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!
