Strategic Methods : How to Pursue Strategies (3.9) Flashcards
Innovation is the development of…
- Likely to have a _________ which can guarantee future…
- Adds __________.
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.
Product Innovation is changing a product that… or developing an….
Changing a product that already exists or developing an invention into a brand new product.
- - (Supermarkets have product and process innovation).
Process Innovation is changing a process of… or putting into practice a…
Changing a process of production that already exists or putting into practice a brand new production process.
- (Supermarkets have product and process innovation).
Innovation, ADVANTAGES & DISADVANTAGES (3) :
+ 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.
Business Model Innovation :
Changes at least 2 of 4 things.
- How do you generate revenue?
- How do you add value
- Who is your target customer?
- What do you offer customers?
Initiation (analyse current business model), Ideation (confront model), Integregation (check consistency of business model), Implementation.
Ways of becoming an innovative organisation? (4)
- K___________.
- R…
- I_________________.
- B_______________.
- Kaizen e.g. cheff cuts lemons in Pizza Express now (small, frequent improvement).
- Research and Development.
- Intrapreneurship.
- Benchmarking.
Intrapreneurship :
Is when an when employees in a larger organisation act in the same way as entrepreneurs.
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Benchmarking is the process of…
Process of identifying the best practice in your industry in relation to yours, identify areas and means of performance improvement.
Kaizen :
Continuously improve all functions, all members of workforce involved.
e.g. Pizzas Express, initially waitresses sliced lemons but now chefs do it so W can lay tables.
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Benchmarking Process (7) :
- Identify…
- Collect…
- Identify best…
- Compare…
- Set…
- Implement…
- Review…
- 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.
Copyright :
Patent :
Copyright : A legal protection for anyone that has produced work in a range of areas, free.
Patent : A legal protection of a unique feature of a product or process, very costly to pay for, e.g. Trunkee still faces problems, as does M&S with Colin the Caterpillar.
(Assessing Change)
Change occurs when a business alters its…
- May be necessary to meet aims and…
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.
(Assessing Change)
Business will either GROW or RETRENCH.
Grow, e.g. to… (3)
Retrench, e.g. to … (4)
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.
(Assessing Change)
Retrenchment :
Downsizing scale of the business’ operations, e.g. closing branches and delayering.
(Assessing Change)
Organic or Internal Growth :
When a business expands in size by opening new stores, branches or functions or new products.
- Can be very time consuming but is relatively low risk.
- Control is easier to maintain.
(Assessing Change)
Inorganic or External Growth :
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.
Advantages (3) & Disadvantages (2) of ORGANIC :
+ Lower risk.
+ Easy to maintain control.
+ Less costly.
- Slower growth.
- Limited market capture
Advantages (4) & Disadvantages (3) of INORGANIC :
+ Rapid growth.
+Takeover competitors.
+ Access to new expertise.
+ Economies of scale.
- Financial risk.
- Could lose company’s vision
- Employee dissatisfaction
Economies of Scale advantages enjoyed by a business as it…
- Lower…
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.
Diseconomies of Scale is the disadvantages suffered as a…
- Rising…
- Includes…
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.
5 main types of Economies of Scale :
- F
- R-B
- Ma
- Ma
- I D
- Financial ES : Banks may feel more secure lending to large businesses as its less risky, may give cheaper interest.
- Risk-bearing ES : business spreads risks on different products that a company can fall back on.
- Marketing ES : spread the cost of advertising over a large number of goods.
- Managerial ES : when a firm can afford to hire specialist, high-skilled people.
- Increased Dimensions ES : theory that increasing output gains you extra benefits, synergy.
Synergy : Two businesses joined together will be…
Two businesses joined together will be able to achieve more than the sum of the two businesses operating separately.
- Shared resources, increasing expertise and joint marketing.
Mergers vs Takeovers :
Mergers : Equal joining, e.g. Lloyds TBC and Curry’s PC world.
Takeover : 51% of shares of more, e.g. Kraft Foods and Cadbury.
(EXTERNAL/INORGANIC GROWTH)
(Growth through M&T)
Vertical Integration : Involves acquiring a business in the same _________________ but a different stage of the…
- Forward VI :
- Backward VI :
Involves acquiring a business in the same industry but a different stage of the supply train.
- Forward VI : Integration of a business that is closer to final consumers e.g. a manufacturer buying a retailer, e.g. TUI takes over travel agents.
- Backward VI : Acquisition operaters earlier in the supply chain e.g. a manufacturer buying a raw material or component, e.g. takeover suppliers.
(Growth through M&T)
Conglomerate Diversification is where a company…
Where a company expands its business by adding new products or services that are unrelated to its existing ones.
- Links to Ansoff’s Matrix.
- e.g. Tesco & Toys R Us
(Growth through M&T)
Horizontal Integration : Involves the combination of two businesses operating in the same ________________ and at the…
- 3 Advantages :
- 3 Disadvantages :
Involves the combination of two businesses operating in the same industry and at the same stage of the supply chain.
+ Exploit internal economies of scale
+ Potential to secure revenue synergies.
+ Reduces competition.
- Risk of diseconomies of scale.
- Reduced flexibility.
- Threatens competition (mergers and acquisitions can lead to monopolies which can be detrimental to consumers).
Economies of Scope : The advantages enjoyed by a business as it…
The advantages enjoyed by a business as it increases the scale of its operations by expanding the range (scope) of activities it undertakes (leading to a fall in unit costs).
- Economies of Scale is 1 product.
- Economies of Scope is multiple.
Economies of Scope includes :
- Entering…
- Introducing…
- D_________________.
- Market ___________ rather than…
Benefits include :
+ Can share…
+ Maximise…
+ Increase…
- Entering new markets.
- Introducing new products.
- Diversification (Ansoff’s Matrix).
- Market brand rather than individual products.
- Benefits include :
+ Can share expertise.
+ Maximise use of resources.
+ Increase brand loyalty.
(Franchise) Franchisor grants a…
- The owner gets paid…
- The franchisor must…
Franchisor grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/business format.
- Owner gets paid royalty payments.
- The franchisor must support the franchisee in a range of areas, e.g. advertising and recruitment.
Franchise, Advantages (4) & Disadvantages (3) :
+ Rapid expansion (maximise profits).
+ Enables quick geographical growth.
+ Investment from franchisees is an important source of growth finance.
+ Economies of scale (buying power and mass advertising).
- Loss of control, can damage reputation.
- Managing growth can be difficult (have to have enough staff & resources).
- Litigation, a failed franchise is a court case waiting to happen.
Joint Ventures is when two or…
Two or more businesses agree to act collectively to set up a new business venture with all parties contributing equity to fund the set up and purchase of assets.
e.g. Primark and Greggs, Tesco and Entertainer (E outlets in Big Tesco’s).
Research and Development examples :
- Amazon :
- Volkswagen :
- Amazon : Uses AI to enhance its services e.g. Alexa, Intraprenurship, the ‘two-pizza team rule’.
- Volkswagen picked up a lot of other business, e.g. Bugatti, Porsche and Skoda, and has invested hundreds of billions into R&D, however, due to this, they have a high recall rate.
How can technology be used in operations management :
- Production…
- Measure stock…
- C_____/C______ …
- Production line, robotics.
- Measure stock levels.
- CAD, CAM : Computer Aided Design and Computer Aided Manufacture.
Digital Technology is the use of…
- It includes…
The use of computers to find, store, analyse, manipulate and communicate digital information.
- E-commece, big data, data mining and Enterprise Resource Planning.
(Digital Technology, E-Commerce) :
— Commercial Transactions can be :
- B2B : …
- B2C : …
- C2C : …
- It’s growing because…
Commercial Transactions can be :
- B2B : business to business transactions.
- B2C : business to consumer transactions.
- C2C : consumer to consumer transactions.
— It’s growing because of improved internet speed, convenience, competitive advantage, safer payment and increased confidence.
E-Commerce, Advantages + Disadvantages for customers & business :
Customers : + Convenience / - potential for slow delivery and can’t try stuff on.
Business : + Operates 24/7 / - can’t provide as good customer specific, have to set up a website, lots of competition.
(Assessing Digital Technology)
Big Data : Refers to the volume…
- 5 V’s make it up, including…
- Collected from… (3)
Refers to the volume of data that can now be accessed as a result of technological advancements.
- 5 V’s make it up, including volume (amount), velocity (form), variety (different types), veracity (accuracy) and value (how does business benefit from it).
- Collected from customers transactions, detailed insight into demographic trends, consumer behaviour etc.
(Assessing Digital Technology)
Data Mining : Refers to the ability to manipulate and…
- Extrapolation trends in…
- Target advertising, sales _______________ and product _________________.
- Inform…
Refers to the ability to manipulate and analyse the data to inform decision making.
- Extrapolation trends in market (predict future trends).
- Target advertising, sales forecasting and product developments.
- Inform resource planning, e.g. inventory, workforce.
(Assessing Digital Technology)
ERP (Enterprise Resource Planning) : A piece of management software that….
- Includes… (4)
+ Greater integration leads to greater _________________ & less ________, increased…
- It takes ___________ , and a lot of ___________, also by the time created it will be _____________, staff…
A piece of management software that enables greater integration between all functional areas.
- Includes : Inventory, production, accounting, HR etc.
+ Greater integration leads to greater efficiency & less waste, increased customer satisfaction.
- It takes time, and a lot of money, also by the time created it will be outdated, staff will need to be trained with it.
Top 5 countries UK imports with :
USA, China, Germany, Netherlands and France.
Reasons for Importing/Exporting :
- Increased…
- Spread…
- S_______________ skills.
- Proximity to….
- Government…
- Tax…
- Increased wealth (greater target market).
- Spread risk (different demand/trends in economy).
- Specialist skills.
- Proximity to raw materials.
- Government incentives.
- Tax advantages.
(Methods of entering International Markets)
- Export :
- Liscensing :
Exports : Sell goods and services produced in one country to another country
- Liscensing : Business gives permission to a third party to sell their goods or services abroad, e.g. franchises.
(Methods of entering International Markets)
- Alliances : e.g.
- Direct Investment :
Alliances : e.g. Apple, forming partnerships with one or more businesses operating in another country.
Direct Investment : Capital expenditure to establish a physical presence in another country, e.g. setting u sales outlets or a manufacturing plant.
(Factors influencing the attractiveness of international markets)
USA :
Political :
Economic :
Social :
Technological :
Legal :
Environmental :
USA :
- Political : Strong trade links.
- Economic : High labour costs.
- Social : Consumerism.
- Technological : Lots of innovation.
- Legal : Legislation varies across USA.
- Environmental : High costs.
Off-Shoring : The process of moving…
- Lower…
- Higher…
- Enter new…
- Overcome…
- Talent…
Process of moving business functions, e.g. production abroad.
- Lower costs.
- Higher productivity.
- Enter new markets.
- Overcome domestic regulations.
- Increase talent pool.
Re-Shoring : Process of moving previously…
- Cost saving may…
- May be…
- May allow for…
- Government…
Process of moving previously off-shored business back to the country of origin.
- Cost saving may no longer be significant.
- May be quality issues.
- May allow for a shorter lead time.
- Government may provide incentives.
Multinational Companies : Large businesses that…
+ Economies of…
+ Economies of…
+ New…
+ Strong…
+ Market…
+ Shared…
Large businesses that operate in a number of different countries.
+ Economies of scale, unit costs fall as output rises, single product.
+ Economies of scope, unit costs fall because produce wide variety of products.
+ New market development.
+ Strong brand recognition.
+ Market dominance.
+ Shared expertise.
Glocalization : When a global…
- Respond to…
- Ease with which…
When a global brand is altered to meet local needs, e.g. McDonald’s.
- Respond to cultural diversity.
- Ease with which products can be altered.
