BST Flashcards
Threshold v unique resources
Threshold resources are basic resources required by a company to compete in the industry
unique are those that provide a sustainable competitive advantage
What is the 9Ms model
Men
Machines
Money
Materials
Markets
Management
Methods
Management info systems
Makeup (culture)
Can be used to identify resources which are available to business and those that need addressed to achieve CSFs
What is human capital?
Human capital considers the collective attributes of an organisation’s
human resources. This includes the capabilities, creativity, skills and
knowledge of the workforce and how these combine to create economic
value.
An organisation’s workforce can be a unique resource and many organisations
develop programmes specifically to enhance the value attained from their workforce.
These typically involve:
Education and training
Allowing creativity
Infrastructure
Recognising the intellectual property
Motivation
Competition
Participation in activities.
Recent developments allow the workforce to be more flexible, which should
maximise the benefits generated from them.
These include:
Flexible workplace arrangements
Home working
Improvements in technology, such as cloud computing.
Core competences
Core competences are the critical activities and processes which
enable the firm to meet the critical success factors and therefore
achieve a sustainable competitive advantage.
The core competences must be better than those of competitors and
difficult to replicate.
Kays core competences model. (3)
Kay’s model can be used to assess the core competences of an organisation.
Kay outlined three main sources of competences:
Internal architecture (relationships with employees)
External architecture (relationships with supplies. customers and intermediaries)
Network architecture (relationships between collaborating businesses)
Explain a value chain
A value chain identifies the relationships between the company’s
resources, activities and processes that link the business together and create a profit margin.
Explain how you would implement porters value chain analysis
Value chain analysis can be used to analyse the sequence of business
activities which add value to the products or services produced by a
company.
The value (or margin) is measured by the difference between the cost of the activities and sales revenue created by sales to customers.
Also, non-value adding activities can be identified and reduced or eliminated.
Porters has primary acitviies such as inbound logistics, operations, outboung logiistics, marketing and sales, as well as support acitivies such as HR tech devlopments procurement, and firm infrastrucutre, to give margin.
How to perform a value chain analysis? (2)
The start point for value chain analysis is to identify the generic strategy, ie cost leadership or differentiaiton
cost leaders should seek to achieve cost advantages in their value chain whilst differentiators should seek quality advantages through their value chain
Cost drivers: factors that cause costs to be incurred
Value drivers: potential sources of value
Explain the primary activities in the value chain. (5)
The primary activities are those that create value and are directly concerned with providing the product or service.
Inbound logistics are activities concerned with receiving, storing and distributing the inputs to the product.
Operations transform these various inputs into the final product.
Outbound logistics relate to collecting, storing and distributing the final product.
Marketing and sales informing customers about the product, persuading them to buy it, and enabling them to do so.
Service: After sales services such as installation, repair, training and customer service.
Explain support acitivites in the value chain. (4)
The support activities do not create value by themselves, but enable the primary activities to take place with maximum efficiency.
Procurement refers to the processes for acquiring the various resource inputs to the primary activities – not the resources themselves.
Technology development – All value activities have a technological content, even if it is just ‘know how’.
Human resource management which involves all areas of the business and is involved in recruiting, managing, training, developing and rewarding people within the organisation
Infrastructure refers to the systems of planning, finance, quality control, information management etc. and is crucially important to an organisation’s performance in primary activities. It also consists of the structures and routines that sustain the culture of the organisation.
Explain linkages in the chain (value chain)
The value chain can used to examine linkages between activities and processes where value can be created.
Linkages can be a source of sustainable competitive advantage. As it may be easy for competitors to identify and copy a single activity, but a linkage (a number of activities working together) is much harder to identify and copy.
Internally – Linkages are where two or more activities in the chain impact each other. There are two key types of linkage:
– Co-ordination: Activities should be consistent with each other and work together to support the generic strategy.
– Optimisation: Strength in one area may enable the firm to commit fewer resources to another area e.g. high quality product design may enable fewer resources to be spent on after sales service as the likelihood of product faults is lower.
Externally – a business’s internal value chain will link to, and should be consistent with:
– the customer’s chain
– and the supplier’s chain.
Ways to strengthen the value chain
Outsourcing – using an external provider to perform activities traditionally performed in-house. E.g. payroll
Automation – using automatic equipment to replace a process
Shared service centres – a number of internal activities, which had previously been conducted in a number of different departments are brought together into one site within an organisation.
Harmons process-strategy matrix (4)
This can be used to analyse business processes to determine how it should be managed.
The table is strategic importance vs process complexity/dynamics
For low importance low complexity these are automated/outsourced
For low importance high complexity these should be outsourced (too complex to automate_
For high importance low complexity should automate eg checkout tills important to a shop but can easily use self checkout
For high importance high complexity should improve this area
What are the main analytics tools for portfolio analysis?
Product life cycle
BCG matrix
The main thing with these is to have balance, to have products in different times of the cycle or different areas of the BCG to allow complimenting with other products eg cash cow can help invest in stars, mature market cash flows could help those in infancy of product life cycle.
BCG matrix
Market growth vs Market share (note relative market share=your sales/largest competitors shares)
High market growth- high market share is a star
HIgh market growth - low market share is a problem child
Low market growth - high market share is a cash cow
Low market growth - low market share is a dog
What are the implications of being a problem child
Lack of economies of scale limit cash flow and decision is either to invest to gain MS or divest
What are the implications of being a star
high threat of new entrants requires constant investment to maintain market position, should company consolidate its current position or further invest to growth further?
What are the implications of being a cash cow
Competitors less likely as not attractive market and large positive cash flow can be achieved
Should company milk the cow and enjoy the cash from minimal investment accepting that MS will fall, use this ot invest in stars or problem children?
What are the implications of being a dog
Product lacks EoS and not attractive enough market to warrant investmene , when should the compnay put the dog down and divest?
Development stage of product life cycle
-Negative cash flows – heavy investment in R&D and initial marketing
-Market research – will be key to ensuring the overall success of the product
Introduction stage of product life cycle
Continued cash outflow – high marketing costs can outweigh initial sales
Initial demand – will determine pricing policy (price skimming vs penetration)
Growth stage of product life cycle
New competition – quality improvements may be needed to compete
Economies of scale – may begin to emerge through mass production
Maturity stage of product life cycle
Critical mass – should be achieved leading to cost efficiencies
Positive cash flow – maximum sales with minimum marketing and investment
Decline phase of product life cycle
-Heavy price discounting – to utilise spare capacity and cover overheads
-Brand loyalty – may be key to retaining remaining customers
Define marketing
Marketing can be described as “the management process that
identifies, anticipates and supplies customer needs efficiently and
profitably”. (Institute of Marketing)
Ie market research -identify and anticipate customer needs
market segmentation - decide target market (B2B industrial segmentation v B2C consumer segmentation)
marketing mix - supply customers needs efficiently and profitably
Main info in marketing research and how can it be done (6)
Price
Product
Promotional research (how will you promote)
Place research (distn channels etc)
Main ways are:
desk research - secondary data
field research - primary data
Explain industrial segmentation (4)
Geographic - regions for sales/distn
Company size - large? small?
Company type - what type of business do you want to target?
Purchasing characteristics - average order size or frequency etc
Explain consumer segmentation (4)
Geographic - regions for sales/distn
demographic - age socio econimic, age etc
purchasing motivaiton - psychological characteristics eg security orientated or ego centred
Purchasing characteristics - average volume or frequency of orders
What are the 4P (7Ps) marketing?
Product (basic - core benefits of said product, actual -branding packagin labelling , augmented - additional value eg extra services product)
Promotion (push available when snd where customer requires them vs pull eg ads
Place (distribution, direct vs indirect selling)
Price (4Cs) and pricing strategies -diff flashcard
in services also have:
people-attitude, professionalism and knowledge etc of those delivering the service
process-appropriate systems and procedures to carry out services
physical evidence- customers can see or experience something when they use the service
4Cs of pricing. (4)
Costs- covering costs
Customers - how much will cusotmers pay, price sensitivity/elasticity
Competition - what are competitors charging
Corporate objectives - low prices may increase MS vs high prices consistent with premium brand
What are different pricing strategies? (6)
Price skimming- high prices initially to skim off customers willing to get product sooner eg new phones
Penetration - low price intially to increase MS
Price discrimination - diff prices charged to diff customer groups for same product eg train fares
Perceived quality - price reflects value placed on by customer eg expensive wine
Going rate - matching competition eg petrol station or meeting market conditions eg house prices in same region
Cost plus pricing - mark up on cost
Price elasticity of demand.
Essentially how reactive demand is based on price , inelastic products dont change as much where as elastic do change a lot based on price
PED = % change in demand/ % change in price
It is convention to ignore the sign of PED as it is almost always negative.
PED < 1 means inelastic
PED > 1 means elastic
PED = 0 perfectly inelastic
PED = infinity means perfectly elastic
Unitary elasticity is when PED=1
Factors impacting PED:
-availability of substitutes
-time- shorter term things tend to be less elastic
competitors pricing
-nature of the product eg luxuries tend to be more elastic and necessities less elastic
-proportion of income accounted for by good - if a good accounts for a large proportion of income the demand will tend to be elastic
Giffen and veblen goods
Both Giffen and Veblen goods have upward-sloping demand curves and positive price elasticity of demand.
Giffen:
Giffen looked at income effect on price changes and saw that increase price of bread but people still buy however people can no longer afford to buy more expensive foods so end up buying even more bread - bread is a giffen good
Veblen:
bought for ostentation so a higher price makes them more exclusive and desirable
What is good at combining internal and external analysis?
SWOT analysis
Strengths / weaknesses (internal)
Opportunities v threats (external)
Explain ansoffs matrix
This matrix looks at growth by considering opportunities to sell more existing products/develop new products and building market share in existing/new markets.
Therefore table is products (existing/new) vs markets (existing/new)
existing markets and products would be market penetration eg sofa companies bank hol sales
existing markets but new products would be product development eg new shaving product by gilette
new markets for existing products is market development
new markets and new products would be diversification
What are the two main forms of diversification?
Related diversification (concentric diversification)
Unrelated diversification (conglomerate diversification).
Related diversification
Related diversification involves integrating activities in the supply
chain (vertical integration-toward the marketplace forward or backward into the supply chain) or leveraging technologies or existing competences (horizontal integration).
What is vertical integration (related diversification)?
Vertical integration occurs when a company becomes its own supplier (backward) or distributor (forward)
Benefits of vertical integration? (5)
Economies of combined operations, e.g. proximity, reduced handling.
Economies of internal control and co-ordination, e.g. scheduling and coordinating operations should be better. Information about the market can be fed back to the production companies.
Economies of avoiding the market – negotiation, packaging, advertising costs are avoided.
Tap into technology – close knowledge of the upstream or downstream operations can give a company valuable strategic advantages. For example, pharmaceutical companies have undergone backwards integration into research to discover multiple possible uses for chemicals/compounds.
Guaranteed demand/supply.
Disadvantages of vertical integration. (4)
(a) Increases the proportion of the firms operating costs that are fixed (increased operating gearing). This is because if a firm purchases components externally all the costs are variable. If the components are purchased internally part of the costs will be variable and part will be fixed.
(b) Reduced flexibility to change partners – if in-house supplier or customer performs poorly or new products/technologies are developed outside the business, not easy to switch to outsiders.
(c) Capital investment needs – vertical integration will consume capital resources and must yield a return greater than, or equal to, the firm’s opportunity cost of capital, adjusting for strategic considerations, for integration to be a good choice.
(d) Differing managerial requirements – skills transfer from one type of business to another is not automatic.
What is horizontal integration? (2)
Involves a company utilising existing competences by entering into:
Complementary markets – e.g. Google’s acquisition of YouTube.
Competing markets – e.g. Honda motorcycles and cars
What is unrelated diversification?
The characteristic of conglomerate diversification is that there is no common thread.
However, it is still possible to achieve synergies through:
Management skills – e.g. Virgin Group.
Brand name – e.g. Yamaha motorbikes and keyboards.
Pros of unrelated diversification. (5)
Risk spreading: Diversified products and markets reduces variability of group
profits.
Can enter more attractive (more profitable) markets.
Can use surplus cash.
Utilise brand image in new markets.
Improve utilisation of central resources e.g. HR dept.
Cons of unrelated diversification. (3)
Lack of management experience in new products/markets.
Failure in one market could damage brand.
Often bad for shareholders as there is a lack of synergies available.
WHat is the rational approach to strategy? Emergent strategies?
This approach is also referred to as the traditional, formal or top-down approach.
It adopts a formal and systematic process of identifying goals and then selecting strategies to achieve those goals.
Emergent strategies are behaviours which are adopted and which
have a strategic impact. These are strategies that emerge over time in
response to the environment.
How to create strategic advantage
Resource based (inside out) focused on working on developing internal resources
Positioning (outside in) focused on identifying customer needs and adapting to these
