Strategic Analysis - General Questions Flashcards
WHAT IS THE RATIONAL ‘TOP DOWN’ APPROACH?
It considers that goals are set first then strategies can be designed to address these goals.
It begins with strategic analysis, then strategic choice and then strategic implementation.
a.k.a the rational approach
WHAT MAKES PLANNING STRATEGIC?
- it considers the LONGER term
- it considers the WHOLE ORGANISATION (not just individual SBUs)
- it considers entities, resources and external environment
- it considers all STAKEHOLDERS
- it looks at how to gain a SUBSTANTIAL COMPETITIVE
ADVANTAGE
WHAT ARE THE MERITS OF STRATEGIC PLANNING?
- goal congruence
- improve performance/ chance of survival
- long term plans reduce short termism
WHAT ARE THE DEMERITS OF STRATEGIC PLANNING? (MINTZBERG)
- formal planning may occur too infrequently and is
slow for dynamic markets - political infighting can disrupt the process
- formal processes discourages innovative thinking
WHAT IS THE EMERGENT APPROACH?
This is where strategies emerge over time in response to the environment.
A business ideally needs to be a flexible and decentralised for this approach to work.
It allows decisions to be made more quickly.
In this approach strategic analysis is completed first and then strategic choice and implementation are completed together.
a.k.a ‘bottom up’ approach
WHAT IS THE POSITIONING (‘OUTSIDE-IN’) VIEW OF STRATEGIC ADVANTAGE?
This focuses on customer needs and develops/ adapts to meet those needs.
DISADVANTAGE:
Changes over time can render the positioning advantages obsolete and require continual change in products. It is disruptive and inefficient.
WHAT IS THE RESOURCE-BASED (‘INSIDE-OUT’) VIEW OF STRATEGIC ADVANTAGE?
This focuses on developing resources/ competences and find/ create a market to exploit them.
ADVANTAGE:
The development of competences are hard to copy so can give a long term competitive advantage.
WHAT IS A MISSION STATEMENT?
Written communication of mission to internal and external stakeholders.
Usually brief statement set out in general terms which doesn’t include a time scale or commercial terms.
1) Mission
2) Objectives
3) Strategies
4) Action plans and budget
Ashridge model states what makes a good mission statement.
WHAT QUESTIONS SHOULD BE CONSIDERED WHEN WRITING A MISSION STATEMENT?
- why do we exist?
- what are we providing?
- who is it for? (Stakeholders)
- what are our values?
- which markets?
- what is our competitive advantage?
Also consider the Ashridge model
WHAT ARE THE ADVANTAGES OF A MISSION STATEMENT?
GOAL CONGRUENCE
- resolve stakeholder conflict
- set direction of organisation to formulate strategy
OTHER
- communicate values and direction of the business
WHAT ARE THE DISADVANTAGES OF MISSION STATEMENTS?
- often full of meaningless terms (‘the best’)
- ignored by managers
- often PR exercise
WHAT ARE THE PRIMARY AND SECONDARY GOALS OF A PROFIT MAKING ORGANISATION?
PRIMARY
Maximise shareholder wealth
SECONDARY
- customer satisfaction
- meaningful employment
- efficiency
- social responsibility
- to continue in existence (survive)
- maintain growth/ development
SMART model is used to see if an objective is good.
WHAT ARE THE PRIMARY AND SECONDARY GOALS OF A NOT-FOR-PROFIT ORGANISATION?
PRIMARY
Usually maximising the benefit for the target stakeholders.
SECONDARY
- investing in staff
- minimising effect of activities on environment
SMART model is used to see if an objective is good.
WHAT ARE THE ISSUES WITH NFP ORGANISATIONS’ OBJECTIVES?
- multiple objectives
- difficulty in measuring objectives
- conflicts between stakeholders
- influence of funding bodies
- financial matters often viewed as constraints under which they
have to operate rather than objectives
DEFINE CRITICAL SUCCESS FACTORS (CSF)
A small number of key goals vital to be success of an organisation.
Or
Those product features that are particularly values by a group of customers, and, therefore, where the organisation must excel to out perform the competition.
BRIEFLY EXPLAIN BENCH MARKING
Need to compare KPIs to competitors to assess whether the business is outperforming the competition and achieving its CSFs.
INTERNAL BENCHMARKING - against last year or between branches
COMPETITIVE BENCHMARKING - against competitors, sectors, industry (internationally or nationally)
ACTIVITY (BEST IN CLASS) BENCHMARKING - comparisons are made into best practise in whatever industry can be found
GENERIC BENCHMARKING - benchmarking against conceptually similar (but not identical) process
WHAT ARE THE PROBLEMS OF THE BCG MATRIX?
- drawing a line between low and high growth/ market share
- no middle ground between categories, could lead to wrong investment
decisions - assumes market share is necessary for competitive advantage
- high growth is seen to be key inductor of market attractiveness
- doesn’t easily compare different risk products/ projects or help with resource
allocation
PORTERS GENERIC STRATEGIES - COST LEADERSHIP
Seeking to be the lowest cost producer in the industry.
HOW TO ACHIEVE?
- invest in production facilities to obtain economies of scale
- more efficient production technologies
- cheaper sources of supply
- cut overhead costs (cheaper premises?)
- value chain analysis to identify and reduce non key activities
BENEFITS
- earn higher profit whilst charging same price as competitors
- remains profitable in price war
- economies of scale create entry barriers
DRAWBACKS
- only room for one cost leader
- cost advantage may be lost due to inflation, exchange rates, cheap overseas labour etc
- customers may prefer to pay more for better quality
PORTERS GENERIC STRATEGIES - DIFFERENTIATOR
Creating tangible and intangible product features that the customer is willing to pay more for.
HOW TO ACHIEVE
- invest in marketing to create strong brand
- give product special features
- use value chain analysis to identify and exploit value adding activities
BENEFITS
- command a premium price so higher margins
- fewer perceived substitutes
DRAWBACKS
- cheap copies
- being out sip differentiated
- customers unwilling to pay extra
- differentiating factors no longer valued by customers
PORTERS GENERIC STRATEGIES - FOCUS
Utilising either cost leadership or differentiator in a narrow profile of market segments.
BENEFITS - smaller investment in marketing/ production required to achieve competitive advantage - less competition - entry is cheap and easy
DRAWBACKS
- need to ensure segment is wide enough
WHAT IS VERTICAL DIVERSIFICATION AND WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF IT?
BACKWARDS - company seeks to operate in markets in which it currently obtains its resources
FORWARDS - company’s seeks to move into it customer base
ADVANTAGES
- economies of combined operations
- economies of internal control and coordination
- economies of avoiding the market
- tap into technology
- guaranteed demand/ supply
DISADVANTAGES
- increases proportion of firms fixed operating costs
- reduced flexibility to change partners
- capital investment needed
- differing managerial requirements
WHAT IS CONGLOMERATE DIVERSIFICATION AND WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF IT?
There is no common thread, moving into a market which is completely unrelated.
ADVANTAGES
- risk spreading
- can enter more attractive markets
- can use surplus cash
- utilise brand image in new markets
- improve utilisation of central resources (HR dept.)
DISADVANTAGES
- lack of management experience
- failure in one market could damage brand
- often bad for shareholders if there is a lack of synergies
