Business Strategy Week 1 Flashcards
Why is planning important?
-gives direction and coordinates everyone in the org
-helps minimize waste and redundancy
-reduces uncertainty by understanding firms external environment
-establishes goals from the firm to the individual
-involves everyone (higher job satisfaction)
What does planning context include?
Includes external and internal environment ( managements vision, culture technology, ip)
-general environmental factors
-communities
-suppliers
-customers
-partners and shareholders
-regulators
-competitors
Hierarchy of plans
managements plans filter down through strategic, tactical and operational plans.
what is managements main task?
planning in managing the firm
the role of planning in managing the firm-planning
-defining goals, establishing strategy, developing plans to coordinate activities.
types - strategic, functional tactical
the role of planning in managing the firm-organizing and staffing
-determining who what when and where of tasks
-how they’re groups
-who reports to whom
-who makes decisions
-also recruiting, selecting, training and performance evaluation
the role of planning in managing the firm-what is the primary role of management?
planning
the role of planning in managing the firm- controlling
process of monitoring performance, comparing it with goals and correcting deviations
What is the purpose of strategic plans?
broadly guiding and positioning the firm relative to the competition;
functional plans
that align the goals and direct the strategic activities of the operating units
tactical/operational
plans that specify the details of how the operational goals will be achieved
residual uncertainty
uncertainty that remains even after planning
planning through the hierarchy?? need to look this up in the lecture notes
-functional structure
-divisional structure
functional plans
-business unit level planning
-interrelated across sbu
-shorter planning horizons than corporate and sbu plans but extend beyond fiscal year
-drive budget development and staffing plans
-ex: marketing plans, production plans, capacity plans
what does sbu mean?
strategic business unit
tactical/ operational plans
-narrow and specific
-allocation of resources to specific tasks
-short planning horizons (timesframes)
ex:
financial budgets
production schedules
staffing schedules
project work plans
more
heirarchical vs flat organizations? which org is more effective in stable and which in dynamic environments?
hierarchical organizations have many levels of managers reporting to managers and tend to be effective in stable environments
flat organizations have fewer levels of middle management. they are more effective in dynamic environemnts because decision making is delegated into operating areas
types of managers
-senior managers
-middle managers
-supervisors
-sometimes team leaders
types of strategic plans
-corporate
-business unit
-functional
competitive parity
when firms perform at the same level
competitive disadvantage
underperformance realtive to other firms and below industry average
competitive advantage
better performance than competitiors in the same industry or industry average
-always relative to competitors
what is business strategy?
goal directed actions a firm takes to get better performance than competitors. good strategy enables superior performance
Elements of a Good Business Strategy - competitive challenge
basically the challenge a firm must overcome in order to be competitive
Elements of a Good Business Strategy - guiding policy
or strategic commitment. specific things that you want to do to achieve a competitive advantage
Elements of a Good Business Strategy - coherent actions
set of steps taken to address obstacles to competitive advantage
how do goals flow through the organization in traditional goal setting
from the top down
How should goals be set?
using S.M.A.R.T. - specific measurable achievable and time bound
Specific-written in terms of outcomes rather than actions or processes
Measurable and quatifiable
Attainable - challenging but attainable
Relevant- relevant to the situation
Time frames - clear timeframes
porter vs mintzberg
porter - more methodical and deliberate
mintzberg - strategy emerges overtime as strategic intentions collide with changing market conditions
create competitive advantage - cost leadership
being the lowest cost producer in an industry
typically produce standardized products and focus on operational excellence
win with price sensitive customers
create competitive advantage - differentiation
having a unique product in a broad market
-can charge a premium if it creates value
create competitive advantage - focus strategy
establish cost leadership or differentiation competitive advantage but focused on a narrow market segment
-niche markets can be a good opportunity for this – can you cater to a specific group enough to charge a premium price
managements vision
managements vision for what the organization will look like in the future
A well crafted vision will be aspirational, motivational; will stretch the capabilities of the organization and create meaningful long term goals
mission statement
-what does the organization do
-how does the org do things
-what is the commitment to key stakeholders
-what are the core values
-real - not hype
criteria for effective vision and mission
-supplement vision with actionable picture of future business
-act out the vision mission and core values in everyday behavior
-back up vision and mission with strategic commitments
-use vision and mission to shape strategy
core values
-guiding principles of the firm
-support companies vision, shape culture and reflect companies identity and personality
vision statement
-exteranally facing and intended for consumption
-concise aspirational and gives a sense of purpose
-more focused on inspiring than driving strategic goals
vision statement vs mission statement
vision - aspirations
mission - how the org intends to accomplish vision
business model framework ( 3 value)
how the components of a business fit together to make a profit
-value delivery
-values creation
-value capture
business model framework -value delivery
component of business model that is customer facing. we need to deliver value to the customer
business model framework -value creation
focuses on business operations– how the firm creates value and supports the products and services in a post sales environment
-core competencies
Strategic Resources
resources important to firms competitive advantages
common revenue models
retail
transaction
rental/lease
usage
advertising and sponsorships
affiliate marketing
brokerage
subscription/membership
licensing
technology fueled new revenue models
-transitioning revenue models
-=data driven revenue models
-e-commerce
business model - economic model
defines the economic logic that is, how the firm captures value. It is comprised of the methods for generating revenues and the cost incurred to capture those revenues.
value capture
describes how the firm captures the value it is created and delivered
-revenues and expenses
-capital requirements and cost structures
cost leader strategy
outsourcing non-core activities
being efficient
lowest costs in industry focused on broad market
differentiation strategy
high quality inputs and outputs
product innovation and performance
higher costs overall
focus strategy
focus on catering to niche markets
should also differentiate or cost leader focus
focus on unserved or underserved markets
ex: store for left handers
traditional top down approach to process models
analysis -> formulate -> implement (afi framework)
analysis - external analysis
environmental trends and actions of industry players that impact the firm’s markets and operations
strategic management process- internal analysis
he firms resources and business model and fit to the evolving environmental conditions and competitor strategies
strategic management process- swot
strengths/weaknesses/ opportunities/threats framework to formulate business strategies
strategic management process- formulation
creation of business processes based on analysis? – need to fix
This activity involves the development of business cases that lay out the economic and strategic reasons for pursuing a particular strategic initiative
strategic management process - implementation
doing the plans you’ve formulated based on your analysis
-the action stage of the strategic management process
limitations of top down approach
-assumes future can be accurately predicted (extrapolation)
-based on centralization of authority and decision making with senior management
afi framework most common approaches
- traditional, conventional top down approach to strategy development;
- scenario-based planning, and
- strategy as planned emergence.
3 levels of characterizing knowledge and uncertainty
-things we know are true with high degree of probability
-things we can learn with research
-things we are unlikely to be able to learn even with research
levels of (residual) uncertainty
1 - clear enough future
2 - alternative but well definable futures ( usually choice between 2 futures)
3 - range of potential futures
4 - true ambiguity
residual uncertainty
things that are unknowable
scenario based strategy planning
think through multiple scenarios to help you develop a plan. used when data is limited or uncertain
scenario based planning steps
set the planning scope - frame key issues and establish the horizon
identify key environmental factors that will shape the firms future
select 2-3 key variables and formulate a set of possible outcomes based on them
create teams to “flesh out” each scenario
pick a dominant scenario and create trigger points for alternative scenarios w/ contingency plans
