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..
