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Le Go > 11 - Strategy development > Flashcards

11 - Strategy development Flashcards

1
Q

2 learning outcomes - chapter 11

A
  • demonstrate the different advantages and disadvantages of the three core strategic pathways
  • recognise the cultural and business impacts of an acquisition process and be able to compare this to a strategic alliance
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2
Q

3 core strategic pathways

A

Organic growth
Acquisition
Strategic alliance

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3
Q

Organic growth as strategic pathway - 5- advantages

A
  • Lower risk
  • Allows for ongoing learning
  • More control over strategy, culture
  • Minimises disruption (smoother)
  • Leads to self-reliance
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4
Q

Organic growth as strategic pathway - 3 disadvantages

A
  • Slow
  • Lack of early knowledge
  • Misreading of markets
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5
Q

Acquisition as strategic pathway - 4 advantages

A
  • Rapid access to resources
  • Rapid access to greater marketplace
  • Buys presence, market share, expertise
  • Opportunity for restructuring
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6
Q

Acquisition as strategic pathway - 5 disadvantages

A
  • High cost
  • High risk
  • Cultural mismatch across business
  • Managerial mismatch (in ambition and salary)
  • Potential for forced disposal of assets if monopolistic
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7
Q

Strategic alliance as strategic pathway - 5 advantages

A
  • Cheaper than acquisition
  • Access to market knowledge and complementary resources
  • Risk is spread
  • Increased speed of access to market
  • Reduced political and legal complications as no external approval required
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8
Q

Strategic alliance as strategic pathway - 2 disadvantages

A
  • Risk of reputational damage caused by partner in alliance
  • Differences in ideas on strategy, direction between partners in alliance
  • Confusion as to who people work for and report to
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9
Q

When would a company not pursue either organic development, strategic alliance or acquisition for growth?

A

If they are comfortable with current business parameters and restrictions and do not want to grow the business at all

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10
Q

What is absolutely vital prior to proceeding with an acquisition?

A

Due diligence process

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11
Q

7 generic considerations as part of due diligence process for target

A
  • Why the entity is for sale
  • Target’s current strategic position
  • Target’s market standing and reputation
  • Understanding of target’s current and previous business plan
  • Soundness and integrity of target’s financial results
  • Culture and ethos of target
  • Any issues facing the target, such as regulatory, litigation, etc.
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12
Q

3 broad areas of motivation for acquisition

A

Strategic
Financial
Managerial

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13
Q

3 strategic motives for acquisition

A
  • Extension of customer potential (geog, products, markets)
  • Reduction of competitors (through consolidation) can allow raising prices
  • Increasing efficiency through sharing of resources
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14
Q

3 financial motives for acquisition

A
  • Potential tax advantages through acquiring loss-making (or less profitable) org
  • Market value of firm will be greater than sum of parts (so long as there is recognised financial benefits to acquisition)
  • Opportunity for financial creativity in restructuring (eg. spreading financial benefits over time)
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15
Q

2 managerial motives (causes) for acquisition

A
  • Personal ambitions for increased power, remuneration, etc.
  • Excessive self-confidence
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16
Q

What is meant by strategic alliance?

A

2 or more orgs sharing resources in pursuit of common strategy

17
Q

Johnson - 2 categories within which strategic drive for alliance will fall in

A

Collective strategy - network of alliances to compete against rival network

Collaborative advantage - achieved through more effective managing of resources than competition

18
Q

3 main motives behind strategic alliance as preferred strategic pathway

A
  • Rapid achievement of critical-mass scale
  • Complementarity of differing capabilities ensuring more holistic business
  • Learning potential from working closely with partners within alliance
19
Q

4 types of strategic alliance

A
  • Customer-end network
  • Supplier-end network
  • Formal partnership
  • Joint-venture
20
Q

What is a ‘customer-end network’? - form of strategic alliance

A

Alliance focussed on increasing potential offering to existing customers of individual partners of alliance

21
Q

What is a ‘supplier-end network’? - form of strategic alliance

A

Alliance seeking to gain competitive edge by creating critical mass requirement from common supply base

22
Q

Define formal partnership

A

Individual organisations agree to work together within a partnership structure for a specific range of activities

23
Q

What is a joint venture

A

Legally recognised structure where independent orgs establish a newly created org that is jointly owned by the individual orgs, enabling development of specific range of activities

24
Q

3 key underlying criteria for evaluation/assessment of strategic options

A

Suitability (does it address the strategic objectives?)

Acceptability (will it satisfy the stakeholder objectives?)

Feasibility (will it actually work?)

25
Q

What is SAFe framework?

A

Evaluation of strategic options based on suitability, accessibility, feasibility

26
Q

4 advantages of strategic alliances

A
  • Access to complementary resources
  • Sharing of risk and resource enabling
  • Speed of access to market
  • Reduced political and legal complications
27
Q

What does assessment of the suitability of a strategic option require (3)

A
  • understanding of mission and objectives of strategy
  • use of a SWOT analysis
  • understanding of the culture of the organisation
28
Q

What does assessment of the acceptability of a strategic option require (3)

A
  • levels of expected returns of different stakeholder groups
  • risk appetite and tolerance of org and its stakeholders
  • perceived synergy that will be driven by achievement of strategic objectives
29
Q

What does assessment of the feasibility of a strategic option require (3)

A
  • ability to drive sustainable change from both a process and people perspective
  • availability of finance and other resources
  • likelihood of gaining sustainable advantage
30
Q

Johnson - 3 areas of caution in the process of strategic evaluation

A
  • need to avoid conflict between people
  • need to ensure consistency between different elements of strategy
  • need to ensure strategic options can be implemented in reality

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