Strategy Flashcards
What is strategy?
a course of action, including the specification of resources required to achieve a specific objective
What does strategy require an understanding of?
Resources, environment and stakeholders
What is business strategy?
How to:
Achieve advantage over competitors
Avoid competitive disadvantage
Focuses on SBU’s
What is Operational Strategy
Human Resource Strategy
Marketing Strategy
IT & Technology strategy
Operations Strategy
What is Corporate Strategy?
Entering New Industries and
Leaving Existing Industries
What is the Rational Model?
Logical, step-by-step approach.
Requires the organization to analyze its existing circumstances, generate possible strategies, select the best one(s), and then implement them.
What is strategic analysis?
External analysis: identify opportunities and threats
Internal analysis: identify strengths and weaknesses
Stakeholder analysis: identify key objectives; assess power and interest of different groups
Gap analysis: identify the difference between desired and expected performance
What are strategic choices?
Strategies required to “close the gap”
Competitive strategy - for each BU
Directions for growth - which markets/products
Expansion achieved by organic growth, acquisition or some form of joint arrangement
What is strategic implementation?
Formulation of detailed plans & budgets
Target setting for KPI’s
Monitoring and Control
What are the advantages of long-term planning?
Forces managers to look ahead
Encourages improved control
Identifies Key Risks
Encourages creativity
What are the disadvantages of long-term planning?
Setting corporate objectives
Short-term pressures
Difficulties in forecasting accurately
Bounded rationality
Rigidity
Cost
Management distrust
What is the Emergent Approach by Mintzberg?
Rational Model is often too slow and becomes quicly outdated
Evolving, continuous and incremental
What is Incrementalism (Lindblom)?
Rational model not used in real world
Strategy making involving small scale extensions of past practices - more acceptable; consultation, compromise and accommodation built into the process
What is freewheeling opportunism?
Do not like planning; take opportunities as they arise
Planning takes too much time and is too constraining
Enjoy taking risks and the excitement of new ventures
What are the risks of freewheeling opportunism?
failure to identify key risks
strategic drift
difficulty in raising finance
management skill
What are the 3 Main approaches to Strategic Planning?
Traditional - examine key stakeholders and develop objectives that will meet their needs
Market-led - Examination of competitors and the market
Resource-based - focuses on areas at which it is good/successful
What are the roles & responsibilities of directors and senior managers?
Fiduciary duty to shareholders
How can we ensure shareholders interests are prioritized?
What about the interests of other stakeholder groups?
How should the performance of companies, divisions and managers be measured to ensure congruence with the objective of maximizing shareholder value?
What is corporate governance?
the system by which companies are directed and controlled in the interests of the shareholders and other stakeholders
Monitor those parties within a company who control the resources owned by the investors
Contribute to improved corporate performance and accountability in creating long-term shareholder value
What are the relevant aims of corporate governance?
To increase the disclosure to stakeholders in general
To ensure that companies are run on ethical grounds
Increased confidence
Increase transparency
What is strategic management accounting?
A form of management accounting in which emphasis is placed on info which related to factors eternal to the entity as well as non-financial information and internally generated information
What does a traditional management accountant do?
Deals with:
Internal company issues
Aids in the creation of operational strategy
Safeguard of company’s assets
Measures and reports financial and non-financial performance
Ensures efficient use of assets and resources
What is a mission?
The fundamental objectives of an entity expressed in general terms
What is a mission statement?
A published statement, apparently of the entity’s fundamental objectives.
This may or may not summarize the true mission of the entity.
What is a vision statement?
They are often confused with mission statements.
Identifies the ideal position that the organization wants to reach within the medium to long-term; it is, essentially, the longer term aspirations of the organization
What is an objective? (SMART)
Seek to translate the mission into a series of mileposts for the organization to follow
Specific - clear statement, easy to understand
Measurable - to enable control and communication down the organization
Attainable - it Is pointless setting unachievable objectives
Relevant - appropriate to the mission and stakeholders
Timed - have a time period for achievement
What is Mendelow’s Power/Interest Matrix?
Prioritize shareholders and decide how to deal with each of them
Low power low level of interest - minimal effort, open to influence
Low power high level of interest - keep informed, lack power to influence
High Power, low level of interest - keep satisfied, avoid gaining interest and moving to key players
High power, high level of interest - key players, most influential
What are the sources of stakeholder power under Mendelow’s Power/Interest Matrix?
- Positional - i.e. directors of the org
- Resource - can control, obtain, or create resources or other items of value
- System - i.e. director closely connected to a major shareholder
- Expert - i.e. skilled employees
- Personal - individual has good communication skills and reputation and (usually) is well liked within the organization
What is Cyert & March’s approach for solving shareholder conflicts?
Satisficing - negotiations to arrive at a compromise
Sequential attention - management gives each stakeholder a “turn” in benefits
Side payments - objectives can’t be met so compensated in some other way
Exercise of power - senior figure forces decision based on their power when there is a deadlock
What is non-market strategy?
Reputation
Ability to work with non-governmental organizations
Foresee relevant government actions and shape policy
What are the seven way Porter says the government can affect the structure of an industry?
- Capacity expansion - encourage firms to increase or cut capacity
- Demand - buy more or less or influence demand by legislative measures
- Divestment & Exit - government might prevent when not in public interest (health, defense, transport, education, agriculture)
- Emerging industries - i.e. government controls number of licenses
- Entry Barriers - government policy may restrict investment or competition by quotas and tariffs (WTO)
- Competition Policy - governments might devise policies deliberately to keep an industry fragmented (prevent one or two producers from having too much market share)
- New product adoption - government regulate new products (i.e. drugs), can ban use
What is Carroll’s corporate social responsibility model?
The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders: Economic responsibility Ethical responsibility Legal responsibility Philanthropic responsibility
What are the four possible strategies Carroll suggests that the organization can adopt with regard to corporate social responsibility?
Reaction
The corporation denies any responsibility for social issues, arguing that it is not to blame or required to act.
Defence
The corporation admits responsibility but fights it, doing the very least that seems to be required. Typically this is only done as an attempt to defend the organization’s current position.
Accommodation
The corporation accepts responsibility and does what is demanded of it by relevant groups.
Proaction
The corporation seeks to go beyond industry norms and anticipates future expectations by doing more than is currently expected. The organization attempts to improve society.
How do Johnson, Scholes and Whittington define ethical stance?
The extent to which an organization will exceed its minimum obligation to stakeholders
What is sustainability?
The use of resources in such a way that they do not compromise the needs of future generations. It also involves not polluting the environment at a rate faster than they can be absorbed.
What are characteristics of strategic decisions?
Impacts on the future prosperity and survival of the organization
Concerns the fit the organization achieves with its environment (satisfaction of owners, investors and other stakeholders; the products it makes and the markets it works in; the risks the business is exposed to)
Outcome sometimes not obvious at the time and may not be clear for some years
Subject to high degrees of uncertainty
What does building a strategy involve?
Analysis, Choice, and Implementation
What is involved in strategic analysis?
Stakeholder expectations
Resources and Capabilities
The business environment
What is involved in strategic choice?
Identifying strategic options
Evaluating options
Selecting the strategy
