Strategy Flashcards
Strategic Capabilities:
Distinctive Resources
Distinctive Competences
- Valuable
- Rare
- Imitate-able
- Non-substitutable
Stratergy:Definition
“Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment, through its usage and configuration of resources and competences with the aims of fulfilling stakeholder expectations”
Levels of strategy
Corporate
Business
Functional/ Operational
Formulation of strategies
- Incremental/ adaptative
- Freewheeling opportunism
- Traditional (Rational) model
- Resource-based approach (hammer –nail)
- Position-based approach (position the company around an identified gap the environment and competitors)
Vision, mission and goals
Vision = The future aspirations of the company
Mission = of the company and the goal it wants to achieve, in line with the values of the company.
The basic reason for the existence
- Include the purpose, scope, strategy and principles
–Provides a basis for uniform decision-making
- Provides a basis for the application of resources
–Help to create goal statements out of the overall goals
–Gives direction to employees and sets the standard for ethical behaviour
–Improves understanding of external stakeholders
SMART:
- Specific - everybody has to be able to understand it/precise detail
- Measurable– progress of performance must be measured
- Attainable– the business must have the ability + the market must allow it
- Relevant –
- Time-bound –when must it be met
Primary Activities
Direct activities related to production, sales, marketing and after-sales services
- Inbound logistics: receiving, handling and storing of raw materials
- Operations: conversion of raw materials into final products
- Outbound logistics: storing products + distribution to customers
- Marketing + sales
- After-sales services
Secondary Activities
Supports the primary activities:
- Procurement: acquire the materials for manufacturing
- Technology: I.e. Use of IT to manage and control processes or to do develop new products (CAD)
- HR management: recruiting, training, development of people necessary for production
- Firm infrastructure: activities necessary to planning, finance, quality control
Value Chain anaylsis
- Finding the cost of activities performed to create a sufficient product or service
- Find the maximum price consumers are willing to pay
- Find and remove activities that consumers don’t value
- Find the assets (infrastructure) that are necessary to do activities
Boston consulting Matrix
Market Share: The amount of sales one company has in comparison to the market
Relative market share: The sales of one company in relation to its competitors
Relative market share:
Cash Cow
Star
Question Mark
Dog
Cash Cow
- High market share in low growth market
- Usually a cash generator and profitable
- Often cost leaders - economies of scale
- Low growth = capital requirements are low, thus good return on investment
- Profits and cash flows can be used to support other products in development stage
- Defensive strategy often adopted to protect this lucrative position
Star
- High market share in high growth areas – usually market leader of product;
- Offer attractive long term prospects – may one day become a cash cow;
- Absorb large amounts of cash for continuous capital investments required in new production facilities in order to sustain growth.
- Cash also required to sustain competitor attack strategies;
- Likely to be attacked by competitors, need advertising and promotion to defend these attacks – advertising required in both defensive and offensive style.
Question mark
- Low market share in high growth industries;
- Opportunity exists in these areas – a dilemma exists – why is market share not growing?
- May need to invest heavily to secure profitable or meaningful market share;
- Potential to become a star if…
- Investment required – machines and expertise but degree of uncertainty as to exactly what is needed;
- Careful consideration required at corporate level;
- Sometimes known as the ‘problem children’ – they need to be caught early to ensure that they don’t become ‘problem adults‘;
- Will usually absorb substantial management time and may not be successfully developed.
Dog
- Low market share in a low growth market;
- To cultivate would require cost and substantial risk;
- Often divested – only question is then the speed or timing of the divestment
- May require investment just to keep product in portfolio, especially if the company is offering a ‘one stop shop’ or is using the product as a ‘loss leader‘.
Product Strategy
- Cash cows’ cash flows used to support and stars and develop question marks; finance
- Cash cows to be from competition; defended
- Question marks should perhaps be sold demands on cash; to reduce
- Dogs perhaps sold or terminated.
NB NB!! Always determine actual profitability of product before taking drastic sales-decisions!
Product stratgery Limitations:
- Simplistic – only considers two variables;
- High market share is assumed to indicate competitive strength, but this is not necessarily true. Depends on profit margins etc.
Macro environment
PESTEL
Political
economic
Socio-cultural
Technological
Ecological
Legal
Political
Government is a country’s biggest supplier, employer, client and investor and can influence your business
Political stability/ corruption/ nationalisation
Include laws on: employment, tax, competition, protection, health and safety
Capital allowances, subsidies, incentives
Barriers to entry (i.e. Need licenses)
economic
Tax rates
Inflation rates
Foreign exchange rates
Unemployment
Interest rates and the
availability of credit
Government subsidies
Economy growth rate (GDP)
Socio-cultural
Change in values and life styles
change in average age of population
Change in working patterns and relaxation
Demographical changes
Change in social classes/ wealth status
Change in religious and ethnical mix of the population
Technological
Change in production techniques
The type of products that are manufactured and sold
How services are rendered
Ways to identify the markets – Big data
Ways of communicating with external parties
Impact of Internet
Ecological
Application of limited natural resources
Pollution
What is the impact of environmental issues on the future demand of our product or service?
Physical environment
Types of strategies
- low cost
Big production volumes (economy of scale)
Optimal use of technology
Emphasis on continuous learning and improvement
Improve productivity - differential
Invest in brand name, good marketing
Invest in good and loyal employees with top workmanship in product design and production - Focus / (Niche)-strategy for very specific market segment.
low cost
differential focus
