, he declared: How I have one hundred copper coins, I will throw them up, if the positive sides of them face up, that means we will win. His subordinate persuades him in a hurry, Diqing was unmoved. He asked his subordinates to throw the copper coins on the ground. It was strange that all of positive sides were up. Soldiers all cheered and thought they would protect by the God less and they would win this battle. Diqing ordered his soldiers to cover those copper coins and dealt them when they came back. As a result they won the battle. When they hadna celebration, Diqing asked someone to turn over these copper coins. At that time the soldiers knew both sides of cooper coins are positive drawings.

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REMARK

Japanese general Nobunaga once used 10 copper plates with same sides at a shrine and said God bless displayed they would won the battle; have confidence, you will win the battle. Battlefield is same with commercial fields. If Buddha worship is benefit for enterprise growing, why dont we have a try?
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SECTION 5. Function Level Strategy

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FUNCTION LEVEL STRATEGY

Function level strategy:

concentrates on enhancing the function development of the department in inner organizations, and strategy selection of operation execution and effects in short- term. Usually describe in specific budge figure objectives, and used to direct specific objective. basically belongs to operation execution.

Its objective can be balanced by specific figure and making comparison work. They are the operation results enterprise hope to complete.
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FUNCTION LEVEL STRATEGY CONT.

1) Marketing Strategy: Emphasizes on decisions on these aspects of products, prices, places, promotion, etc. 2) Human Resource Strategy: There are four kinds in total, they are development strategy, reinforcement strategy, inspiring strategy. 3) Research and Development Strategy: Aiming at innovation of the development for enterprise future product and improving objectives, cooperate with formation of research team.
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SECTION 6. Function Level Strategy

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(7.30) MANAGERIAL WISDOM : EXAMPLE OF USING

TACTICS FLEXIBILITY

When Sunbin was the staff of Tianji, Tianji had a horse race with chide of Qi, he failed every time. Once a day, Sunbin told Tianji the method to win: divided the horse into the first- class, middle-class and the lower-class according to horses capability. Use your lower-class horse to fight with the others finest horse. And use your own middle-class horse to fight with others inferior horse, the next use first-class horse to fight with others middle-class horse. The result is you have two victories and one loss. But you win the last victory. The use of empty city: When Zhuge Liang guarded in Pingyang, there were only 2500 soldiers and a group of civilian members. He heard Sima Yi will led a military of 150.000 soldiers to attack them. At that time, Zhuge Liang ordered his soldiers to open the gate calmly, Sima Yi hesitated with the opening gate, and said to his subordinates: Zhuge Liang was usually cautious and never took a risk, today he opened the gate, there must be an ambush. So he retreated his military

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(7.30) MANAGERIAL WISDOM CONT.

Relieve the state of Zhao by besieging the state of Wei : In the period of warring states, Wei attacked Zhao, so the state of Zhao asked Qi for help. Tianji, a general of Qi intended to take the military to help Zhao. Tianjis military adviser Sunbing said:Wei attacked Zhao. It will mobilize its elite forces to the front line. Its internal country will be weak. Youd better to lead the forces to attack Dialiang, the capital of Wei, so Wei must lift its siege to Zhao automatically, solve its own problem. We could kill two birds with a stone. We solve the Zhaos difficulty and defend Wei easily at the same time. We get great achievement with few forces, because of attacking its weakness.

Remark

The upper three story is the successful examples of using tactics in the history of China. It supplies for reference and consideration.

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(7.31) MANAGERIAL WISDOM : A FUTILE HELP

A drive tried his best to move a big cabinet on the truck, seems wanted to move it to the earth effortlessly. A pedestrian thought he is hard. He came forward to help him. They pushed and grabbed each other, as a result, their whole body were dripping with sweat. They did nothing about half an hour breathlessly. The pedestrian was discouraged, and said breathlessly I cant do it, we may not move the cabinet from the truck. Move out! The driver said loudly: My god! Im not going to move it from the car, I mean to move it into the truck, I just move it to the correct position!

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(7.31) MANAGERIAL WISDOM CONT.

One helpful woman, one day when she was on the street, she saw a car driving along the street slowly. There was no driver in it. She developed the spirit of being ready to stand out for justice, walked up in one step and jumped into the car to stop it by hand brake. At that time, a man with a sweaty face appeared. She asked: Is it your car? Yes! The man said, It went down along the street just now, fortunately I found it early, otherwise there would be a trouble! I know! that man who was sweating said with a look of resignation. Im going to push gas station.

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REMARK

Have no sense of direction, you will do a futile help. Function strategy doesnt have one common strategy just like corporate strategy and business level strategy. Function strategy focus on expert and profession on personal aspect. Be an expert need long-term, deep, continuous endeavor towards to profession function, the professional capability will be measured. Function level strategy use management method of knowledge on the aspect of company to hold experienced talent.

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BALANCED SCORECARD

Robert Kaplan and David Norton, professor in Harvard University offered the concept of Balanced Scorecard (BSC) after being used by many companies actually. According to the report of USA Fortune Magazine, there were 40 companies in the top 100 in USA executed balanced scorecard in 2004. Its main spirit is to offer a doing structure for changing mission and strategy into action plan, and at last reflect its actual results
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BALANCED SCORECARD CONT.

Balanced scorecard not only solely emphasize on the achievement of financial objective, which can be seen as the only emphasize for past companies, balanced scorecard takes advantage of finance, customer, internal operation process and study and growth, in total four dimension to complete the objective of increasing company operation performance. But every dimension all gradually carry out form the four aspects of objective, balanced indicators, objective value and action plan, and others. BSC just like instrument panel on aircraft, which makes pilot know all condition about it at a glance.

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BALANCED SCORECARD REMARK AS:

1)

Financial: Enterprise should adopt different profit strategy for different phases in a life circle, and decide appropriate finance measuring method. Customer: Enterprise should find out objective market at first, combine customers of objective market with products at the same time. Internal Business Process: Balanced scorecard differs from tradition, supposes enterprise to establish various balance indicators according to internal process, which contains processes of new procedure, accounting system, operation process and after-sales service. Learning and growth: Traditional investment view focuses on the development of new instruments and new products

2)

3)

4)

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END OF CHAPTER 7

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