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Le Go > 10 - Strategic choices > Flashcards

10 - Strategic choices Flashcards

1
Q

6 learning outcomes - Chapter 10

A
  • differentiate between short-term and long-term strategic choice.
  • use the Ansoff matrix and the Porter strategic choice models to analyse differing market potential and how to progress it.
  • consider the implications of a blue-ocean type approach to strategy.
  • demonstrate the purpose of business process re-engineering.
  • understand how and why the BCG portfolio matrix is a useful analysis tool.
  • consider the impact and challenges of internationalisation.
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2
Q

Johnson - 3 predominant areas of strategic choice an organisation needs to consider

A

Business strategy - how an org has positioned itself in relation to competitors

Strategy methods - is the org acting in isolation or seeking some form of strategic alliance?

Strategic direction - products, industries and market sectors than an org intends to operate within

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3
Q

What is required to be carried out prior to the development of strategy?

A

Understanding of the organisation as it stands now through research and development activities
(such as research into business environment and competition)

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4
Q

2 variables to manipulate when looking at strategic direction

A

Products/services
Customers (markets)

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5
Q

Ansoff’s product/market grid - explain

A
  • Products/services on top (existing on left column, new on right column)
  • Markets on left (existing on top row, new on bottom row)
  • Top left = market penetration
  • Top right = product development
  • Bottom left = market development
  • Bottom right = diversification
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6
Q

Why does Ansoff’s product market grid no longer have lines separating quadrants?

A

4 different aspects are more malleable than boxed lines indicates

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7
Q

Ansoff product/market grid - market penetration

A
  • Growth through increase of market share in current product/market mix
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8
Q

2 forces restricting growth through market penetration (product/market grid)

A
  • Retaliation from competitors
  • Legal restrictions on monopolistic dominance
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9
Q

Ansoff product/market grid - product development

A

Using the knowledge of the existing customer base and markets to provide different, evolved or complementary products

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10
Q

Ansoff product/market grid - market development

A

Taking existing products or services into new markets

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11
Q

What is often required prior to market development (product/market grid)

A

Significant pre-emptive market and consumer research, possibly some product development to tailor existing product

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12
Q

Ansoff product/market grid - 4 types of diversification

A

Horizontal diversification

Vertical diversification

Concentric diversification

Conglomerate diversification

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13
Q

Ansoff product/market grid - diversification - horizontal diversification

A

New product marketed to customers of competitors

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14
Q

Ansoff product/market grid - diversification - vertical diversification

A

Org acquires new supplier or customer to broaden depth and breadth of commercial control

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15
Q

Ansoff product/market grid - diversification - concentric diversification

A

New closely related product introduced by an org, often times to support sale of existing product and vice versa

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16
Q

Ansoff product/market grid - diversification - conglomerate diversification

A

Completely new and unrelated products introduced by org wishing to take advantage of its markets

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17
Q

Why is diversification the highest risk option within Ansoff’s product/market grid?

A

It requires significant research and market intelligence in terms of both aspect of development

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18
Q

What is a strategic business unit (SBU)?

A

A grouping of certain areas/subsidiaries within one organisation, often due to location or customer/supplier focus

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19
Q

Classic definition of an SBU

A

A fully functional unit of a business with its own vision and direction, operating as a separate unit but often still reliant upon the organisational centre for ultimate direction

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20
Q

2 benefits of creating formal SBUs

A
  • Focused and aligned strategy
  • Agility to react quickly in decision-making
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21
Q

Porter - 3 fundamental methods to achieve competitive advantage

A
  • Lower costs
  • Differentiation
  • Focus (particular area of market)
22
Q

Porter’s strategic choices matrix (re. competitive advantage) - explain

A
  • Competitive advantage on top (lower cost on left column, differentiation on right column)
  • Competitive scope on left (broad target on top row, narrow target on bottom row)
  • Top left = cost leadership
  • Top right = differentiation
  • Bottom left = cost focus
  • Bottom right = differentiation focus
23
Q

What is meant by being a cost leader in an industry/sector?

A

Becoming the lowest cost organisation while maintaining quality

24
Q

4 key cost drivers to take into consideration when aiming to be cost leader

A

Input costs - need to minimise cost of labour and raw materials

Economies of scale - reduction of fixed costs through greater quantities

Experience - cumulative experience and knowledge of people can ensure efficiency

Design - efficiency can be built into the core design of product/process

25
Q

3 risks of cost leadership - causes of failure

A
  • Restricted and insufficient supply base that is shared by all competitors
  • Easy imitation of strategy by competitors
  • Detriment in quality due to cheaper supplies
26
Q

Financial benefit of product differentiation

A

Charging a price premium

27
Q

Johnson - 3 primary drivers of differentiation

A

Product and service attributes/quality

Customer relationships - manner in which org deals with customer

Complements - provision of additional products or services, enhancing value of core purchase

28
Q

Garvin - 8 dimensions of differentiation quality

A

Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Perceived quality

29
Q

5 natural dangers of pursuing strategy focused on differentiation

A
  • Too much differentiation causing confusion
  • Too high a price premium
  • Easy imitation by competitors
  • Differing perceptions of the meaning of quality between buyers and sellers
  • Striving for a uniqueness that fails to bring sufficient added value
30
Q

What is the aim of strategic focus? (competitive advantage)

A

To achieve competitive advantage by giving a better service to target customers than which is achieved by competitors who are aiming for a broader customer base

31
Q

What should management focus on after deciding how the org is to gain or maintain competitive advantage?

A

How to design and implement the strategy to achieve the required objectives

32
Q

What does BPR stand for?

A

Business process re-engineering

33
Q

What does BPR entail?

A

A fundamental reconsideration in a radical redesign of org processes with the ultimate aim of increasing efficiency

34
Q

Five rules underpinning principles of BPR

A
  • Strategy must be determined before redesign takes place
  • Existing process-flow used as basis for redesign
  • Use of IT should be optimised
  • Governance, culture and org structures should be aligned with process-flow
  • People from all across business should understand and participate in redesign
35
Q

Differentiate between business level and corporate level

A

Business level refers to single business operating within defined boundary
Corporate level refers to a number of businesses operating within a wider boundary

36
Q

3 alternative approaches to development, analysis, challenge and understanding of corporate strategy:

A
  • Blue ocean strategy
  • Corporate parenting
  • Portfolio analysis and the Boston Consulting Group (BCG) approach
37
Q

3 underpinning principles of blue ocean strategy

A
  • markets need to be analysed to find new opportunities
  • value can be added by lowering costs and by raising prices
  • innovative thoughts will come through a focus on the key elements that provoke new ways of thinking and acting
38
Q

Kim and Mauborgne - what are red oceans?

A

Existing markets which are awash with the blood of competitors which are competing sharks

39
Q

Kim and Mauborgne - what is the benefit of seeking out blue oceans?

A

They have untapped market space, offering highly profitable growth

40
Q

Lynch - 4 dimensions of realising and deriving value from blue ocean strategy

A

Elimination - which aspects of current red ocean can be eliminated (eg. excessive packaging)

Reduction - removal of overdesigned products and services within red ocean

Raising - improving features of current products and services

Creation -use of existing knowledge to create value addition for both customers and the org itself

41
Q

What is the natural result of a successful blue ocean

A

It becomes a red ocean as competition arrives

42
Q

What is corporate parenting?

A

The centralised control exerted over a diversified organisation that has a number of different parts, subsidiaries or SBUs

43
Q

Goold et al. - 5 core activities through which a corporate parent can add value

A

Envisioning - provision of clear overall vision for each aspect of org
Facilitating synergy - enabling of co-operation across business units
Coaching - development of managers
Central services/resources - cost-efficient use of expertise
Intervention - intervening, where necessary, with a particular unit

44
Q

Danger of corporate parenting

A

Destroying value through unnecessary central cost and bureaucratic complexity

45
Q

What does portfolio analysis involve?

A

The grouping together of a range of similarly performing products (or businesses) to help decision-makers consider where best to build their organisation or business

46
Q

BCH approach to portfolio analysis - explain diagram

A
  • Market share on top (High on left column, Low on right column)
  • Market growth on left High on top row, Low on bottom row)
  • Top left = STARS - cash neutral
  • Top right = PROBLEM CHILD - cash user
  • Bottom left = CASH COWS - cash generator
  • Bottom right = DOGS - cash neutral
  • cash generator/user is in relation to that org
47
Q

Benefit of BCG model

A

Plot and monitor movement of different products between four statements, and to analyse how this aligns with the product lifestyle

48
Q

Lynch - 3 difficulties with BCG matrix

A
  • Defining market growth and understating what is perceived as high or low
  • Defining market itself
  • Understanding what is meant by relative market share
49
Q

3 potential drivers of internationalisation as a business strategy

A

Market drivers - potential customer reach of expansion

Cost drivers - reduction of operational costs

Government drivers - potential gov support to enable international operation

50
Q

What does Porter’s diamond model consider?

A

Why some countries produce firms with sustained competitive advantages in some industries - he suggests 4 interacting factors which will help an org determine optimal approach to internationalisation

51
Q

Porter’s diamond - 4 interacting factors

A

Factor conditions - what goes into making product that can give competitive advantage?

Demand conditions (in domestic market) - can help company become sophisticated when trading internationally

Related and supporting industries - in same geographical regions can lead go cost and logistics advantage

Firm strategy, structure and rivalry (in domestic market) - will build more resilient approach when trading internationally

52
Q

Porter - 4 international strategies

A

Simple export - majority of activities remain in domestic country of origin, finished products exported

Multi-domestic - certain activities placed non-domestically to maximise efficiency and resources

Complex export - most activities in one country, but not necessarily domestic

Global strategy - highly co-ordinated activities dispersed around the world

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