Theory Flashcards
Rational planning model
1) Strategic analysis (external/internal)
2) Strategic choice
3) Strategy implementation
4) Review and control
Strategic planning approach (and model)
- Rational approach
- Top down
- Formal/traditional
- Rational planning model
Strategic management approach
- Emergent approach
- Bottom up
Ohmae’s strategic thinking (3Cs)
3 core elements:
- Corporate-based strategies (superior competences)
- Customer-based strategies (tailoring)
- Competitors-based strategies (exploit rival weaknesses)
Mintzberg’s 5 types of strategies
- Intended (deliberately planned)
- Deliberate (intended plans put into action)
- Unrealised (not all planned strategies implemented)
- Emergent (unforeseen circumstances)
- Realised (outcome)
SMART meaning
Specific = unambiguous Measurable = quantified Achievable = within reach Relevant = congruent with mission Timely = completion date
3 categories of stakeholder
- Internal (employees, management)
- Connected (owners, suppliers, customers, lenders)
- External (government, local community)
Mendelow (power-interest) stakeholder mapping
High power / high interest = key players
Low power / low interest = minimal effort
High power / low interest = keep satisfied
Low power / high interest = keep informed
PESTEL
- Political
- Economic
- Social
- Technological
- Ecological/environmental
- Legal
Porter’s diamond (competitive advantage of nations)
- Firm strategy, structure, rivalry
- Demand conditions
- Factor conditions (basic/advanced)
- Related and supporting industries
Ohmae’s 5Cs (encourage acting globally)
- Customer (converging tastes)
- Company (economies of scale)
- Competition (global competitors)
- Currency volatility (setting up overseas reduces risk)
- Country (cheaper access to resources)
Porter’s 5 forces
- Rivalry among existing firms
- Bargaining power of customers
- Bargaining power of supplier
- Threat of substitute products
- Threat of new entrants
Product life cycle
1) Introduction
2) Growth
3) Shakeout
4) Maturity
5) Decline
6 internal analysis considerations
- Critical success factors
- Competences
- Resources
- Value chain
- Supply chain
- Product portfolio
Kay’s 3 sources of core competences
- Competitive architecture (internal/external/network)
- Reputation
- Innovative ability
Resource audit 9Ms
- Men and women (number/skills/motivation/adaptability)
- Machines (number/capacity/age/condition/location)
- Money (sources/uses/cash flow/bank relationship)
- Materials (supplier reliability/flexibility/cost/distribution)
- Markets (status/position/share/loyalty/distribution)
- Management (quality/skills/ability)
- Methods (processes)
- Management information systems (quality/timeliness)
- Make up (stricture/culture)
Big data 4 Vs
- Volume
- Velocity
- Variety
- Veracity
Value chain 5 primary activities
- Inbound logistics (receiving/handling/storing)
- Operations (converting inputs)
- Outbound logistics (storing/distributing)
- Marketing and sales (advertising/promotion)
- Service
Value chain 4 support activities
- Procurement (acquiring inputs)
- Technology development (design/processes/utilisation)
- HR management (recruiting/training/rewarding)
- Firm infrastructure (organisational structure)
Harmon’s process strategy matrix
Low importance / low complexity = automate/outsource
High importance / high complexity = improve
High importance / low complexity = automate
Low importance / high complexity = outsource
Supply chain management 3Rs
- Responsiveness
- Reliability
- Relationships
Methods of benchmarking
- Internal (historical/branch)
- Competitive/strategic (same sector)
- Activity (any industry)
- Generic (similar processes)
BCG matrix
Low RELATIVE share / low growth = dog
High RELATIVE share / high growth = star
High RELATIVE share / low growth = cash cow
Low RELATIVE share / high growth = question mark
GE’s business screen
Business strength / market attractiveness
Weak / attractive = develop selectively/build on strengths
Weak / average = harvest
Weak / unattractive = divest
Average / attractive = invest selectively/build
Average / average = develop selectively for income
Average / unattractive = harvest or divest
Strong / attractive = invest for growth
Strong / average = invest selectively for growth
Strong / unattractive = develop for income
Institute of business ethic 3 tests
1) Transparency (do I mind other knowing my decision?)
2) Effect (who does the decision affect?)
3) Fairness (considered fair by those affected?)
Ethical issues question approach
1) Legal issue?
2) Principle/code of conduct issue?
3) Whom impacted?
4) 3 tests (transparency/effect/fairness)
5) Issues with not doing?
6) Sustainability issues?
4 strategic approaches to corporate responsibility
- Proactive (take full responsibility)
- Reactive (continue unresolved until someone finds out)
- Defence (minimising/avoiding additional obligations)
- Accommodation (taking responsibility when encouraged)
SWOT (corporate analysis)
- Strengths
- Weaknesses
- Opportunities
- Threats
TOWS matrix
Strength / threat = ST (counter/avoid threats)
Weakness / threat = WT (defensive - avoid threats)
Strength / opportunity = SO
Weakness / opportunity = WO
Planning gap
Difference between strategic objective and forecast
3 strategic choices
- Competitive
- Product/market
- Development
Porter’s generic strategies
Cost / broad = cost leadership
Cost / narrow = cost focus
Differentiation / broad = differentiation
Differentiation / narrow = differentiation focus
Bowman’s strategic clock
1 - No frills 2 - Low price (cost leadership) 3 - Hybrid 4 - Differentiation 5 - Focused differentiation 6 - FAILURE 7 - FAILURE 8 - FAILURE
Perceived added value and price
Ansoff’s product-market growth matrix
Existing market / existing product = market penetration
Existing market / new product = product development
New market / existing product = market development
New market / new product = diversification
Market penetration options
- Withdrawal
- Demerger
- Privatisation
Diversification options
- Related (vertical/horizontal)
- Unrelated (conglomerate)
Lynch expansion methods
Home county / internal = internal domestic development
Home country / external = JV/merger/acquisition/alliance/franchise/licence
Abroad / internal = exporting/overseas office/overseas manufacture/global operation
Abroad / external = JV/merger/acquisition/alliance/franchise/licence
3 strategy evaluators
- Suitability (SWOT - logic/fit)
- Acceptability (to stakeholders - return/risk)
- Feasibility (resources)
Gross profit margin formula
Gross profit / revenue * 100
Net profit margin formula
Net profit / revenue * 100
Mark up formula
(Selling price - COS) / COS * 100
ROI formula
Profit before interest and tax / capital employed *100
Current ratio formula
Current assets / current liabilities
Stock turnover ratio formula
COS / average stock held
Debtors days formula
Debtors / revenue * 365
Creditors days formula
Creditors / COS * 365
Gearing ratio formula
Debt / equity
Debt / (debt + equity)
Interest cover formula
EBIT / interest
Resource performance 3Es (public sector/NFP)
- Economy (resources used)
- Efficiency (productivity)
- Effectiveness (impact achieved)
RI (residual income) formula
Divisional profit - (net assets of division * required rate)
Superior to ROI as absolute amount instead of %
Kaplan and Norton balanced scorecard
- Customer
- Internal business (processes)
- Innovation and learning (new products)
- Financial
Qualities of good information (ACCURATE)
- Accurate
- Complete
- Cost-beneficial
- User-targeted
- Relevant
- Authoritative
- Timely
- Easy to use
Earl’s systems audit grid
Low value / low quality = Divest
High value / high quality = maintain/enhance
High value / low quality = renew
Low value / high quality = reassess
Business value and technical quality
Johnson, Scholes and Whittington model of change matrix
Reactive / incremental = adaption
Proactive / incremental = tuning
Reactive / transformational = forced
Proactive / transformational = planned
Lewin’s iceberg model
1) Unfreeze (existing behaviour)
2) Move (behavioural change)
3) Refreeze (new behaviour)
Gemini 4Rs framework
- Reframing (questioning organisation purpose)
- Restructuring (culture changes)
- Revitalising (securing good fit)
- Renewal (support change)
3 stages to overcoming resistance to change (PMS)
- Pace
- Manner
- Scope
Lewin’s force field analysis
- Driving forces pushing towards preferred state
- Restraining forces pushing back to current state
Attractiveness of a market segment (MASS D)
- Measurable (ability to forecast)
- Accessible (make/distribute/promote)
- Stable (persist for sufficient time)
- Substantial (profits give adequate return on capital employed)
- Defensible (barriers to entry)
5 targeting strategies
- Single segment
- Selective specialisation
- Product specialisation
- Market specialisation
- Full market coverage
Marketing mix 7Ps
- Product
- Price
- Place
- Promotion
- People
- Processes (booking/delivery)
- Physical evidence (premises)
Marketing mix - product (PQ BAPS)
- Packaging
- Quality and reliability
- Branding
- Aesthetics
- Product mix
- Servicing/associated services
Marketing mix - price (4Cs)
- Costs
- Customers
- Competitors
- Corporate strategy
Marketing mix - place (SNAIL)
- Size
- Number
- Accessibility
- Inventory
- Layout
Marketing mix - promotion (SAPP)
- Sales promotion
- Advertising
- Public relations
- Personal selling
Brand positioning matrix
Low price / low quality = economy
High price / high quality = premium
High price / low quality = cowboy
Low price / high quality = bargain
Perceived price and perceived quality
Contribution formula
Selling price - variable costs
Bartlett and Ghoshal multi-national structures matrix
Low co-ordination / low responsiveness = international division
High co-ordination / high responsiveness = transnational corporation
High co-ordination / low responsiveness = global product division
Low co-ordination / high responsiveness = local subsidiary
Global co-ordination and local responsiveness
5 main sections of corporate governance code
1) Leadership
2) Effectiveness
3) Accountability
4) Remuneration
5) Relations with shareholders
Factors affecting amount of decentralisation (E-MESSAGE)
- Extent of activity diversification
- Management style
- Effectiveness of communication
- Size of organisation
- Speed of technological advancement
- Ability of management
- Geography
- Extent of local knowledge
Mintzberg’s organisational structure 6 elements
- Operating core (produce goods)
- Strategic apex (ensure mission met)
- Middle line (middle managers)
- Technostructure (analysts)
- Support staff (no standardised function)
- Ideology of organisation
Mintzberg’s 5 organisational configurations
- Simple structure (strategic apex)
- Machine bureaucracy (technostructure)
- Professional bureaucracy (operating core)
- Divisionalised form (middle line)
- Adhocracy (informal)
Handy’s shamrock organisation
- Professional core (permanent)
- Flexible labour force (temporary/part-time)
- Contractual fringe (external)
- Customers
Risk formula
Risk = likelihood * financial consequences
Risk management model
- Risk appetite
- Risk identification
- Risk analysis
- Risk evaluation and response
- Risk monitoring and reporting
- Review process and feedback
Miles and Snow’s 4 strategic types of business (risk)
- Defenders (low risk)
- Prospectors (risk seeking)
- Analysers (balanced attitude to risk and return)
- Reactors (risk adverse)
6 risks (BOSH FC)
- Business:
- Operational
- Strategic
- Hazard
- Financial
- Compliance
Trading risks (PLC)
- Physical
- Liquidity
- Credit
Cultural risks (VANE)
- Values
- Attitudes
- Norms
- Expectations
Political risks
Action by government which restrict activities
Legal risks (P TEAM)
- Patents
- Taxation law
- Export/import controls
- Advertising restrictions
- Monopolies and mergers legislation
IT systems risk (HD VISN)
- Human
- DoS attacks
- Viruses
- Integrity fraud (data systems)
- Sabotage
- Natural
Risk response matrix
Low frequency / low severity = accept
High frequency / high severity = avoid
High frequency / low severity = reduce
Low frequency / high severity = transfer
Breakeven formula
Fixed costs / contribution per unit
Required profit formula
(Fixed costs + required profit) / contribution per unit
Margin of safety formula
(Planned sales - breakeven sales) / planned sales * 100
6 elements of a business plan
1) Cover sheet
2) Statement of purpose
3) Table of contents
4) Business information
5) Financial data
6) Supporting documents
7 elements of business information in business plan
- Description of business
- Marketing
- Competition
- Operating procedures
- Personnel
- Business insurance
- Financial data
6 elements of financial data in business plan
- Loan applications
- Capital equipment and supply list
- SOFP
- Breakeven analysis
- Pro-forma income projections
- Pro-forma cash flow
7 supporting documents in business plan
- 3 years tax returns (business and owner)
- Personal financial statement
- Copy of franchise contract
- Copy of proposed lease
- Copy of licences
- Copy of resume of owners/managers
- Copies of letter of intent from suppliers
Pro-forma income projections and cash flow guidance for business plan
- 3 year summary
- Detail by month for 1st year
- Detail by quarters for 2nd and 3rd years
- Assumptions upon which projections are based
Devanna’s human resource cycle
- Selection
- Performance
- Appraisal
- Rewards
- Training and development
Operations 4Vs
- Volume
- Variety
- Variation in demand
- Visibility
Purchasing mix
- Quantity
- Quality
- Price
- Delivery
International trade life cycle
1) Product developed in high-income country
2) Overseas production starts
3) Overseas producers compete in export markets
4) Overseas producers compete in domestic market
5 areas in which CSFs should be identified
- Structure of industry
- Competitive strategy/position of firm
- Environmental factors
- Temporary factors
- Functional management issues
7 transfer pricing methods
- Full cost (variable cost + overheads)
- Variable cost
- Opportunity cost
- Negotiated prices
- Two-part transfer prices
- Dual pricing
- Central subsidy
Optimal transfer pricing
Higher of:
- Variable cost
- Opportunity cost
4 purposes of NEDs
- Independent viewpoint
- Scrutinise management performance
- Satisfy themselves integrity financial information
- Responsible for remuneration of executives
4 non-relevant cash flows
- Sunk costs (already spent)
- Accounting costs (depreciation is not a cash flow)
- Unavoidable costs (already committed)
- Finance costs (interest)
4 quality related costs
- Prevention costs
- Appraisal costs
- Internal failure costs
- External failure costs
Report layout
1) To
2) From
3) Date
4) RE
Strategic risk
Risk relating to company’s strategic position with respect to competitors and environment
Operational risk
Risk arising from how business is managed and controlled on day to day basis, including compliance issues
Hazard risk
Risk arising from accidents or natural events
Financial risk
Risk associated with how business is financed
Compliance risk
Risk of failure to comply with laws and regulations
Cyber risk
Risk of financial loss/disruption/damage to reputation of organisation from failure in IT systems
Marketing definition
Identifying, anticipating and supplying customer needs efficiently and profitably
Sustainable enterprise definition
Organisation that takes account of social, environmental and finance returns
Nolan’s principle of public life (corporate governance for NFPs)
- Selflessness
- Objectivity
- Openness
- Leadership
- Integrity
- Accountability
- Honesty
Triple bottom line (3Ps)
- People
- Planet
- Profit
