ch5 Flashcards
what is Strategy
The adoption of courses action and the allocation of resources necessary to achieve the goal.
What does “imperative” mean
A variable that dictates structure.
How does an organisation determine its strategy?
Planning mode strategy as an explicit and systematic set of guidelines developed in advance.
It reduces the determination of a strategy to a well thought out process where rationality plays a significant role.
What is Corporate level strategy:
- attempts to define the nature of businesses in which the firm seeks to operate
- If a corporation is more then one line of business it will need a corporate level strategy.
What is Business level strategy:
- refers to those strategies adapted by business units of the organisation.
- seeks to answer the question: How should we compete in each of our businesses?
What is Chandlers Thesis?
-About relationship between an organisations strategy and its structure
-concluded that changes in an organisations strategy led to change in its structure.
- “unless structure follows strategy, inefficiency results
“
What are Miles and Snow four strategic types:
Defender
Prospector
Analyser
Reactors
Define Defender strategic type, and some characteristics
Organisations whose strategy is to produce a limited set of products directed at a narrow segment of the total potential market.
Seek stability.
Prevent competitors from taking market share.
High Horizontal differentiation.
Define Prospector strategic type, and some characteristics
Organisations whose strategy is to find and exploit new market and product opportunities.
Innovation may be more important then high profit.
Prospectors success depends on developing and maintaining the capacity to survey a wide range of environmental conditions, trends and events and introduce new products based on that research.
Structure must be flexible.
There will be numerous decentralised units.
Structure low in formalisation.
Define analyser strategic type, and some characteristics
Organisations whose strategy is to move into new products or markets only after their viability has been proven.
Minimise risk by adopting innovations after they’ve been proven by others.
Seek flexibility and stability.
Seek structures that can accommodate both stable and dynamic areas of operation.
Define Reactor strategic type, and some characteristics
A residual strategy that describes organisations that follow inconsistent and unstable flow patters.
In general reactors respond inappropriately and perform poorly.
Management has failed to shape the organisations structure properly to the strategy.
What are porters competitive strategies
Cost leadership
Differentiation strategy
Focus strategy
Stuck in the middle
What is Cost leadership strategy in relation to porter
Aims to achieve the lowest cost within an industry.
What is Differentiation strategy in relation to porter
Aims to achieve unique position in an industry in ways that are widely valued by buyers.
What is Focus strategy in relation to porter
Aims at cost advantage or differentiation management.
What is “Stuck in the middle” in relation to porter
Organisations that are unable to gain a competitive edge through one of the various strategies.
Commonly required skills and resources of porters Cost leadership strategy
- Sustained capital investment and access to capital
- Process engineering skills
- Intense supervision of labour
- Products designed for ease of manufacture
- Low cost distribution system
Commonly required skills and resources of porters Differentiation strategy
- Strong marketing abilities
- Product engineering
- Creative flair
- Strong capabilities in basic research
- Corporate reputation for quality or technological leadership
- Long tradition in the industry or unique combination of skills drawn from other businesses
- Strong cooperation from channels
Commonly required skills and resources of porters focus strategy
Combination of Differentaition and Cost leadership strategy policies directed at the particular strategic target
Common organisational requirements of porters Differentiation strategy
Strong coordination among functions in R&D, product development and marketing
Subjective measures and incentives instead of quantitative measures
Amenities to attract highly skilled labour, scientists or creative people
Common organisational requirements of porters Cost leadership strategy
Tight cost control
Frequent, detailed control reports
Structured organisation and responsibilities
Incentives based on meeting strict quantitative targets
Common organisational requirements of porters focus strategy
Combination of requirements of differentiation and cost leadership
Who wrote a thesis relevant to strategy and globalization
Ghosal and Bartlett
What is Ghosal and Bartletts theory
Bartlett and Ghosal proposed a theory that linked global strategy and structure;
they claim that the strategy adopted when entering the overseas markets depends on the:
- interaction of cost pressures found in the market with the pressures of local responsiveness.
What are the four strategies relevant to Bartlett and ghosals theory
International strategy
Multi domestic strategy
Global strategy
Transnational strategy
What does International strategy require
- transfer valuable skills and product knowledge to overseas market.
- Some customisation may take place for local markets. –R&D is centralised in the home market,
- manufacturing, distribution and marketing is all carried out locally.
- Generally head office maintains tight control over key technologies.
What does a multi domestic strategy aim for
A multi domestic strategy:
-Aims to achieve maximum local responsiveness with products customised to meet local conditions.
What does a global strategy features
A global strategy:
- Adopted where a product can be sold in most markets with very little modification.
- Firms adopting this strategy work very hard at lowering costs by locating activities where they make the most sense.
What does a transnational strategy want to achieve
Transnational strategy:
Attempts
- maximum local representatives
- worldwide economies of scale.
Structural characteristics of International Strategy
- Centralisation of core competencies
- Knowledge and strategy developed at the centre and transferred to local units.
- Local operations aimed at adapting and leveraging parent company competencies.
- Moderate need for coordination
- Moderate need for culture control.
- divisionalisation based on product.
Structural characteristics of Transnational Strategy
- Mixed centralised and decentralised form with integrates worldwide operations.
- Knowledge jointly shared and developed worldwide.
- Units are dispersed, interdependent and specialised.
- Very high need for coordination and extensive coordinating mechanisms.
- Predominant structural form is a world wide matrix.
Structural characteristics of Multi domestic Strategy
- Decentralised and nationally self sufficient units which sense and exploit local opportunities.
- knowledge is developed and contained within each unit.
- Low need for coordination with almost no integration mechanisms.
- Low need for a common culture.
- Predominant structure form is divisionalisation based on geographic area.
Structural characteristics of Global Strategy
- Centralisation of most operating decisions.
- Knowledge developed and retained at the centre.
- Global scale of operation leads to requirement for extensive coordination and integration mechanisms.
- Extensive effort to promote a common culture.
- Predominant structure forms based on worldwide product divisions.
Miles and snow VS Bartlett and Ghosal
Miles and Snow, and Porter focus on a strategy aimed a single market.
Barlett and Ghosal develop strategies appropriate to internationalising firms.
The theories both agree, strategy causes structure
What is the Industry- Structure relationship
The Industry- Structure relationship.
The role of industry as a determinant of structure.
Industry–> Strategy –> Structure
What is networking
Group of organisations that pool their resources in various ways
What are the different approaches as to how strategy is determined
- Planning mode which views strategy as a plan or explicit set of guidelines developed in advance. In other words, it views strategy as the outcome of a rational deliberation process.
- Evolutionary mode which acknowledges the unpredictable processes involved in strategy formation. It views strategy as a stream of significant decisions evolving over time. In other words, it views strategy as emerging from a string of minor incremental decisions.
What is Chandlers argument
Alfred Chandler argued that organizations typically begin as single-product companies, which do only one thing (e.g. manufacture cars). Depending on the size of the company, the appropriate structure for this strategy would be a simple structure or a machine bureaucracy. Thus, the efficient structure for an organization with a single-product strategy is one that is high centralization, low formalization and low complexity.
role of industry as a determinant of structure
Type A industries which are characterized by high capital requirements for entry and high product-innovation rates (e.g. telecommunication firms);
Type B industries which are characterized by low capital requirements for entry and high product-innovation rates (e.g. computer software manufacturers);
Type C industries which are characterized by high capital requirements for entry and low product-innovation rates (e.g. appliance manufacturers);
Type D industries which are characterized by low capital requirements for entry and low product-innovation rates (e.g. bicycle manufacturers).
What is networks of companies in terms of strategy
Strategy is implemented not only by individual companies, but also by combinations of firms that are so closely connected and mutually dependent that the boundaries between them are difficult to identify, not so much in the legal sense, but in the operational sense
What are different forms of networks and strategic alliances
- industrial networks – this is when there is a dominant company which clearly leads a group of subcontractors;
- clusters – in those cases there is no leading company or project manager to offer direction or control (e.g. in the personal computer industry) networks of this type are generally coordinated by market forces.
- strategic alliances – this is when two or more companies cooperate in a venture by each contributing their distinctive skills while maintaining their independence.
