(1, 1) – The characteristics of functional and corporate strategy Flashcards
Strategy is defined as “the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. What does a strategic decision consider?
- Its ‘Scope’ (product range, geographical coverage, type of business)
- Its direction over the ‘Long Term’
- Creating ‘Competitive Advantage’
- The ‘Demands’ of its environment, resources and competencies
- ‘Stakeholder Values’ and expectations
What is ‘Strategy Safari’ by Mintzberg?
• Plan – strategy formed looking forward
• Pattern – strategy formed by looking back at consistency of behaviours
• Position – strategy formed by looking at products and markets
• Perspective – strategy formed by looking at theory
• Ploy – strategy based on manoeuvres within a market
The 5 P’s are used to help understand strategy and assessing strategy but not for helping to create or execute strategy.
Ohmae considered strategy as an integration of 3 C’s to enable practical creation of successful business strategy. What are the 3 C’s?
- Customer focussed strategies
- Corporate strategies aiming to maximise organisations strengths compared to competition
- Competitor strategies to differentiate between your business and others
What’s the difference between Operational Management and Strategic Management?
Operational management involves the efficient management and implementation of broader strategy over a short to medium term.
Strategic management is organisation-wide, looking at direction and scope at a high level and over the long term.
Strategic Management can be considered as having 3 main stages, what are they?
P – analysis of strategic ‘position’ of the organisation
C – ‘choice’ of strategic options for future
A – turning strategies into ‘action’
What is involved in the ‘position’ stage of the PCA model for strategy formulation?
External Analysis - looking at markets competition, supplier markets and regulatory / economic environment identifying opportunities and threats
Internal Analysis – looking at resources, culture and competencies to identify strengths and weaknesses
Stakeholders – identifying expectations of stakeholders to inform strategic aim and purpose
What is involved in the strategic ‘choice’ stage of the PCA model for strategy formulation?
Understanding the underlying bases for strategy development at a Business Unit level (how you can compete, how you can beat the competition) and at a Corporate level (determining the range of the organisations products and markets).
Once strategic options have been identified, they need to be evaluated to choose the best solution. What questions might you answer as part of the evaluation process?
- Does the strategy address the mission and values?
- Does it reflect the organisations resources and capabilities?
- Is it acceptable (does it fit with stakeholder expectations)?
- Is it sustainable and make economic sense?
Once the final strategy option has been chosen (PCA Model), the final ‘action’ stage is implementation. What does this involve?
- Organising (Organisational changes, creating new units, merging existing ones, changing geographical structure)
- Resourcing (Implementation may require budget shifts, human resources and capital)
- Change Management (Minimising disruption by communicating vision, obtaining commitment, confronting resistance etc.)
What are the different levels of strategy?
- Corporate – Highest level, describe general direction of company
- Business – Medium term, apply to particular divisions or strategic business units
- Functional – Apply at functional and departmental level, consider specific detail of tasks, targets, resources and actions to deliver the corporate / business strategy over the short term.
What is in the corporate strategy?
It sets out the long term vision for the business. The vision is often encapsulated in a mission statement (key values, aims and cultural beliefs which sets out “Why do we exist?”). They aim to be aspirational (setting out long-term goals) and inspirational (to gain commitment). The vision will then be supported by goals and objectives,
• goals describe where the organisation is trying to go, they are usually qualitative
• objectives describe what stakeholders need to do to get there, objectives usually contain quantified and time related targets
What levels of corporate objectives are there?
- Primary objectives, in private sector these are likely to be financial objectives such as profitability, return on capital, earnings per share.
- Secondary objectives, help achieve primary objectives such as introducing new products or services, reducing costs of production, increasing market share.
What is ‘Vertical Alignment’?
The aligning of corporate, business and functional objectives to ensure they are consistent. Each functional strategy must support the business strategy. In turn, the business objectives must support the corporate strategy.
What is ‘Horizontal Alignment’?
Ensuring plans are consistent across the organisation and co-ordinated so the outside world sees a common face. For example you can’t have marketing function emphasising high ethical standards while procurement work for low cost solutions at the cost of ethical standards.
What is the McKinsey ‘7S’ framework?
It’s a tool used for alignment of objectives which suggests there are 7 internal aspects of an organisation which need to be aligned for it to be successful. These are all interlinked.
• Structure
• Systems (A planned course of action to reach defined goals)
• Strategy
• Shared Values (Culture, guiding beliefs and assumptions which shape the way the organisation sees itself and purpose)
• Style (Management style and corporate image)
• Staff (HR, motivation, flexibility etc)
• Skills (Distinctive capabilities of key personnel)
