A. The strategy process Flashcards
what is an ecosystem?
made up of a network of organisations-including customers, suppliers, distributors, competitors, government agencies- involved in the delivery of a product or service
can be via either co operation or competition
constantly evolving and within which each organisation must be flexible and adaptable to survive
what is CIMA’s definition of strategy?
a course of action, including the specification of resources required, to achieve a specific objective
what is the J,S and W definition of strategy?
strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resrouces within a changing environment, to meet the needs of markets and to fulfil staeholder expectations
what are the characteristics of strategic decisions?
- likely to be affected by the scope of an organisation’s activities as they conceive the organisation’s boundaries
- involves the matching of the activities of an organisation to its ecosystem
- must also match the activities of an organisation to its resource capability
- needs to be considered in terms of the extent to which resources can be obtained, allocated and controlled to develop a strategy to the future
- operational decisions will be affected by strategic decisions because they will set off waves of lesser decisions
- will be affected by the expectations and values of those who have power within and around the organisation
- affect the long-term direction of the organisation
- strategic decisions are
what are the advantages of deliberate long-term planning?
- forces managers to look ahead:identify changes and how to deal with them
- improved control:identify mission and objectives, communicate these with management and targets
- identify key risks:undertaking detailed analysis, management can identify key external and internal risks and create contingency plans to deal with these
- encourages creativity: management will have to generate ideas for the organisation, meaning that it can benefit from their experience and ability to innovate
what are the disadvantages of formal, long-term planning?
- setting corporate objectives:difficult to create overall mission and objectives. could be contradictory to key stakeholders.
- short-term pressure:pressures on management are often for short-term results. can be difficult to motivate managers by setting long-term strategies when short-term problems can consume their entire working day
- difficulties in forecasting accurately
- bounded rationality:incomplete analysis, strategy based on this
- rigidity
- cost
- management distrust
what are the levels sf strategy?
CORPORATE (strategic) for whole organisation: -acquisitions, disposals and diversification -entering new industries -leaving existing industries
BUSINESS (or management) how the org can compete successfully in the individual markets: -achieve advantage over competitors -meet the needs of key customers -avoid competitive disadvantage
FUNCTIONAL( or operational) day to day management strategies of the organisation -HR strategy -marketing strategy -IT and IS strategy -operations strategy
what are the different types of strategic planning models?
rational model emergent model (Mintzberg) Logical incrementalism (Lindbolm) Freewheeling oppurtunism
what is the rational model?
logical, step-by-step approach
-requires analysis of existing circumstances, generate possible strategies and select the best ones and then implement them
what 3 stages did JSW group the rational model stages into?
STRATEGIC ANALYSIS
- internal analysis to identify strengths and weaknesses
- external analysis to identify opportunities and threats
- stakeholder analysis to identify key objectives and to assess power and interest of different groups
- gap analysis to identify the difference between desired and expected performance
STRATEGIC CHOICE
- strategies are required to ‘close the gap’
- competitive strategy - for each business unit
- directions for growth-which markets/products should be invested in
- whether expansion should be achieved by organic growth, acquisition or some form of joint arrangement
STRATEGIC IMPLEMENTATION
- formulation of detailed plans and budgets
- target setting for KPIs
- monitoring and control
how can the JSW approach be applied to an airline?
strategic analysis:competitor action, oil price forecasts, passenger volume forecasts, availability of cheap landing rights
strategic choices: which routes to launch?set up a subsidiart from scratch or buy an existing low-cost airline?
strategic implementation: setup of new subsidiary. Staff recruitment and training. Acquisition of aircraft and obtaining of landing slots.
what is an emergent strategy?
strategies that evolve in response to unexpected events that impact on the organisation
what is an example of the emergent model working with Pfizer
Viagara was originally a medicine for high blood pressure but after seeing side effects, used for other reasons
what is Logical Incrementalism?
small scale extension of past policy rather than radical change
Why doesn’t Lindbolm believe that the rational model of decision-making is sensible and suggests that in the real world it is rarely used?
Strategy is not usually decided by autonomous strategic planning terms that have time to impartially sift all the information and possible options before deciding on the optimal solution
managers have to sift through options themselves, bounded rationalist means they usually choose between relatively few options
leads to strategy being small scale extensions of past policy
what are the advantages of the incrementalism model over the rational model?
more acceptable to stakeholders as consultation, compromise and accomodation are built into the process
less of a cultural shift for the organisation to adopt an incremental approach to strategy as the organisation will not be trying to implement major shifts in its activities
what are the disadvantages of the incrementalism model?
no overall long-term plan causing it to suffer from strategic drift, eventually leading to it being unable to meet the needs of its customers
can mean that the organisation fails to make major changes if needed
what is freewheeling opportunism?
suggest that organisations should avoid formal planning and instead simply take advantage of oppurtunities as they arise
what is the main justification against formal planning?
takes too long and is too constraining especially in fast paced industries such as pharma and tech development
may also suit any experienced managers who happen to dislike planning
what are the problems of lack of formal planning?
failure to identify risks: don’t look ahead
strategic drift:does not have an overall plan for the future, meaning that it may be difficult for it to effectively compete in its market in the long term
difficulty in raising finance:investors like to know future plans
management skill:highly skilled at understanding and reacting to the changing market
what are the drawbacks of formal strategic planning?
too rigid: stifles innovation
bounded rationality: key issues are missed
time consuming, expensive and slow: issue in fast paced industries
what type of organisations do more formal planning approaches suit?
- exist relatively stable industries meaning there is sufficient time to undertake detailed strategic analysis
- have relatively inexperienced managers, as the formal planning approach helps to ensure they are familiar with the organisation as well as providing a series of guidelines they can follow to help them develop a strategy
