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CIMA - P3 > 4. Risks Associated with Strategy > Flashcards

4. Risks Associated with Strategy Flashcards

1
Q

What are the 3 levels of strategy?

A
  1. Corporate
  2. Business
  3. Operational/functional
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2
Q

What is corporate strategy?

A

The overall purpose and scope of the organisation, what products or services to offer and whether to compete on price or quality

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3
Q

What is business strategy?

A

How to compete successfully in the chosen market

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4
Q

What is operational strategy?

A

Ensuring components of the business can effectively deliver the corporate and business level strategy

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5
Q

What 5 steps of the rational planning model for creating strategy?

A
  1. Establish a mission and objectives
  2. Analyse SWOT and PESTLE
  3. Generate potential strategies and evaluate them
  4. Implement the strategies
  5. Review the results and modify for any necessary changes
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6
Q

What are the 3 main benefits of rational planning?

A
  1. Forces to look ahead and identify risks
  2. Improves control
  3. Encourages creativity
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7
Q

What are the 4 downsides of the rational planning model?

A
  1. Costly
  2. Forecasting can be difficult
  3. Difficult if focus is on delivering short term results
  4. Stifle initiative
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8
Q

What are emergent strategies?

A

Strategies that develop in reaction to events affecting the organsiation

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9
Q

What are the 2 types of emergent strategies?

A
  1. Logical incrementalism (small incremental changes, but can drift with no plan)
  2. Freewheeling opportunism (take as they arise, must be adept to responding to changes and small)
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10
Q

What are the 3 competitive strategies?

A
  1. Cost leader
  2. Differentiation
  3. Stuck in the middle
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11
Q

What are Ansoff’s 4 options for strategic growth?

A
  1. Market penetration
  2. Market development
  3. Product development
  4. Diversification
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12
Q

What are the 4 common types of diversification?

A
  1. Backward (related) integration
  2. Forward (related) integration
  3. Horizontal (related) integration
  4. Unrelated diversification
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13
Q

What are the 4 methods for growth in Lynch’s expansion matrix?

A
  1. Internal development
  2. Exporting / overseas manufacture
  3. Home country JV or acquisition
  4. International JV or acquisition
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14
Q

What are the 6 advantages of acquisitions over organic growth?

A
  1. Bypass barriers to entry
  2. Take out competitors
  3. Less reaction from competitors
  4. Cheaper than internal development
  5. Can acquire scarce resources and core competencies
  6. Cost efficiency through synergy
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15
Q

What are the 5 risks of acquisition?

A
  1. Cultural differences
  2. Difficult to control speed
  3. Buy ‘warts and all’
  4. May cause staff anxiety
  5. Risk of paying too much
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16
Q

What are the 5 methods of joint expansion?

A
  1. Joint ventures
  2. Strategic alliances
  3. Franchising
  4. Licences
  5. Outsourcing
17
Q

What are the 5 key risks of joint expansion?

A
  1. Lack of strategic fit
  2. Reaching profit split agreement
  3. Knowledge sharing
  4. Loss of control
  5. Loss of skill development
18
Q

What are the 3 methods of growing internationally?

A
  1. Exporting
  2. Manufacturing abroad
  3. Operating multinationally
19
Q

What are the 6 main new risks that arise from growing internationally?

A
  1. Foreign exchange risk
  2. Political risk
  3. Ethical risk
  4. Cultural risk
  5. Supply chain risk
  6. Customer relationship risk
20
Q

What are the 3 criteria for evaluating strategy?

A
  1. Suitability
  2. Acceptability
  3. Feasibility
21
Q

When is scenario planning most appropriate?

A

When the environment is complex and at risk of sudden and significant change

22
Q

What are the 10 steps of scenario planning?

A
  1. Define the scope of the activity
  2. Identify key stakeholders
  3. Identify main trends
  4. Identify key uncertainties
  5. Identify potential causes of disruption
  6. Construct initial scenarios
  7. Check for plausibility
  8. Reduce to 2/3 scenarios
  9. Use scenarios to formulate strategy
  10. Identify resource needs
23
Q

What is game theory?

A

Modelling the interactions between competitiors that are making decisions, mindful of what others might do

24
Q

What is stress testing?

A

Critically appraising an existing strategy, designed to challenge the status quo when there is risk of stagnation

CIMA - P3 (6 decks)

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