Block 1 Flashcards

1
Q

What is Company Strategy?

A

is the set of actions that its managers take to attract customers, outperform the company’s competitors, and achieve superior profitability

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2
Q

What is meant by a company’s strategy? (6)

A
  1. What is our present situation?
    • Business environment and industry conditions.
    • Firm’s financial and competitive capabilities.
  2. Where do we want to go from here?
    • Creating a vision for the firm’s future direction.
  3. How are we going to get there?
    • By crafting an action plan that heads the firm in the direction of its intended market position.
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3
Q

What is strategy about? (6)

A

● 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.

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4
Q

Explain Strategy as a choice: (4)

A
  1. It’s about deciding to compete differently from rivals
  2. 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.
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5
Q

How can a company compete differently from rivals? (5)

A
  • 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.
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6
Q

Why does a company need a strategy? (3)

A
  • To improve its financial performance.
  • To strengthen its competitive position.
  • To gain a sustainable competitive advantage over its market rivals.
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7
Q

What does a good strategy do for a company? (2)

A

● Helps produce above-average profits.
● Increases competitive pressures on rivals.

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8
Q

What should you look for when identifying a company’s strategy?

A

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
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9
Q

Define a competitive advantage:

A

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.

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10
Q

Define a Sustainable competitive
advantage:

A

Is when a company’s competitive advantage persists despite the best efforts of competitors to match or surpass this advantage.

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11
Q

What are the five basic strategic approaches?

A
  1. Low-cost provider
  2. Focused low-cost
  3. Best-cost provider
  4. Focused differentiation
  5. Broad differentiation
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12
Q

How do you create a sustainable
competitive advantage? (4)

A
  • 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.
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13
Q

Why does a company’s strategy evolve over time? (6)

A

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.
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14
Q

Explain a Realised (current) strategy:

A

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.
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15
Q

Define a deliberate strategy:

A

A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.

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16
Q

Define an emergent strategy:

A

An emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.

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17
Q

What does a firm’s business model focus on and consist of?

A

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

18
Q

Define a business model:

A

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.

19
Q

For a business model, explain the customer value proposition:

A
  • 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.
20
Q

For a business model, explain the profit formula:

A
  • 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.
21
Q

What are the three tests of a winning strategy? (6)

A
  1. 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.
  2. The competitive advantage test
    Is the strategy helping the company achieve a sustainable
    competitive advantage?
  3. The performance test
    Is the strategy producing superior company performance?Two kinds of performance indicators:
    - Competetive strength and market standing
    - Profitability and financial strength
22
Q

Explain why crafting and executing strategy are important tasks: (4)

A

Strategy provides:

  • A prescription for doing business.
  • A road map to competitive advantage.
  • A game plan for pleasing customers.
  • A formula for improving performance.
23
Q

Give the 5 stages of The Strategy-Making, Strategy-Executing Process:

A

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.)

24
Q

Why should we communicate the strategic vision?(4)

A
  • 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.
25
Q

Why does a well-communicated strategic vision matter? (5)

A
  • 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.
26
Q

Define Strategic Vision?

A

A strategic vision describes management’s aspirations for the company’s future and the course and direction charted to achieve them.

27
Q

Define Mission Statement?

A

A mission statement describes the company’s present business and purpose.

28
Q

Define Core Values?

A

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.

29
Q

What is the purpose of setting objectives?

A
  • 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
30
Q

What are the Characteristics of Well-Stated Objectives?

A
  • Specific
  • Quantifiable (measurable)
  • Challenging
  • Deadline for achievement
31
Q

Define Stretch Objectives?

A

Stretch objectives set performance targets high enough to stretch an organisation to perform at its full potential and deliver the best possible results.

32
Q

Setting stretch objectives promotes better overall performance because they?(4)

A
  • 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
33
Q

Define Strategic Intent

A

Is when a company relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.

34
Q

What are the characteristics of strategic intent? (3)

A
  • 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.
35
Q

Name and explain the two types of objectives a company should set:

A
  1. 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.
  2. 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.
36
Q

Define the balanced scorecard:

A

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.

37
Q

What are the three levels of management in a firm (6)

A

There are three levels of management in a firm:
1. CEO
2. Senior executives
3. Senior management

  1. Chief executive officer (CEO):
    - Has ultimate responsibility for leading the strategy-making process as strategic visionary and chief architect of strategy.
  2. Senior executives:
    - Fashion the major strategy components involving their areas of responsibility.
  3. 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.
38
Q

Name and explain the four levels of a firm’s strategy-making hierarchy: (10)

A
  1. 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.
  2. 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.
  3. 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.
  4. Operational strategies:
    are developed by frontline managers and are relatively narrow approaches for managing key operating units and specific operating activities with strategic significance.
39
Q

What are the requirements for executing the strategy? (5)

A

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.
40
Q

Explain what needs to be done when managing the strategy executing process: (10)

A
  • 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.
41
Q

What is involved in Evaluating and Monitoring developments?(2)

A
  1. Evaluating performance
  • Deciding whether the enterprise is passing the three tests of a winning strategy
  1. 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.