Block 1: Strategy Flashcards
Distinguish between firm and organization
A firm is said to have more than one partner that go in agreement between them. On the other hand an organization is a social arrangement characterized by collective goals and it looks upon its own performance.
Complete the sentence
A company’s strategy is…
The set of actions that its managers take to outperform the company’s competitors and achieve superior profitability.
Discuss strategy as a choice
- Is about deciding to compete differently from rival, doing what competitors do not do or, even better, doing what they cannot do! * 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 competitor
Discuss strategy and competitors
Strategy is about competing differently from rivals.
- Doing what they do not 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 bother with strategy?
An organization needs a strategy to specify what actions will be taken.
* To improve its financial performance
* To strengthen its competitive position
* To gain a sustainable competitive advantage over its market rivals
Elaborate on competitive advantage and sustainable competitive advantage
Competitive advantage
* Requires meeting customer needs either more effectively (with products or services that customers value more highly) or more efficiently (by providing products or services at a lower cost to customers)
Sustainable competitive advantage
* Requires giving buyers lasting reasons to prefer a organization products or services over those of its competitors
State the basic strategic approaches
- broad differentiation
- focused differentiation
- best cost provider
- focused low cost
- broad low cost
When does a firm gain competitive advantage and sustainable competitive advantage
An organisation (aka firm) achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers buyers the same value as its rivals but at a lower cost to the firm.
The firm achieves a sustainable competitive advantage if the basis for its advantage persists despite the best efforts of competitors to match or surpass its advantage.
How to create a sustainable competitive advantage?
Develop valuable expertise and competitive capabilities over the long term that rivals cannot readily copy, match, or best Put the constant quest for sustainable competitive advantage at center stage in crafting your strategy
Managers modify strategy in response to what?
*Changing market conditions
*Advancing technology
*Fresh moves of competitors
*Shifting buyer needs
*Emerging market opportunities
*New ideas for improving the strategy
Complete the sentence.
Changing circumstances and ongoing management efforts to improve the strategy cause…
An organisations strategy to evolve over time—a condition that makes the task of crafting strategy a work in progress, not a one-time event.
An organisations strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and of learning by doing
What is the evolving nature of an organisations strategy?
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
Deliberate strategy consists of?
A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.
Emergent strategy consists of?
Its emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.
True or False
A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments
True
How does a firm make money?
By providing customers with value The firm’s customer value proposition By generating revenues sufficient to cover costs and produce attractive profits
Complete the sentence
A firm’s business model sets…
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.
Discuss the customer value proposition in relation to business model
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
State the profit formula
The profit formula Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition V – the value provided to customers P – the price charged to customers C – the costs (of the organisation)
True or false
Thehigher the costs (C) for a given customer value proposition (V–P), the greater the ability of the business model to be a moneymaker
False
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 does strategy provide?
A prescription for doing business
A road map to competitive advantage
A game plan for pleasing customers
A formula for attaining long-term standout marketplace performance
True or False
A company performs is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.
True.
Disclose process of strategy making and execution
- Developing a strategic vision, a mission statement, and a set of core values
- Setting objectives for measuring the firm’s performance and tracking its progress
- Crafting a strategy to move the firm along its strategic course and achieve its objectives
- Executing the chosen strategy efficiently and effectively
- Monitoring developments, evaluating performance, and initiating corrective adjustments
Complete the sentence
A company’s strategic plan lays…
“A company’s strategic plan lays out its future direction, performance targets, and strategy.”
How can one develop a strategic vision?
- Delineates management’s aspirations for the firm to its stakeholders
- Provides direction: “where we are going”
- Sets out the compelling rationale (strategic soundness) for the firm’s direction
- Uses distinctive and specific language to set the firm apart from its rivals
State the do’s of developing a strategic plan
- Be graphic
- Be forward-looking and directional
- keep it focused
- Have some wiggle room
- Be sure the journey is feasible
- Indicate why the directional path makes good business
- Make it memorable
State the do not’s of developing a strategic plan vision
- Don’t be vague or incomplete
- Don’t dwell on the present
- Don’t use overly broad language
- Don’t state the vision in bland or uninspiring terms
- Don’t be generic
- Don’t rely on superlatives
- Don’t run on and on
How should one communicate their strategic vision?
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 should one communicate their strategic vision?
- 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 communicate?
- 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
True or False
An effectively communicated vision is a valuable management tool for enlisting the commitment of company personnel to engage in actions that move the company forward in the intended direction
True
Explain what is an mission statement
●Uses specific language to give the firm its own unique position. Describes the firm’s current business and purpose
“who we are, what we do, and why we are here”
● Should focus on describing the firm’s business, not on “making a profit”—earning a profit is an objective not a mission
What is strategic vision?
● A strategic vision portrays a firm’s aspirations for its future (“where we are going”).
● A firm’s mission describes the scope and purpose of its present business (“who we are, what we do, and why we are here”)
What should a mission statement encompass?
- Identifies the firm’s product or services
- Specifies the buyer needs it seeks to satisfy
- Identifies the customer groups or markets it is endeavouring to serve
- Specifies its approach to pleasing customers
- Sets the firm apart from its rivals
- Clarifies the firm’s business to stakeholders
Explain core values
- Are the beliefs, traits, and behavioral norms that employees are expected to display in conducting the firm’s business and in pursuing its strategic vision and mission
- Become an integral part of the firm’s culture and what makes it tick when strongly espoused and supported by top management
- Match the firm’s vision, mission, and strategy, contributing to the firm’s business success
Explain setting objectives
- To convert the vision and mission into specific, measurable, challenging and timely performance targets
- To focus efforts and align actions throughout the organization
- To serve as yardsticks for tracking a firm’s performance and progress
- To provide motivation and inspire employees to greater levels of effort
Define objectives in context of setting objectives
Objectives are an organisation’s performance targets—the specific results management wants to achieve
Explain the difference between short-term objectives and long-term objectives
Short-Term Objectives:
* Focus attention on quarterly and annual performance improvements to satisfy near-term shareholder expectations.
Long-Term Objectives:
* Force consideration of what to do now to achieve optimal long-term performance. Stand as a barrier to an undue focus on short-term results.
Define stretch objectives in context of setting objectives
Stretch objectives set performance targets high enough to stretch an organization to reach its full potential and deliver the best possible results.
* Push a firm to be more inventive.
* Increase the urgency for improving financial performance and competitive position.
* Cause the firm to be more intentional and focused in its actions.
* Act to prevent internal inertia and contentment with modest to average gains in performance.
Define financial objectives
Financial objectives relate to the financial performance targets management has established for the organization to achieve.
* Communicate top management’s goals for financial performance.
* Are focused internally on the firm’s operations and activities.
Define strategic objectives
Strategic objectives relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects.
* Are the firm’s goals related to marketing standing and competitive position.
* Are focused externally on competition vis-à- vis the firm’s rivals.
When does a company exhibit strategic intent?
A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.
- Supports making quantum gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds. * Develop a grandiose performance target out of proportion to immediate capabilities and market position, but then 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
Explain 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.
* A balanced scorecard measures a firm’s optimal performance by:
* Placing a balanced emphasis on achieving both financial and strategic objectives.
* Tracking both measures of financial performance and measures of whether a firm is strengthening its competitiveness and market position.
What does effective corporate governance require?
Effective corporate governance requires the board of directors to oversee the company’s strategic direction, evaluate its senior executives, handle executive compensation, and oversee financial reporting practices.
What is crafting a strategy?
- Addresses a series of strategic how’s.
- Requires choosing among strategic alternatives.
- Promotes actions to do things differently from competitors rather than running with the herd.
- Is a collaborative team effort that involves managers in various positions at all organizational levels.
State the CEO responsibility
● Has ultimate responsibility for leading the strategy making process as strategic visionary and chief architect of strategy
What is the board of directors responsibility?
- Oversee the firm’s financial accounting and reporting practices compliance with GAAP principles
- Critically appraise the firm’s direction, strategy, and business approaches
- Evaluate the caliber of senior executives’ strategic leadership skills
- Institute a compensation plan that rewards top executives for actions and results that serve stakeholder interests—especially shareholders
Disclose the senior executives responsibilities
● Fashion the major strategy components involving their areas of responsibility. 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
What is corporate strategy?
Multi-business strategy—how to gain synergies from managing a portfolio of businesses together rather than as separate businesses
What is business strategy?
*How to strengthen market position and gain competitive advantage
*Actions to build competitive capabilities of single businesses
*Monitoring and aligning lower-level strategies
What is functional area strategy?
*Add relevant detail to the “hows” of business strategy
*Provide a game plan for managing a particular activity in ways that support the business strategy
What is Operational strategy?
*Add detail and completeness to business and functional strategies
*Provide a game plan for managing specific operating activities with strategic significance
True or false
A company’s vision, mission, objectives, strategy, and approach to strategy execution are never final; reviewing whether and when to make revisions is an ongoing process.
True
Complete the sentence
An objective of a company…
Is not to obtain competitive success which is temporary, but to obtain long-term success which will support the growth of a company, and this will secure the company’s future in the industry.
What does a creative and distinctive strategy help with?
Help a company produce above-average profits and increase competitive pressures on rivals
When does a strategy have a better chance of succeeding?
- It appeals to buyers in ways that set a company apart from its competitors
- It establishes a market position that is not crowded with strong competitors.
State the different 3 test a strategy goes through
- The fit test
- The competitive advantage test
- The performance test
True or false
To be a winning strategy, a strategy must match industry and competitive conditions.
True
How can company strategy pass the fit test?
To pass the fit test a strategy must fulfill the following:
- External fit
- Internal fit
- Dynamic fit
Explain external fit
Well-matched to industry and competitive conditions, market opportunities, and other pertinent aspects of the business environment in which the company operates
Explain internal fit
Tailored to the company’s resources and competitive capabilities and be supported by a complementary set of functional activities
Explain dynamic fit
Evolve over time in a manner that maintains close and effective alignment with the company’s situation even as external and internal conditions change
Discuss the competitive advantage test
- Is the strategy helping the company to achieve a sustainable competitive advantage?
- If a strategy does not achieve continuous competitive advantage over rivals, they rarely produce excellent performance for more than a brief time period.
- Winning strategies equip a company to achieve a competitive advantage over key rivals, the bigger and more durable the competitive advantage the more powerful it is.
What are the performance indicators of performance test that tell most about the quality of a company’s strategy?
- Competitive strength and market standing
- Profitability and financial strength
