Chapter 7 - Framework for generating strategic options Flashcards
What does the internal environmental analysis look at?
Strengths and weaknesses
What does the external environmental analysis look at?
Opportunities and threats
What is a SWOT analysis?
Tool to assist the position audit process
What question does the position audit ask?
Where are we now?
What does the position audit seek to identify?
Threats focusing on weakness
Threats focusing on strength
Opportunity focusing on strength
Opportunity focusing on weakness
What is the position audit exercise designed to do?
Identify current issues relating to organisation concerned
Analysis and identification of relevant problems facing the organisation
Considerations of strategic capability
What are value drivers?
Anything that can be used to create additional value to a consumer in respect of the product or service.
What are some examples of tangible value drivers?
Art production facilities
Distribution facilities strategically placed to enable rapid delivery to customers
Raw materials that are cheaper than those used by rivals
What are some examples of intangible value drivers?
Brands
Intellectual property and patents
Relationships with customers and suppliers
Employees
Reputation
Know-how
What is a gap analysis?
Comparison between an entity’s ultimate objective and expected performance from projects, both planned and under way, identifying means by which any identified difference or gap may be filled
What are the three types of gaps?
Diversifaction gap
Expansion gap
Efficiency gap
What is the process of gap analysis?
- Firm sets its key strategic objective for some time in the future. (T)
- Firm then forecasts likely performance from current operations (F0), after efficiency savings (F1) and after new strategic objectives (F2).
- Identify any remaining ‘gap’.
How do you close and efficiency gap?
Involves undertaking an efficiency drive.
Organisation looks to make cost savings and any other actions that will improve output for a given set of inputs
How do we close an expansion gap?
Looking at ways that organisation can expand its sales.
Could adopt a market development approach or product development strategy.
How do we close a diversification gap?
Involves organisaiton taking a riskier strategy where it looks to sell new products to the markets
What are the benefits of gap analysis?
Acts as a starting point to intiate further debate and consideration
Easy to understand and as such acts as an effective communication device
Highlights need to keep an eye on long-term horizon and draws attention away from short term focus
Provides basic option to close the gap
Held as a tool to assist and not as solution provider
Allows the questioning of the realism of the objective
Stable environments will still provide a basis for effective gap analysis
What is a forecast?
Prediction of future events and their quantificaition for planning purposes
What is a regression analysis?
Looks at how a particular variable correlates with another variable
What is a time series analysis?
Involves 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 that past results are a good indication of the future
Regression analysis assumes two factors are strongly correlated
Regression analysis is only likely to be accurate within the range of the past data collected
Can be difficult to accurately build in seasonal and other fluctuations into time series analysis
What are some intuitive forecasting methods?
Think tank - group of experts who are encourage to speculate about future developments
Delphi technique - individually, systematically and sequentially interrogating a panel of experts
Brainstorming
Derived demand
What is foresight?
Goes beyond simple forecasting and tried to identify possible ways that the future organisation could develop
What are the 5 characteristic of foresight according to John Irvine and Ben Martin?
Communication
Concentration
Coordination
Consensus
Commitment
What are some technique to an organisations foresight?
Scenario planning
Visioning - involves management developing a mental image of the organisation
Delphi method
Morphological analysis - systematic investigation of all the components of large-scale problems
Relevance trees
Issue analysis - issues arise through the convergence of trends and events
Opportunity mapping - identify gaps in current environment
Cross impact analysis
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 the most important scenarios
- 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 is the downside of scenario planning?
Costly and inaccurate
Tendency for cultural distortion and for people to get carried away
Risk of self-fulfilling prophecy
Many scenarios considered will not actually occur
What is the upside of scenario planning?
Focuses management attention on future and possibilties
Encourages creative thinking
Used to justify a decision
Encourages communication via participation
process
Identify 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, as such, can be a useful tool to analyse and understand different scenarios
What are the two key principles of 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 the priority is to eliminate that strategy
What are the three possible real options that a manager may wish to take into account when deciding on a strategic project?
Option to follow on
Option to abandon
Option to delay
