8 Flashcards
What is strategy
Direction that organisation intends to take over long-term to meet its mission and achieve its objectives
Focuses on ways to manage organisations resources to create value for owners and/or shareholders
What is corporate strategy
Making choices about types of businesses and markets in which organisation will operate
Decisions regarding what businesses to divest or acquire and how best to structure and finance company
What is business or competitive strategy
Concerned with way that a business competes within its chosen market
What is strategic planning
Deciding to become a low-cost producer/service provider (cost leadership) – allows business to sell its goods or services at a lower price than competitors
What is strategy implementation
Economies of scale in production
Superior process technology
Tight cost control
Cost minimisation in areas such as marketing, production, research and development, and customer service
What is a strategic performance measurement
Have a strategic orientation
Include non-financial measures
Subject to managerial discretion
Use external benchmarks
Emphasise continuous improvement
What do non financial measures reflect
Drivers of future financial performance – improvements/three financial performance
More actionable, understandable and easier to relate to
What are examples of non-financial measures 
Customer satisfaction
Defect measures
Quality
Employee capability
What is the balance scorecard
Performance measurement system that identifies and reports on performance measures for each key strategic area of the business
Translates strategy into a plan of action through specific objectives and performance drivers
Also identifies assumed cause-and-effect relationships between these measures
What are the four perspectives in balance scorecard
Financial
Customer
Internal business
Learning and growth
What are lag indicators
Represents past performance
Examples include customer satisfaction or revenue
If objective is to improve customer satisfaction, lag indicator will monitor extent to which we have achieved that objective
What are lead indicators
Performance drivers that lead to achievement of lag indicators
Actionable and manageable
What are the steps for constructing balanced scorecard
Decide on overall objectives for each perspective
Decide how to monitor this objective –this is your lag indicator
What is the financial perspective
Reflects perspective of shareholder
Summarises financial outcomes of strategic decisions and actions
Survive
Succeed
Prosper
What is the customer perspective
Measures company’s success in achieving customer value
Quality
Cost
Performance and service
Time
What is the internal business perspective
Objectives relate to specific processes that contribute to customer and financial objectives
Cycle time
Productivity
Quality
What is the learning and growth perspective
Focuses on capabilities of organisation to achieve superior internal processes that create internal, customer and shareholder value
Employee capability
Organisational climate
Information systems capability
What are strategy maps
Visual representation that explains assumed cause and affect relationships linking objectives of four perspectives of BSC and organisations objectives
May also identify linkages between lag and lead measures
Tool to communicate to managers components of strategy and processes that will help achieve it
What are the errors in using non-financial measures
Lag between financial and non-financial performance
Incentives to engage in dysfunctional behaviour
Wrong strategic priorities selected
What are the disadvantages of non-financial measures
Wide choice of non-financial measures available
Inclusion of non-financial measures can be ad hoc and undirected
Managers must necessarily make trade-offs
Some non-financial measures lack integrity
Some measures may not easily translate into financial outcomes
