Strategic management Flashcards
What is a Strategic Plan?
Strategic planning sets a long-term direction for an organisation, guiding resource allocation to achieve competitive advantage while meeting customer and stakeholder needs in a challenging market.
It’s a formal process for setting a business’s direction, managing risks, and ensuring it complies with laws. This includes creating a plan to achieve goals and track progress.
Ultimately, strategic planning aligns a business’s resources and efforts to achieve its desired outcomes. It is a continuous process that requires regular review and adjustment.
Mission and objective
A mission statement tends to be a simple declaration underlying the purpose of an organisation’s existence and its core values. It outlines the purpose of the business, what it wants to achieve and how it is different to its competitors.
Objectives help to measure and control, they set boundaries for business activity and without having clear objectives, organisations have no sense of direction and purpose.
The long term objectives of a business can include profit maximisation, growth and/or image/reputation.
Environmental scan
An environmental scan is a tool to research and analyse a firm’s environment to identify and anticipate internal and external factors which will affect long-term growth and success. It enables the company’s leaders to be ready to react and respond to changes in the marketplace. The environmental scanning process will shift a business from reactive approach to a proactive approach as they adapt to meet market changes and new customer expectations.
Pest
These factors are defined as a framework of external factors which are used in environmentally scanning strategic management and a firm’s external business environment. As a management tool whereby a business can assess major external factors that influence its operation to become more competitive in the market. This type of environmental scan is used to assess external factors that could impact the profitability of a company.
What is Porters 5 forces.
Porter’s Five Forces is a framework that gives managers some insight into the degree of competition within the industry they operate in, to identify the important issues that need addressing or profitable opportunities a market has. This theory is also referred to as competitor analysis.
The five forces are:
Threat of new entrants to an industry
Threat of new entrants assesses the ease with which new competitors can enter a market. Factors such as high capital requirements, strong brand loyalty, or government regulations can deter new entrants and protect existing firms.
Threat of substitutes
Threat of substitutes evaluates the potential impact of alternative products or services on an industry. The availability of close substitutes can limit pricing power and erode profitability as customers have more options to choose from.
Bargaining power of suppliers,
Measures the influence suppliers have on businesses in industry and how easy it is for suppliers to drive up prices. Key factors include the number of suppliers, the uniqueness of their offerings, and the switching costs for buyers. Strong supplier power can reduce industry profitability by increasing input costs.
Bargaining power of buyers
Bargaining power of buyers examines the impact customers have on industry profitability and how easy it is for them to drive prices down. Factors such as number of buyers in the market; importance of each individual buyer to the organisation; and cost to the buyer of switching from one supplier to another. Powerful buyers can depress prices and margins. If a business has just a few powerful buyers, they are often able to dictate terms.
Extent of rivalry among existing competitors
The importance of this force is the number of competitors and their ability to threaten a company. The larger the number of competitors, along with the number of equivalent products and services they offer, the lesser the power of a company.
SWOT
SWOT analysis aims to identify the key internal and external factors that are usually out of a businesses control seen as important to achieving an objective.
Factors of SWOT
S- Consider your Strengths Strengths are internal, positive parts of your business. These are things that are within your control. Strengths describe what an organisation excels at and what separates it from the competition
W- Weaknesses are internal, negative factors. These are things that you might need to improve on to be competitive. Weaknesses stop an organisation from performing at its optimum level. They are areas where the business needs to improve to remain competitive
O- Opportunities refer to favourable external factors that could give an organisation a competitive advantage
T- Threats refer to factors that have the potential to harm an organisation
strategic formulation
Strategic formulation is the process by which firms choose the most appropriate course of action to achieve its mission and objective. Information gained from environmental scans help formalise the course of action. Articulation and communication of the strategy must be done to all stakeholders and all levels must cooperate in order for effective coordination of the strategy, it involves writing each key strategy in key business documentation: includes operational plans, annual reports and websites. This formulation is aimed at improving competitive advantage(s) and profitability.
strategic implementation
Strategic implementation is the process of transforming a strategic plan into actionable steps. It involves breaking down the plan into specific objectives, allocating resources and responsibilities across departments, and developing detailed action plans. Effective communication is crucial to ensure employees understand the strategy and their role in achieving it. Regular monitoring and evaluation are essential to measure progress, identify potential issues, and make necessary adjustments to the plan.
Evaluation and control
Evaluation and control are crucial final steps in strategic planning. By measuring performance against goals, organisations can determine their strategic direction’s effectiveness. This involves analysing various metrics like financial results, customer satisfaction, and market performance. These insights help businesses make necessary adjustments to stay on track and achieve their objectives.
