4. Risks Associated with Strategy Flashcards
What are the 3 levels of strategy?
- Corporate
- Business
- Operational/functional
What is corporate strategy?
The overall purpose and scope of the organisation, what products or services to offer and whether to compete on price or quality
What is business strategy?
How to compete successfully in the chosen market
What is operational strategy?
Ensuring components of the business can effectively deliver the corporate and business level strategy
What 5 steps of the rational planning model for creating strategy?
- Establish a mission and objectives
- Analyse SWOT and PESTLE
- Generate potential strategies and evaluate them
- Implement the strategies
- Review the results and modify for any necessary changes
What are the 3 main benefits of rational planning?
- Forces to look ahead and identify risks
- Improves control
- Encourages creativity
What are the 4 downsides of the rational planning model?
- Costly
- Forecasting can be difficult
- Difficult if focus is on delivering short term results
- Stifle initiative
What are emergent strategies?
Strategies that develop in reaction to events affecting the organsiation
What are the 2 types of emergent strategies?
- Logical incrementalism (small incremental changes, but can drift with no plan)
- Freewheeling opportunism (take as they arise, must be adept to responding to changes and small)
What are the 3 competitive strategies?
- Cost leader
- Differentiation
- Stuck in the middle
What are Ansoff’s 4 options for strategic growth?
- Market penetration
- Market development
- Product development
- Diversification
What are the 4 common types of diversification?
- Backward (related) integration
- Forward (related) integration
- Horizontal (related) integration
- Unrelated diversification
What are the 4 methods for growth in Lynch’s expansion matrix?
- Internal development
- Exporting / overseas manufacture
- Home country JV or acquisition
- International JV or acquisition
What are the 6 advantages of acquisitions over organic growth?
- Bypass barriers to entry
- Take out competitors
- Less reaction from competitors
- Cheaper than internal development
- Can acquire scarce resources and core competencies
- Cost efficiency through synergy
What are the 5 risks of acquisition?
- Cultural differences
- Difficult to control speed
- Buy ‘warts and all’
- May cause staff anxiety
- Risk of paying too much
What are the 5 methods of joint expansion?
- Joint ventures
- Strategic alliances
- Franchising
- Licences
- Outsourcing
What are the 5 key risks of joint expansion?
- Lack of strategic fit
- Reaching profit split agreement
- Knowledge sharing
- Loss of control
- Loss of skill development
What are the 3 methods of growing internationally?
- Exporting
- Manufacturing abroad
- Operating multinationally
What are the 6 main new risks that arise from growing internationally?
- Foreign exchange risk
- Political risk
- Ethical risk
- Cultural risk
- Supply chain risk
- Customer relationship risk
What are the 3 criteria for evaluating strategy?
- Suitability
- Acceptability
- Feasibility
When is scenario planning most appropriate?
When the environment is complex and at risk of sudden and significant change
What are the 10 steps of scenario planning?
- Define the scope of the activity
- Identify key stakeholders
- Identify main trends
- Identify key uncertainties
- Identify potential causes of disruption
- Construct initial scenarios
- Check for plausibility
- Reduce to 2/3 scenarios
- Use scenarios to formulate strategy
- Identify resource needs
What is game theory?
Modelling the interactions between competitiors that are making decisions, mindful of what others might do
What is stress testing?
Critically appraising an existing strategy, designed to challenge the status quo when there is risk of stagnation
