Week 1 Flashcards
What questions does strategic management answer:
1) why do companies do the things they do?
2) Why do some companies perform better than others?
3) How can companies achieve their goals?
The main aim of strategic management is to analyze, formulate, and systematically implement strategic decisions to improve performance regarding strategic issues.
Strategy hierarchy:
1) Corporate strategy - focuses on where to compete, and the scope of the company in terms of markets and industry, directed by the top management.
2) Business strategy - focuses on how to compete, it uses a competitive approach in an industry and a market, steered by a specific branch (market/industry) management
3) Functional area strategy - focuses on how to implement the chosen business strategy, guided by different heads of functional areas. Usually overlaps with different subjects.
4) Operating strategy - is steered by the middle management, and aims to execute the business and functional area strategy
Micheal Porter definition of strategy:
Strategy is not - about operational effectiveness, best practices or benchmarking, doing everything because that is failing to choose, focusing purely on individual activities.
A company needs to align its interests and focus on more activities, strategy is also not driven by short-term thinking, but by long-term goals.
Main essence of strategy is in activities:
1) perform activities differently - to do what other companies do, but in a better way
2) Perform different activities than competitions
In what three parts can strategy be divided?
1) Analysis - identifying the fundamental issues, which the company must address through its strategy.
2) Decision - formulating a strategy that addresses these issues and leads to a decision (what to do and what not)
3) Actions - creating a plan for implementing the chosen strategy (which functional area will do what)
Strategic analysis:
an action of evaluating the match between the company’s internal and external environment
Internal analysis - focuses on the extent to which a company’s strategy can fit its resources, capabilities, values, goals, systems, and structure. Two factors:
1) Strengths - features or resources that give a company an advantage over its competitors
2) Weaknesses - features or resources that put a company at a disadvantage over its competitors
External analysis - focuses on the extent to which a company’s strategy can fit its external environment (customers, competitors, suppliers). Two factors:
1) Opportunities - external elements that a company can exploit
2) Threats - external elements that pose a challenge or a risk to the company.
What is a competitive advantage?
It is achieved when a company meets its customer’s needs more effectively or efficiently than its competitors thanks to its successful strategy.
Sustainable competitive advantage is connected to elements that give customers a reason to return continuously, stay loyal to the company, and choose one company over others.
Strategy process:
Starts with external and internal analysis, then the company can develop:
1) Values - are the norms, traits, and beliefs expected of the management and employees in a company which serve as a guideline for adhering to the company’s mission and vision.
2) Vision - created by the management’s aspirations for the future. Sets the course and direction for the long-term and be specific and concise.
Serves as a: motivation for employees, provides guidelines for management and reduces the likelihood of aimless decisions, can help to prepare for the future.
3) Mission statement - focuses on the short-term company’s current operations and goals. Answers more concrete questions. To identify which customer demand/market the company wants to satisfy and serve, to give the company its identity, to specify how the company makes its customers happy, and to identify company’s products and services.
4) Goals - convert the mission and vision into concrete targets. To concentrate and keep actions aligned, provide a standard that can be used in evaluating performance, and motivate employees.
What can be developed after values, vision, mission, and goals?
Intended strategy - a detailed strategic plan for the future. Is a proactive approach, top-down.
Emergent strategy - is reactive and bottom-up. Continuous process based on the current situation.
After the intended strat can become:
Realized strategy or unrealized strategy. Sometimes the strategy that is realized can be created from an emergent strategy.
Business Model Canva:
A firm-centric, yet boundary spanning, holistic view of how a firm conducts its business since it brings many different stakeholders and activities into a single model. Explains logic by which the firm creates value, also describes the activities in which the firm excels.
The top - key partners, activities and resources, value proposition (a promise to its customers), customer relationships) - is how the firm creates value.
The bottom - revenue streams, costs - is how firm captures value.
SWOT:
1) Analysis stage - thorough process that results in a list of strengths, weaknesses, opportunities, threats.
2) Synthesis stage - figuring how all the elements relate to each other, and how they can be combined
3) Implementation - combining all the information from the previous steps and creating a good implementation plan for the company. Includes:
Matching - strengths to opportunities
Converting - weaknesses to strengths, threats to opportunities.
