Chapter 4: Introduction to Business Strategy Flashcards by Kaitlin Ashton

What is strategy?

Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of the markets and to fulfil stakeholder expectations.

How well did you know this?

Not at all

Perfectly

What does strategy consider?

The longer term
The whole organisation
Resources and external environment
All stakeholders
How to gain a sustainable competitive advantage

How well did you know this?

Not at all

Perfectly

What are the 3 levels of strategy?

Corporate
Business
Functional (Operational)

How well did you know this?

Not at all

Perfectly

What is corporate strategy?

Strategies determined at main board level for the business as a whole

For example, overall mission and objectives, expansion strategies, divestments

How well did you know this?

Not at all

Perfectly

What are business strategies?

Strategies for strategic business units and individual markets.

For example, how to gain a sustainable competitive advantage

How well did you know this?

Not at all

Perfectly

What are functional (operational) strategies?

Strategies for the main functions within each SBU

For example, operations, finance, HRM and marketing strategies

How well did you know this?

Not at all

Perfectly

What is a strategic plan?

A strategic plan is a statement of long-term goals along with a definition of the strategies and policies which will ensure achievement of these goals.

How well did you know this?

Not at all

Perfectly

What are the four main stages to strategic planning per Johnson and Scholes?

Strategic analysis - Where are we now?
Strategic choice - Selection of strategic option
Strategy implementation - Convert into plans/objectives
Review and control - Monitor targets and budgets

How well did you know this?

Not at all

Perfectly

What is external analysis?

External analysis looks at factors outside the business which can present opportunities or threats.

How well did you know this?

Not at all

Perfectly

What is the external environment?

Business - Task - General - Physical

How well did you know this?

Not at all

Perfectly

What is environment uncertainty?

A business needs to think about how static or dynamic its future environment is likely to be.

How well did you know this?

Not at all

Perfectly

What are static environments?

Static/slow change
Single product/market
Simple technology
Safe environment

How well did you know this?

Not at all

Perfectly

What are dynamic environments?

Dynamic changes
Diverse product/market
Difficult environment
Dangerous to stand still

How well did you know this?

Not at all

Perfectly

What is a PESTLE analysis?

Political
Economic
Social and demographic
Technological
Legal
Ecological (Environmental)

How well did you know this?

Not at all

Perfectly

What is the use of Porter’s five forces analysis?

Porter’s five forces analysis can be used to assess the attractiveness of an industry in terms of long run profitability

How well did you know this?

Not at all

Perfectly

What is Porter’s five forces analysis?

Bargaining power of customers
Threat of new entrants
Bargaining power of suppliers
Threat of substitutes

Determine the level of competitive rivalry and therefore profitability of the industry.

How well did you know this?

Not at all

Perfectly

What is competitor analysis?

A competitor analysis can be used to analyse the competitive rivalry within the industry.

This should identify who the competitors are and how they are likely to react to the organisation’s strategies.

How well did you know this?

Not at all

Perfectly

What are the 4 types of competitor listed by Philip Kotler?

Brand - similar size firms with similar products
Industry - similar products but different markets or distribution methods
Form - distinctly different products that satisfy the same need
Generic - different products but compete for the same disposable income

What are the 4 types of competitor reactions listed by Kotler?

Laid back - no response to competitor moves
Tiger - responds aggressively to all competitor moves
Selective - reacts to some threat in some markets but not to others
Stochastic - difficult to predict when or how they will react

What is internal analysis?

Internal analysis looks at factors inside the business which comprises the business’s strengths and weaknesses

What is the use of the 9M’s model?

The 9Ms model can be used to identify the resources which are available to the business and those resources may need to be addressed to achieve CSFs

What are the 9Ms?

Men/Women
Machines
Money
Material
Markets
Make up
Management
Methods
MIS

What is 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.

How is the value measured?

The value (or margin) is measured by the difference between the cost of the activities and sales revenue created by sales to customers.

What is the product life cycle analysis?

Product life cycle analysis is the application of life cycle theory to product or services.

What is a BCG matrix?

BCG matrix analyses the balance of a business's product portfolio based on a combination of both market growth and market share.

BCG Matrix - Star

High market growth and High market share Top left Star - market share is high but is under constant threat from new entrants requiring the business to continue to build often resulting in a cash neutral position.

BCG Matrix - Question Mark

High market growth and low market share Top right Question mark - the business must decide whether to harvest or build by injecting further finance resulting in negative cash flow.

BCG Matrix - Cash Cow

Low market growth and high market share Bottom left Cash cow - reduced threat from new entrants makes it easier for the business to hold their position or just harvest resulting in positive cash flow.

BCG Matrix - Dog

Low market growth and low market share Bottom right Dog - the business now must decide whether to divest or may hold position in the short-term if modest positive cash flows are being made.

What is a SWOT analysis?

SWOT analysis is a technique that can be used to perform a corporate appraisal to evaluate the strategic position of the organisation. Strength, Weaknesses, Opportunities and Threats

What is stakeholder mapping?

Mendelow's power-interest stakeholder matrix can be used to analyse stakeholders and to identify an appropriate response.

What is Mendelow's power-interest stakeholder matrix?

Low level of interest and low power: Minimal effort can be directed High level of interest and low power: Keep informed Low level of interest and high power: Keep satisfied High level of interest and high power: Key players need participation

What two questions does Porter argue that organisations need to address about strategic choice?

Should the strategy be one of differentiation or cost leadership? Should the scope be broad or narrow?

What is cost leadership?

Achieving a lower cost base than rivals allows the business to reduce prices. This can be achieved through: - Economies of scale - Seek cheaper sources of supply - Reduced labour cost

What is differentiation?

Standing out from competitors due to product features or consumer perception. This can be achieved through: - Strong branding - Product innovation - Quality - Product performance

What is focus strategy?

Specialising on a clearly defined market segment or segments. - Identify a segment of consumers/customers with similar needs. - Choose whether to adopt a differentiation or cost focus approach. - Develop the marketing mix to meet the needs of the segment.

What does Ansoff's matrix do?

Ansoff's matrix looks at growth by considering opportunities to sell more existing products/develop new products and building market share in existing/new markets.

Ansoff's Matrix - Market Penetration

Existing products and existing markets More sales of existing products to existing markets, e.g price cuts, increased advertising

Ansoff's Matrix - Product Development

New products and existing markets Developing new products for existing markets, e.g. spending on R&D to develop new products.

Ansoff's Matrix - Market Development

Existing products and new markets Finding new markets for existing products, e.g. new customer segments or geographical locations

Ansoff's Matrix - Diversification

New products and new markets Developing new products for new markets Related diversification, e.g. Honda motorbikes and cars Unrelated diversification, e.g. Yamaha motorbikes and keyboards

What are the 4 key functional strategies of a business?

Human resource management Finance Marketing Operations