Chapter 10 – Strategic choices Flashcards
What are the 4 strategic choices outlined by Ansoff’s Matrix?
- Market penetration
- Market development
- Product development
- Diversification
What is a strategic business unit (SBU)?
Large group of companies combined under one holding company with same strategic management e.g. Kingfisher
What are the three fundamental methods to achieve competitive advantage according to Porter?
- Cost leadership: Being the lowest-cost organisation in a sector
- Differentiation: Creating differences perceived as valuable by the customers, so that they are prepared to pay a premium for the product or service
- Focus: Choose to dominate a particular segment of a market
Johnson suggests there are four key cost drivers that need to be considered from a cost leadership perspective. DIEE
- Design - rational strategic approach can ensure efficiency is built into the core design of the product or process – e.g. laptop which can be transformed into a tablet
- Input costs – using cheap raw materials or relocating labour intensive activities to developing nations
- Economies of scale – bulk purchasing power
- Experience – learning curve effect – highly significant source of cost efficiency
According to Johnson, what are the three primary drivers for differentiation? PCC
- Product and service attributes: how their product or service is unique
- Customer relationships: the manner in which the organisation deals with its customer
- Complements: whether you are offering something additional to your product or service to enhance the value
Name some examples of the eight dimensions outlined by Garvin’s Harvard Business Review relating to to differentation
- Performance
- Features
- Reliability
- Conformance – degree to which design and operating characteristics meet established standards
- Durability
- Serviceability
- Aesthetics
- Perceived quality
How can a company sustain competitive advantage via Porter’s three fundamental methods?
- Cost leadership can be monitored and controlled through the effective and ongoing use of a robust value-chain analysis (chapter 5)
- Differentiation can be monitored and controlled through a close understanding of different stakeholder expectations, through the effective and ongoing use of a stakeholder mapping exercise (chapter 7)
- Focus can be monitored and controlled through a robust understanding of the different options that are available to customers, and that might act in competition to the organisation, through the effective and ongoing use of a model such as that of the ‘five forces’ (chapter 4)
What is business process reengineering?
Fundamental reconsideration in a radical redesign of organisational processes with the aim of achieving significant improvement in operation to enable the achievement of a particular set of strategic objectives. The ultimate aim is to increase efficiency within the organisation, and this could include all or one of: cost control, product differentiation or specific customer focus.
Ford reduced its Accounts Payable team from 500 to 125 via the BPR strategy – Ford found that each supplier payment required 14 separate actions within the team, based on processes that had evolved and been added over time – rather than making minor changes to the flow, Ford used a BPR approach - new system that eliminated many of the previous stages
Name some examples of some strategic models.
- Blue-ocean strategy
- Corporate parenting
- Portfolio analysis (BCG) approach
- Internationalisation
What is the blue ocean strategy?
Red ocean is where competition exists and is heavily contested – therefore blue ocean strategy, sees strategists as entrepreneurs and encourages strategists to move their minds into the unknown and use their imagination
Think David Dein’s mum - importing African food into UK
Lynch outlined four dimensions of realising and deriving value from the blue ocean strategy - CERR
- Creation: use of existing knowledge and abilities to create new value addition for both customers and the organisation itself – e.g. a move to more sustainable packaging can create a better approach to CSR and enhanced customer perception, combined with a reduced cost to the manufacturer
- Elimination: the recognition of which aspects of the current business are really important to customers, and which can be eliminated e.g. do we need excessive packing?
- Reduction: the removal of overdesigned products and services in the business without any detrimental effect – e.g. do all mobile phones need to have complex technological features?
- Raising: the need to improve features of current products and services to make them more attractive to customers – e.g. are we more likely to buy a product if it contains a longer warranty in the price?
According to Goold et al, what are the five core activites where a corporate parent can provide value? FICCE
- Facilitating synergy: the enabling co-operation and sharing across different business units
- Intervention: where necessary, the alignment and correction of individual unit performance
- Coaching: the development of business unit managers to encourage a shared vision
- Central services and resources: the cost-efficient use of expertise from the centre
- Envisioning: the provision of a clear overall vision for each aspect of the organisation, enabling differentiation between different units while ensuring a comprehensive vision for the entire organisation
What is Portfolio analysis and the BCG approach?
Portfolio analysis is a technique that has been developed by a number of strategic thinkers to help decision-makers consider the strategic options available to them and where best to build their organisation or business.
A popular and frequently used model was developed by the BCG (1979) and is widely recognised as a useful and challenging alignment of differently performing segments or units of a business.
Dogs – low market growth, low market share – only be marginally profitable and therefore need monitoring – will be withdrawn when they become loss making
Cash-cows – low market growth, high market share: established products in market which the company is leading – core cash generator – may use cash to help others
**Problem child – high market growth, low market share **– new products being launched into high-growth markets which require high expenditure – intention for it to become a star or cash-cow
**Stars – high market growth, high market share **– usually from a successful problem child, but with investment still being required to maintain the rate of growth
According to Yip (1992), what are the drivers of globalisation? MCGC
- Market drivers: the potential customer reach
- Cost drivers: operational costs could be reduced by operating internationally
- Government drivers: government providing support to enable companies to operate internationally
- Competition drivers: development and maintenance of competitive advantage
