Strategy Flashcards
Strategy
Plan of action for accomplishing an
organization’s overall and long-range goals to create value.
Strategy details separate activities
Tactics and initiatives
Is growth a strategy?
No, it is the result of a successful designed and implemented strategy
Three levels of strategy
Organizational strategy
Business unit strategy
Operational strategy
Organizational strategy
Focuses on the future of the organization as a single unit
General vision of the future it seeks and long-term goals
Business unit strategy
Answers the question on how and where the organization will focus to create value
Operational strategy
The way the organization and business unit strategies are translated into action at the functional level through functional strategies
Alignment of strategies
Levels must be aligned
HR should be in the organizational and functional strategies
All policies, programs and processes should be evaluated for strategic impact
HR strategic activities
Should add value at all points in the employment management cycle:
- Workforce planning
- Talent acquisition
- Engagement and retention
- Rewards
- Development of skills and leaders
Awareness of stakeholders with strategy
Strategy must be developed with stakeholders and their perceptions and value the organization delivers and the context that affects those strategic choices
Strategic planning
Process of setting goals and designing a path
toward a competitive position.
Helps create alignment of efforts and provides a layer of control
Strategic management
Actions that leaders take to drive an
organization toward its goals and objectives.
Makes adjustments to the plan and organization ans needed
Strategic management provide the organization with
Consistent, long-term goals
Consistent decision making by leaders
Better competitive and external vision
Better internal vision
How does strategic management provide consistent, long-term goals
Fewer resources will be wasted on activities that are unrelated to the goals or are ineffective in supporting attainment of the goals.
How does strategic management provide consistent decision making by leaders
Strategy provides guideposts throughout the organization, from top to bottom.
Each action and each investment of resources must be assessed in light of the organization’s long-term goals.
Alignment of effort
Necessary to maintain organizational focus on defined mission and goal
Each department evaluates it’s plan against the organization’s
Strategic drift
When an organization fails to recognize and respond to changes in its environment that necessitate strategic change.
Strategic drift
Caused by organizational culture too deeply rooted in past
How can HR help control drift
Develop leaders with vision and courage
Embody these values as well
Core competencies
Unique advantages an organization possesses
Abilities that are integral to creating customer value and difficult for customers to imitate
Can include a vision
Vision
Ability to see when and how the organization can reinvent itself
Mistakes to avoid in strategic planning
Taking shortcuts
Little follow-through
Over-reliance on the comfortable and familiar
Insufficient commitment from management
Insufficient involvement from the rest of the organization
Inadequate communication
Taking shortcuts mistake in strategic planning
Poorly researched, vague, or overly ambitious strategies are usually not successful and make a poor argument for strategy.
Little follow-through mistake in strategic planning
Strategic plans should lead to decisions.
These decisions are risky, require complex execution, or are in conflict with the current organizational culture, leaders may be reluctant to translate intent into action.
Strategy requires leadership and good decision makers.
Deliberate strategy
Carefully articulated as a plan for future actions
Emergent strategy
A predictable pattern of decisions that management makes as it uses the organization’s mission, vision, and values to respond to external conditions.
Strategic Planning Steps
- ) Formulation
- ) Development
- ) Implementation
- ) Evaluation
Formulation step in strategic planning
Leaders gather and analyze internal and external information to determine the organization’s current position and capabilities, opportunities, and constraints.
Development step in strategic planning
Creating strategic goals and tactics that will optimize success given the environment, opportunities, and constraints—the strategic plan.
Implementation step in strategic planning
Requires clear communication of objectives to teams, coordination and support of their efforts, and control of resources.
Evaluation step in strategic planning
Both continually and at designed intervals
Continually - make sure that activities maintain strategic focus and are effective
Designed intervals - determine the effectiveness of strategy and need for change or improvement
Systems thinking
Process for understanding how seemingly
independent units within a larger entity interact
with and influence one another.
How is systems thinking dynamic
One part can affect other parts
Changes from leadership can go across divisions and to the lowest levels of an organization
Lower levels can go through multiple divisions and upward
Root causes of problems
Must be addressed
When just treating symptoms - other unintended issues may be created elsewhere
External environment in systems thinking
Separate systems that exert their own influence over the organization
IPO (Input-Process-Output) Model
Inputs -> Process -> Outputs
Inputs in IPO
All factors that can affect the outcome
Inputs in IPO include
Internal and external constrains that will make a chosen strategy more difficult to achieve
Organizational resources or external conditions that will enhance the chances of achieving strategic goals
Process in IPO
All methods the organization can apply to maximize its opportunities and manage constraints
Process in IPO includes
Work processes and workforce skills
Outputs in IPO
The desired strategic effect
Environmental scanning
Process that involves a systematic survey and
interpretation of relevant data to identify
external opportunities and threats and to assess
how these factors affect the organization
currently and how they are likely to affect the
organization in the future.
Environmental scanning includes
PESTLE analysis
SWOT analysis
Growth-share matrix
Scenario analysis
PESTLE analysis
Scanning process that searches for
environmental forces in
Political Economic, Social Technological Legal Environmental
Levels of PESTLE analysis
Entire enterprise
Individual units/functions
Specific activities
PESTLE analysis use
Gives a broader long-range perspective
TO save time and complexity of data 0 organization must restrict horizons and direction of scanning
Steps in PESTLE analysis
- ) Create a list of possible events or trends that exist now or could come up within a defined time frame.
- ) Identify the potential impacts on the organization
- ) Research the impacts more thoroughly to understand possible causes, their dimensions and connections with other events or trends
- ) Assess the importance of possible impacts based on strength of the data
SWOT analysis
Method for assessment of an organization’s
strategic capabilities through use of the
environmental scanning process
Internal and external factors affecting
achievement of organizational goals are
identified and considered.
SWOT internal environment includes
Strengths and weaknesses
SWOT external environment includes
Opportunities and threats
Desired effect in SWOT are represented in
Opportunities
Danger, harm and menace in SWOT are represented in
Threats
What can be leveraged in SWOT
Strengths and opportunities
Problems that must be solved and difficult to control in SWOT
Weaknesses and threats
Creating SWOT
- ) Info is used from environmental scanning
- ) Meetings can be used to generate items and sort into the categories
- ) Ranking sheet - each scenario (strategic option) is scored against the four categories, and scenarios are ranked by composite score
SWOT analysis can provide
Need for cultural misalignment
Skill gaps before committing to strategy
Preformed as companies enter new markets
Growth-Share Matrix
Used to find where the greatest value in the organization lies
Vertical axis of growth-share matrix
Indicates rate of growth
Horizontal axis of growth-share matrix
Size of market share
Growth-Share Matrix assumptions
Growth trend (rather than stasis or decline) predicts greater value and a larger market share indicates a stronger competitive position.
Growth-Share Matrix components
Star
Cash cow
Dogs
Question marks
Stars in Growth-Share Matrix
High market share and high growth rate
Cash cow in Growth-Share Matrix
High market share and low market growth
Dogs in Growth-Share Matrix
Low market share and low market growth
Consuming resources without offering value of future growth
Question marks in Growth-Share Matrix
Low market share and high market growth
Could be winners or losers; future is unclear
Scenario Analysis
Compare the impact of changes in the environment on the organization’s outputs.
Identifies environmental factors that have the greatest potential for positive or negative impact and to apply the principles of risk management to strategy formulation.
Destination of strategy
Image on how the organization defines its purpose (its mission), the future it hopes to see (its vision), and the principles it agrees will guide its behavior (its values).
Are mission, vision and value statements always deliberate and formal
No, sometimes they are made informally through a pattern of decisions and actions and not articulated publicly
Purposes of strategic statements
Guide management thinking and decisions during crisis
Individual initiatives can be held against statements
Employees understand expectations
They reflect on organizational culture
Contribute to the employer’s brand and make recruiting and onboarding more focused and effective
Stakeholders can see how they are included and challenges leaders to fulfill these pledges
Mission statement
Concise outline of an organization’s strategy
Specifying the activities it intends to pursue and
the course its management has charted for the
future.
Could name one or more key stakeholder
Communicates sense of purpose and drives value the organization intends to deliver to stakeholders
Vision statement
What an organization hopes to
attain and accomplish in the future, which
guides it toward that defined direction.
Organizational values
Beliefs and principles defined by an
organization to direct and govern its employees’
behavior.
Communicating Mission, Vision, and Values
Reiterated at business unit and functional levels which then has their own mission, vision and values
Value drivers
Actions, processes, or results that are needed
to deliver a desired value.
Balanced scorecard
Performance management tool that depicts an
organization’s overall performance, as
measured against goals, lagging indicators, and
leading indicators.
Areas of the Balanced Scorecard
Finance
Customers
Internal business processes
Learning and growth
Purpose of a balanced scorecard
To achieve balance between:
- ) Financial and nonfinancial indicators of success
- ) Internal and external constituents in the organization
- ) Lagging and leading indicators of performance
Leading indicator
Predictive in that action in this area can change future performance and help achieve success.
Lagging indicator
Effects that have already occurred and cannot be changed.
Effective strategy focuses on leading indicators of performance rather than lagging because
Improving leading indicators will turn lagging indicators around
Setting targets for each KPI
Indicate desired level of performance
Measurable against defined scale or ratio
SMARTER Goals
Specific
Measurable
Attainable
Relevant
Time-bound
Evaluated
Revised
Benchmarking
Process of identifying
performance gaps and sets goals for
performance improvement
Done by by comparing its
data, performance levels, and/or processes
against those of other organizations.
Benchmarking Steps
- ) Define KPIs
- ) Measure current performance
- ) Identify appropriate benchmarks and securing their performance data
- ) Identify performance gaps between oneself and the benchmark organization
- ) Set objectives and implementing any necessary support activities
Types of benchmarks
Internal and external
Benefits of benchmarking
Identify challenging goals and obstacles that must be overcome to achieve those goals
Helps organization improve not only measure performance
Encourages growth by focusing organization’s attention outside itself and current practices
Global benchmarks
Should be carefully weighed and analyzed
Not accepted at face value
Strategic fit
A state in which an organization’s strategy is
consistent with its external opportunities and
circumstances and its internal structure,
resources, and capabilities.
Optimized strategic fit
The organization will do whatever it needs to get there
Each organization’s strategy must describe
How they will create a strategic position
Corporate strategy - where they will compete in terms of market and industries
Strategic position
Position where an organization enjoys a competitive edge over its rivals—its business strategy.
Corporate strategy
Defines the scope of the organization
Business strategy
Addresses the way that the employer will relate to the industry and marketplace
How it will define its particular value to its customers
Ways organizations can create a competitive advantage
- ) Change in the external environment
2. ) Change in the organization itself
Organizations can create competitive advantage in external changes by
Reacting swiftly to changes
Organizations can create competitive advantage in internal changes by
Ability to create change and innovate
Blue ocean
Creating competitive advantage through innovation
Creating new marketplaces
Red ocean
Businesses compete in existing marketplaces
Win by taking a share of a competitor
Porter’s Competitive Strategies include
- ) Cost leadership
- ) Differentiation
- ) Focused
Focused strategies under Porter’s Competitive Strategies
Apply cost leadership or differentiation within narrow industry segments or niches
Corporate strategy
Defines the industries and markets the organization will compete in
Growth Strategies Include
Strategic alliance
Joint venture
Equity partnership
Merger/acquisition
Franchising
Licensing
Contract manufacturing
Management contract
Turnkey operation
Greenfield operation
Brownfield operation
Strategic alliance
Companies agree to share assets, such as technology or sales capabilities, to accomplish a goal.
The relationship may have varying degrees of tightness and formality.
Some alliances involve customers, partners, or competitors.
Joint venture
Two or more companies invest together in forming a new company that is jointly owned.
Equity partnership
One firm acquires partial ownership through purchase of shares.
The relationship may be general or limited
Partnership agreements define such issues as leadership and division of profits and losses.
General equity partnership
Sharing proportionally in control, profits, and liabilities
Limited equity partnership
No managerial authority, liability limited to investment
Merger/acquisition
A firm purchases the assets of a local firm outright, resulting in expanding the acquiring company’s employee base and facilities.
Integration of acquired companies often involves significant cultural, systems, and management challenges.
Data privacy can be a big issue
Franchising
A trademark, product, or service is licensed for an initial fee and ongoing royalties.
Often used in the fast-food industry.
Similar to licensing as a low-risk entry strategy, although control over franchisee behavior is greater.
Licensing
A local firm is granted the rights to produce or sell a product.
Low-risk entry strategy
Avoids tariffs and quotas imposed on exports.
Little control of the licensee’s activities and results.
Contract manufacturing
A firm arranges for a local manufacturer to produce components or products as a means of lowering labor costs.
Management contract
Another company is brought in to manage and run the daily operations of the local business.
Decisions about financing and ownership reside with the host-country owners.
Turnkey operation
An existing facility and its operations are acquired and run by the purchaser without major changes.
Greenfield operation
A company builds a new location from the ground up.
Represents a major task and a commitment to completely staff and equip the new location.
Brownfield operation
A company repurposes, through expansion or redevelopment, an abandoned, closed, or underutilized industrial or commercial property.
Divestiture
“Pruning” of parts of the organization that are underperforming or that are no longer in line with the organization’s strategy
Benefits of divestiture
Increases value of subsidiary or its opportunities. - Sometimes the parent company may not have the necessary talent to take the “child company” to its next level of growth.
Investment may be recouped through the sale of a high-value subsidiary and the cash used to increase the parent’s value in other ways.
The enterprise’s activities may be refocused on new priorities, perhaps as the result of competitive threats and/or opportunities.
Risk that might derive from financial positions (such as poor cash flows or high debt load) or strategic outlooks (such as declining market growth or the possibility of a hostile takeover) can be managed.
Challenges of divestures
Keeping key talent during and after the process
Ways to retrain key talent during divestiture
Providing enhanced severance protection if employees are laid off soon after the close of the deal.
Making managers accountable for employee retention.
Benchmarking compensation and benefits.
Steps for divestiture
- ) Identify the candidate for divestiture.
- ) Identify a target buyer
- ) Restructure
- ) Execute the deal
Identify the candidate for divestiture step in divestiture
HR plays a role in this stage by performing due diligence as a seller: identifying potential risks connected with divesting particular candidates
HR can participate in SWOT analysis of candidate
Identify a target buyer step in divestiture
strongest candidate will be an enterprise that needs the strengths and opportunities the divested subsidiary can provide and that can address potential weaknesses in the workforce.
Restructure step in divestiture
Even before an actual sale or spin-off, the parent company should prepare the subsidiary for its new identity by defining new leadership, board composition, and organizational structure.
HR role in restructure step in divestiture
Identify and prepare strong leaders for the subsidiary (without harming the talent of the parent company).
Leaders may be drawn from other parts of a global organization. HR will also be involved in designing incentive offers for the subsidiary’s new leaders.
Execute the deal step in divestiture
Transition service agreements are often established to support the new entity.
Agreements might cover financial (treasury and tax), legal, IT, business processes, and HR—including such capabilities as HRIS, payroll, and benefits.
Parts of HR budget
- ) Operational - ongoing activities
2. ) Strategic - funds projects that are aligned with organization’s strategic goals
First step of HR leaders in allocating resources of strategic activities
Compare previous/current activities and budget allocations with what will be needed to support the proposed organizational strategy
Elements needed for effective implementation of strategy
Communication outward to the entire team.
Communication inward to leaders
Leadership support of decisions made by subordinates
Free flow of information across organizational boundaries
Enough information to allow team members to connect their work to the strategy
Communication plan should include
Ongoing opportunities for feedback
Project Stages
- ) Planning
- ) Executing
- ) Closing
In the planning stage in a project the project manager will
Work with stakeholders to define strategically aligned project objectives
Define the project’s deliverables
Create a project schedule
Assemble a team
Work with stakeholders to define strategically aligned project objectives in a project
Objectives are used to create metrics used to evaluate project’s results
Critical activity
Possible to meet project objectives but not have strategic merit
Defining a project’s deliveravles
Broken down into smaller units of work to meet deliverables
Tools to assist with project scheduling
Critical path analysis
Gnatt charts
Critical path analysis
Uses information about start or mandatory end dates, the logical relationship of tasks (which needs to start first) and the earliest/latest completion date
Gnatt charts
Scheduling of tasks visually, showing the length and timing of specific activities.
Identifies possible conflicts of activities or gaps that can be exploited to condense the schedule
Primary ways to communicate expectations to the team and coordinate activities
Executing the project Plan
Establish and maintain channels of communication
Provide leadership
Clear away obstacles to progress
Manage internal and external stakeholders
Monitor and control progress
Closing the project in project plan
Evaluate if the project investment yielded desired results
Find ways processes could have been improved
Lean project management focus
Eliminating waste
How does lean project management focus on eliminating waste
Keep tight focus on intended value of the project
Empower the team to make decisions
Analyze and solve problems rather than work around them
Emphasize continuous learning
Six Sigma
Level of quality so high that very few errors occur
Six Sigma project management is done by
Focuses on projects with good return of value
Encourages team commitment to quality and improvement in problem solving
Measures results that allows empirical analysis and fact-based decision making
Agile project management
Used when the project assumptions are unclear or evolve as project work proceeds.
Project focuses on iterations of the deliverables - completes one and then uses customer input to plan the next iteration
Critical chain project management
Used when resources cannot be increased to meet deadlines.
Buffers are built into the schedule both to account for dependencies and to allow some room for variance - once buffers are set, they are strictly enforced
Measuring performance determines
If strategic initiatives have been implemented as planned
If initiative is having the intended effect
If investment in the initiative is returning benefits to the organization
Performance objectives
Combine activity measurement (what is being done) and results measurement (what are the effects of the activity)
Performance objectives should measure what on the initiative
Effectiveness
Efficiency
Impact
Key performance indicators (KPIs)
Quantifiable measures of performance used to gauge progress toward strategic objectives or agreed standards of performance
Recommendations for Measuring Performance
Don’t measure everything. Focus instead on performance that supports strategic goals.
Blend awareness of past, present, and future performance in creating objectives.
Be mindful of all stakeholders.
Reexamine what you’re measuring regularly.
Evaluation of strategic results is essential because
Good strategic management
Good governance
Allows organization improve their strategies and continually increase their institutional knowledge and skills
During strategy implementation, data is gathered and then analyzed
Tools and processes are created to collect data related to the key performance objectives
Data is analyzed in an ongoing manner
Measurement tools used in strategy implentation
Performance scorecards
Score sheets for quantifiable metrics
Spreadsheets comparing planned to actual outcomes
Observation guides and narriatives
Best strategy for communicating results of an initiative
As a narrative that supports the data
Data does not drive the report
