10.4b - Why Strategies Fail

Question 1

Divorce of ownership and control definition

Answer 1

When the owners of a firm no longer are in day-to-day control as it is passed down to managers

Question 2

Corporate governance definition

Answer 2

The power structure of a business - how decisions should be made

Question 3

How can divorce of control lead to strategic failure?

Answer 3

• Shareholders put pressure on directions to make decisions that will encourage profit
• Shareholders will look for short-term gains rather than considering the bigger picture
• Directors/managers may be focused on furthering their own careers rather than the success of the business

Question 4

Strategic drift definition

Answer 4

When strategy becomes less suited to the environment

Question 5

Why does strategic drift occur?

Answer 5

• Business is reactive rather than proactive and is too late to respond to change
• Culture of business does not permit change to occur
• Strategic plan is too structured

Question 6

What are the phases in the strategic drift diagram?

Answer 6

1. Incremental change (business keeps up with external change)
2. Strategic drift (external change speeds up but incremental change is kept at same pace)
3. Flux (drift is recognised - strategies developed without clear direction)
4. Transformational change or demise

Question 7

How will a business know if a strategy is working or not?

Answer 7

• Benchmarks
• Monitoring of internal and external issues
• Incremental corrections to ensure strategy is suitable

Question 8

What are the stages of contingency planning?

Answer 8

1. Decide what could go wrong
2. Distinguishing which problems are critical and which are manageable
3. Using ‘what if’ questions to work out what could occur
4. Finding ways to prevent each crisis
5. Formulate business-continuity plan
6. Computer simulate or role-play each crisis and response to check effectiveness

Question 9

Business-continuity plan definition

Answer 9

The process of creating systems of prevention and recovery to deal with potential threats

Question 10

Disadvantages of contingency planning:

Answer 10

Time of staff and money is needed to:

• Complete assessment and formulate plan
• Run through test scenarios

Question 11

Crisis management definition

Answer 11

Responding to a sudden even that means the business cannot operate as usual

Question 12

What are the effects on the different functions of a business of crisis management?

Answer 12

• Marketing may need to improve PR
• Finance need clean-up expenditure
• HRM need strong leadership and quick decision-making
• Operations need to ensure customer needs are met