chapter 5 Flashcards
Strategy
the adoption of courses of action and the allocation of resources necessary to
achieve the organization’s goals (+determination of the basic long-term goals)
Tactics/tactical decisions
(≠ strategy) are day-to-day decisions associated with implementing
plans and operating the expertise
Planning mode
- views strategy as a plan or explicit set of guidelines developed in
advance - starts with identifying the direction, then develops a systematic and structured
plan to get there - rationality plays a significant role to create a well-thought-out process
Evolutionary mode
- views strategy as a pattern in a stream of significant decisions that
evolves over time - acknowledges the unpredictable process involved in strategy formation
Environmental factors and organisational capabilities -> strategy -> structure
Levels of strategy:
o Corporate level strategy (more than one line of businesses)
- defines the nature of businesses in which the film should operate
- defines the role of each businesses in the organisation
o Business level strategy
- defines the way to compete in each of our businesses
- for the small organisations in only one line of activity or the large organisations that
avoided diversifications
Miles and Snow’s four strategic types:
Defenders
Prospectors
Analysers
Reactors
Defenders
organisations whose strategy is to produce a limited set of products
directed at a narrow segment of the total potential market
Prospectors
- organisations whose strategy is to find and exploit new product and
market opportunities - innovations are more important than high profitability
- develop and maintain the capacity to survey a wide range of environmental conditions,
trends and then introduce new products based on their research
Analysers
- organizations whose strategy is to move into new products or markets only
after their viability has been proven - minimisation of risks, adaptation of only proven innovations
- maximisation opportunity for profit
Reactors
organisations that follow inconsistent and unstable patterns (one of the other
three strategies is pursued improperly)
- respond inappropriately, perform poorly
- are reluctant to commit themselves to specific strategy
- lack of response mechanisms with which to face a challenging environment
Porter’s competitive strategies:
Porter suggests 3 strategies for organisations, the choice of which has to develop on the
organization’s strengths and competitor’s weaknesses
Cost leadership strategy
aims to achieve the lowest cost within an industry
- high in complexity, high in formalisation and high in centralisation
- efficiency of operations
- economies of scale and minimalisation of overheads
- technological innovations
- low-cost labour
- preferential access to raw material
Differentiation strategy
aims to achieve a unique position in an industry in ways that
are widely valued by buyers
- low in complexity, low in formalisation and low in centralisation
- flexibility
- high quality/extraordinary service/innovative design/technological capability/unique
brand image
Focus strategy
aims at cost advantage or differentiation advantage in a narrow segment
- special focus for selected segment of industry (product variety, type of buyers,
distribution channel,..) with the goal to develop a narrow segment of market
Stuck in the middle
organisations are unable to gain a competitive advantage through
one of varieties strategies and are unlikely to achieve long-term success
THE INDUSTRY STRUCTURE RELATIONSHIP
Industry -> strategy -> structure
Industry -
an important factor influencing strategy, which differs in terms of growth
possibilities, regulatory constraints, barrier to entry, capital requirements, product life cycle,
long-term prospects, technologies..
OUTSIDE IN
asking consumer what do they want, filling the gap in market, begins from research
inside out strategy
focuses primarily on capabilities and strengths within the org- efficient processes, talented workers, HOW TO OPTIMISE USE OF RESOURCES WHICH THE ORG CAN use to create a valuable product- to promote to customers
VRIN
focus on development and attainment of VALUABLE, RARE, INIMITABLE, NON- SUBSTITUTABLE RESOURCES AND CAPABILITIES
5 forces analysis
- potential entrants
buyers
substitues
suppliers
rivalry
James march
org. learning
Organizational learning
Dynamic capabilities
Absorptive capacity
mutual learning
Dynamic capabilities
the firm’s ability to integrate, build, and
reconfigure internal and external competences to address rapidly
changing environments
Absorptive capacity
a firm’s ability to recognize the value of new
information, assimilate it, and apply it to commercial ends
