Operations Strategy (some questions that you already should know by strategy course) vertical integration, Pareto principle Flashcards
Pareto principle
The Pareto principle or Pareto law establishes that, for many results, in general, 80% of the consequences come from 20% of the causes. In other words, a small percentage of causes has a huge effect.
Vertical Integration
Vertical integration refers to a business strategy in which a company controls and operates multiple stages of the production and distribution process within a particular industry. It involves owning or acquiring businesses that are involved in different stages of the supply chain, from raw material acquisition to production, distribution, and retail.
two types of vertical integration
Forward Integration: This occurs when a company extends its control over the distribution channels or retail outlets. By moving downstream, the company gains control over the marketing, sales, and customer experience. For example, a clothing manufacturer opening its own chain of retail stores to sell its products directly to consumers.
Backward Integration: This happens when a company expands its control over the upstream activities of the supply chain. It involves owning or controlling suppliers or raw material sources. By moving upstream, the company gains control over its inputs, ensuring a stable supply of raw materials, and potentially reducing costs. For example, an automobile manufacturer acquiring a tire manufacturing company to secure a steady supply of tires for its vehicles.
Characteristics of strategic decision
Long term
scope of several organization activities
create advantage over competitors
fit with the business environment
Explore strategic capabilities
consider the expectations of powerful actors.
Implication of strategic decisions
Complexity
uncertainty
affect all business decisions
Require integrated strategy for all areas of the company
require relationships and networks
Require organization changes
Levels of strategy
corporate-level strategy → concerned with the overall scope of an organization and how value is added to the constituent business units.
Business-level strategy→ concerned with the way a business seeks to compete successfully in its particular market
Operation Strategy → concerned with how different parts of the organization deliver the strategy. Managing : resources, processes and people.
What are key drivers
are environmental factors that are likely to have a high impact on the success or failure of strategy
What are scenerios
detailed and plausible views of how the business environment of an organization might develop in the future. It is a method of projections, and it does not try to show an exact picture of the future.
What is a Scenario Analysis
*Defined time horizon, business scope and key decision variables;
*Identify the stakeholders, roles and power;
*Identify key trends and environmental factors that may influence;
*Construct two or three plausible scenarios;
*To evaluate the internal consistency and plausibility of the scenarios;
*Analyze the dynamics of the scenarios anticipating the actions of the agents;
*Formulate strategic alternative
What are industries and sectors
Industry changes can be analyzed in terms of the industry life cycle, hypercompetitive models of competition, and the comparative models of competition, and the comparative five forces radar.
Industries and sectors can be analyzed in terms of porter’s five forces model, clusters, industry life cycle and competitive cycles also affect this analysis.
what is a cluster
Geographic concentration of interconnected businesses in a particular field : suppliers, clients and competitors
Advantages of a cluster
Increase productivity
reduce costs
stimulate
Core concepts –> strategic capabilities
Foundations → resources and competences
cost efficiency → ability to achieve and improve
sustainability → capability to sustain competitive
organizational knowledge → how generate comparative advantage
Analysis → value chain/network, benchmarking, activity maps, SWOT analysis
Development → how generate strategic capabilities
Define value chain
The categories of activities within and around an organization, which together create a product or service.
Define value network
The set of inter-organizational links and relationships that are necessary to create a product or service.
