1
Q
influence on a strategy
A
- Objectives - e.g. business with CSR objective will need a different strategy than business focusing on shareholder value alone
- Strengths of business / core competencies - focus on what you’re good at for more likely success
- Competitors - influence and even restrict the strategy you use, e.g. if they innovate then you will be forced to match or outcompete the innovation even if it is costly.
- Resources - budget is a limitation
2
Q
what are the 3 components of strategic management?
A
- strategic analysis
- strategic choice
- strategic implementation
useful eval: for successful SM, ALL 3 STAGES NEED TO BE DONE WELL. Cannot just choose good plan then implement it poorly, or analyse well and choose poorly
3
Q
what factors are required for implementation?
A
- Appropriate change to org. Structure
- Adequate resources
- Well-motivated stuff in favour of the successful change
- Leadership style and culture that support the change
- Control and review of the firm’s progress
4
Q
strategy VS tactics
A
strategy is:
-long term
- high risk
- costly and difficult to reverse
- decided by senior mgmt
tactics are:
-short/medium term
-low risk
-fairly easy to reverse
- decided on by more junior managers (delegation)
5
Q
strategic analysis methods
A
Scenario planning
SWOT analysis
PESTLE analysis
Porter’s 5 Forces
Core competencies
6
Q
strategic choice methods
A
Ansoff Matrix
Force-field analysis
Decision trees
7
Q
blue ocean strategy
A
Find and exploit uncontested markets and use original strategies
Aim: don’t beat the competition, make competition irrelevant through product differentiation and low cost advantage
8
Q
blue ocean strategy eval
A
Blue oceans need not remain blue oceans forever! New rivals can eventually tap into the market after overcoming your barriers to entry, attracted by the prospect of high profits
you will need to work on protecting your USP and use competitive strategies to protect market share or drive rivals out
9
Q
scenario planning
A
Identify a number of possible outcomes called scenarios
Discuss the strategy that could be adopted in the event of the scenario occurring
10
Q
pros of scenario planning
A
- lowers risk of being unprepared and falling behind rivals or failing
- seize profitable new opportunities - identify potential changes that you can capitalise on e.g you can plan to employ tech specialists in a particular field if needed in the future - gain a competitive advantage
11
Q
cons of scenario planning
A
- Managers may try to plan for too many uncertainties - less prepared for any one
- may be unable to consider multiple scenarios simultaneously and choose to focus on only one - may be unprepared and leads to a lack of flexibility
- time consuming - other more important strategic issues
12
Q
scenario planning eval
A
- find a balance between the most likely scenarios and less obvious ones to stay realistic but well prepared
- More effective when considering long-term risks as it may lead to more creative strategies that aid business decisions as a whole
- delegation of scenario planning to free up snr. Managers’ time and also decide a time frame for which to consider scenarios instead of for an indefinite time period
- carry out the process regularly
- planning not enough, managers must have skills and experience to implement action successfully
- do resources exist to enact planned response?
- resistance to change may impact action
- reliability of market research used - past data may not represent the future, and the older the data is, the more unreliable it is. Reliability of research methods.
13
Q
how does SWOT analysis work?
A
- Helps to identify successful strategies on the basis of strengths and opportunities, but also the constraints, i.e. weaknesses and threats on them
- You LEVERAGE strengths to EXPLOIT opportunities (say this in your K/An point)
- May have to overcome weakness before this is done
14
Q
pros of SWOT analysis
A
- reduce risk of strategy - match up strengths and opportunities to identify most viable strategies - leverage strengths to exploit opportunities
- helps judge the viability of a strategy when constrained by weakness/threats - if too significant, may be too risky and should choose another
- Threats and opportunities help the business to plan objectives and strategies in advance that prepare for threats and exploit opportunities - e.g. new innovation means firm can prepare by employing new specialists
15
Q
cons of SWOT analysis
A
- Time and cost needed to conduct SWOT analysis - productivity/distract from core functions
- Subjectivity of individual carrying it out - what appears to be a strength to one person may seem to be a weakness to another. Limits the identification of the most successful strategy
16
Q
EVAL for SWOT analysis
A
- good starting point only identifies factors that can help to form the outline of a strategy and is thus insufficient. Further analysis techniques needed to form and choose a strategy so combine with PESTLE, Porter’s, core competence analysis (identifies more specific strengths that can exploited)
- Depends on how up to date the analysis is - market and internal conditions may change over time, so SWOT changes too
- How comprehensive and detailed the analysis is depends on the effort and skill of the person undertaking it - must actually provide useful insight based on a good understanding of the current circumstances
17
Q
PESTLE analysis
A
Analysis of the firm’s macroeconomic environment: Political, Economic, Social, Technological, Legal, Environmental factors
These are either opportunities or threats as they are beyond the business’ control
18
Q
pros of PESTLE analysis
A
- Provides more detailed insight into external factors that could influence a business strategy - consider a wider range of factors that might gives a bigger picture of success of potential strategies
19
Q
cons of PESTLE analysis
A
- Time and cost needed to conduct
- the factors identified need to be interpreted to determine what it means for the business, so if done poorly will increase risk of strategy
- static analysis
- lacks internal consideration
20
Q
PESTLE analysis eval
A
- need to consider internal factors too so combine with SWOT/core comp.
- depends on skill and experience of manager undertaking to do it correctly; does not decide strategy for you
- depends on the strategic choice and implementation stages too - resources, workforce skills and flexibility, culture
- Must be regularly updated over time to monitor dynamic business environment
21
Q
uses of Porter’s 5 force analysis
A
map out competitive forces in an industry to:
- understand the best way to develop a competitive advantage over rivals
- Decide whether a market is worth entering - see which agents hold power and how powerful they are in relation to you
- firm already in an industry - assess changes in the power balance to devise strategies to redress power in their favour
22
Q
supplier power exists when
A
- only supplier in the area
- Difficult and costly to switch suppliers - e.g. from microsoft computers to macs; due to binding contracts
- Customers are small with little bargaining power - e.g. independent cafes VS cooperatives that work together to increase buyer power
- Brand is very powerful and well-known - difficult to bargain
- could realistically open their own forward-integration operations - e.g. coffee suppliers open a cafe, will no longer supply to other cafes)
23
Q
strategies to redress supplier power
A
- Find new suppliers - even if no direct alternatives, try to find firms supplying SIMILAR parts and try to strike a deal to get them to produce what you need
- backwards vertical integration - no scope for the supplier to profit off of you, you now control inputs
- joint venture with supplier
- Maximise EOS - buying in bulk makes you a more powerful buyer and can bargain for lower prices
24
Q
buyer power exists when
A
- Many undifferentiated small suppliers (no market power), but small number of buyers –> suppliers more reliant on them for sales,
- Inexpensive to switch suppliers
- High substitutability
- Bulk orders - more bargaining power
25
strategies to redress buyer power
* Find new customers - new market segments to spread risk
* Product differentiation - increases price-making power and encourages customer loyalty (reduced substitutability)
* Drive rivals out of the market using non-price/price-war - lower choice, more market power
* horizontal integration
* Collude with rivals to limit buyer choice and increase prices - however, this is illegal and could lead to penalties/closure
26
entry threat exists when
there are low BTE! (e.g. low EOS, cheap equipment, no legal restrictions, less importance on product differentiation and marketing)
27
strategies to redress entry threat
Erect greater barriers to entry!
* Maximise your EOS to min. Unit costs and lower prices - limit pricing horizontal integration)
* R&D/innovation leading to patents
* Stronger branding - brand loyalty deters entrants (harder to win market share)
* vertical/forward integration (control over inputs and points of sale respectively)
* Lobbying - influence govt policy to make markets less contestable
28
substitute threat exists when
there are substitutes in OTHER industries, e.g. cinemas and amusement parks
- New technology makes other options available e.g. Netflix instead of satellite TV
- Substitute Price competition - e.g. lower bus fares could win over rail commuters
- A change in expenditure patterns - e.g. increased spending on mobile phones by young people reduces income to spend on clothes
29
strategies to redress subsitute threat
* Develop strong brand name and customer loyalty - product differentiation, better customer service - less substitutable
* Build a moat for consumers to switch around within - essentially diversify → e.g. Amazon uses Prime to reduce switching
* Pass cost savings on as lower prices so they are less likely to seek out substitutes
* Promotional tactics - give customers a reason to make repeat purchases
30
why is it important to maximise your power in an industry?
avoid pressure on your costs and profits due to price wars that may occur
31
core competence
important business capability that gives a firm a competitive advantage
is not just any strength, must be:
- hard to replicate - e.g. patented and hard-to-source inputs
- highly differentiated
- applicable to a range of products and markets
- provides superior benefit to consumers
32
how can core competencies be used by a business?
* identify the CC
* develop core products
* build a portfolio of new products for new markets, that require the core product as an input
* exploit greater EOS of core product
33
pros of core competency analysis
- allocate business resources more effectively - e.g. would not outsource functions directly related to CCs
- by identifying CCs, can use them to develop a strategy that is more likely to be successful since the CC has proven to be successful in previous products ventures
34
cons of core competence analysis
- CCs can expire due to internal and external changes, so no guarantee it works in the future just because it did in the past - competitors find a way to outperform you, consumer tastes change (maybe a change in mgmt?)
35
core competency analysis eval
36
Ansoff matrix
model showing 4 **growth strategies** and their **degree of risk**: market pen, market dev, product dev, diversification
## Footnote
risk is based on how much experience and knowledge you have in that area, using your CCs and past reactions to a product
37
pros of Ansoff's matrix
1. assess risk of each strategy then use choice techniques to assess the costs and benefits in RELATION to the risk
38
cons of Ansoff's matrix
- only considers two factors in strategic analysis, but more needs to be taken into account - use SWOT/PEST
- does not suggest detailed strategy, only the type of strategy
39
Ansoff's matrix eval
1. support with PEST and SWOT
2. depends on manager skill and experience to weigh up risks and returns and choose best strategy
3. depends on skill of manager developing the strategy - should choose the right market/product/sales tactic using further market research
40
how to use decision trees
choose the option with the highest expected value of economic return
41
pros of decision trees
- objective, quantitative method to compare risk with probabilities and decide based on potential profitability
42
cons of decision trees
- probabilities may be inaccurate, especially if firm has no prior experience with similar project
- probability may be based on past data but future circumstances change
- ignores qualitative factors like managers' attitude towards risk, the impact on the environment and the skills/motivation of workforce
- Assignment of probabilities and expected values prone to bias
43
eval of decision trees
- less useful if limited experience with a product or a new market as probabilities more likely to be wrong, too risky to depend on them
- depends on skill and experience of the person generating probabilities - may help to make them more accurate
- need to consider qualitative factors too - may be important than monetary return
- very much depends on the implementation stage - need to have enough resources, skills and flexible workforce
- not useful to GENERATE a strategy, only to decide between two strategy options
9609 Business A2
flashcards
Decks in class (15)
# Cards
-
Ratio Analysis8
-
Marketing Analysis29
-
HRM Strategy39
-
Organisational Structure40
-
Marketing Strategy39
-
Location10
-
Quality27
-
Leadership18
-
Operations Strategy52
-
Applications of AI/Tech to each Department4
-
Communication6
-
Corporate Planning and Implementation40
-
Strategy43
-
External Influences5
-
AS CONCEPTS REVISION - DON'T SKIP THESE13
