Strategic Methods : How to Pursue Strategies (3.9)

Question 1

Innovation :

Answer 1

Is the development of an idea into a new product or process.
- Likely to have a patent which can guarantee future income for a business.
- Adds value.

Question 2

Product Innovation :

Answer 2

Changing a product that already exists or developing an invention into a brand new product.
- - (Supermarkets have product and process innovation).

Question 3

Process Innovation :

Answer 3

Changing a process of production that already exists or putting into practice a brand new production process.
- (Supermarkets have product and process innovation).

Question 4

Innovation, ADVANTAGES & DISADVANTAGES (3) :

Answer 4

+ Prevent products from becoming obsolete.
+ Can increase efficiency/more cost effective.
+ Likely to be a premium product with high prices (USP).
- Expensive and time-consuming (especially during R&D).
- Can make substantial losses if fail.
- Legal implications can arise with other businesses questioning whether the PorP is really an innovation.

Question 5

Business Model Innovation :

Answer 5

Changes at least 2 of 4 things.
- How do you create value proposition?
- How do you add value?
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Question 6

Ways of becoming an innovative organisation?

Answer 6

• Kaizen e.g. lemons in PE (small, frequent improvement).
• Research and Development.
• Intrapreneurship.
• Benchmarking.

Question 7

Intrapreneurship :

Answer 7

Is when an when employees in a larger organisation act in the same way as entrepreneurs.
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Question 8

Benchmarking :

Answer 8

Process of identifying the best practice in your industry in relation to yours, identify areas and means of performance improvement.

Question 9

Benchmarking Process (7) :

Answer 9

• Identify areas that can be benchmarked.
• Collect quantitative data on these areas.
• Identify best practice.
• Compare performance to identify areas of weakness.
• Set new targets.
• Implement procedures to achieve these targets.
• Review progress.

Question 10

(Assessing Change)
Change :
- May be necessary to meet aims and…

Answer 10

Occurs when a business alters its structure, size or strategy to respond to internal or external influences.
- May be necessary to meet aims and objectives but also creates opportunities and threats.

Question 11

(Assessing Change)
Business will either GROW or RETRENCH.
Grow because…
Retrench because…

Answer 11

Grow : e.g. to increase shareholder value, increase marker share or fulfil an objective growth.
Retrench : e.g. to increase efficiency, turn around poor performance, focus on core business, sell off less profitable parts of business to improve overall performance.

Question 12

(Assessing Change)
Retrenchment :

Answer 12

Downsizing scale of the business’ operations, e.g. closing branches and delayering.

Question 13

(Assessing Change)
Organic or Internal Growth :

Answer 13

When a business expands in size by opening new stores, branches or functions.
- Can be very time consuming but is relatively low risk.
- Control is easier to maintain.

Question 14

(Assessing Change)
Inorganic or External Growth :

Answer 14

When a business expands in size by either merging or taking over another business.
- Allows a business to expand more rapidly as its buying pre-established businesses.
- Can be high risk if the two businesses are not compatible.

Question 15

Advantages (3) & Disadvantages (2) of ORGANIC :

Answer 15

+ Lower risk.
+ Easy to maintain control.
+ Less costly.
- Slower growth.
- Limited market capture

Question 16

Advantages (3) & Disadvantages (2) of INORGANIC :

Answer 16

+ Rapid growth.
+Takeover competitors.
+ Access to new expertise.
+ Economies of scale.
- Financial risk.
- Could lose company’s vision
- Employee dissatisfaction

Question 17

Economies of Scale :

Answer 17

Advantages enjoyed by a business as it increases the scale of its current operations leading to a fall in unit costs.
- Lower unit costs allow businesses to be competitive e.g. lower prices.

Question 18

Diseconomies of Scale :

Answer 18

The disadvantages suffered as a result of a business increasing the scale of its operations that lead to a rise in unit costs.
- Rising unit costs will make a business less competitive, may mean businesses have to increase prices.
- Includes communication, coordination and control.

Question 19

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