4: Introduction to business strategy Flashcards
What is strategy in business?
Strategy is the direction and scope of an organisation over the long term
Strategy is concerned with an organisation’s basic direction for the future, its purpose, its ambitions, its resources and how it interacts with the world in which it operates
Levels of strategy (3)
Corporate
Business
Functional (operational)
What is corporate strategy?
generally determined at main board level for the business as a whole
- determining the overall corporate mission
- overall product / market decisions
- other major investment decisions besides those for products / markets such as IT
- organisation’s policies
What is a strategic business unit (SBU) ?
A section, within a larger business, which is responsible for planning, developing, producing and marketing its own products or services
What is strategic management and the approach?
A statement of long term goals along with a definition of the strategies and policies which will ensure achievement of these goals
The formal approach to strategic management is to
- take decisions about the scope of the business activites
- long term direction of the business
- allocation of resources
What is formal strategic planning?
- strategic analysis
- strategic choice
- implementation of chosen strategies
- review and control
What factors are there to consider when making strategic decisions?
- what is it good at?
- how might the market change?
- how can customer satisfaction be delivered?
- what might prevent the plan from coming into being?
- what should be done to minimise risk?
- what actions should be followed?
Name the steps involved in strategic analysis? (4)
- External analysis (analysing the environment)
- Internal analysis
- Corporate appraisal
- Mission goals & objectives
What is the environment of a business?
Everything outside its boundaires. It may be segmented into the physical and task environment
What is the general and task environment of a business?
General environment:
- covers all the political, legal, economic, social, ecological and technological (PESTEL) influences in the countries in which a business operates
Task environment:
- relates to factors of a particular relevance to the business, such as its competitors, customers and suppliers of resources
What is the PESTEL framework?
Political
Economic
Social
Technological
Ecological
Legal
influences in a business
What are the four Ss that can be used to describe a static environment?
Static
Single - product/market
Simple - technology
Safe
What are the four D’s that can be used to describe a dynamic environment?
Dynamic
Diverse
Difficult
Dangerous
Name the political influences on business i.e government impact (6)
- Capacity expansion
- Demand
- Divestment (disposal) and rationalisation
- Emerging industries
- Entry barriers
- Competition
Name the economic influences on which businesses must attend (9)
- Local economic trends (rent, labour rates)
- National economic trends
- Overall growth and fall in wealth (GDP)
- Inflation
- Interest rates
- Tax levels
- Government spending
- The business cycle
- Productivity
Name the social/demographic factors that rise in strategic planning (7)
- Growth (+/- population)
- Age
- Geography
- Household and family structure
- Social structure
- Employment
- Wealth
Name the technological factors that affect business activities
- the type of products sold
- way in which services are provided (internet)
- way in which businesses are managed
- AI systems
- extend of communication with external clients
- way in which information is stored
Name the ecological factors that affect business activities (8)
- Resource inputs
- Waste output
- Legislation
- Government
- Disasters
- Demand
- Pressure groups
- Natural capital
Name the legal factors that affect business activities (different types of legislation) (9)
- General legal framework
- Criminal law
- Company law
- Employment law
- Health and safety law
- Data protection legislation
- Consumer protection
- Environment
- Tax law
Kotler’s four reaction profiles
- Laid back competitor - does not bite
- Tiger competitor - responds aggressively
- Selective competitor - reacts to some but not all threats
- Stochastic competitor - unpredictable
What is the part of the strategic plan referred to as position audit inferring?
Part of the planning process which examines the current state of the entity in respect of
- resources and assets
- competencies
- products, brands and markets
- internal organisation
- current results
- sustainability of the business
What is the ‘9 Ms Model’ which categorises the factors to be reviewed in a resource audit?
- Machinery
- Make-up (culture, structure, goodwill)
- Management
- Management information
- Markets
- Materials
- Men and women
- Methods
- Money
What is a limiting or key factor?
Anything which limits the activity of an entity. An entity seeks to optimise the benefit it obtains from the limiting factor.
E.g.: shortage of supply of a resource or a restriction on sales demand at a particular price
What is meant by an activity?
The means by which a business creates value in its products
