Strategy Flashcards

1
Q

What is top down vs emergent approach for strategic planning

A

Top down
- uses external/internal analysis to feed into corporate appraisal to then identify mission and objectives
- make analysis and choose which strategies to implement

Emergent
- behaviours which have been adopted and have a strategic impact
- emerge over time in response to the environment
- adopted by dynamic organisations with a flexible decentralised structure
- flexible; allows managers to make decisions when opportunities arise

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2
Q

What’s a mission statement and what does it include

A

Most generalised type of objective which expresses the business’s reason for existence:

  • purpose
  • strategy = how does it get competitive advantage
  • policies
  • values
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3
Q

What is the objectives and issues for non-for profits

A

primary objective = maximise benefit to target stakeholders

Issues
- multiple stakeholders so conflicts
- multiple objectives so conflcits
- difficulty in measuring non-financial objectives e.g happiness
- financial constraints limit the amount they can achieve

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4
Q

Mendalow Matrix

A

Manage stakeholders differently

Low power, low interest = minimal effort

Low power, high interest = keep informed

High power, low interest = keep satisfied

High power, high interest = key players need participation

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5
Q

PESTLE

A

Identify opportunities and threats from organisation’s macro environment

Political
- taxation policy
- government spending
- foreign trade regulations

Economic
- economic growth
- exchange / interest rates
- inflation

Social and demographic
- attitudes, tastes and fashions
- population demographics
- income distribution

Technological
- new products
- improved production me th odd
- rate of obsolescence

Ecological
- sustainability
- pollution and climate change
- natural capital impact
- green finance issues

Legal
- industry regulation
- company legislation
- employment law

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6
Q

Porter’s diamond

A

Why some nations have a sustained competitive advantage in certain industries

Useful to identify organisation’s source of competitive advantage

Demand conditions = demanding local consumers force firms to be more innovative

Factor conditions = availability of factors of production e.g Human Resources , capital, knowledge, physical resource, infrastructure

Strategy, structure and rivalry = strong domestic rivalry forces local firms to become more efficient to survive

Related and supporting industry = proximity of related and supporting industries leads to knowledge sharing and easy access to components, reducing lead times and carriage costs e.g UK finance sector aided by UK accountancy firms

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7
Q

Industry life cycle

A

Introduction

Growth (competition rivalry low)

Shakeout - weaker players forced to leave industry/ merge, market growth slows

Maturity - stable period of low growth, price competition intensified, smaller companies shook out

Decline - firms leave the industry and eventually ceases to exist

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8
Q

Porter five forces

A

Attractiveness of an industry, determines the level of competition and therefore profitability

  1. Competitive rivalry
    - Lots of existing competitors
    - High fixed costs
    - Low industry growth
    - High exit barriers
    - Low switching costs

Threat of new entrants
- Low barriers to entry
- Market attractiveness e.g high growth, high profit margins, few competitors, easy switching

Threat of substitutes
- Are substitutes available
- Consumers likely to switch e.g. price is low, relative performance is comparable, easy switching

Bargaining power of suppliers
- Few large suppliers
- Supplier’s products are differentiated
- High switching costs for customers
- Suppliers have other buyers

Bargaining power of customers
- Small number of large customers
- Lots of competitors
- Low levels of product differentiation
- Low switching costs
- Customer’s own profitability is low
- High degree of price transparency

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9
Q

Critical success factors and core competencies

A

CSF are a number of small key goals vital to success or organisation (where they excel), identifying them helps identify core competencies

Core competencies

  1. Competitive architecture
    - Internal e.g employees
    - External e.g suppliers
    - Network e.g collaborating firms
  2. Reputation
  3. Innovative ability
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10
Q

Value chain analysis

A

Examines how business can gain competitive advantage by breaking down into primary and support activities and looking for cost/quality advantages

Primary activities
- Inbound logistics = storing / distributing inputs
- Operations = transform inputs into final product
- Outbound logistics = storing / distributing final product
- Marketing and sales
- Service = after sales service e.g installation, repair and training and customer service

Support activities
- Procurement = acquiring various inputs to the primary activities, not the resources themselves
- Technology development
- Human resource management
- Firm infrastructure = planning, finance, quality control, information management

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11
Q

Portfolio analysis - product life cycle

A

Development = negative cash flows, heavy investment in initial R&D and marketing

Introduction = continued cash flow, initial demand

Phase in life cycle will impact strategy adopted

Maturity = critical mass should be achieved leading to cost inefficiencies. Positive cash flow - minimum marketing and investment, maximum sales

Decline = heavy price discounting to utilise space capacity and cover overheads. Brand loyalty

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12
Q

Portfolio analysis - BCG matrix

A

Analyse company’s product portfolio in terms of market share and market growth

Problem child = lack of economies of scale limit cash flow.
- Should company invest further to gain market share

Star = high threat of new entrants required the company to continue to invest to defend market share
- Should company consolidate its current position or invest further to seek additional growth

Cash cow = competitors will decide not to attach out market shares as the market does not warrant the investment
- large positive cash flow can be achieved
- Should company milk cow and accept market share may eventually fall

Dog = product may lack economies of scale but market not attractive enough to seek growth
- when should you put the dog down

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13
Q

Strategic position using SWOT

A

Used to perform a corporate appraisal to evaluate the strategic position of the organisation

Strengths
- are strengths matched to opportunities
- are strengths sufficient to minimise threats

Weakness
- what weakness needs to be addressed before pursing opportunities
- can these be converted into strengths

opportunities

threats
- can these be converted into new opportunities

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14
Q

Porter generic strategies

A

Three ways to gain a competitive advantage

Cost leadership = seeking to be the lowest cost producer in the industry
- But … only one, can lose position easily due to tech and economy

  • Differentiation = creating tangible and intangible product features that the customer is willing to pay more for
  • demand more elastic, less direct competition and fewer perceived substitutes
  • but changes in fashion, cheap copies
  • Focus = utilising the above in a narrow profile of market segments
  • if too small then insufficient sales and if too large then large players may be interested
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15
Q

Ansoff’s matrix

A

Existing market existing product = market penetration, increase sales to existing markets

Existing market new product = product development, new product for existing markets

New market existing product = market development, find new markets for existing products

New market new product = diversify! This can be related (vertical/horizontal integration) or unrelated

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16
Q

Advantages of vertical integration

A

Economies of combined operations

Easier to schedule and co-ordinate

Avoid the market so no negotiating, packing, advertising

Tap into technology e.g pharmacy finding multiple uses for chemicals or compounds

Guarenteed demand / supply

17
Q

Disadvantages of vertical integration

A

Increase proportion of firm’s fixed operating costs, if firm purchased all components externally all costs would be variable

Reduced flexibility to change partners

Capital investment needs - vertical integration will consume capital resources and must yield a return greater than or equal to firm’s opportunity cost of capital

Differing managerial requirements - no automatic transfer of skills

18
Q

Advantages and disadvantages of unrelated diversification

A

Advantages
- risk spreading. Diversified markets reduced variability of profits
- can enter more attractive markets
- can use surplus cash
- utilise brand image in new markets

Disadvantages
- lack of management experience in new products/ markets
- failure in one could damage brand
- often bad for shareholders as lack synergies

19
Q

Pros and cons of decentralisation

A

Pros
- Senior management free to concentrate on strategy
- Better local decisions due to local expertise
- Better motivation
- Quicker responses/flexibility

Cons
- Loss of control
- Dysfunctional decisions due to lack of goal congruence
- Poor decisions made by inexperienced managers
- Training costs
- Duplication

20
Q

What is transfer pricing and common methods

A

Transfer pricing = price at which one division in a group sells its products or services to another division in the group

  1. Cost plus pricing = full cost plus mark up
  2. Market price = current market rate
  3. 2 part tariff = products/services supplied at marginal cost but fixed annual fee charged to recover fixed costs
  4. Dual pricing = supplying division is credited with a different price to the one which has been debited to the receiving division

Should consider
- combined tax liabilities
- performance management
- goal congruence

21
Q

Corporate governance

A

Corporate governance = system by which business operations are directed and controlled

  1. Chairman shouldn’t be chief executive = appropriate balance of power
  2. Use of independent NED = objective and experts
  3. Audit, remuneration and nomination committee = formed by NEDs
  4. Risk management
22
Q

How does finance department acting as a business partner help

A
  1. Provide real time support in data and information needs
  2. Help managers understand performance
  3. Help create credible business plans
  4. Help managers prepare budgets
  5. Help design information systems
23
Q

Cyber security threats

A
  1. Human threats
  2. Fraud
  3. Deliberate sabotage
  4. Viruses and other corruptions
  5. Denial of service