Strategy models Flashcards
What are the factors of PESTEL? Give examples of each in the oil industry
Political:
Instability in Suadi Arabia
Economical:
Slow economic growth
Social:
Lower car usage
Technology:
Fuel efficient tech
Ecological:
Climate change
Legal:
Pollution laws
PESTEL:
How can the political environment be evaluated?
In terms of two dimensions:
1) Degree of political exposure
2) Degree of direct state involvement
See page 30
PESTEL:
What can be analysed when looking at the social aspect?
One might look into:
1) Demographics
2) Distribution of wealth
3) Geography
4) Culture and attitudes
What is key drivers of change? What can they be used for?
Key drivers for change are the environmental factors likely to have a high impact
on industries and sectors, and the success or failure of strategies within them.
Managers need to address
in their strategic choices. Alternative scenarios about the future can be constructed
according to how the key drivers develop.
What are the elements of Porter’s Five Forces?
1) Extent of rivalry
2) Threat of entry
3) Threat of substitutes
4) Power of buyers
5) Power of suppliers
What insights can be gained from Porter’s Five Forces
It gives an insight into market attractiveness
Five Forces:
What should be considered when evaluating the extent of rivalry?
Competitor concentration and balance:
Many, same-sized competitors = less attractive
Industry growth rate:
Low growth rate = less attractive
High fixed costs:
High costs = less attractive
High exit barriers:
High = less attractive
Low differentiation:
Low = less attractive
What should be considered when evaluating the threat of entry?
Scale and experience:
If incumbants have economies of scale it is hard to enter the market
Access to supply or distribution channels:
Expected retailiation:
High retaliation might prevent entries
Legislation:
Patents or regulation of markets can be examples of how legislation can prevent entries
What should be considered when evaluating the threat of substitutes?
Important to note, that substitutes are OUTSIDE the industry.
Price/Performance ratio:
A substitute can still be a threat if is more expensive, as long as it is equally better
Switching costs:
Are there high switching costs, then the threat decreases
What should be considered when evaluating the power of buyers / suppliers?
Concentrated buyers:
Are there few, large or many, small customers?
Few, large = higher power
Low switching costs:
If buyers can easily shift = higher power
Describe the phases in the industry life cycle
Development:
- Low rivalry
- High differentiation
- Innovation key
Growth:
- Low rivalry
- High growth
- Low entry barriers
- Growth ability key
Shake-out:
- Slower growth
- Managerial and financial strenght key
Maturity:
- Low growth
- Standard products
- High entry barriers
- Market share and cost key
Decline:
- Many exits
- Price competition
- Cost and commitment key
What is a strategy canvas?
A strategy canvas compares competitors according to their performance on key success
factors in order to establish the extent of differentiation.
It highlights:
- CSF
- Value curves
- Value innovation/Blue Ocean
What does the resource-based view (RBV) state?
the competitive advantage and superior performance of
an organisation are explained by the distinctiveness of its resources and capabilities.
What is the difference between resources and capabilities?
Resources: what we have (e.g. assets)
Capabilities: what we do well (e.g. processes)
What is threshold resources and capabilities?
Threshold resources and capabilities are those needed for an organisation to meet the necessary requirements to compete in a given market and achieve parity
with competitors in that market.
What are the elements of the VRIO framework?
Value:
Do resources and capabilities exist that are valued by customers and enable the organisation to respond to environmental opportunities or threats?
Rarity:
Do resources and capabilities exist that no (or few) competitors possess?
Inimitability:
Are resources and capabilities difficult and costly for competitors
to obtain and imitate?
Organisational support:
Is the organisation appropriately organised to exploit the
resources and capabilities?
What must be considered when evaluating “value” in VRIO?
Does the capability address opportunities or threats in the environment?
Is the capabilities valued by customers?
Can the costs be held low enough?
What are the different outcomes of the VRIO framework?
If not valuable: Competitive disadvantage
If not rare:
Competitive parity
If not inimitable:
Temporary comp. ad.
If not supported by organization:
Unused comp. ad.
If all is fulfilled:
Sustained comp. ad.
Give examples of rare capabilities/resources
Resources:
- Patentes
- Unique book collection
- Unique services
- Brand
Capabilities:
- Unique skills
- Unique processes
- Special relationships with customers/suppliers
Describe the TOWS matrix
The TOWS matrix is used in the discussion of future choices and options.
S+O: Use strengths to exploit opportunities
S+T: Use strengths to avoid threats
W+O: Use opportunities to overcome weaknesses
W+T: Minimise weaknesses and avoid threats
What are stakeholders?
stakeholders are
those individuals or groups that depend on an organisation to fulfil their own goals and on
whom, in turn, the organisation depends.
What is stakeholder mapping?
Stakeholder mapping identifies stakeholder power and attention in order
to understand political priorities.
See page. 116 for figure
What is CSR?
ypically expect greater responsibility on
the part of organisations than the bare minimum. Corporate social responsibility (CSR) is the
commitment by organisations to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their families as well as the local
community and society at large
What are the different stances on CSR?
Laissez-faire:
Enlightened self-interest
Forum for stakeholder interaction
Shaper of society
See p. 125
What are the cultural web and the individual elements?
The cultural web shows the behavioural, physical and symbolic manifestations of a
culture that inform and are informed by the taken-for-granted assumptions, or paradigm,
of an organisation
Paradigm:
Assumptions held common and taken for granted
Rituals and routines:
How things are done and events used to emphasize the culture
Stories:
Symbols:
Power:
Organizational structures:
Control systems:
What is a competitive advantage?
competitive advantage is about how a company, business unit
or organisation creates value for its users both greater than the costs of supplying them and
superior to that of rivals.
What are four keys to ensure cost leadership?
Low input costs
Economies of scale
Experience
Product/process design
What is differentiation strategy?
Differentiation strategy
involves uniqueness along some dimension that is sufficiently valued by customers to allow
a price premium
What is a hybrid strategy?
A hybrid strategy combines different generic strategies.
Draw the strategy clock
See p. 155
What four strategies are proposed by the strategy clock?
Differentiation:
Higher price & higher value
Low-Price:
Low price & lower value
Hybrid:
Medium price & medium value
Non-competitive strategies:
High price & low value
What is a business model?
A business model describes a value proposition for customers and other participants, an
arrangement of activities that produces this value, and associated revenue and cost structures.
What framework would you use for competitive advantages?
Generic strategies
What framework would you use for sustainable competitive advantages?
VRIO
What framework would you use for changes in external factors?
PESTEL
What framework would you use for attractiveness of industry?
Five Forces
Describe Ansoff’s growth matrix
Two axis:
Market (existing/new)
Products (existing/new)
Four types:
- Market penetration (ex m / ex p)
- New products (ex m / new p)
- Market development (new m / ex p)
- Diversification (new m / new p)
What is diversification?
This process of increasing the diversity of products
and/or markets is known as ‘diversification’. Diversification involves increasing the range of
products or markets served by an organisation
What is the difference between related and conglomerate diversification?
Related:
New products are related to existing business
Conglomerate:
Diversifying into new
products or services in markets unrelated to existing businesses
What can Ansoff’s growth matrix be used for?
Ansoff’s axes can be used for brainstorming strategic options, checking that all four zones
have been properly considered.
What is vertical integration?
Vertical integration describes entering activities where the organisation is its own supplier
or customer
Backward: Input activities (e.g. component supplier)
Forward: Output activities (e.g. retailer)
Describe the BCG / Growth share matrix
Two axis: Market growth (High / Low) Market share (High / Low)
Four categories: Stars (high / high) Question marks (high growth / low share) Cash cows (low growth / high share) Dogs (Low / low)
What are the three ways a merger/aquisition can help improve a competitive advantage?
Extension: To extend the reach of a firm in terms of geography, products or markets.
Consolidation:
1) it increases market power by reducing competition
2) the combination
of two competitors can increase efficiency
3) the greater
scale of the combined operations may increase production efficiency or increase bargaining power with suppliers
Capabilities:
The third broad strategic motive for M&A is to increase a company’s capabilities
Which organizational structure might be best for diversification?
A diversification challenge presents control and accountability difficulties across widely
different businesses. A divisional structure should allow managers enough decentralised
responsibility to enact their own strategies, while the corporate parent can exercise control by monitoring business performance. The functional structure would be too centralised and matrix structures could blur accountability
Which organizational structure might be best for internationalisation?
An internationalisation challenge raises dilemmas over global scale, horizontal coordination and local adaptation. A matrix structure could be very effective in accommodating
both sides of such dilemmas
Which organizational structure might best support an innovation strategy?
An innovation strategy typically requires knowledge creation and knowledge sharing. A
matrix structure could be good for horizontal sharing whereas a functional structure
could be effective for centralising resources, such as research and development
What are the elements of McKinsey’s 7S’s framework?
Se bogen
Style: Leadership style
Staff: People in the org.
Skills: Capabilities
Superordinate goals: Purpose of the org.
Structure: Org. structure
Strategy: generic
Systems: it, infrastructure
What can McKinsey’s 7S model be used for?
It can help when evaluating the design of an organization.
the McKinsey 7-S
framework, which highlights the importance of fit between strategy, structure, systems, staff,
style, skills and superordinate goals.7 All seven elements have to be configured together to
achieve effectiveness. The seven elements can therefore serve as a checklist in any organisational design exercise:
What is a top manager’s role in managing change?
Envisioning future strategy
Aligning the org.
Embodying change
What is middle manager’s role in managing change?
Advise top management
Make sense of new strategy
Reinterpret and adjust responses
Local leadership
What is the difference between transformational and transactional leadership?
Transform:
- Focus on vision, creating identity and values
- Helpful for impacting motivation and wider business performance
- Good when uncertainty
Transaction:
- Focus on designing systems, structures, setting targets
Describe the four types of change
Two axis:
- Speed
- Extent
Types:
Evolution:
- Incremental speed
- Transformation extent
Adaption:
- Incremental speed
- Realignment extent
Big bang:
- Big bang speed
- Transformation extent
Reconstruction:
- Big bang speed
- Realignment extent
What is an adaption change?
Low speed changes, realigning the organization.
Changes are gradual, building upon what is already being done.
E.g. changes to product design or production process.
What is an reconstruction change?
High speed changes, realigning the org.
Changing the org., but not fundamentally changing business model or culture
E.g. changes in the org. structure or cost-cutting program.
What is an revolution change?
High speed changes, transforming the org.
Changes are quick and dramatic.
E.g. change of strategic direction, top management, culture or target/monitoring of employees
What is an evolution change?
Low speed changes to transform the org.
When changing the org. gradually
What is a forcefield analysis and when can it be used?
A forcefield compares the forces at
work in an organisation acting either to prevent or facilitate change.
It can be used when undergoing changes to ensure a smooth change.
(See p. 227 for explaination)
What are the 8 step in Kotter’s change model?
1) Establish sense of urgency
2) Form powerful coalition
3) Create a vision
4) Communicate the vision
5) Empower others to act on the vision
6) Create short-term wins
7) Consolidate gains and build more changes
8) Institutionalize new approaches
What could be the sixth force in Porter’s five forces? And how to evaluate it?
The bargaining power of complementary:
Companies producing complementing products (e.g. hotdog bread) will affect the hotdog market.
It can be evaluated by:
- Relative strength to the main market
- Switching costs of buyers/suppliers
- Ease of unbundling the two goods
- Possibility for forward/backward integration
- Growth on the main market
Which actions must be considered when creating blue ocean?
- Which factors to eliminate
- Which factors to reduce
- Which factors to raise
- Which factors to create
Value innovation
When increasing buyer value and lowering costs.
Related to blue ocean
How to create a competitive advantage?
Have a superior position against rivals
Have superior resources and capabilities
What are Hofstede culture dimensions?
- Power distance
- Individualism vs collectivism
- Masculinity vs femininity
- Uncertainty avoidance
- Long-/short run focus
- Indulgens vs restraint
How can a business model be formulated?
Using business model canvas One must identify: - Key partners - Key activities - Key value propositions - Cost structures - Revenue streams - Key resources - Customer relationships - Channels - Customer segments
Draw McKinsey’s portfolio matrix
ok
What are + and - for functional structure
Strenghts:
- EOS
- In-depth knowledge
Weaknesses:
- Slow response to environmental changes
- Poor horizontal coordination
- Less innovation
- Harder to coordinate that functions strives towards common organizational goal
