Chapter 9: Strategy and Development Modes Flashcards
What is the primary purpose of strategies in organizations?
Strategies ensure sustainable success by defining long-term goals and the paths to achieve them.
Can strategies be both explicit and implicit?
Yes, strategies can be explicitly formulated or implicitly recognizable in the actions and decisions of the organization and its members.
From where can strategies originate in an organization?
Strategies may be prescribed by managers or emerge from lower hierarchical levels.
What are the two basic dimensions of strategy?
Strategy content: Focuses on content-related outcomes.
Strategy process: Focuses on how to develop strategy content.
How does the St. Gallen Management Model relate to strategy?
It identifies strategy as one of the four structuring forces, emphasizing that structure follows strategy.
Why must an organization’s structure align with its strategy?
Structure and organization should serve as instruments to facilitate the realization of strategy, not as self-serving elements.
Give an example of how structure reflects strategy in international growth.
If a company focuses on foreign growth, its organization might include strong country-specific divisions to prioritize and develop individual markets effectively.
How does governance influence strategy?
Governance structures the influence and decision-making possibilities of responsible parties and guides strategy development.
Who are the main players in strategy formulation and implementation?
Board of Directors: Defines priorities, makes basic decisions, questions details, and monitors implementation.
Management/Specialist Departments: Handle detailed processing and implementation of strategy.
What characterizes strategy processes in organizations?
Strategy processes are marked by interaction between different levels: the board of directors, management, and specialist departments.
What are three different definitions of strategy?
- Determining long-term goals, adjusting approaches, and allocating resources over time.
- A pattern in a stream of decisions and actions.
- The way an organization moves forward and develops its value creation.
What do all definitions of strategy have in common?
They describe strategy as the path an organization chooses to achieve its goals.
What characterizes strategic decisions in profit-oriented companies?
- They are long-term.
- They impact the ability to generate and internalize value.
- They allocate expensive or hard-to-change resources.
- They consider competitors’ reactions and relevant markets.
- They positively impact return on investment.
What are the three reference levels of strategy in organizations?
- Normative Level: The organization’s role in society, values, and norms.
- Strategic Level: Focus on markets and long-term success prerequisites.
- Operational Level: Day-to-day business and efficient resource use.
How does strategy relate to normative and operational levels?
Strategy lies between normative orientation processes and operational coordination processes.
What is the goal of normative management?
To legitimize the company in society and among stakeholders.
Define “mission” in the context of an organization.
A consistent statement of purpose that reveals the company’s products/services, markets/customers, and philosophy.
How does “vision” differ from “mission”?
Vision illustrates the future-oriented and long-term image of a company, while mission defines what is to be achieved.
What role do values and norms play in normative management?
They guide actions and define fundamental behavioral maxims for the organization.
What is a mission statement?
A document outlining the company’s values and guidelines for dealing fairly with stakeholder concerns.
What is the purpose of operational coordination processes?
To stabilize organizational value creation in day-to-day operations through efficient processes and problem-solving routines.
What is included in operational management activities?
- Regular orientation and decision-making meetings.
- Planning and implementing performance and support processes.
What is the “business plan,” and what does it include?
A multi-year plan presenting the strategy and measures, linked to a financial plan that includes budgeted income statements and investment plans.
What does the financial plan in a business plan contain?
Planned annual results (budgeted income statements) and medium-term investment and financing plans (for approximately five years).
What are the key design fields in a strategy according to the SGMM?
- Service offering
- Service creation processes
- Business models
How does a company’s service offering influence strategy?
It is shaped by environmental changes (e.g., market development) and stakeholder expectations (e.g., customers and suppliers).
What questions are central to developing a business model?
- How is value created?
- For whom is this value created?
- How is this value internalized?
What is the main aim of strategic development processes?
To create sustainable competitive advantages and ensure competitiveness.
How can companies achieve sustainable competitive advantages?
By creating and utilizing protectable market positions and leveraging dynamic capabilities.
Define a competitive advantage from an outside-in perspective.
A brand or market positioning anchored with customers that is hard to replicate and increases willingness to pay.
Define a competitive advantage from an inside-out perspective.
A core competence that is valuable, rare, hard to imitate, and nonsubstitutable.
Give an example of an inside-out competitive advantage.
A company producing innovative fastening products due to superior innovation and stable production processes.
What are “economies of scale,” and how do they provide a competitive advantage?
Economies of scale occur when a company achieves lower costs due to large production volumes, offering a cost advantage over competitors.
What are the three possible competitive strategies in a competitive strategy matrix?
- Differentiation from competitors
- Comprehensive cost leadership
- Concentration on focal points (niche focus)
What strategy do low-cost airlines typically pursue?
Comprehensive cost leadership by reducing costs in service processes, employee salaries, and supplier choices.
What strategy do legacy carriers typically pursue?
Differentiation by offering high-quality intercontinental connections from strong economic hubs.
What risk do companies face if they don’t focus on one of the three competitive strategies?
They risk being “stuck in the middle,” achieving neither cost efficiency nor differentiation.
Why is protecting competitive advantages important?
It ensures the company can sustain its market position and profits necessary for innovation and growth.
What are examples of outside-in and inside-out elements of competitive advantage?
Outside-in: Customer relationships, strong brand, monopoly position.
Inside-out: Skilled employees, strategic location, efficient machinery.
What is the strategy process in an organization?
The strategy process involves how a strategy is developed, including individual steps and how these steps are worked on to create and implement a strategy.
What is the core activity of the analysis phase in strategy development?
The core activity is assessing challenges, opportunities, and the organization’s situation to conceptualize possible future scenarios, also known as “strategizing.”
What is a “thrust” in the strategy development process?
A “thrust” refers to the main direction chosen by the company from the options developed during the analysis phase, which concretizes its strategic positioning.
What are strategic initiatives in the strategy process?
Strategic initiatives are larger project packages that group the changes resulting from strategic positioning and lead to organizational changes for implementation.
What is the purpose of the performance review in the strategy process?
The performance review evaluates whether and how well the adopted strategy is working, and the results feed into the next cycle of strategy development.
What factors can inhibit meaningful and efficient strategy development?
Cognitive problems (different mental models), sociological issues (groupthink), and politico-economic problems (lack of common understanding) can inhibit strategy development.
What prerequisites are needed for successful strategy development?
Successful strategy development requires decision-making ability, a culture of cooperation, courage, patience, and clearly defined intermediate steps.
What is the “command approach” in strategy formulation?
The command approach enables rapid decision-making through a clear hierarchy, with strategy formulation occurring in a centralized manner, separate from implementation.
What is “strategic planning” in strategy formulation?
Strategic planning is a centralized process with a formalized, analytical framework for strategy formulation, unlike the command approach.
What is the “directed evolution” approach to strategy?
Directed evolution incorporates ideas from the entire organization at an early stage, merging strategy formulation and implementation into a simultaneous process.
What is the “symbolic approach” to strategy formulation?
The symbolic approach focuses on a common vision for the company, with managers acting as coaches and motivating employees, without explicit strategy formulation and implementation.
What is the “self-organization” approach to strategy?
Self-organization is a passive management approach where the company’s strategic development is driven independently by initiatives from anywhere within the organization.
What are the two dimensions used to classify ideal-type decision-making patterns in strategy development?
The two dimensions are “where” (outside or inside the organization?) and “how” (implicit-intuitive or explicit-systematic?).
What is the first variant of strategy development?
The first variant involves explicit-systematic strategy work conducted outside the organization, often with external consultants or in-house strategy units.
What is the second variant of strategy development?
The second variant involves patronal strategy work outside the organization, often relying on the leader’s experience and intuition to shape the strategy.
What is the third variant of strategy development?
The third variant involves strategy emerging from the respective strategies of different parts of the company, with each part responsible for its future development.
What is the fourth variant of strategy development?
The fourth variant is explicit-systematic strategy development within the organization, where strategy is jointly developed by managers from different company areas.
What two factors are important in choosing the optimal strategy process?
The factors are urgency (e.g., a turnaround) and resources (e.g., mobilizing creativity and commitment across the organization).
What is the role of strategy tools in the strategy process?
Strategy tools help structure discussions, specify questions, and guide the strategy development process, while ensuring that all alternatives and viewpoints are considered.
Why is it important to consider all options in a strategy process?
It prevents strategy tools from dominating perceptions, ensuring that alternative approaches or important additional viewpoints are not overlooked.
What are the typical steps in the explicit strategy development process?
The steps are:
- Analysis
- Developing alternatives
- Choosing strategy
- Implementation
- Evaluation
What is the purpose of a SWOT analysis in strategic planning?
A SWOT analysis assesses a company’s strengths, weaknesses, opportunities, and threats, comparing internal resources and capabilities with competitors and evaluating external trends.
What are the key questions an organization should ask in a SWOT analysis?
- Strengths/threat: How can I use strengths to avoid threats?
- Strengths/opportunities: How can I use strengths to utilize opportunities?
- Weaknesses/threats: Which weaknesses pose a danger?
- Weaknesses/opportunities: Which opportunities are hindered by weaknesses?
What does Porter’s competitive forces framework assess?
It assesses industry attractiveness based on five factors:
- Suppliers’ bargaining power
- Customers’ bargaining power
- Threat from new entrants
- Threat from substitutes
- Intensity of industry competition
What does systemic network analysis help identify?
It helps identify interactions between different elements and problem areas, visualizing interdependencies and assessing development dynamics in the organization and its environment.
What are the four strategic options in the Ansoff Matrix?
- Market development
- Product development
- Market penetration
- Diversification
What does the Core Competence Market Matrix focus on?
It combines market dimensions and core competencies to open up different strategic options for an organization.
What is the concept of emergent strategies?
Emergent strategies are spontaneous, reactive, and opportunistic patterns that arise over time, often leading to discrepancies between intended and implemented strategies.
What is “business planning” in strategy selection?
Business planning helps assess strategic alternatives based on economic success over the medium term, prioritizing strategies based on their potential returns and contributions.
What does the BCG Matrix evaluate?
The BCG Matrix classifies strategic business areas based on market share and market growth into four categories:
- Cash Cows
- Pets
- Stars
- Question Marks
What is the difference between top-down and bottom-up strategy implementation?
Top-down: Strategy is specified by management and “commanded” down.
Bottom-up: Employees support the strategy through shared understanding and motivation.
What is the balanced scorecard?
The balanced scorecard tracks a strategy’s goals and key figures across four perspectives:
- Financial
- Customer
- Internal process
- Potential
What are Key Performance Indicators (KPIs)?
KPIs are metrics used to assess the performance of strategies, focusing on results (e.g., new patents) or processes (e.g., improving collaboration).
What is “value at risk” in strategy evaluation?
“Value at risk” defines the maximum expected loss in a new market strategy, helping manage risks by setting thresholds for adjustments or exit scenarios if targets are not met.
How does the BCG Matrix define a “Cash Cow”?
A “Cash Cow” has high market share but low growth, generating stable earnings and suggesting the company should continue to “milk” it until the product’s life cycle ends.
How does “strategy evaluation” differ in evolutionary vs. revolutionary strategies?
Evolutionary strategies allow for minor adjustments during implementation.
Revolutionary strategies require clearly defined control points to terminate if success thresholds aren’t met.
What is the role of “business planning” in strategy selection?
Business planning evaluates the financial viability of strategic alternatives, helping prioritize those with the most potential for medium-term economic success.
What are “Question Marks” in the BCG Matrix?
“Question Marks” are strategic business areas with low market share but high growth, requiring decisions on whether to grow faster than the market to gain share.
What is the purpose of using “key performance indicators” (KPIs) in strategy evaluation?
KPIs measure specific outcomes or processes, helping to assess whether a strategy is being successfully implemented and achieving its desired results.
What happens when a strategy faces a “discrepancy” between intended and implemented outcomes?
The discrepancy leads to the need for managers to adjust strategies based on emergent alternatives or new challenges, resulting in adjustments to the overall approach.
What is the principal focus of a strategy for long-term organizational survival?
The principal focus should balance between optimization (incremental improvement) and renewal (disruptive, revolutionary change).
What is optimization in a business strategy?
Optimization refers to continuous product innovation, enhancing quality and processes, and reducing costs (e.g., releasing updated editions of a vehicle).
What is renewal in a business strategy?
Renewal involves making radical changes to a company’s value chain or business model, such as transforming into an integrated mobility provider.
How can strategy be linked to entrepreneurial change?
Strategy requires balancing evolutionary optimization (low-impact changes) and revolutionary renewal (high-impact changes).
Why is it not enough to focus solely on optimization?
Focusing only on optimization may leave a company vulnerable to disruptive innovators who introduce radically new technologies or approaches.
What is the dilemma between optimization and renewal?
The dilemma is balancing efficiency (“doing things right”) with effectiveness (“doing the right things”), which is a key strategic challenge.
What does organizational ambidexterity refer to?
Organizational ambidexterity is the ability to exploit existing advantages (optimization) while exploring new opportunities for success (renewal) to ensure long-term survival.
What is an example of evolutionary development in business strategy?
An example is a sneaker manufacturer evolving into an integrated lifestyle coach by adding sensors to shoes and developing apps.
What is an example of revolutionary development in business strategy?
An example is an automobile manufacturer transitioning to an integrated service provider by offering delivery and maintenance logistics to other car makers.
How are many traditional business models being transformed?
Through evolutionary (expanding horizontal performance) or revolutionary (focusing on narrower service production) processes.
What is sequential weighting in optimization and renewal?
It refers to the process where a company optimizes its current business model until limits are reached, after which it undergoes fundamental renewal.
How do optimization and renewal occur in parallel in many organizations?
One part of the company works on optimizing the existing model, while another part focuses on long-term, fundamental changes.
What is a challenge when old and new business models coexist within the same company?
The challenge is managing different cultures, employee types, and business logics across the organization.
What often triggers the need for strategic change in organizations?
Crises often reveal the need for change, such as missing new technologies or market trends, leading to strategic crises.
What is an example of a company facing a strategic crisis?
A machine manufacturer that fails to transition to Industry 4.0 and doesn’t offer sensor-based remote diagnostics, leading to a decline in sales.
What is the relationship between strategic crisis, earnings crisis, and liquidity crisis?
A strategic crisis, like unclear business models or lack of competitive advantage, often leads to an earnings crisis, and eventually a liquidity crisis.
What is the main reason organizational change processes often fail?
They fail when the transformation or reorganization is not recognized or implemented in time, leading to a critical turnaround situation.
What makes organizational change especially challenging?
It requires employees, stakeholders, and customers to abandon old habits, understand the necessity of change, and adapt to new conditions.
What is the key triangle in organizational change?
The key triangle consists of strategy, structure, and culture, where structure follows processes, processes follow strategy, and strategy is influenced by culture.
What must be fulfilled for a successful organizational change process?
A careful narrative, certainty about the process, and trust-building by clarifying stakeholder expectations.
