MGM101 CH5 Flashcards
What is the diamond e framework and what does it do
a high-level road map for strategic analysis.
It identifies the key variables that need to be considered in the analysis and it structures the critical relationships among them
strategy is the critical linking variable: it tells wat opportunities the business is pursuing
other variables can drive or constrain strategy
Wat is the principle logic for diamond e framework
consistency: will lead to successful performance
coherence: Diamond-E framework is complete in and of itself as well as being internally logical and consistent.
alignment: strategy needs align with opportunities and challenges of environment and with the internal capabilities, drives, and constraints of business
*strategy must satisfy both internal and external factors simultaneously
wat is a critical aspect of strategic analysis related to inconsistencies
identify these inconsistencies and to assess the degree of risk associated with them. The risks can then be weighed against the opportunity that the initiative offers
Explain environmental risks in the short run and long run
Short run: miscalculate timing, potential, or competitive reaction
Long run: missing or underestimating changes in environment
What does Chris Zook suggest for addressing viability of a strategy?
take close look at customers to see where your product stands in terms of profitability, market share, retention rate, loyalty, and share of wallet.
look at relative cost position, degree of differentiation, and emerging business models of competitors so you can see what environmental risks are present and how it affects profit. u can also see growth of industry and the revenues and costs.
Explain capability risks in the short run and long run
Short run: New strategy may demand too much from business unit’s resources and capabilities
Long run: Resources and capabilities may not develop adequately to the consistent but continuously demanding strategy. why? cuz environments evolve and strategies change but people become complacent so less innovation.
What does Chris Zook suggest for addressing capability risks?
look at the core capabilities and also the organization and its associated culture to determine any stress points arising from undesired attrition (leaving employees?), energy, motivation, or bottlenecks to growth
which types of strategies are successful
strategies that stretch what is possible in market and what is possible to implement
Why is it incorrect to say that strategy is the endpoint of a grand plan
a strategy is the result of an evolutionary process, the cumulative outcome of a
series of small steps taken one at a time over an extended period of time. it is likely to be the product of a series of important but limited strategic decisions
What are strategic proposals?
discrete ideas or action plans that will have significant implications for one or more of the components of strategy and thus for the strategy of the business as a whole
How to establish the desirability of strategic proposals
their implications for the ongoing strategy of the business, consistency with the other variables in the Diamond-E framework, and, ultimately, their promise of profitability
what is diamond e analysis
shorthand for a systematic review of each of the key linkages in the Diamond-E framework—strategy with respect to environment, resources, management preferences, and organization
objectives of diamond e analysis
(1) help assess the appropriateness of the firm’s current strategy
(2) generate new ideas and strategic proposals
(3) evaluate specific strategic proposals
what is final step in strategy-environment linkage
put together a performance forecast for the proposal(s) under study based on the assumption (to be tested later in the analysis) that it could be successfully implemented
wat is PEST analysis
political, economic, social, and technological analysis
what is political analysis
Elements: Laws, regulations, taxes, trade agreements or conditions, political system, political stability
Significance: Rules that business must follow, Protection of consumers and vulnerable groups, Support / protection and regulation of domestic businesses, Opportunity creation in foreign markets
what is economic analysis
Elements: Inflation / deflation, interest rates, employment rates, exchange rates, balance of trade, productivity
Significance: Affect economic stability, employment, economic growth (measures: aggregate output, GDP, GNP)
what is social analysis
Elements: Customs, values, attitudes, demographic characteristics
Significance: Affect customer preferences and worker attitudes and behaviour, standards of business conduct, and corporate social responsibility
what is technological analysis
Elements: Internet, information technologies, not limited to computers and information
Significance: demands constant scanning & learning; legacies / compatibility make change challenging
what are the 5 forces in Porter’s 5 forces model
- threat of new entrants
- threat of substitutes
- bargaining power of buyers
- bargaining power of suppliers
- rivalry among existing competitors
why is 5 forces model important
- Predicts industry profitability
- Helps determine whether a firm should enter a particular industry
- Helps determine whether and/or how firm can carve out an attractive position in that industry
what are the steps in checking strategy-resource linkage
identify the resource requirements for the current strategy or new strategic proposal. Then compare the resources required with those available, to the business and identification of resource gaps. judge probabilities of being able to close the resource gaps and consequences of failing.
what to do for checking strategy-organization linkage
identify organizational capabilities required to implement strategy, check consistency between required capabilities and those evident in organization, forecast performance, make changes.
4 critical variables that impact organizational capabilities:
- leadership
- structure
- management process
- culture
what is significant about strategy-management preference linkage
it takes into account that strategies can be made differently based on the preferences of key leaders, manager, or anyone in general.
what to do for checking strategy-management preferences linkage
identify preferences that is consistent with successful execution of strategy, then compare with preferences of managers that are critical to execution process
possible problems:
- preferences of managers are similar to strategy preferences but are different at critical points
- preferences of managers are completely different to strategy
what are the tensions that exist among diamond e framework
- want to do (given management preferences)
- need to do (given the competitive environment)
- can do (given their organization, resources and capabilities)
ex. may have to stretch wat business ‘can’ deliver to satisfy what they ‘need’ to deliver
Process of strategic analysis
- Base case analysis (asses strategic position of business for action/urgency): asses performance, identify evaluate current strategy, forecast future performance, decide on nature and urgency of change
- Strategy formulation and testing (develop evaluate proposal addressing opportunities/challenges): work from environment/capabilities form new proposals, shape and short-list proposals, prepare performance forecasts
- Decision and execution (commit, implement, review): decide on proposal(s) to implement, move to build commitment, implement
