Strategy Flashcards
What is top down vs emergent approach for strategic planning
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
What’s a mission statement and what does it include
Most generalised type of objective which expresses the business’s reason for existence:
- purpose
- strategy = how does it get competitive advantage
- policies
- values
What is the objectives and issues for non-for profits
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
Mendalow Matrix
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
PESTLE
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
Porter’s diamond
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
Industry life cycle
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
Porter five forces
Attractiveness of an industry, determines the level of competition and therefore profitability
- 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
Critical success factors and core competencies
CSF are a number of small key goals vital to success or organisation (where they excel), identifying them helps identify core competencies
Core competencies
- Competitive architecture
- Internal e.g employees
- External e.g suppliers
- Network e.g collaborating firms - Reputation
- Innovative ability
Value chain analysis
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
Portfolio analysis - product life cycle
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
Portfolio analysis - BCG matrix
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
Strategic position using SWOT
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
Porter generic strategies
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
Ansoff’s matrix
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