Block 1 Flashcards
What is Company Strategy?
is the set of actions that its managers take to attract customers, outperform the company’s competitors, and achieve superior profitability
What is meant by a company’s strategy? (6)
- What is our present situation?
- Business environment and industry conditions.
- Firm’s financial and competitive capabilities.
- Where do we want to go from here?
- Creating a vision for the firm’s future direction.
- How are we going to get there?
- By crafting an action plan that heads the firm in the direction of its intended market position.
What is strategy about? (6)
● How to position the firm in the marketplace.
● How to attract customers.
● How to compete against rivals.
● How to achieve the firm’s performance targets.
● How to capitalize on opportunities to grow the business.
● How to respond to changing economic and market conditions.
Explain Strategy as a choice: (4)
- It’s about deciding to compete differently from rivals
- Is likely to be successful when its actions, business approaches, and competitive moves appeal to buyers in ways that:
- Set a company apart from its rivals.
- Stake out a market position that is not crowded with strong competitors.
How can a company compete differently from rivals? (5)
- Doing what they don’t do or doing it better.
- Doing what they cannot do.
- Doing things that attract customers and set a firm apart from its rivals.
- Doing things calculated to produce a competitive edge over rivals.
- Doing what the firm must do and also knowing what it must not do.
Why does a company need a strategy? (3)
- To improve its financial performance.
- To strengthen its competitive position.
- To gain a sustainable competitive advantage over its market rivals.
What does a good strategy do for a company? (2)
● Helps produce above-average profits.
● Increases competitive pressures on rivals.
What should you look for when identifying a company’s strategy?
Actions to:
- Gain sales and market share via more performance features, more appealing design
- Gain sales and market share with lower prices based on lower costs.
- Enter new markets or exit existing ones.
- Capture emerging market opportunities and defend against external threats.
- Strengthen market standing by merging with other companies.
- Strengthen competitiveness through strategic alliances.
- Managing R&D, production, sales and marketing and other key activities.
- Upgrade, acquire or build important resources.
- Strengthening the firm’s bargaining power with suppliers distributors and others
Define a competitive advantage:
Is when a company provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm.
Define a Sustainable competitive
advantage:
Is when a company’s competitive advantage persists despite the best efforts of competitors to match or surpass this advantage.
What are the five basic strategic approaches?
- Low-cost provider
- Focused low-cost
- Best-cost provider
- Focused differentiation
- Broad differentiation
How do you create a sustainable
competitive advantage? (4)
- Develop valuable expertise and competitive capabilities over the long-term that rivals cannot readily copy, match, or beat.
- Put the constant quest for sustainable competitive advantage at center stage in crafting your strategy.
Why does a company’s strategy evolve over time? (6)
Managers modify strategy in response to:
- Changing market conditions
- Advancing technology
- Fresh moves of competitors
- Shifting buyer needs
- Emerging market opportunities
- New ideas for improving the strategy.
Explain a Realised (current) strategy:
A Realised (current) strategy is a blend of:
- Proactive (deliberate) strategy elements that include planned initiatives to improve the company’s financial performance and
secure a competitive edge. - Reactive (emergent) strategy elements developed on the fly in response to unanticipated developments and fresh market conditions.
- Abandoned and superseded strategy elements that no longer fit with the firm’s ongoing strategy.
Define a deliberate strategy:
A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.
Define an emergent strategy:
An emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.
What does a firm’s business model focus on and consist of?
It focuses on how the firm will make money:
● By providing customers with value
- The firm’s customer value proposition
● By generating revenues sufficient to cover costs and produce
attractive profits
- The firm’s profit formula
Define a business model:
A firm’s business model sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit.
For a business model, explain the customer value proposition:
- Satisfying buyer wants and needs at a price customers will consider a good value.
- The greater the value provided (V) and the lower the price (P), the more attractive the value proposition is to customers.
For a business model, explain the profit formula:
- Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition.
- The lower the costs (C) for a given customer value proposition (V– P), the greater the ability of the business model to be a moneymaker.
What are the three tests of a winning strategy? (6)
- The fit test
How well does the strategy fit the company’s situation?- External: well matched to industry and competetive conditions,
market opportunities, and other pertinent aspects of the
business environment in which the company operates. - Internal: tailored to the company’s resources and competetive
capabilities and be supported by a complementary set of
functional activities. - Dynamic: evolve over time in a manner that maintains close and
effective alignment with the company’s situation even as external
and internal conditions change.
- External: well matched to industry and competetive conditions,
- The competitive advantage test
Is the strategy helping the company achieve a sustainable
competitive advantage? - The performance test
Is the strategy producing superior company performance?Two kinds of performance indicators:
- Competetive strength and market standing
- Profitability and financial strength
Explain why crafting and executing strategy are important tasks: (4)
Strategy provides:
- A prescription for doing business.
- A road map to competitive advantage.
- A game plan for pleasing customers.
- A formula for improving performance.
Give the 5 stages of The Strategy-Making, Strategy-Executing Process:
Stage 1: Developing a strategic vision, mission and core values.
Stage 2: Setting objectives
Stage 3: Crafting a strategy to achieve the objectives and the company vision.
Stage 4: Executing the strategy
Stage 5: Monitoring developments, evaluating performance and initiating corrective adjustments.
(The first three stages are part of Strategy making, the last 2 stages are part of Strategy execution.)
Why should we communicate the strategic vision?(4)
- Fosters employee commitment to the firm’s chosen strategic direction.
- Ensures understanding of its importance.
- Motivates, informs, and inspires internal and external stakeholders.
- Demonstrates top management support for the firm’s future strategic direction and competitive efforts.
Why does a well-communicated strategic vision matter? (5)
- It crystallizes senior executives’ own views about the firm’s long-term direction.
- It reduces the risk of rudderless decision making.
- It is a tool for winning the support of organization members to help make the vision a reality.
- It provides a beacon for lower-level managers in setting departmental objectives and crafting departmental strategies that are in sync with the firm’s overall strategy.
- It helps an organization prepare for the future.
Define Strategic Vision?
A strategic vision describes management’s aspirations for the company’s future and the course and direction charted to achieve them.
Define Mission Statement?
A mission statement describes the company’s present business and purpose.
Define Core Values?
Core Values are the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company’s business and pursuing its strategic vision and mission.
What is the purpose of setting objectives?
- To convert the vision and mission into specific, measurable, challenging and timely targets.
- To focus efforts and align actions throughout the organisation.
- To serve as yardsticks for tracking a firm’s performance and progress
- To motivate and inspire employees to greater levels of effort
What are the Characteristics of Well-Stated Objectives?
- Specific
- Quantifiable (measurable)
- Challenging
- Deadline for achievement
Define Stretch Objectives?
Stretch objectives set performance targets high enough to stretch an organisation to perform at its full potential and deliver the best possible results.
Setting stretch objectives promotes better overall performance because they?(4)
- Push a firm to be more inventive
- Increase the urgency for improving financial performance and competitive position
- Cause the firm to more intentional and focused in its actions
- Act to prevent contentment with modest to average gains in performance
Define Strategic Intent
Is when a company relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.
What are the characteristics of strategic intent? (3)
- It indicates a firm’s intent to making significant gains in competing against key rivals and to establishing itself as a winner in the marketplace.
- Involves establishing a performance target and devoting the firm’s full resources and energies to achieving the target over time.
- Entails sustained, aggressive actions to take market share away from rivals and achieve a much stronger market position.
Name and explain the two types of objectives a company should set:
- Financial Objectives
- relate to the financial performance targets management has established for the organisation to achieve. They focus internally on the firm’s operations and activities. - Strategic Objectives
- relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects. They focus externally on competition.
Define the balanced scorecard:
The Balanced Scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
What are the three levels of management in a firm (6)
There are three levels of management in a firm:
1. CEO
2. Senior executives
3. Senior management
- Chief executive officer (CEO):
- Has ultimate responsibility for leading the strategy-making process as strategic visionary and chief architect of strategy. - Senior executives:
- Fashion the major strategy components involving their areas of responsibility. - Senior management:
- Managers of subsidiaries, divisions, geographic regions, plants, and other operating units (and key employees with specialized expertise)
- Utilize on-the-scene familiarity with their business units to orchestrate their specific pieces of the strategy.
Name and explain the four levels of a firm’s strategy-making hierarchy: (10)
-
Corporate strategy:
is developed by the CEO and other senior executives and establishes an overall game plan for managing a set of businesses in a diversified, multi-business company. -
Business strategy:
is developed by business unit heads and is concerned with strengthening the company’s market position, building competitive advantage, and improving the performance of a single line of business. -
Functional area strategies:
are developed by the heads of the respective functions and are approaches used to manage particular functions within a business, like R&D, production, procurement, sales and marketing, customer service, distribution and finance. -
Operational strategies:
are developed by frontline managers and are relatively narrow approaches for managing key operating units and specific operating activities with strategic significance.
What are the requirements for executing the strategy? (5)
Converting strategic plans into actions requires:
- Directing organisational action
- Motivating people
- Building and strengthening the firm’s competencies and competitive capabilities.
- Creating and nurturing a strategy -supportive work climate.
- Meeting or beating performance targets.
Explain what needs to be done when managing the strategy executing process: (10)
- Creating a strategy-supporting structure
- Staffing the firm with the needed skills and expertise.
- Developing and strengthening strategy supporting resources and capabilities.
- Allocating ample resources to the activities critical to strategic success.
- Ensuring that policies and procedures facilitate effective strategy execution.
- Organising work effort to achieve best practices.
- Installing information and operating systems that enable company personnel to perform essential activities.
- Motivating people and tying rewards directly to the achievement of performance objectives.
- Creating a company culture conducive to successful strategy execution.
- Exerting the internal leadership needed to propel implementation forward.
What is involved in Evaluating and Monitoring developments?(2)
- Evaluating performance
- Deciding whether the enterprise is passing the three tests of a winning strategy
- Initiating corrective adjustment
- Deciding whether to continue or change the firm’s vision and mission, objectives, strategy, and strategy execution methods.
- Applying lessons based on organizational learning.
