Chapter 6 Entrepreneurial Strategy Flashcards
Why is strategic management important?
Strategic management is important to an organisation because it provides a sense of direction and outlines measurable goals. Suggested planning is useful for guiding day-to-day decisions and evaluating progress and changing approaches when moving forward.
4 Strategic Management phases
The strategy formulation phase
The strategy evaluation phase
The strategy implementation phase
Sustainable competitive advantage
THE STRATEGY FORMULATION PHASE
- DEVELOPMENT OF BUS MISSION
- ANALYSIS OF INTERNAL & EXTERNAL ENVIRONMENTAL
- SWOT ANALYSIS
- DEV LONG TERM OBJ
THE STRATEGY EVALUATION PHASE
- ANALYSIS & REVIEW OF EXTERNAL AND INTERNAL FORCES
- EVALUATION using innovation and financial risk matrix
THE STRATEGY IMPLEMENTATION PHASE
- DEV OF POLICIES AND ANNUAL OBJ
- ALLOCATION OF RESOURCES
- MEASURING PERFORMANCE
- TAKING CORRECTIVE ACTION
- CONTINUOUS EVALUATION
SUSTAINABLE COMPETITIVE ADVANTAGE
- COST LEADERSHIP STRATEGY
- DIFFERENTIATION STRATEGY
- FOCUS STRATEGY
- CUSTOMER SERVICE
- CSR
- BBBEE
The business mission
Identifies :
The target market
Needs of that target market
The means by which these p/s will achieved
Refrain from:
Reflecting sentiments
Using words that cannot be measured
Focuses on making profit
9 components of a business mission (David)
CUSTOMERS
CONCERN FOR PUBLIC IMAGE
CONCERN FOR EMPLOYEES
CONCERN FOR SURVIVAL
PRODUCTS AND SERVICES
PHILOSOPHY
MARKETS
TECHNOLOGY
SELF CONCEPT
Analysis of external environment
Read through pages 103-110
Social and political
International and national economic
Physical
Technological
Administrative and institutional
Communications and infrastructure
Legal and political
Competitive
Analysis of internal environment
SWOT ANALYSIS
Strengths: these are resources and abilities to which the entrepreneur has access in order to take adv of OPP and fight off threats
Weaknesses: deficiencies in resources and processes available to the entrepreneur
Opportunity: a favorable situation that exists in the market that can be exploited for profit
Threats : indication of an undesirable situation that could lead to loss
Generation of alternative strategies
Strength- opportunity strategy
Weakness - opportunity strategy
Strength - threat strategy
Weakness- threat strategy
STRENGTH-OPPORTUNITY STRATEGY
Internal strengths are used to address external opportunities. Example surplus financial resources to expand to a second shop
WEAKNESS-OPPORTUNITY STRATEGY
Strategies aimed at improving internal weaknesses by taking advantage of external opportunities
Taking over a new supplier for better prices
Strength-Threat strategy
Using internal strengths of the business to avoid threats identified in the environment.
Using surplus financial resources to create biodegradable products when external emphasis is placed on environmentally friendly products.
Weakness-Threat strategy
Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats.
Evaluation criteria of strategies
Internal consistency: The strategy of an organisation should be supported by its internal strengths and addressed by its weaknesses
Realistic: The plan should be achievable even if it is challenging
Stakeholder benefit: the strategy will add value for the stakeholders
Focused on strategic problems: the strategy addresses key problems revealed through earlier analysis
Capable of solving key subproblems : the strategy addresses minor problems and symptoms of company deficiencies
Customer benefit: the strategy will add value for customers
Suitability: extent to which a strategy fits the situation identified in the strategic analysis and the way it should sustain and improve the competitive positioning of the venture
Competitive advantage
Competitive advantage is the strategic advantage one business entity has over its rival entities within its competitive industry
Sustainable competitive advantage are long-term advantages that are not easily duplicable or surpassable and which allows an organisation to outperform its competitors
Sustainable advantage strategies
Cost leadership
Differentiation
Focus strategy
Customer services corporate social responsibility
BBBEE
Cost leadership
- a business’ ability to produce a p/a at a lower cost than competitors, if they can match the quality it would lead to a true competitive advantage.
Differentiation strategy
The development of a p/s that offers unique attributes that customers view as as better than its competition. The added value allows firms to charge a premium for using their products .
Focus strategy
Where an organization concentrates its resources and efforts on entering or expanding into a narrowly defined market segment
Customer services
An organizations ability to have a positive interaction with their customers when supplying their needs and wants
CSR
Corporate social responsibility is the continuing commitment by a business to contribute to Economic development and capacity building for sustainable livelihoods whilst improving quality of life of the workforce, their families, the community and society at large
B-BBEEE
The governments initiative to promote economic transformation in order to ensure meaningful participation in the economy and business by black people.
