Chapter 1 - The strategy process Flashcards
What is an ecosystem?
Made up of a network of organisations - including customers, suppliers, distributors, competitors etc. - involved in the delivery of a product or service
What is strategy defined as?
A course of action, including the specification of resources required, to achieve a specific objective
What does strategy require?
Comprehensive understanding of the organisations:
Resources
Ecosystems
Stakeholders and what they expect of the organisation
In their book ‘Exploring Corporate Strategy’, Johnson, Scholes and Whittington outline the characteristics of strategic decisions. What areas do they discuss?
Decisions likely to be affected by the scope of the organisations activities
Strategy involves the matching of the activities of an organisation to its ecosystem
Strategy must also match the activities of an organisation to its resource capability.
Strategies need to be considered in terms of the extent to which reosurces can be obtained
Operational decisions will be affected by decisions
What are the advantages of long-term planning?
Forces managers to looks ahead
Improved control
Indentifies key risks
Encourages creativity
What are the disadvantages of long term planning?
Setting corporate objectives
Short term pressures
Difficulties in forecasting accurately
Bounded rationality
Rigidity - once plan set managers believe it should be followed at all costs
Cost
Management Distrust
What are the three levels of strategy?
Corporate Strategy
Business Strategy
Functional Strategy
What is corporate strategy?
Highest levels
Examines strategies for the organisation as a whole
Focuses on which businesses and markets the organisation should operate within
Concerned with issues such as:
Acquisitions, disposals and diversification
Entering new industries
Leaving existing industries
What is business strategy?
Looks at how the organisation can compete successfully in the individual markets
Concerned with issues such as:
Achieve advantage over competitors
Meet the needs of key customers
Avoid competitive disadvantage
Focus on strategic business units
What is functional strategy?
Day to day management strategies of the organisation. Concerned with how the components pull together in terms of resources, people and processes.
Concerned with:
Human resource strategy
Marketing strategy
Information systems and technology strategy
Operations strategy
What are some models that can be adopted to create a strategy?
Rational model
Emergent approach
Logical Incrementalism
Freewheeling opportunism
What is the rational model?
Logical, step by step approach.
Analyse existing circumstances, generate possible strategies, select best one and then implement them
What are the six steps in the rational model?
Mission and objectives
position and appraisal
Strategic options
Evaluation & choice
Implementation
Review and control
What three stages did Johnson, Scholes and Whittington group the stages into?
Strategic analysis
Strategic Choice
Strategic Implementation
What happens in the strategic analysis stage?
External analysis to indentify risk and ops
Internal analysis to indentify strengths and weaknesses
Stakeholder analysis to identify key objectives and to assess power and interest of different groups
Gap analysis to identify the difference between desired and expected performance
What happens in the strategic choice stage?
Strategies are required to ‘close the gap’
Competitive strategy - for each BU
Directions for growth - which markets/products should be invested in
Whether expansion should by acheived by organic growth, acquisition or some form of joint arrangement
What happens in the strategic implementation stage?
Formulation of detailed plans and busgets
Target setting for KPIs
Monitoring and control
What is the emergent approach?
Strategies are not always formally planned. In reality, strategies may evolve in response to unexpected events that impact on the organisation.
Rational model is often slow and quickly becomes outdated.
Strategy tends to evolve rather than result from a logical, formal process.
This approach is evolving, continuous and incremental
Timing, order and distictions between analysis, choice and implementation becomes blurred
What is logical incrementalism?
Strategy tends to be small-scale extension of past policy, rather than radical change.
Suggests that rational model is not sensible because:
Strategy not usually decided by autonomous strategic planning teams that have time to impartially sift all the information
Managers have to sift through options themselves
Leads to strategy being small scale extensions of past policy
Most acceptable to stakeholders as consultation, compromise and accomodation are built into the process
What does freewheeling opportunism suggest?
Organisations should avoid formal planning and instead simply take advantage of opportunities as they arise
What is the risks involved with freewheeling opportunism?
Failure to identify risks - not being forced to looks ahead
Strategic drift - may be difficult to effectively compete in its market in the long term
Difficulty in raising finance
Management skills - requires managers that are highly skilled at understanding and reacting to changing market
What organisations does the formal planning approaches suit?
Exist in relatively stable industries
Relatively inexperienced managers
What organisations does the freewheeling opportunism tend to suit?
In dynamic, fast changing industries
Have experienced, innovative managaers
No need to raise significant external finance
What are the different perspectives to strategic planning?
Traditional approach
Market led approach
Resource based approach
