strategy and implementation Flashcards
what is corporate strategy?
strategic decisions made by business that affect entire business. made by senior managers and concern long term direction of business.
what is strategic direction?
course of action that ultimately leads to achievement of stated goals of corporate strategy to achieve mission and vision statement.
what is the strategy hierarchy?
corporate strategy
strategic direction
divisional strategy
functional level strategy.
what is divisional strategy?
overall corporate strategy communicated to divisional managers. this shapes plans that divisional managers make.
what is functional strategy?
relates to single functional operation such as production, marketing or HRM and activities involved withing each of these. guided by divisional strategy.
what are strategic decisions?
way a business operates in order to achieve medium to long term aims and objectives.
what are tactical decisions?
medium term decisions made by middle managers. they follow strategic decisions. more adaptable, can adjust to changing market conditions.
what is a corporate plan?
statement of organisational goals to be achieved in medium to long term.based on management assessments of market opportunities, economic situatuion and resources and technologies available.
includes methods for monitoring achievement of objectives and tactical decisions made to achieve objectives.
what is a SWOT analysis?
used to analyse internal strengths and weaknesses and external opportunities and threats.
what can business decide to do with SWOT analysis?
use strength to long term advantage
address weakness to improve competitiveness
respond to threat
capitalise opportunity first.
what is porters five forces used for?
5 main forces on business that can determine behaviour of business and measure profitability of business in certain industry
what are porters five forces?
barriers to entry
buyer power
supplier power
substitution
competition
examples of barriers to entry?
cost advantages of existing businesses
high investment required
high skill required
strong brand identity of existing business
what is supplier power?
how powerful suppliers are in prices they charge for supply.
factors affecting supplier power?
number of alternative suppliers
cost of switching to new supplier
availability of raw materials
operation cost.
factors affecting buyer power?
alternative supplier
usp/exclusivity
brand identity/loyalty
price elasticity of demand
factors affecting competition?
maturity of market
how many businesses in market
brand loyalty
laws/restriction/licenses
product differentiation.
what is meant by substitution?
product that performs same function as one in industry eg aeroplane/train.
what is ansoff’s matrix?
Market penetration , product development
market development , diversification
what does ansoff’s matrix show?
options to business if they wish to grow.
how risk changes with different methods of growth.
why is ansoff’s matrix useful?
easy to understand
make informed decisions
minimises risk
facilitates strategic planning.
drawbacks of ansoff’s matrix?
ignores external factors
lack of cost benefit analysis
difficult to predict the future.
what should you do if asked about ansoff’s matrix in exam?
don’t talk about it generically, apply one strategy to business
what is integration?
a business seeks to grow inorganically (externally).
involves merging or taking over a business.
what are the 3 types of integration?
backwards vertical
horizontal
forward vertical.
what is backwards intgegration?
merging or acquiring a business in the previous stage of production.
what is horizontal integration?
merging or acquiring business in same stage of production.
what is forward vertical integration?
merging or acquiring business in next stage of production.
strengths of horizontal integration?
can share knowledge/expertise
reduces competitive rivalry
less likelihood of failure when entering markets
more brand awareness
fast access to resources such as land and equipment.
drawbacks of horizontal integration?
cost of purchase
time consuming
culture clashes
benefits of backward vertical integration?
control of quality and delivery of raw materials
profit margin of supplier is removed.
benefits of forward vertical integration?
manufacturer has guaranteed outlet to sell products
manufacturer has control over price and advertisement of product.
limitations of backward vertical integration?
increased costs of operation such as staff and additional marketing
hidden costs may be discovered too late
lack of experience.
limitations of forward vertical integration?
increased costs of operation such as staff and additional marketing
hidden costs may be discovered too late
lack of experience.
what is organic growth?
business uses existing resources to grow without involving any other businesses, by selling more products.
advantages of organic growth?
no culture clash
cheaper than inorganic
less risky
what is a franchise?
legal right to use brand name products and business style of an existing business. franchisor sells brand name to others and franchisee is person who buys franchise.
disadvantages of organic growth?
slow
requires expertise from managers to drive growth
business may stay too small to compete with competitors.
advantages from franchisee’s pov?
don’t have to think of new idea
well established already - don’t have to market lots
should recieve training
customers will understand you are offering best possible value for money.
advantages from franchisor’s pov?
fast growth with lower risk
franchisees have to pay fee for rights.
economies of scale can happen quickly
leads to growth and more brand awareness.
disadvantages of franchising?
loss of control - franchisees may be harder to control.
not all profits return to franchisor
potential loss of rep
quick growth could cause diseconomies of scale.
what is rationalisation?
reorganisation of business in order to increase efficiency.
usually leads to reduction in size
reasons for rationalisation?
some parts of business may be less profitable.
business environment not always positive and growth isn’t always correct strategy.
markets change over time.
there may be diseconomies of scale.
examples of rationalisation?
closing branches
transferring of production
trimming of product range
incorporation of IT systems.
drawbacks of rationalisation?
can result in uncertainty, resistance from staff, loss of jobs.
can lead to industrial action
must be well planned and thought through with clear objectivces.
factors affecting location/relocation?
regional (access to market, access to labour, social reasons, historic reasons)
international location (maximise economies of scale, tax advantages, freedom from restrictions, access to international markets)
what is outsourcing production?
transfer of activities previously conducted in house to a third party.
strengths of outsourcing production?
able to react to changes in demand quicker with access to another firms production plants.
outsourcers more specialised so more efficient.
lets business focus on core business.
non standard orders completed with no disruption.
increase capacity utilisation.
weaknesses of outsourcing production?
may result in poor customer service
existing employees may feel demotivated if they believe jobs are at risk.
quality of production not guaranteed
more difficult to have JIT
breakdown in communication
data less secure.
factors influencing whether a business outsources?
capacity
expertise
nature of demand
cost
level of risk
impact on profit
what does strategy depend on?
pestle
organisational structure
skill/motivation of managers and employees
what does PESTLE mean?
political, environmental, social, technological, legal environmental.
pros of market penetration?
reduced risk as known target market.
quick and affordable.
cons of market penetration?
limited scalability and profit margins
depends on supply.
pros of market development?
know product is successful.
new TM means profitable
new locations
cons of market development?
risky
expensive
can’t control competitor actions.
pros of product development?
same brand rep
expansion opportunities.
cons of product development?
risky
availability of supply
pros of diversification?
huge profits
scale
availability of supply
cons of diversification?
expensive
time consuming
risky
market research costs
