Unit 6/7- Strategy Implementation Flashcards
What is strategy
This refers to a plan of action or set decsions that help acheive specific goals or objectives
Strategic decisons
This is the general direction and overall policy of the business
Tactical decisons
These are meduim term decisions that are less reaching than strategic decisions
Operational decisions
These are adminstrative decisions that will be short term and carry little risk
Formulation
This is the same as developing a business plan
Implementation
This is putting the plan into practice. It should be flexible to allow for a change in circumstances
Corporate Strategy
This deals with the overall purpose of the business. This is setting objectives for overall financial performance, propsed mergers or acquisitions
Strategic decisions
This is the course of action that allows the corporate strategy to be completed. This is done with a complete mission statement and also business objectieves
Divisional strategy
This is concered with the directing of divisions within the organisation. The overall corporate strategy will be commuincated with divisional managers
Functional Strategy
Relates to a single functional operation such as production, marketing or HRM and the activities invloved with each of these functions. These are guided and limited by the higher level corporate and divisonal strategy
What can influence a corporate plan
Internal/External
Internal influences:
* Helping plan and prepare the resources needed to deliver the objectives.
* Seeing whether they have the workforce requirement along with the operational capacity.
External Influences:
* This would be the current market conditions and oppurtunities avaliable to the business
SWOT Analysis
What is SWOT
This is used when developing corporate objectives, or on a smaller functional scale such as a marketing strategy. Which looks at strengths, weaknesses , oppurtunites and threats.
SWOT Analysis
When is SWOT used
- Exploring avenues for new initiatives
- Making decsions about execution strategies for a new policy
- Identifying possible areas for a change in program
- Refining and redirecting efforts mid-plan
SWOT Analysis
Elements of SWOT
Internal/External
Internal:
* Financial resources- Sources of income and investment
* Physical resources- Companies location, facilities and equipment
* Human resources- Employees, volunteers
* Current Processes- Employee programs, department hierarchies
External:
* Market trends- New products and technology or shifts in auidence
* Economic trends- Local, national and international trends
* Funding- Donations, legislature
* Demographics- Target audience
SWOT Analysis
Strengths- SWOT
- Specialist marketing expertise
- New innovative products
- Patents
- Strong brand identity
- Location of business
- High staff motivation
- High levels of productivity
Weaknesses-SWOT
- Lack of marketing expertise
- Undifferentiated products and services
- Limited product ranges
- High levels of staff turnover
- Poor investement record in technology
- Bad debt or cash flow problems
SWOT Analysis
Oppurtunites- SWOT
- Gaining market share through developing innovative products to meet new market needs
- Diversifying into devloping markets
- Mergers, joint ventures or strategic alliances
- Changes in technology and competitive structure markets
- Changes in social patterns, population profiles, lifestyle changes
- New international market
SWOT Analysis
Threats- SWOT
- A new competitor in their home market
- Price wars
- New techonlogies being used by competitors
- Economic slowdown/recession
- Increased trade barriers
- Taxation may be introduced on product or service
- Demographic changes
- New legal constraints
SWOT Analysis
What does an effective SWOT do
- Build strengths
- Resolve weaknesses
- Exploit oppurtuinties
- Avoid threats
Porter Five Forces
What does Porter Five Forces do
Businesses can use this to better understand the industry in which the business operates and to properly consider the external influences on the business behaviour. Understanding this helps show that there are limits on what can be achieved allowing them to set realistic targets
Porter Five Forces
What are the five forces
- Supplier power- Ability to set prices
- Buyer power- Power of customers to determine price
- Competitive rivarly- How much competition exists in the market
- Threat of subsitition- Threat or risk of alternative products or services
- Threat of new entry- Threats that prevent new competition entering the market
Porter Five Forces
Supplier Power
They are able to increase the costs of business and decrease the extent to which it can control its operations. The factors include:
* Number of alternative suppliers
* Volume of orders to supplier
* If inputs make up a large proportion costs
* Costs of switching to a new supplier
Porter Five Forces
Buyer Power
The higher the buyer power the lower the potential for the business to set the price themselves. The factors include:
* The amount of bargaining leverage
* Whether the customers buys in bulk
* Whether the buyer has information on costs
* Product USP and exclusivity
* Brand ideninty and loyalty
* Price sensitivity
Porter Five Forces
Threats of new entrants
If barriers to entry are high the monopoly profits occur. Examples of this include:
* Cost advantages of exsiting businesses
* Access to factor of production
* High capital/investement requirements
* Strong brand identity
* Access to distribution networks
Porter Five Forces
Threat of subsitutes
This concerns the availability of alternative products or services that customers could switch to. The more available the weaker the position of the business. The factors include:
* Rate of change in technology
* Availability of capital for investement
* Switching costs for customers
* Level of substitution effect
* Existence of patents and licences
Porter Five Forces
Competiton in the market
This can vary between pure monopoly to perfect competiton. The lower the competition the higher the profit. The factors that affect it include:
* The level of collusion in the market
* Maturity in the market
* Industry concentration
* Product differentiation
* Strengths of brands
* If horizontal intergration
Porter Five Forces
What is an attractive industry
- New entrants finding difficulty setting up
- Few strong competitors
- Weak suppliers
- Lack of competition from subsitute products
Porter Five Forces
What is an unattractive industry
- Many subsitutes
- Lack of barriers to entry
- Strong well established competitors
- Powerful suppliers
Ansoff matrix
What does the ansoff Matrix do
This is a strategic market planning tool that links business marketing strategy to its general strategic direction. It considers whether it is targeted at existing customers or new customers and if exisiting products should be used as an alternative or if new products should be developed
Ansoff Matrix
The four options of the Ansoff Matrix
- Existing products+ Existing Markets: Market penetration
- Existing products+ New Markets: Market Development
- New products+ Existing Markets: Product development
- New Products+ New Markets: Diversifictaion
Ansoff Matrix
Market Penetration
This is the method of conecntrating sales of existing products to existing markets. The methods to do this includes:
* Attracting customers who have not yet become regular users
* Attacking competitor sales
* Increasing consumption amongst existing users
Ansoff Matrix
Product Development
This involves developing new products for existing markets. The business will attempt to increase profitability and growth by introducing new products targeted at the existing customer base
Ansoff Matrix
Market Developmet
This involves finding and developing new markets for existing products. They can do this by:
* Identifiying users in different markets with similar needs to existing customers
* Identifying new customers who would use a product in a different way
Ansoff Matrix
Diverisification
This involves developing new products and new markets. This can be attempted if a business sees a new oppurtunity and has the investment funds avaliable . This has the greatest level of risk. But it can also spread risk as it allows for lower reliance in the markets that they are already in
Organic/External Growth
Organic Growth
This is referred to as internal growth and is the expansion of the business by selling more of its products. The most used method is the opening of more factories to increase capacity. Other methods include:
* Expanding product range
* Targeting new markets
* Expanding the distribution network
* Benefiting from economies of scale
Organic/External Growth
Benefits and Drawbacks of Organic growth
Benefits:
* Less risky form of growth as it most likely funded with retained profit
* Less threat of brand dilution
* Allows for greater consistency
* Growth can be steady
* There is is less loss of control
Drawbacks:
* Oppurtuinites may be missed from acquisitions
* Potential for growth may be more limited
* There could be a lack of shared expertise
* A lack of competitiveness could result due to a lack of economies of scale
Organic/External Growth
External Growth
This is also reffered to as inorganic growth and is acheived by takeovers or mergers this is also quicker than organic growth
Organic/External Growth
Takeovers
This is the acquisition of one business by another, either on an agreed or hostile basis. This will take place when a business sells more than 50% of its shares
Organic/External Growth
Mergers
This is the process in which two businesses become one. They are normally equal in size and will agree on the share ownership of the new business
Organic/External Growth
Horizontal Intergration
This is when the business merges with or takes over another in the same industry at the same stage of the production process. The benefits of this include:
* The removal of some of the competition
* May increase economies of scale
* Increases market power to compete with market leaders
* Synergy may occur
* Increased capital of merged businesses
* Opportunity to cut costs
Drawbacks of this include:
* Large initial cost.
* Possible culture clashes in management.
* Diseconomies of scale.
* Investigation from the CMA.
* Problems with the high street such as reduction in customer numbers or high fixed costs.
Organic/External Growth
Backwards vertical Intergration
This is when business merges or takes over another business at the previous stage in the production process within the same industry. ( Taking over supplier)
Organic/External Growth
Foward Vertical Intergration
This is when a business mergers or takes over another business at the next stage in the production process.( Takes over the customer)
Organic/External Growth
Benefits of Vertical Intergration
- Security of supplies and control of supplier prices
- Improves supply chain co-ordination
- Can guarantee the quality of its raw materials
- Can determine standard of outlets/shops
- Use of outlets to determine brand image
- Keeps all profits and removes middlemen
- Control over quality
- Possible economies of scale
Organic/External Growth
Conglomerate intergration
This is when a business merges or takeovers another business with no connection to the product or the market. ( Totally unrelated business activites)
Franchising
What does franchise mean
The is the legal right to use the brand name, Proudcts and buiness style of an existing product. It is a method of achieving growth and is often quick as the business model is replicated by the selling rights to other people to run the business.
Franchising
Advantages for the franchisor
The person selling the franchise
- Fast growth
- Economies of scale can happen quickly
- Increased income from franchise fees
- Extra commitment from the franchises
Franchising
Disadvantges for the franchisor
The person selling the franchise
- Loss of control
- Not all profits return to the franchisor
- Potential loss of reputation
- Disputes could occur
- Does not have complete
- Diseconomies of scale
Franchising
Advantges for the franchisee
Individual who is buying into the franchise
- They may be supported by national advertising/ promotion
- Reduced risk of failure
- Support is offered by franchisor
- Retaining degree of indepnednce
Disadvantages for the franchisee
Individual who is buying into the franchise
- Not be able to operate with the same level of freedom as an ordinary business
- Can not sell the business without permission
- Franchisor can end the franchise without reason or compensation
- Regular payments need to be made to franchisor
Rationalisation, Growth and Risk
Rationlisation
This is where a business reorganises its production in order to increase its productivity and efficiency. Reasons can include:
* Restructuring the business to increase efficiency
* To turn around poor performance
* To focus on core business
* To sell off less profitbale parts of business to improve overall performance
Rationalisation, Growth and Risk
Examples of rationalisation
- Closing of branches
- Transferring of production
- Trimming of production ranges
- Incorporation of IT systems to replace paper systems
Location and Relocation
What factors affect decisions about location and relocation
- External economies of scale
- Costs
- Availability of goverment grants
- Target market
- Qunatitiatve techniques
- Corporate objectives and strategy
- Ethical/Enviromental considerations
- Infastructure
Location and Relocation
Offshoring
This is the process of moving business functions. Reasons to do this include:
* The ability to take advantage of lower costs
* Higher productivity as a result
* Can be easier to enter new markets
* Businesses can take advantage of talent pools
Location and Relocation
Reshoring
This is where businesses who have previously moves business function offshore bring it back to the country of origin. Reasons for this can include:
* Cost savings are no longer as significant
* It is easier to control quality issues
* Infringement to intellectual property
* Shorter lead times as an result
* May be able to take advantage of goverment incentives
Location and Relocation
Regional location
- Access to markets
- Cost and nature of factors of production
- Social reasons
- Historical reasons
Location and Relocation
International location
- Maximising economies of scale
- Access to international markets
- Tax advantages
- Freedom from restrictions
Outsourcing
What is outsourcing
This is delagting one or more business process to an an external provider who then owns manages and administers the selected processes to an agreed standard
Outsourcing
Advantages of outsourcing
- Significantly reduced staffing costs
- Well trained staff provided by the outsourcing company will reduce HRM costs such as training
- Existing workload and stress levels reduced, this is very important if a business is operating near or at full capacity
- Less investment risk
- Capital needed reduced
Outsourcing
Disadvantages of outsourcing
- The potential of poor customer service with communication made difficult because of cultural differences
- Exisiting employees may feel demotivated if they belive their jobs are at risk
- Quality of production/product cannot be guarenteed
- More difficult to implement JIT systems
- Loss of security data
