09. Conceptd Of Strategy And Environmental Issues Flashcards
What is strategy?
The determination of long-run goals and objectives of an enterprise and the adoption of courses of action and allocation of resource necessary for carrying out these goals.
Johnson, Scholes and Whittington explore strategy using a three part model. What are its components?
Strategic analysis - impact on internal and external environments on the strategy of an organisation (aka strategic position).
Strategic choice - involves identifying the best strategies for an organisation and the methods by which those strategies will be pursued.
Strategic implementation - the practicalities of forming and implementing strategy ( aka strategy into action).
Outline PESTEL.
Political - degree of govt influence and control of business and commerce. Consider political stability and govt policy on infrastructure eg health, transport and competition regulations.
Economic factors - general nature of economy. Govt spending, inflation, fx rates and business cycle.
Socio-cultural factors - trends, beliefs and attitudes. Eg mobility of customers and staff, demography and attitude to work.
Technological - developments in IT. New production methods, new distribution tech. The internet.
Environmental - green issues. Eg pressure from green groups, environmental legislation, sustainability of non-renewable resources.
Legal factors - legal framework. Company law, healthy and safety regulations, data protection etc.
What is strategic drift?
Org’s strategy gradually moves away from the forces at work in its environment.
A drift from vision.
Strategy fails to address strategic position of org and performance deteriorates.
What are the four phases of strategic drift according to JS&W?
P1. Incremental change - environment stable; incremental change doesn’t affect strategy being aligned with environment.
P2. Strategic drift - environment change accelerates eg tech advancement and strategy diverges from it since strategy changes incrementally. Towards end you can see symptoms of strategic drift eg loss of market share.
P3. Flux - due to performance downturn in P2, strategies change with no clear direction. Managers and board clash over sticking with strategy or changing course. Org rep suffers and managers become hard to recruit making the problem worse.
P4. Transformational change or death - one of three outcomes at this point:
1. Org dies (liquidation or receivership).
2. Org gets taken over by another one.
3. Management makes transformational change to the org. May require cultural and structural shifts to align strategy with its environment.
Give an overview of Porter’s Diamond and outline the four attributes.
Porter’s Diamond looks at why some nations or industries in nations are more competitive than others. Basically the conditions in the country. He says there are 4 attributes that give nations competitive advantage and these can be affected by govt policy and change (random occurrences).
- (Favourable) factor conditions - FOP can be either non-key (general use eg unskilled labour) or key (specialised) factors created through innovation and investment which cannot be easily replicated and thus offer sustainable competitive advantage. Eg intellectual capital created through training or high productivity through bpr. Nations with nuff non key factors eg natural resources tend to become inefficient and lost competitive advantage eg oil rich countries.
- Demand conditions - nations customers have high expectations and so it has to create high quality goods creating a competitive advantage which can be exported globally eg wine lovers in France make French wine better globally.
- Strategy, structure and rivalry -
a. Strategy: countries where cap mkt have short term outlook (USA) will be more competitive in industries with short term investments (computers) and vice versa (Switzerland - pharma)
b. Structure - countries oriented to a specific management style will be more competitive in industries where that style is best.
c. Rivalry - intense competition drives innovation. - Related and supporting industries - competitors, suppliers and related industries being in one location provides competitive strengths usually at regional level instead of national. Eg Silicon Valley for tech.
How can govt influence Porter’s determinants and assist an industry in attaining competitive advantage?
- Create specialized/key factors through investment in education and infrastructure.
- Privatising state-owned industries and deregulating markets to promote competition.
- Providing grants, subsidies or tax incentives to innovative small companies.
- Setting of special economic zones eg Jamaica special economic zone
