10.4 Problems with strategy and why it fails Flashcards

1
Q

Types of strategy implementation

A
  • Planned strategy
  • Emergent strategy
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2
Q

What are planned strategies

A
  • Planned by managers and leaders
  • Purposefully implemented
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3
Q

What are emergent strategies

A
  • Develop overtime
  • Not planned or implemented purposefully
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4
Q

When does strategic drift occur

A

When a business fails to respond to changes in the external environment (customer demands), no longer offers the products and services demanded by customers

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5
Q

How to overcome strategic drift

A
  • Businesses will need to make a transformational change or their failure to respond to market changes may become fatal
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6
Q

Stages leading up to and after strategic drift

A
  • Incremental change
  • Strategic drift
  • Flux
  • Transformational change or death
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7
Q

Phase 1 of strategic drift

A

Incremental changes:
- part of planned strategy to change in line with the external or competitive environmental changes
- aim is to remain ahead of the market and develop or retain a competitive advantage

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8
Q

Phase 2 of strategic drift

A

Strategic drift:
- Rate of change speeds up
- the firms approach to incremental changes means that the strategic drift begins and the firm start to get left behind

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9
Q

Phase 3 of strategic drift

A

Flux:
- leaders recognise the decline in their performance and the gap between the market expects and what they provide
- try to extend the market by repeating what it already does and has always done
- strategic change has no clear direction
- disagreement about what the right strategies are and when performance deteriorates - the strategic drift widens

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10
Q

Phase 4 of strategic drift

A

Transformational change or death:
- the business either fails completely and the firm closes or, if it survives, this is because it undergoes transformational change to align its strategies with the market
= begins to operate successfully again

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11
Q

Why does strategic drift happen

A
  • business fails to adapt to a changing external environment
  • what worked before doesn’t work now
  • complacency has set in - often built on previous success
  • senior management deny there is a problem
  • organisational culture restricts the business
  • an organisation simply reacts to change rather than being proactive and innovating
  • organisations are not keeping up with or adapting quickly to change
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12
Q

Effect on strategy of the divorce between ownership and control (shareholders are different from the managers)

A
  • investment
  • hand over day-to-day running of the business
  • managers not involved in detailed decision making
  • rely on senior managers about options and communication about issues (divorce between ownership and control - managers pursue own interests at the expense of the owners = common to make shares part of managers’ reward to pursue the interests of the owners)
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13
Q

What is Corporate Governance

A

The systems and processes that are in place to monitor and control how a business is run:
- much greater concern over how businesses are regulated and how their owners know what is happening within them
- people who are supposed to be protecting the shareholders interests may also be trying to protect their own jobs as managers
- companies advised to have non-executive directors so that they have some ‘outside eyes’ on what they are doing to ensure that managers acting in the best interest of the owners

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14
Q

What is the purpose of Corporate Governance

A

Facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company

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15
Q

Evaluating strategic performance

A
  • Assessing if the strategy worked -
  • clear what it was trying to achieve, the resources it had and the conditions it was operating under
  • understand objectives, how managers expect to be measured and how they are expected to behave
    -“success” means different things in different businesses
  • time frame : businesses might not be profitable in the short term e.g building reputation and reputation for longer term growth
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16
Q

The benefits of strategic planning

A
  • It bases plans on data: should avoid irrational and badly thought through decisions being made
  • provides strategy that sets out for managers what the business is doing and how to do it ; can unify and motivate employees and provide a sense of direction
17
Q

The disadvantages of strategic planning

A
  • environment changes so fast that strategic plans may new renewing regularly and ay need a complete overhaul
  • strategy evolves over time and is the result of a series of decisions that gradually moved the business forward in a series of small steps
  • level of detail needed : things change so fast there is little point trying to anticipate detail too far in advance : is is maybe better to focus on overall direction and work out the detail as it is needed
18
Q

What is contingency planning

A

Part of the way businesses manage risk - planning for unforeseen events
- Risk management
- Contingency planning
- Crisis management

19
Q

Risk management

A

identifying and dealing with the risks threatening a business

20
Q

Crisis management

A

Handling potentially dangerous events for a business

21
Q

What is risk in business

A
  • the possibility of loss or business change
  • a threat that may prevent or hinder the ability to achieve objectives
  • the chance that a hoped-for outcome will not occur (e.g customers do not respond well to a product launch)
22
Q

Different ways businesses deal with risk

A
  • ignore it (wait and see)
  • reduce probability of risk
  • share or deflect the risk (e.g insurance)
  • make contingency plans - prepare for it
  • treat risk as an opportunity (particularly if it also affects other competitors)
23
Q

Examples of the common approaches in marketing to day-to-day risk management

A
  • avoid over-reliance on customers or products
  • develop multiple distribution channels
  • test marketing for new products
24
Q

Examples of the common approaches in operations to day-to-day risk management

A
  • hold spare capacity
  • quality assurance & control
25
Q

Examples of the common approaches in finance to day-to-day risk management

A
  • insurance against bad debts
  • investment appraisal techniques
26
Q

Examples of the common approaches in the HR to day-to-day risk management

A
  • key man insurance : protect against loss of key staff
  • rigorous recruitment & selection procedures
27
Q

How is contingency planning part of risk management

A
  • identifying what and how things can and might go wrong
  • understanding the potential effects if things go wrong
  • devising plans to cope with the threats
  • putting in place strategies to deal with the risks before they happen
28
Q

What is involved in contingency planning

A
  • preparing for predictable and quanitfiable problems
  • preparing for unexpected and unwelcome events
29
Q

Example of when contingency planning was essential

A

Thomas Cook - resilient in face of terrorist attacks

30
Q

Evaluating the need for contingency planning

A
  • Risks vary in terms of their significance to the business and likelihood
  • not required for every eventuality
  • cannot be ignored