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
What is meant by a value driver?
Elements of a product or service and activities that increase the amount of value consumers place on it.
They are means of differentiating the product or service from the competition and may include product features or intangibles such as branding
What is meant by a cost driver?
Any activity that affects the cost of a product or a service
What is a value chain?
The sequence of business activities by which, in the perspective of the end user, value is added to the products or services produced by an entity
What are the differences between primary and support activities within an organisation
Primary: directly related to production, ops, sales, marketing, delivery and service
Support: provide purchased inputs, HR, tech, infrastructual functions to support the primary activities
What is the supply chain management (SCM)?
Optimising the activities of a business working together to produce goods and services
SCM is a means by which the business aims to manage the chain from input resources to the consumer
What is meant by the product life cycle?
How a product demonstrates different characteristics of profit and investment over time
Analysing it enables a business to examine its portfolio of goods and services as a whole
What is meant by:
Product class?
Product form?
Brand?
Product class:
broad category of product such as cars
Product form:
e.g. five door hatchback cars
Brand:
particular type of product e.g. Ford Focus
What are the four stages of the product life cycle?
- Introduction
- Growth
- Maturity
- Decline
What is meant by market share?
One entity’s sale of a product or service in a specified market expressed as a percentage of total sales by all entities offering that product or service
Assessing the market share as high or low depends on the conditions in the market
What is SWOT analysis?
Strengths
Weaknesses
Opportunities
Threats
What is corporate appraisal?
A ‘critical assessment of the strengths and weaknesses, opportunities and threats (SWOT) in relation to the internal and environmental factors affecting an entity in order to establish its condition before the preparation of a long term plan’
What is a mission statement?
A formal document that states the business’ basic function in society expressed in terms of how it satisfies its stakeholders
Define competitive strategy
‘Taking offensive or defensive actions to create a defendable in an industry; to cope successfully with … competitive forces and thereby give a superior return on investment for the business
What is cost leadership?
Producing at the lowest cost in the industry as a whole (not necessarily being the producer offering the lowest prices to the consumer, through the cost leader can compete freely on price in the marketing mix)
What is differentiation with regard to products?
The provision of a product or service which the industry as a whole believes to be unique
What is a focus or niche?
Involves restriction of activities to only part of the market (a segment) through:
- cost focus
- differentiation focus
What are stars, cash cows, question marks, and dogs? (With regard to products)
Stars:
- require investment in excess of the cash they generate in order to maintain market position
Cash cows:
- very little investment and generate high levels of cash income
Question marks
- do the products justify considerable capital expenditure in the hope of their increase in market share?
- should they be left to die?
Dogs:
- may be ex-cash cows that have now fallen on hard times
- only show a modest net cash outflow
- may have a useful role either to complete a product range or keep competitors out
