3.10.4 Flashcards
why do some strategies fail
Sometimes failure is beyond the control of the business, for example because of external factors like economic conditions. However, strategy can also fail because sufficient plans were not put in place, implementation failed or some other human factor was involved.
setting objectives - failure
Objectives are wrong - either
not achievable or send the business down the wrong path.
gather data - failure
Data not easily available - often business decisions are made on hunches instead of scientific data.
analyse data - failure
Poor analysis may occur when a business has little understanding or experience of the situation.
identify strategy - failure
The wrong strategic direction could be one that is too similar to that of a competitor or one that the business does not have the resources to achieve.
evaluate performance - failure
Success may depend on a number of factors and different managers are likely to have a different perspective on what success looks like; it is very subjective.
what is a planned strategy
A planned strategy is one that is formulated and then carried out over a period of time.
what is a emergent strategy
an emergent strategy is one that develops as the strategic plan is implemented.
Often a business will adapt the strategy because it has to respond to external forces or the managers realise that the initial plan was not appropriate.
An emergent strategy may not be what the business set out to achieve, but
this does not mean that the business was not successful. A business’s ability to adapt is a key factor in its long-term success.
features of planned strategy
- clear purpose for all employees leading to a consistent approach
- easier to measure success against
- easier to build a reputation (brand image).
emergent strategy features
- allows a business to adapt to its environment
- encourages a business to learn from its mistakes.
the divorce between ownership and control
In large organisations the owners and managers may be different people - particularly in a Plc. Owners may not understand issues ‘on the ground’ and managers may make decisions based on factors that they believe are right or which might benefit themselves - perhaps short-term gains to boost profits. Where there is a divorce of ownership and control, this can create problems when implementing a strategy.
what is corporate governance
Corporate governance refers to the systems and processes that are in place to monitor and control how a business is run.
why is corporate governance important
Corporate governance is important to ensure the interests of a particular stakeholder are not catered for over all others and to ensure the long-term success of the business.
how is corporate governance achieved
corporate governance policies
CSR reporting
non-executive directors (external).
why is assessing the success of a strategy difficult
because different stakeholders will have different perspectives. Furthermore, success of a business strategy is relative to external factors that have changed since the strategy was put in place.
A business can evaluate strategic performance using
key performance indicators (KPIs).
A business may use a number of KPIs (such as the Balanced Scorecard) and these should be:
well-defined and quantifiable
thoroughly communicated throughout the organisation and department
crucial to achieving the business’s goal (hence, they are key performance indicators)
applicable to the nature of the business.
examples of KPIs
customer satisfaction and retention
percentage of product defects
labour turnover
cost of goods sold
profit
revenue
number of new product lines launched
why is strategic planning important
Strategic planning is important because it helps managers understand their business and the environment in which it operates. It also identifies the steps that need to be taken and targets by which to measure success.
limitations of strategic planning
- the business environment is constantly changing
- strategies evolve over time
- the inaccuracy of data may limit the validity of any plan.
contingency plans
These are plans of action for possible but unlikely events - the ‘what if scenarios. Although contingency planning could be a waste of resources and time, it provides businesses with a fallback that they can act on should they need to. Contingency planning often considers how a business may react to the failure of a strategy.
