1: Strategy formulation and objective Flashcards
What is strategy
‘Strategy is the direction and scope of an organisation over the long term
What are the approaches to strategy
Resource - based strategy oriented around Its internal resources and competences for competitive advantage
Positioning view - What it thinks its market or customers want and then to build the business around that.
What are characteristics of the positioning approach
- A focus on customers, their needs and building a portfolio of products to meet those needs.
- Building market share and leveraging this to obtain competitive advantage over rivals.
- Reduction of costs, perhaps through obtaining preferential access to materials, low cost labour and/or scarce skills.
- Strong relationships with key stakeholders such as government, shareholders, suppliers and distributors to obtain competitive advantage.
What theories can be used to assess the positioning approach ?
Porter’s Five Forces, Porter’s Generic Strategies, life cycle analysis and BCG matrix
What are characteristics of the resource-based approach
- Using superior competences, such as design and technology, to disrupt existing markets.
- Creation of new markets in which competences are deployed.
- Continual development and acquisition of new resources and competences to maintain competitive advantage. These resources and competences should be hard to copy.
What are key theories to assess resource based approach
include critical success factors and the theories that lead to their achievement, 9Ms, benchmarking and Porter’s Value Chain. These businesses are often differentiators in their market.
Strategic business unit
a relatively autonomous division of a large company that operates as an independent enterprise with responsibility for a particular range of products or activities.
What is the strategy setting hierachy
Mission - formal summary of aims and values of corp
Corp goals - Targets set for org according to mission and primary objective
Corp objectives - corp strategy
SBU objectives - business strategy for each SBU
Functional objectives - functional strategy - how day to day operations fufil business objectives/strategy.
Ashridge college model states a successful mission statement contains what 4 elements
Reason - why organisation exists and/or for whom
Strategy - The way org will achieve mission
Values - what org believes in
Policies - and behavioural patterns underpinning its work
What are goals of profit seeking org
Primary - maximise shareholder wealth
Secondary - anything else org chooses to do that supports primary goal
Goals of Not-for-profit orgs
Primary - Whatever the org is there to do e.g. save lives, disease research, disaster support
Secondary - Supporting primary e.g. raising funds and surviving
What do shareholders need to bare in mind beside profit max
- Long term viability of business, longer term investments
- Corporate responsibility - Profits balanced with good of society and natural environment
- Non financial goals e.g. ethical firms, family firms
What decisions need to be made with regards to corporate strategy and objectives
- Which product and markets the org should persue
- Which major investments decisions it should undertake
- Allocation of resources to its business units
- How it will raise finance
What are benefits of the rational approach to strategy formulation
- Forces busineses to consider wider environment
- Provides framework on how to formulate strategy
- Ensures objectives and strategies across organisation are aligned
- Research justifies strategic choice, modelling provide some degree of certainty in outcome
What are are drawbacks of rational approach to strategy?
Unsuitable for businesses in a dynamic environment where change is frequent
- Time consuming and expensive
- May discourage innovative thinking
- Researchers/strategy may be submitted as its what they think superiors want to hear.
What is the rational approach
Top - down approach
Strategy involves setting goals first and
then designing strategies to reach them.
* Some prediction of the future is possible.
* Outcomes of strategic choices can be
predicted and controlled.
* Possible to separate the planning and
selection of strategies from the
implementation of strategies
What are emergent strategies?
- Strategy is born out of a combination of intention and opportunity, e.g. emerge when the conditions are right inn the organisation to spot and harness them
5 types of strategy
Intended: result of a formal planning process
- Deliberate: Intended plans that have been put into action
- Unrealised: intended plans that fell by the wayside
Emergent: strategies created by force of circumstance
Realised: the final realised strategy, whether delierate or emergent
What is goal congruency
All objectives in the organisation work towards the same goals
- over time
- across all SBU’s
- throughout levels of strategy
Objectives should be
SMART Targets
Specific
Measurable
Attainable
Relevant
Timebound
What are open/closed objectives
Open objectives - principle followed akin to a goal e.g. excellent customer service
Closed ovjective - specific measurable target
Objectives for not-for-profit organisations
- Surplus maximisation, revenue maximisation
What are the planning horizons
ST 1-3 YRS
MT 3-10
LT 10+
How does ethics affect strategy
Some firms will not consider lines of business for ethical issues
External appraisal will need to consider the ethical climate in which the firm operates
Internal need to consider sustainability with present/future ethical expectations
