Lecture 1 - Principles of Strategic Planning Flashcards
What is strategy?
- Strategy is the overall plan for deploying resources to establish a favourable position
-
Characteristics of strategic decisions:
- Important
- Involve a significant commitment of resources
- Not easily reversible
What makes a succesful strategy?
Illustrate the thought process of deciding between going for a business strategy or corporate strategy.
Explain what is meant as strategy as positioning and strategy as a direction.
Draw the industry life cycle graph ( x: Time, y: Industry shares)
Draw a graph showing how product and process innovation varies over time.
How typical is the life cycle pattern?
illustrate this with life cycles of television (x: time, y: sales)
- Industry life cycles have become increasingly compressed (e.g., e-commerce) and patterns of evolution might differ.
- Some industries (especially those providing basic necessities, e.g. food processing, construction, apparel) reach maturity, but not decline
- Industries may experience life cycle regeneration
In many industries, what percentage of companies are started as spin offs from employees?
- 20%
- outperform de novo entrants
- a large proportion of the industry leaders
- play a major part in shaping business models and industrial structure
Draw a bar chart showing the UK productivity by sector. ( x: sector, y: output per worker)
What is the UK industry poor at? (or doesn’t do much of it)
- Patent Grants low
- UK’s R&D as percentage of GDP low
Give some facts about the UK’s research compared to the world.
The UK accounts for:
- 1% of Global population
- 3.2 per cent of global R&D expenditure
- 4.1% per cent of global researches
- 8% of papers published
- produce 6.4% of worlds research articles
- 16% per cent of the worlds most highly cited papers
UK is one of the best places to start and grow a business.
What needs to be overcome in the productivity paradox?
- Slowdow in technological diffusions across firms
- Skills mismatch due to changes in the product market structures
- Legacy of financial crisis
- Mismeasurement due to digital economy
- As digital economy grows it is harder to add value intangibles
- Lack of business model innovation
What are the impacts of brexit for the UK
- Vision of ‘Global Britain’
-
Single market
- free movements of goods, capital, services and people
- economic policy harmonisation (e.g. health and safety legislation and monopoly & competition policy)
-
Customs union
- no customs duties are levied on goods moving within the member states
- members of the customs union impose a common external tariff on all goods entering the area
-
Impact on
- R&D spending and scientific research
- foreign investment in the UK
- supply chain
- demand for goods
- Negotations about wether UK should still be part of the customs union despite brexit so it doesnt experience tax on imports/exports.
- If UK exports/imports outside of the EU thennot being part of customs union will be beneficial.
What is the planning perspective?
- Driven by senior management who set strategic direction for the whole company
- Rational process heavily driven by empirical models and concepts
- Intentionally designed
- Formally structured and comprehensive
- Future to be predicted and anticipated
What is the emergence perspective?
- Driven by vision and organisational learning
- Process of adaptive persistence where strategic direction evolves from incremental adjustments to evolving events
- Unstructured and gradually shaped
- Experimentation and parallel initiatives
- Future partially unknown and unpredictable
Give the Intel story of how it moved from being a DRAM to a microprocessor manufacturer.
(DRAM = Dynamic Random Access Memory)
- Japanese calculator company, Busicome wanted a chipset designed for its calculator.
- Intel purchased the rights from Busicom
- IBM chose 8088 microprocessor for its first personal computers.
- Intel saw the margins for the memory business shrinking and the computer industry growing.
- The memory and semiconductor business shared fabrication plants (Intel didn’t need new factories to make microprocessors)
- Margin-per-wafer start did not maximize immediate profits but selected niche over commodity markets ( PC market was niche at the time)
- Since microprocessor had a higher margin it gradually was provided more resources in factories - resulting in exit from DRAM.
Describe the HONDA story, from both BCG and Pascale interpretations.
(BCG = Boston consulting group)
- BCG: Honda entered the US Market with the small 50cc which it used to establish a foothold.
- Pascale: Honda tried to sell larger bikes, but couldnt so it started to sell the 50cc.
- BCG: Honda redefined the motorcycle market by targeting the ordinary person and distributing them through bicycle shops
- Pascale: Honda reluctantly chose the “nicest people campaign” developed by a UCLA undergraduate. Sold through bicycle shops because results were not good through traditional channels.
- BCG: Honda followed a policy of developing the market region, by region. The started on the west coast and moved eastward.
- Pascale: Honda chose LA where there wa a large second & third generation Japanese community, a suitable climate and a growing population.
Some people say there where successful because they had a rational strategy. Others say they learnt from mistakes through an emergent strategy.
What are Mintzberg’s critique of formal strategic planning?
- The fallacy of prediction – The future is unknown
- The fallacy of detachment – Impossible to divorce formulation from implementation
- The fallacy of formalisation – Inhibits flexibility, spontaneity, intuition and learning
