Purpose of strategy Flashcards
What does strategy require?
Comprehensive understanding of the organisations:
Resources
Ecosystems i.e. its environmental factors
Stakeholders
What are the advantages of long term planning?
Forces managers to look ahead
Improved control
Identified key risks
Encourages creativity
What are the disadvantages of long term planning?
Setting corporate objectives
Short-term pressures
Difficulties in forecasting accurately
Bounded Rationality
Rigidity
Cost
Management Distrust
What is bounded rationality?
Internal and external analysis undertaken as part of long-term strategic planning is often incomplete.
What is rigidity?
Once a long term plan is created managers often believe is should be followed at all costs
What are the four types of strategy?
Rational Model
Emergent Approach
Logical incrementalism
Freewheeling Opportunism
What is the rational model?
Logical, step-by-step approach.
Requires organisation to analyse its existing circumstances, generate possible strategies, select the best ones and then implement them
What is the emergent approach?
Strategies not always formally planned. In reality, strategies may evolve in reponse to unexpected events that impact the organisation.
What is logical incrementalism?
Approach suggests that strategy tends to be a small-scale extension of past policy
Incrementalism does not believe that rational model of decision-making is sensible and suggest that in the real world it it rarely used
What is freewheeling opportunism?
Suggests that organisations should avoid formal planning and instead simply take advantage of opportunities as they arise
What are the problems with a lack of formal planning?
Failure to identify risks
Strategic drift
Difficulty in raising finance
Management skill - Freewheeling opportunists require managers that are highly skilled at understanding and reacting to changing markets
