Chapter 7: Framework for generating strategic options Flashcards
What will an internal environmental analysis look at?
Strengths and weaknesses of the organisation
What will an external environmental analysis look at?
Opportunities and threats that the organisation needs to be aware of
What process does the SWOT analysis assist with?
Position audit process
What would the position audit seek to identify?
Threats focusing on weakness
Threats focusing on strength
Opportunity focusing on strength
Opportunity focusing on weakness
What would the position audit allow?
Identification of the current issues relating to the organisation concerned
Analysis and identification of the relevant problems facing the organisation
Consideration of the strategic capability of the company and its history
What are value drivers?
Anything that can be used to create additional value to a consumer in respect of the product or service
More value drivers organisation has the greater the competitive advantage
What are some examples of tangible value drivers?
State of the art production facilities
Distribution facilities that are strategically placed to enable rapid and efficient delivery to customers
Raw materials that are either better quality or cheaper than those used by rivals
What are some examples of intangible value drivers?
Brands
Intellectual property and patents
Relationship with customers and suppliers
Employees
Reputation
Know-how
What is a gap analysis?
comparison between an entity’s ultimate objective and the expected performance from projects, both planned and under way, identifying means by which any identified difference or gap might be filled
How do we do a gap analysis?
- Firm sets its key strategic objectives for some time in the future
- Firm forecasts its likely performance from current operations, after efficiency savings and after new strategic initiatives
- Identify and remaining ‘gap
How do we close an efficiency gap?
Undertake ‘efficiency drive’
Make costs savings and any other actions that will improve the output
Look at improving market penetration strategies
How do we close an expansion gap?
How the organisation can expand its sales.
Adopt a market development approach
Product development strategy
How do we close a diversification gap?
Organisation taking a riskier strategy where it looks to sell new products t new market.
Usually last strategy to adopt
What are the benefits of a gap analysis?
Simple starting point to initiate further debate and consideration
Easy to understand
Effective communication device
Highlights need to keep and eye on the long-term time horizon and draws attention away from short-term
Provides basic options that may be considered for closing the gap
Questioning of the realism of the objective
Stable environments will still provide a basis for effective gap analysis
What is a forecast?
Predicition of future events and their quantification for planning purposes
What are some statistical models that an organisation can adopt to try and quantify key forecast figures?
Regression analysis
Time series analysis
What is a regression analysis?
Looks at how a particular variable correlates with another variable
What is a time series analysis?
Involves the identification of short and long-term trends in previous data and the application of these patterns for projections.
What are the drawbacks of statistical models?
Assume past results are a good indication of the future
Regression analysis assumes that two factors are strongly correlated
Regression analysis is only likely to be accurate with the range of the past data collected
Difficult to accurately build in seasonal and other fluctuations into time series analysis
What are some other forecasting models?
System modelling
Intuitive forecasting models
What is foresight?
Goes beyond simple forecasting and tries to identify possible ways that the future of the organisation could develop
What are the advantages of foresight according to John Irvine and Ben Martin (5C’s)?
Communication
Concentration
Coordination
Consensus
Commitment
How can we improve an organisations foresight?
Scenario planning
Visioning - developing a mental image of organisation in the future
The delphi method
Morphological analysis - systematic investigation of all the components of a large scale problems
Relevance trees
Issues analysis
Opportunity mapping - identify gaps in the current environment
Cross impact analysis - recording events on a matrix
Role-playing
What are the steps involved in scenario planning?
- Identify high impact, high uncertainty factors in the environment
- for each factor, identify different possible futures
- Cluster together different factors to identify various consistent future scenarios
- Writing the scenario
- For each scenario identify and assess possible courses of action for the firm
- Monitor reality to see which scenario is unfolding
- Revise scenarios and strategic options as appropriate
What should be considered when we are constructing scenarios?
Use a team for a range of opinions and expertise
Identify time-frame, markets, products and budget
Stakeholder analysis
Trend analysis and uncertainty identification
Building of initial scenarios
Consider organisational learning implications
Identify research needs and develop quantitative models
What is the downside of scenario planning?
Costly and inaccurate
Tedency for cultural distortion and for people to get carried away
Risk of the self-fulfilling prophecy
Many scenarios considered will not actually occur
What is the upside of scenario planning?
Focuses management attention on the future and possibilities
Encourages creative thinking
Can be used to justify a decision
Encourages communication via the participation process
Can identify the sources of uncertainty
Encourages companies to consider fundamental changes in the external environment
What is game theory concerned with?
Interrelationships between the competitive moves of a set of competitors and can be useful tool to analyse and understand different scenarios
What are the two key principle in Game theory?
Strategists can take a rational, informed view of what competitors are likely to do and formulate a suitable response
If a strategy exists that allows a competitor to dominate us, then priority is to elimiate that strategy
What are the three real options?
Option to follow on
Option to abandon
Option to delay
