207 stratergy and implementation Flashcards
relationship between objectives and strategy
objectives leads to stratergy- busines decides what its objectives are and the strategy can be made to meet these objectives
what are the 4 stratergies
- corperate stratergy
- stategic stratergy
- divisional stratergy
- functional stratergy
what is the corporate starergy
-Refers to strategic decisions that impact the entire organization.
-Made by senior managers.
-Decisions on how to achieve a business’s vision/mission/aims/objectives
describe startegic direction
- sets out in broad how objectives will be achieved
describe divisional stratergy
- the overall corperate stratergy will be communicared to divisonal managers
- this infomation shapes the plans the divisional managers create
- comany orginises different departmenst to focus on diffrernt products
describe functional stratergy
- relates to a single functional operation such as; production , marketing the actitives involved within these functions
explain the relationship between strategy and tactics
- tactics- meduim term decsions made by middle maagers- aim to implement strategic decisions
- tactics are adaptable- adjust to changing market decisions eg. advertising campaign
explain the purpose of corporate plans
-Based on management assessment of market opportunities, resources, and technology.
-Establish clear and measurable objectives.
-Include methods for monitoring progress and tactical decisions to achieve goals.
what is SWOT analysis
used to idenity and anysise the internal streoghs and weakneses of an orginisation and external oppotunities and threats created by the external environment
SWOT anysis examples
-strenths- brand reputation, USP, efficient production methods, high market share
-weakness- demotivated workforce, customer disatiscation, low working capital, lack of innovation
-oppotunites- favourable econmic condictions eg.low interest rates, social changes, high retained profit/working capital, new markets that are increasing in size
-threats-unfavourable ecomic conditions eg.high interest rate, new competitors/growth of existing competitors
what is poters 5 forces
- barriers to entry
- supplier power
- buyer power
- competitive rivalrly
- threat of substitution
what is the ansoff matrix
-A strategic tool used by a business to achieve growth
-Suggests the level of risk associated with each strategy
-Considers weather to target existing customers or new customers and if existing products should be used or new products should be developed .
desribe market penetraton
- focuses on exisiting products in existing markets
- aim to incease sales within its exising market eg. Mc Donalds selling a Big Mac
describe product development
- indroducing new products targeted at the exising market ( customers)
- prodcuts similar to those that the business already has eg. apple selling an apple watch
describe market development
- introducing existing products into new markets.
- Involves targeting new geographic areas or customer segments.
- Requires identifying market needs and adapting marketing strategies, e.g., Apple opening stores in India or Macciess veggie burger
decstibe diversification
- business ventures away from their core product and introduces a new product in a new industry for a new target audence eg.black and white maccies burger in China
usefulness of ansoff matrix to a business
- easy to undertand
- help businss make informed decisions
- minimises investment risk
drawbacks of using ansoff matrix to a business
- does not take into account competitors actions-> could be the first in market development- competitve advanatge/ first mover advantage
- difficult to predict futire
- lack of cost benifit analysis
what is organic growth
-uses existing resources to grow and will not involve any other business
- achived by; selling more products, expanding product range, targeting new markets, benifiting from econoies of scale
(+) of organic growth
- less risky -funded by retained profit
- less threat of loosing brand identiry
- less loss of controll
- employees know of the brand already
- cheaper than inorganic growth especially in the short term
- no culture clashes
(-) of organic growth
- lack of shared expertise
- disatisfaction from shareholders if they belive they are loosing out on the return on their investment
- business may be to small to compete with competitors
what is inorganic (external) growth
- achieved by takeovers (acquisitions) or mergers as a form of growth
- It is a quicker method of growth than organic growth
what are takeovers (external)
- when one business aquires another
- takes place when 50% shares are sold
-> Public companies: More vulnerable to takeovers (shares are traded on stock markets).
Private companies: Less vulnerable (shareholders must agree to sell)
what are mergers
- the process by which two companies become one
- agreed upon mutual concent
what is intergergration
refers to when a business seeks to grow inorganically (externally)
this involves the business either merging or taking over a business
what are the types of intergration
-backwards->previous stage of production eg. aldi-dairy farm
- horizontal-> same stage in the same industry eg. aldi- asda
-forwards-> the next stage of prodcution eg.aldi- deliveroo
benifts of horizonal intergration
-
less liklihood of failure when entering new markets- if businss has an established business in the market they want to enter- benifit from established brand awarness and dcustomer loyality- reduces competition
-business can share knowlege and expertise- two busisnes have strenth in different areas- greater quaility products/ customer satisfaction- increased revnue/ market share
limitations of horizontal intergration
-
culture clashes- employees at pervious comany may struggle to adapt as they have different ethods/ efficiency- slowing down production
-cost of puchase- mergers less likely to have much cost- taking over a competitor is time cinsuing/expenisve-ecpecially if one PLC is buying another PLC- leads to less capital available tooperate new business in short term
what is backwards vertical intergation
objective is to reduce costs / secure supplies/ more control over the quality of the product and the supply chain
eg. Starbucks buying a coffee farm in China
benefits of backwards vertical intergration
- business can dicatate when products/raw materials are delivered - many deliveries a day- JIT system
- controll quality of raw materials- important for predium brands- differ on quality
- profit margin of suppler is removed- cheaper variable costs
what is forward vertical intergration
when a business stars selling its prodcuts directly to customers, instead of relying on other businses to do it
eg. phone manufactoer opening stores to sell them directly
benifits of forward vetical intergration
- manufactor has guanteed oulets to sell their products- firms do not have to negotiate with retailors to stock their products- retailors requst large discounts/ could choose ot stop selling the product
- manufactorer has conrol of the price and advertisement of the product- eg. if its sold at prenium price or promotional offors attached- affecting brand image of a product
limitations of vertical intergration
- increased cost of operation such as staff, services and additional marketing
- lack of experince- taking over a comany comes with the risk of having a lack of understanding in how to recruit, market amd operate the business in the diferent stages in the supply chain
what is francising
is the legal right to use the brand name, products and business style of exising businses
franchisor - business who sells their brand
name to others
franchisee- business who has bought the
franchise
advantages from the franchisor’s (the person selling the franchise) point of view
-fast growth with lower risk- franchisee finances the growth
- economies of scale can happen quickly- franchisor now is involved in bulk buying for the franchises
- extra commitment from the franchises – committed to the success of the business -likely to be hardworking, helping to give a greater chance of successful growth- they had to pay for the franchise.
limitations from the franchisor’s (the person selling the franchise) point
- dieconomies of scale- growing too quickly may become harder for the franchisor to oversee management of quality across large amount tof franchises
- depends on the qulity of the frranchisee- weak undepreformincan affect the brand reputation for the whole business
benefits for the franchisee of buying into a franchise rather than starting their own business from scratch
- lower risk of failure than setting up a new business due to exising brand reuptation and supply chain network or exising business
- acsess to experice/ support from head office/ senior management of the franchisor
diadvanatges for the franchisee of buying into a franchise rather than starting their own business from scratch
- depends on the level of autonomy to make decisions such as branding, pricing and product portfolio made by the franchisor
- ongoing payments to franchisor- royalty fee
what is rationlisation
is the reorginisation of a business in order to increase its efficiency
methods of rationlising + limitations
-redundacies-> long term- reduces capacity utilisation , short-term: cost of trainig exisiting staff, challenge of re-orginising the remaing staff, expensive
-reduce product portfolio(remove dogs)-> loose some customer base
-introtuction of tech-> could lead to further job losses (band reputation), cost to impliment/train
-close branches-> loss of accesibilityto rtaget makret- reduces market share
-sale of assets and leaseback)-> reduces business size-increase monthly outgoings
-offsore to cheaper production country*-> less control of production/quality, distribution cost increased
importance of rationlisation
- can be neccesary to reduce/ avoid liquidity problems as the business may be experiencing a cash flow problem
- can maintain shareholders confifence as their dividnets are being protected
- reduced costs - reduced prices for customers
- greater efficiency if pursued with lean production techniques
limitations of rationlisation
- demotivates staff as job security is reduced-> therefore it depends on the motivation/ productivity of remaining staff
- negive PR can negitivelly impact brand reputation-> *depends on how well it is communicatd
- legal issues if redudnacies are not made by negotiation with trade unions-> depends negotiations made wiith trade unions*
factors effecting location
-increased market growth/acsess to new markets-> business with sufficient acsess to capital will seek to expand into fast growing market as they want stars rather than dogs in their portfolio, through using market development
-*acsess to factors of prodcution(land/labour)-> busisnes close to production- cheaper -reduce transportation costs, minimize delays, and have easier access to raw materials and skilled labour
-brand related/historic reasons-> reinforce brand identity, attract loyal customers. historic locations builds trust and brand recognition, while prestigious areas strengthen premium brands
what is outsourcing
is the busines practice of hiring a third party outside a comany to preform services or create goods that used to be preformed by the comany’s own employees and staff
(+) of outsorcing
- businses are able to react to changes in demand more quickly if they have access to a number of other firms’ production plants.
- lets the business focus on its core business
- Non standard orders can be completed with no disruption
•- allows the business to increase capacity utilisation.
(-) of outsourcing
-breakdown in communication in the production chain- cultural differences-> poor customer service
• employee demotivation: Job insecurity from outsourcing can lower morale, increase turnover, and reduce productivity.
• quality cannot be guranteed- production in the hands of producers miles away
•more difficult to impliment JIT systems
factors influencing weather a business outsources
- available capacity
- expertisie
- nature of demand
- cost
- level of risk
- impact on profit
