Chapter 8 business strategy Flashcards
The difference between corporate strategy and tactics
Corporate strategy: long-term plan of action for entire organization to achieve a certain goal
Business strategies are influenced by 4 main factors: Strengths of the business, Resources available, Competitive environment and Objectives
Tactics: short-term policy aimed at resolving particular problems
What is strategic management
Role of management when setting long-term goals and implementing cross-functional decisions that enable business to reach its goals
(Essay) What are the stages of strategic management and what is their main purpose
Strategic Analysis: assessing the current position of the company in relation to its market, competitors and the external environment.
Purpose: decisions that do not start from the knowledge of where the business is now may be inappropriate and ineffective
Strategic Choice: taking important long-term decisions that will push the business towards the objective set.
Purpose: a new direction for a business will require key decisions to be taken about the products and markets
Strategic Implementation: allocating sufficient resources to put decisions into effect and evaluating success.
Purpose: new business strategies always require additional resources. These must be provided at the right time and in sufficient quantities to allow the new strategies to be effective
What is the need for strategic Management - 3 Key stages of strategic management
Strategic analysis: (Answered by PESTAL & SWOT) tries to find answers to three questions:
1. where is the business now?
2. How might the business be affected by what is happening or likely to happen
3. How could the business respond to these likely changes
Strategic Choice: Analyzes the benefits and limitations of different strategic options and decides between them. Successful strategic choice have to be challenging enough to gain a comparative advantage. They must also be achievable and affordable within the resources available.
Strategic Implementation: without successful strategic implementation there can be no effective change within an organization. Implementing a major strategic change is a very important cross-functional management task. it enforce ensuring all the following factors are in place:
- An appropriate organizational structure to deal with the change
- Adequate resources to make the change happen
- Well motivated stuff who want the change to happen successfully
- leadership style in.nization culture that allow change to be implemented with wide-ranging support
- Control and review system to monitor the firm’s progress towards the desired final objectives
Differences between strategic decisions and tactical decisions
Strategic decisions: eg to develop new markets abroad
- Strategic decisions are long-term
- The decision is difficult to reverse once made is departments will have committed resource to it
- it is taken by directors and/or senior managers
- it is cross-functional and will involve all major departments of the business
Tactical Decisions: eg to sell a product in a different sized packaging
- Tactical decisions are short to medium-term
- the decisions are reversible but they may still be a cost involved
- it is taken by less senior managers and subordinates with delegated authority
- the impact of Tactical decisions is often only on one department
What is Blue Ocean strategy and what is the four action framework of Blue Ocean strategy
STOP COMPETING — START CREATING
It is one that exploits uncontested market space through product differentiation and low cost
Four Actions Framework
Raise: what factors, such as quality or customer service, could be raised above industry standards?
Reduce: what factors, such as costly competitive advertising, with a result of competing against other businesses, and which of these can be reduced?
Eliminate: Which factors that the business has used to compete against rivals could be eliminated altogether?
Create: Which factors should be created that the industry has never offered before?
Red Ocean strategy VS Blue Ocean strategy
Red Ocean Strategy:
- compete in existing market
- out-compete the competition
- exploit existing demand
- make the value cause trade off
- product differentiation or low cost
Blue Ocean Strategy:
- create and contested markets to enter
- make the competition irrelevant
- create and exploit new demand
- break the value cost trade of
- product differentiation and low-cost
Scenario planning advantages and disadvantages
Advantages
- it forces managers to consider the main risks and uncertainties that affect their business
- managers have to develop a range of strategies to deal with difference scenarios
- it makes managers adopt a flexible approach is different scenarios will require different strategies
Disadvantages
- managers try to consider too many uncertainties and become confused by the range of possible scenarios
- in contrast, some manages made only focus on one possible features scenario and beyond prepared for the others.
- it will be less effective if only short-term risk are considered. looking for into the future can lead to more creative strategies
Evaluation of SWOT analysis
- subjectivity is a limitation
- different managers may not agree
- it is not a quantitative assessment so cannot compare
- it should be used as a management guide for strategies
Evaluation of PEST analysis
- any new business strategy requires a detailed analysis
- PEST analysis results are important part of developing strategies for the future
- it’s a continuous process
- it’s uncertain, it constantly changes
PEST Factors: Political and legal
- stability of the government
- likely legal changes impacting on this industry
- environmental regulations
- employment law
- competition regulations
- government attitude to Free Market and legal controls over business
- Consumer Protection laws
PEST Factors: Economic
- rate of economic growth
- exchange rate stability
- country’s membership of free-trade areas
- membership offer common currency such as the euro
- tax rate and likely changes
- interest rates and likely changes
- inflation rates and stage of the business cycle
PEST Factors: Social
- demographic changes: aging or youthful population
- dominant religion and impact this could have a marketing strategies
- education standards an impact on labor skills
- roles of men and women in Society
- labor and social mobility in migration levels
- social and environmental issues could be of increasing concern to the population
- one or many languages spoken
PEST Factors: Technological
- new technology allowing products to be made more cheaply
- government support for research spending
- impact of internet access and speed on marketing and other strategies
- cost of renewable energies compared to fossil fuels
- speed of technological obsolescence
- importance of product Innovations to consumers
- process innovation and impact on competitiveness
Porter’s five forces model definition
A technique for analyzing competitive forces within an industry
