Strategy and implementation Flashcards
What is a strategy
Th way a business operates in order to achieve its aims and objectives
What are the 2 parts of strategy
1 formulation
2 implementation
What is formulation of a strategy
What is implementing the strategy
Same as constructing a business plan
Putting the plan into practice
Why is the setting and achieving of objectives described as hierarchical in a large business
It starts at the top with the setting of corporate strategy an is put into action by business functions that design strategies to fulfill objective
Corporate strategy
Strategic direction
Divisional strategy
Functional level strategy
Describe corporate strategy
Corporate level strategy is concerned with strategic decisions made that effects the whole business
It is concerned with setting objectives for overall financial performance , proposed mergers, acquisitions, long term human resource planning and allocating resources to different divisions
What is strategic direction
The actions that lead to the achievement of the stated goals of the corporate strategy
What is divisional strategy
It is directing the divisions in the company and communicating the strategy
What is the functional strategy
A single operation e marketing or production and the activities within each operation
What are tactical decisions
Medium or long term decisions made by middle managers - hey follow from a strategic decision and aim to meet objectives of a plan
What is a corporate plan
A statement of organisational goals to be achieved in the medium or long term based on the managements assessments of market opportunities economic situation and resources available
What is a SWOT analysis
Tool to identify a businesses strengths and weaknesses, opportunities and threats
Why use a swot analysis
1 to develop a strategic plan which considers many internal and external factors and maximises strengths and opportunities whilst minimising impact of threats and weaknesses
Why use a swot analysis
1 it considers many different internal and external factors and maximises potential straengths and opportunities whilst minimising impact of weaknesses and threats
2 It gives an overall picture of all potential influences on future business success and then adapt business strategy to reflect them
What are the 4 stages to prepare and use a SWOT
1 internal analysis - examine the capabilities of the business by analysing its strengths and weaknesses
2 external analysis - gathering data on market and competitor activities, economic outlook and environmental impact on the business and decide does the data reveal external threat or opportunities
3 prepare a swot table - enter the information collected onto a swot table
4 use the swot to develop a business strategic pan
Describe the 4 components of a swot
1 strengths - positive features of the sines identified at stage 1
2 weaknesses - negative features of the business identified at stage 1 occurs when a business performs poorly in an important area of operation or fails to take advantage of an existing strength
3 opportunities - prospects identified at stage 2 an opportunity exists if an external condition could positively impact of the businesses performance and improve competitive advantage if action is taken in time
4 threats - dangers identified at stage 2 , an external condition that could have a negative impact on businesses performance and reduce competitive advantages
What will an effective swot allow a business to do
1 build on strengths
2 resolve weaknesses
3 exploit opportunities
4 avoid threats
Who is Dr Michael Porter and what does he say
He is a professor at Harvard Business School and he believes under certai circumstances a business can exert an influence on the markets - they can be active not passive
What did Dr Porter propose
A model of the business environment that stated industries and businesses were being influenced by 5 external forces and the interaction and influence of these forces determine the behaviour of business and the likely levels of profitability for the business
How can manages use this model of potters 5 forces
1 to better understand the business in which they operate
2 properly consider external influences on business behaviour
3 understand how to set realistic objectives
What are Porters 5 forces
1 barriers to entry - factors that prevent new competition entering the market
2 user power- power of customers to determine the price
3 supplier power - the ability of suppliers to set prices
4 substitutes - threat or risk of alternative products or services
5 competition - how much competition exists in the market
What are barriers to entry
Factors that prevent new competition entering the market
2 if they are high monopoly profits can occur
2 when they are low normal profits can be earned
4 if new businesses can enter market easily then existing businesses will have a challenge to keep their profits high
5 new businesses will be attracted to the market if profits are high but barriers or entry exist or existing businesses attempt to create barriers stopping or reducing new businesses entering the market
Give examples of barriers to entry
1 cost advantages of existing businesses
2 access to factors of production
3 high capital/investment requirements
4 strong brand identity of existing business’s products and high levels of advertising
5 access to distributing networks
6 predictable behaviours of existing businesses
7 access to technologies used in the industry
What is supplier power
1 if supplier has high levels of power they are able to push up prices of raw materials and components so lowering profit margin
2 with lower levels of supplier power buyer can force prices paid for components and raw materials down resulting in higher profits for the business
Give examples of factors that determine supplier power
1 number of alternative suppliers
2 importance of volume of orders to supplier
3 if inputs make up a large proportion of costs
4 if inputs help create differentiation of products made
5 the cost of switching to a new supplier
6 availability of alternative inputs
If backward vertical intergration exists
WHat is buyer power
1 the ability of the customer within an industry to affect the price they pay
2 the higher the buyer power the lower th potential for the business to set prices for themselves,
3 if buyer power is low then the business is able to set the price high and achieve more profit
Give examples of factors that determine buyer power
1 amount of bargaining leverage the buyer has
2 if the customer buys in bulk
3 if the buyer has information on costs, availability, alternative supplier
4 product USP and exclusivity
5 brand identity and loyalty of product bought
6 price sensitivity of the product
7 if vertical integration exists
What is degree of competition in the market
1 can vary between a pure monopoly to perfect competition
2 the lower the level of competition the higher the profit margin
3 extent of competition between businesses in a market determines prices set for products and the profit made
Examples of factors that determine number of competitors in the market
1 level of collusion in the market - do they act together to control prices and share out the market between them
2 maturity of the market ie is it stable with established brands and market leaders
3 industry concentration - is the market a monopoly or oligopoly with few businesses dominating or more like perfect competition
4 product differentiation in markets - is the market of very similar products
5 strength of brands in the market - are customers easily tempted to switched brands
6 existence of patents and licenses to operate in the market. Patents can give companies monopolies of production
7 if horizontal integration exists
What is risk of substitute products or services
1 the more substitute products available the weaker the position
F factors that determine the likelihood of availability of substitute products
1 rate of change of technology -faster rate more quickly substitutes are likely to occur
2 availability of capital for investment - are potential producers of substitutes able to raise capital for research and development of products
3 switching costs for customers - cost of changing to substitute
4 level of substitution effect - how close is the substitute
5 price performance trade off of substitute - how effective are the substitutes in cost and performance
6the existence of patents and licenses to operate in the market
