B. Analysing the organisational ecosystem Flashcards
who are stakeholders?
those persons and organisations that have an interest in the strategy of the organisation
what is a strategic network?
collection of different organisations that are separate in legal terms but which work collectively to try to achieve long term strategic advantage
- formal arrangements such as joint venture
- simple arrangement on informal basis
what is a strategic platform?
transfer of goods or services between provider and consumer can take place
modern version is a digital platform
what are the different levels of stakeholders?
internal, connected and external
when does stakeholder involvement increase in mission and strategy?
more power and interest
use Mendelow’s to prioritise
what are B&D’s ‘actors’ who have an influence on the way an organisation conducts its business
Organisation of states
-e.g. WTO, EU
States
-political and geographical e.g. Sweden
Organisations formed by firms
-business org with common agendas
Corporations
-invest in them as commercial vehicles e.g. Ford, BT
Non-governmental org (NGOs)
- explore common agenda, can be International or national
- aka civil society
Mass publics
-large audiences of citizens who express together a common concern about an issue
Knowledge based (epistemic) communities -state, business and NG reps who meet sporadically to share discourse e.g. CIMA
what are the sources of stakeholder power?
positional power
resource power
system power:high visibility or access relevant to situation
expert power
personal power:communication skills, reputation
how can you manage relationships with stakeholder groups?
- allocate organisational responsibility for the process of stakeholder management along with a budget
- use a team to manage stakeholders and decide on appropriate management techniques-ensuring a broad range of opinion and expertise
- establish and order the objectives of the organisation. Identify the areas for potential conflict and target resources into those ares
- frequent face-to-face meetings with the key player and keep satisfied
- communication processes for the keep informed and minimal effort groups-possibly via public Q&A sessions
- periodic formal reporting to stakeholders including the use of a website for FAQs
what are the 4 ways C&M suggest resolving conflicting stakeholder objectives?
satsificing: negotiation between key stakeholders to arrive at a compromise
sequential attention: focus on each stakeholder’s needs in turn
side payments: offer compensation to the stakeholder whose needs are not being met
exercise of power:force a decision
what does PESTEL stand for?
Political Economic Social Technological Environmental Legal
what are the criticisms of PESTEL analysis>
- issues identified by a formal PESTEL analysis may quickly become irrelevant. Esp in fast-moving industry
- PESTEL analysis process is prone to bias. Different managers may have different ideas on what the important issues are that need to be included in the analysis
- PESTEL may be incomplete. Can be difficult to correctly identify and understand every environmental issues that might affect the organisation in the future i.e. bounded rationality
what is Porter’s 5 forces analysis?
- 5 forces an organisation’s industry
- just because an industry is large and/or growing, high profits do not necessarily follow. The dive forces determine profit potential, both for the industry as a whole and for individual firms/SBUs
- strong collective forces give low profitability overall
- individual firm can earn better margins that competitors if it can deal more effectively with key forces
- the model can also be useful to generate ideas for a position analysis-especially threats
How can you determine barriers of entry?
- which barriers exist
- the extent to which they are liekly to prevent entry
- the organisaion’s poition-it is trying to prevent or attempt entry?
what are barriers to entry?
economies of scale
capital requirement for entry-high for capital intensive industry such as chemicals, power, mining
access to distribution channels
cost advantages independent of size
expected retaliation
legislation
differentiation
switching costs
when is bargaining power likely to be high?
when there is a concentration of buyers, particularly if the colume purchases of the buyers are high
when is supplier power likely to be high?
- when input is important to the buying company
- the supplier industry is dominated by a few suppliers who have secure market positions and are not subject to competitive pressure
- supplier products are branded or involve switching costs
- supplier customers are highly fragmented with little buying power
what factors affect the level of rivalry?
- extent to which competitors are in balance
- stage of life cycle:during growth stages, all companies grow naturally
- high storage costs may lead to cost-cutting to improve turnover which in turn increases the rivalry
- extra capacity in large increments which means price cuttine may follow to fill capacity
- difficulty in differentiating products leaves the basis for competition on price or augmented product
- high exit barriers mean that some companies must stay in the market
what is the conclusion of Porter’s 5 forces analysis?
a desirable circumstance would be a situation where there are weak substitutes and buyers, few substitutes with high barriers to entry and little rivalry
what are the criticisms of Porter’s 5 Forces model?
Porter argues that each of these forces can reduce overall industry profitability and their ‘profit potential’
abandon idea of satisfying customer in favour of a view that sees customers as direct competitors
what can the industry/product life cycle graph be used to predict?
competitive conditions and identify key issues for management in corporate appraisals and strategic choices
what are the key points of the introduction stage of the industry/product life cycle?
- it will be purchased by ‘innovators’
- high launch and marketing costs are likely
- production volumes will be low and product costs will be high
- buyers are unsophisticated
- competition is little if any
how does price elasticity of demand influence pricing strategy?
price skimming is appropriate when the product is known to have a price-inelastic demand
penetration pricing is appropriate where the demand is thought to be price-elastic and when gaining market share is seen as more important than fast recovery of development costs
what are pioneer companies?
the first to the market with a particular product , are usually forced to sell the concept
why is early entry risky?
heavy requirement for cash and product idea may fail but early entry allows the prospect of establishing market share and developing first mover advantage
what are the key points of the growth stage?
- sales for the market as a whole increase
- new competitors, attracted by the prospects, enter to challenge the pioneer
- new segments may be developed
- demand becomes more sophisticated
- competition levels increase
what are the key points of the maturity stage?
- fully sophisticated demand
- high levels of competition
- price becomes more sensitive
- demand reaches saturation. the only way to increase market share is to gain business from competitors or from ‘late adopters’ or ‘laggards’
- it would be desirable to have a high market share at this stage or to have successfully developed a niche
- large market share changes can be difficult to achieve at this stage and most companies would concentrate on defensive strategies to protect their current position and compete hard for the new customers coming into the marketplace
- over time the company must be vigilant to detect and anticipate changes in the market and be ready to undertake product or market modifications with a view to lengthening the life
what are the key points of the decline?
- competition reduces as players leave
- price falls to attract business as sophisticated customers expect cheap prices
- slow ‘harvesting’ must be balanced with straight divestment
- investment kept to a minimum to take up any market share that may be left by departing competitors
- there may be profitable niches remaining after industrial death
What are some considerations of the product/industry life cycle?
- offer a range of products at various stages of the life cycle-mature products will fund the development of new products
- competencies need to change-at the early stages, creativity and innovation are key whilst at later stages efficiencies and low costs become important
- life cycles are difficult to predict, can change quickly and will vary from one product to another. turning points are very hard to predict
- management anticipation of decline can cause decline! Reduction in investment and advertising can cause the appropriate market response
- SWOT varies across the life cycle
- strategies will need to change as the organisation progresses through the life cycle
what is the usefulness of the life cycle model?
improved strategic planning
improved budgeting
proactive approach
what does competitor analysis seek to do?
- provide an understanding of the comapny’s competetive advantage/disadvantage
- help generate insights inot competitors strategies
- give an informaed basis for developing future strategies to sustain/establish advantages over competitors
what 3 purposes of competitor analysis does Grant highlight?
- to forecast competitors’ future strategies and decisions
- to predict competitors’ likely reactions to a firm’s strategic initiatives
- to determine how competitor behaviour can be influenced to make it more favourable for the organisation
what are the 3 steps for competitor analysis?
- identify competitors
- brand competitors
- industry competitors:similar products but different segments
- form competitors:sell products that satisfy the same need as ours though technically very different
- generic competitors compete for the same income e.g. home improvements and golf clubs - analyse competitors
- objectives
- strategy
- assumptions
- resources&competencies
all contribute to predictions
- develop competitor response profiles
- laid back:does not respond
- selective:reacts to attack in only selected markets
- tiger:always responds aggressively
- stochastic:no predictable pattern exists
why enter foreign markets?
PRESSURE from shareholders to increase their ROCE
SATURATED domestic markets making home expansion difficult
OPPORTUNITIES as emerging markets arise with increases in economic income and spending power. Advances in technology, such as the internet and cloud computing, means recognising and exploiting such opportunities becomes more viable
TRADE BARRIERS COMING DOWN enabling competitors to compete in our domestic markets as well as increasing the opportunities for our company overseas
what are the risks arising from entering global markets?
marketing mis adaptions:modifications, cultural implications and potential costs
cultures vary
varying cost structures:quality of production factors, sufficiently skilled labour and management to enable global strategy
different competitive levels will exist in different markets
exchange rate volatility:control systems to protect company
different economic situations
political involvement
political situation:war, terrorism, government stability
entry requirements
what are the benefits of entering global markets?
EO:R&D, bulk-buying discounts available as the volume of our purchases and our reputation increases
management opportunity is increase and may prove motivational to certain types of managers
challenge to the traditional home cultural perspective
cheaper sources of raw materials and labour may allow competitive advantage
market development as the emerging markets bring a whole new range of consumers who will be embarking on their ‘first buy’ and so may not be as ‘fussy’ as consumers ina saturated market
risk reduction via portfolio spread
political sponsorship through national governments keen to boost local economy
political power becomes possible as the company grows in size and is seen to be contributing to wealth creating as opposed to exploitations of the nation concerned
what does Porter’s diamon model suggest?
reasons why some nations are more competitive than others and why some industries within nations are more competitive than others;
- the organisation can understand what, if any, factors have caused it to be successful in its current country or countries of operation
- the model can be used by the organisation to assess whether a particular country is suitable for expansion into
- governments can identify how to adjust their policies in order to attract or stengthen certain industries
what are the factor conditions?
supply side factors that convey an advantage
provide initial advantage which is then subsequently built upon to develop more advanced factors
basic factors are unsustainable as they are easily copies (unskilled labour) whilst advanced factors can convey the advantage as they are less easy to emulate (scientific expertise)
these usually include human, physical, knowledge, capital and infrastructure
what are the demand conditions?
sophisticated home demand can lead to the company developing significant advantages in the global marketplace
demanding customers set high standards can provide valuable input to new strategic initiatives
-Japanese customers have high expectations of their electival products which forces producers to provide technically superior product for the global marketplace, developing sophisticated markets
what are the related and supporting industry?
the value chain and system
advantage conveyed by the availability of superior supplier industries e.g. Italy has a substantial leatherwear industry which is supported by leather-working plants and top fashion and design companies
what are the strategy, structure and rivalry?
the competition element
different nations have different approaches to business in terms of structure and the intensity of rivalry that can take place
domestic rivalry can keep the org ‘lean and mean’ so that when they go out into the global marketplace, they can compete more successfully with the less capable foreign competition
governemnts can promote this rivalry via policy
according to Porter, how can countries produce world-class firms?
the role of government-subsidies, legislation and education can all impact on the other four elements of the diamond to the benefit of the industrial base of the country
the role of chance events-wars, civil unrest, chance discoveries and others can also change the four elements of the diamond unpredictably
make markets more appealing
what are the criticisms of Porter’s diamond model?
- looked at 10 developed countries so only applied to developed economies
- argues that inbound foreign direct investment does not increase domestic competition significantly because domestic firms lack the capability to defend their own markets and face a process of market-share erosion and decline. However, there seems to be little empirical evidence to support that claim
- Porter model does not adequately address the role of multi-national corporations. Ample evidence that the diamond is influenced by factors outside the home country
- Porter analysis focused on manufacturers, banks and management consultancy firms. Some have questioned its relevance to service-based companies
- Porter’s focus is on the domestic country rather than which foreign markets have been targeted. A careful choice of target is essential to ensure that the firm has the competences required for success
- not all firms from a given country are successful, suggesting that corporate management is more important than geographical location
what is a supply chain?
all activities and information flows necessary for the transformation of goods from the origin of the raw material to when the product is finally consumed or discarded
what is the difference between an upstream anddownstream supply chain?
upstream: between business and suppliers
downstream: between customers and business
why can businesses no longer only consider their immediate customers and suppliers?
the problems in the organisation ecosystem can have a significant impact on the business
what is the difference between a pull and push system?
pull:demand driven, use electronic connections to pull what is needed, less inventory e.g PCS,
Push:try to sell supplies
due to e-commerce capabilities, moving from traditional push model to pull
