3.9 STRATEGIC METHODS –HOW TO PURSUE STRATGIES Flashcards
(153 cards)
1
Q
Define ‘streamlining’
A
Improvement of the efficiency of a certain process
2
Q
Advantages of streamlining
A
- Fewer errors and delays
- Increased cost efficiency
- Improved productivity
- Better time management: can meet deadlines
- Minimise risk
3
Q
Define ‘retrenchment’
A
Downsizing the scale of a business’ operations
e.g. closing branches / selling off parts of a business / delayering
4
Q
Reasons for retrenchment
A
- Restructure to increase efficiency
- Turn around poor performance
- Focus on core business
- Sell off less profitable parts of a business to improve overall performance
5
Q
Reasons for growth
A
- Increase shareholder value
- Increase market share
- Reduce average costs
- Fulfil an objective of growth
- Pressure from competitors
6
Q
Define ‘organic growth’
A
INTERNAL GROWTH
- Occurs when a business expands in size by opening new stores, branches, functions or plants
7
Q
Define ‘inorganic growth’
A
EXTERNAL GROWTH
- Occurs when a business expands in size by either merging with or taking over another business
8
Q
Define ‘overtrading’
A
A business has expanded too rapidly resulting in it operating at a level beyond its resources leading to potential liquidity problems
9
Q
Define ‘liquidity’
A
How easily an asset can be converted into cash without affecting its market price
10
Q
Issues with growth
A
- Diseconomies of scale
- Overtrading
- Harder to communicate
11
Q
Define ‘synergy’
A
Potential financial benefit achieved through the combining of companies
Often a driving force behind a merger.
e.g. Ant&Dec not good on their own but good together
12
Q
Methods of growth
A
- Mergers
- Takeover
- Ventures
- Franchising
13
Q
Define ‘integration’
A
Bringing two or more businesses TOGETHER
14
Q
Define ‘merger’
A
When two or more businesses agree to become integrated to form one business under joint ownership
15
Q
Define ‘takeover’
A
When one business gains control over another and becomes the owner, can be achieved by buying 51% of shares
16
Q
What are all of the forms of mergers and takeovers?
A
- Horizontal
- Vertical
- Conglomerate
17
Q
Define ‘horizontal’ (mergers/takeovers)
A
2 businesses at the same stage within a process integrate
18
Q
Define ‘vertical’ (mergers/takeovers)
A
2 businesses at different stages within a process integrate
19
Q
Define ‘FORWARD vertical’ (mergers/takeovers)
A
Joins with a business at next stage on the process
20
Q
Define ‘BACKWARD vertical’ (mergers/takeovers)
A
Joins with a business at an earlier stage in the process
21
Q
Define ‘conglomerate’ (mergers/takeovers)
A
2 unrelated businesses integrate
22
Q
Define ‘joint ventures’
A
Two or more businesses agree to collectively set up a new business venture with all parties contributing equity to fund the set up and purchase of assets
23
Q
Advantages of ‘joint ventures’
A
- Combined expertise
- Build connection with eachother
- Shared risk and control
- Financed through equity not debt
- Greater potential capacity
24
Q
Disadvantages of ‘joint ventures’
A
- Shared revenue
- Potential for conflict between stakeholders objectives
- Cultural differences (each business runs differently)
- Difficult to work effectively together
- Loss of control for each business
25
Define 'Greiner's Growth Model'
Predicts the six phases and five crisis that businesses go through as they grow
The move from one stage to the next is usually triggered by a crisis
Businesses that cannot make adjustments get stuck in a difficult place and that hinders their growth
26
What are the 6 phases of the 'Greiner's Growth Model' ?
| Responses to the crisis
- Creativity
- Direction
- Delegation
- Coordination
- Collaboration
- Alliances
27
What are the 5 crises of the 'Greiner's Growth Model' ?
- Leadership: too big for leader
- Autonomy: new managers demand more power
- Control: more layers to hierarchy
- Red Tape: slow decision making, less aware of external environment - higher costs (too many layers) - overweight and too many managers
- Growth: business runs out of ideas
28
What are the 5 crises of the 'Greiner's Growth Model' ?
- Leadership: too big for leader
- Autonomy: new managers demand more power
- Control: more layers to hierarchy
- Red Tape: slow decision making, less aware of external environment - higher costs (too many layers) - overweight and too many managers
- Growth: business runs out of ideas
29
Outline the 'leadership' crisis of the 'Greiner's Growth Model'
Communication begins to fail as business grows
Business now too big for leader to get involved in everything
To solve a leadership crisis, businesses will appoint someone to drive the business forward
30
Outline the 'autonomy' crisis of the 'Greiner's Growth Model'
Business now has functional management
But leader still struggling to let go
New managers may demand more power
Workload can be too excessive which creates an autonomy crisis
31
Outline the 'control' crisis of the 'Greiner's Growth Model'
More formal management structures in place
But new layers of hierarchy needed to keep control
32
Outline the 'red tape' crisis of the 'Greiner's Growth Model'
Slow decision making as got to pass through multiple layers
Less aware of external environment
Higher costs (too many layers)
Overweight with too many managers
33
Outline the 'growth' crisis of the 'Greiner's Growth Model'
Growth slowing as business runs out of ideas
Alliances are sought after (mergers or takeovers)
34
Suggest the combinations of phases and crisis within the 'Greiner's Growth Model'
Creativity + N/A
Direction + Leadership
Delegation + Autonomy
Coordination + Control
Collaboration + Red Tape
Alliances + Growth
35
Criticism of the 'Greiner's Growth Model'
SIMPLISTIC
- Not every growing business will face crisis
- Delegation might also always remain a problem in most businesses, not just at this stage
- Ignores the pace of growth
36
Contextual example of the 'Greiner's Growth Model' not working
CocaCola has grown steadily over 100+ years and has not experienced crisis to trigger growth
37
What can we learn from 'Greiner's Growth Model'
- Growing a business is rarely easy
- Growth poses many management and leadership challenges (crises)
- Leadership and organisational structure has to evolve as the business changes
- Businesses that don't adjust will experience lower growth than those that do
38
Outline the 'creativity' phase of the 'Greiner's Growth Model'
- Beginning of all growth
- Staff low
- Growth from long working hours
- Informal communication
39
Outline the 'direction' phase of the 'Greiner's Growth Model'
- Communication formalised
- Major strategic decisions are made
- Workload can be too excessive which creates an autonomy crisis
40
Outline the 'delegation' phase of the 'Greiner's Growth Model'
- Organisational structure expanded
- Head office now required to oversee and coordinate the decisions made
- Identify new markets / spot gaps
41
Outline the 'delegation' phase of the 'Greiner's Growth Model'
- Organisational structure expanded
- Head office now required to oversee and coordinate the decisions made
- Identify new markets / spot gaps
42
Outline the 'coordination' phase of the 'Greiner's Growth Model'
- Business can now expand
- Isolated departments are now working together for the goal of the business
- Performance related pay introduced and aligned to corporate goals
- Business slow to respond to external changes, so growth opportunities are lost
43
Outline the 'collaboration' phase of the 'Greiner's Growth Model'
- Business must now switch management styles
| - Functional specialists from different areas will work together in project teams
44
Outline the 'alliances' phase of the 'Greiner's Growth Model'
- Most organisation eventually stop growing because they run out of ideas
- To grow again, they will need to form alliances with other businesses
- Mergers, take-overs and joint ventures
45
What must a business do if a crisis occurs? ('Greiner's Growth Model')
Reorganise if it is to continue growing onto the next phase
46
Who founded the 'Greiner's Model of Growth' ?
and... IN WHAT YEAR
Larry Greiner in 1972
47
Advantages of using technology to gather data
- Reduces human error: more accurate
- Quick
- Accurate
- Efficient
- Professional
- Collect consumer opinions worldwide
- Can utilise social media and review sites
- Bigger storage: cloud data
- Can be more secure online
48
Examples of technology in gathering data
COOKIES
- Shop Wi-Fi: know what you are looking at and where you are in the store
- Loyalty cards: spending habits
- INTERNET: reviews and cookies
- Newsletters
- Social media
- Online surveys
- Search engines
49
Disadvantages of using technology to gather data
- Staff need educating
- Possible data breaches, if not secure - TWITCH
- More costly: expensive to maintain; fix and upgrade
- Customers may feel violated
50
What does the 'experience curve' suggest?
The more experienced a business has in producing a particular product, the lower its costs are.
51
Define 'innovation'
Development of a new idea into a new product or process
52
Define 'product innovation'
Changing a product that already exists or developing an invention into a brand new idea.
Ideas, theorises about a potential product
53
Define 'process innovation'
Changing a process of production that already exists or putting into practice a brand new production process
54
Pressures to innovate
- Decline phase
- Stay ahead of dynamic market
- Businesses don't want to miss opportunities to innovate
- Competitor actions
55
Advantages of Innovation
- Businesses cannot afford to stand still in a competitive market
- Today's innovations are later rising stars / cash cows
- Although expensive, alternative risk of losing future markets might be worse
- Benefits economy as a whole, pushing humanity forward
56
Disadvantages of Innovation
- Other businesses may copy / react with own innovations to compete
- Legal implications often arise with other businesses questioning if production or process is an innovation ('we did it first')
- TIME CONSUMING - R&D
57
Ways of becoming an innovative organisation
- Kaizen
- Research / development
- Intrapreneurship: allows an employee to act like an entrepreneur within an organisation
- Benchmarking
58
Contextual example of Kaizen
Pizza Hut: Lemon cutting, task changed for waiters to kitchen staff
59
Define 'kaizen'
Concentrates on frequent small improvements
Small steps so service becomes more efficient
60
Define 'benchmarking'
- Process of identifying best practice normally within the industry
- Comparing to the best and seeing how to improve
e. g. businesses seeing what works for other businesses then copies this
61
Define 'intrapreneurship'
Employees in larger organisation act same way as entrepreneurs
62
Define 'greenwashing'
False claims about positive impact on environment
63
Advantages of 'Kaizen'
- Improve quality
- Improve productivity: more tasks (job enrichment) &&& employees take ownership of their work
- Employees feel like they are helping the business to achieve goals
- Reduce waste
- Improves small issues that are usually overlooked
- Small improvements less likely to require major capital investment than major process changes (cheaper to manage)
64
Disadvantages of 'Kaizen'
- Additional training
- Increased pressure on employees: targets set
- Some workers may see Kaizen as an extra burden: demotivating
- Contrasts with major leaps seen in an industry, due to radical new technology
- Can take time to embed Kaizen successfully into a company's culture
65
Advantages of Benchmarking
- Gain an independent perspective about how well you perform compared to other companies
- Identify areas for improvement
- Set performance expectations for employees
- Enable a mindset and culture of continuous improvement - motivating
66
Disadvantages of Benchmarking
- It doesn't really measure effectiveness
- Not very flexible
- Requires lots of information: time consuming to gather
- May put up boundaries that could stop innovative thinking.
67
Ways of protecting innovation
- Copyright
- Patent
- Trademark
68
What is 'copyright' ?
- Legal protection for anyone that has produced work in a range of areas
- It is illegal to use copyrighted work and without the permission of the owner
- Lasts 70 years after person dies
- Media, articles, songs, art
69
Difference between patent and copyright
- Copyright don't have to pay
- Patent have to pay
- Copyright focuses on media, articles, songs and art
- Patent focuses on ideas, products and inventions
70
What is 'patent' ?
- Legal protection of a unique feature of a product or process
- Have to apply through IPO
- Ideas, products, inventions
- Paid for
71
What is 'trademark' ?
(TM)
Protects logo, catchphrase or slogan
72
Problems of using technology
- High start-up costs / investment appraisal
- Expensive fixed cost
- Depreciate in value as further innovations occur
- Staff need additional training
- Data breaches / viruses
73
Define 'M-Commerce'
Commercial transactions conducted electronically by mobile phone
74
Advantages of using technology
- Improved efficiency
- Convenience for customers - 'Click and Collect'
- Utilise the internet - becomes their 'place'
- Reduced human error
- More effective the tech is, more customers reachable
75
Define 'big data'
Describes vast amount of data generated by the technological devices that we use daily
76
# Define 'data mining / analytics'
Give example of usage
Process of sifting through data to try and identify trends and relationships
(e.g.) links to HR: when recruiting, businesses look through social media accounts
77
Define 'Enterprise Resource Planning' (ERP)
Software used by businesses to collect, store, manage and interpret data from different business functions
Coordinate all operation systems
78
Factors that 'Enterprise Resource Planning' enables a business to do (ERP)
- Advanced planning / scheduling
- Billing / cost management
- Traceability: where suppliers are coming from
- Helps with quality control
- Production organisation
- Can do all accounting for a business - helping financial department
79
What do 'PLEX' offer?
A personalised 'Enterprise Resource Planning' ('ERP') software
80
Benefits of Enterprise Resource Planning (ERP)
- Reduction in admin costs
- Increase profitability
- Cloud - protection
- Accuracy, no human error
- Can be personal software - (e.g. from PLEX)
- Efficient
81
Where is 'Enterprise Resource Planning' ('ERP') mostly used?
Manufacturing industry
82
What can 'Enterprise Resource Planning' ('ERP') contribute towards?
- Organisation of kaizen
- Efficiency
- Economies of scale
83
Define 'intellectual property'
A creation of the mind
84
Define 'offshoring'
Establishing production sites abroad
85
Disadvantages of 'offshoring'
- Time Zone Differences and Proximity: hard to supervise?
- Communication and Language Issues
- Cultural and Social Differences
- Risk of exposing confidential data - if in poorer, less secure country
86
Advantages of 'offshoring'
- Lower costs: less devloping country
- Lower risks
- Utilise digital communications
- Opportunities for staff to work abroad: motivating
- Bigger talent pool
87
What process leads to innovation?
Research and Development
88
Define 'research and development'
An activity that companies undertake in order to develop new products, processes or services OR to improve those that already exist
89
R&D Cycle
1. Ideation and theorising
2. Research and development
3. Design and development (final)
90
Where is R&D mostly used? (Context)
Pharmaceuticals and science
91
Main 2 Types of Research within R&D
- Basic research
| - Applied research
92
Define 'basic research' (R&D)
Acquiring knowledge and using it to build understanding and intelligence.
This knowledge can be the foundation for further R&D projects, and feed into the business' strategic decisions
93
Define 'applied research' (R&D)
ADVANCED RESEARCH
A lot more defined than 'basic research'.
Looks to achieve a specific objective
Often what leads to development phase
94
What is the 'design and development phase' ? (R&D)
Taking an idea and making it into a product or process
Translating the research into a commercial product or service
95
What is the 'design and development phase' ? (R&D)
Taking an idea and making it into a product or process
Translating the research into a commercial product or service
96
Examples of 'design and development phase' (R&D)
- Prototyping
- Trials
- Testing
- Refinement
97
Why is prototyping key? (R&D)
Allows you to identify and overcome issues, improving the design
Prevents these issues before official launch
98
How would a business conduct R&D to look at 'new product research and development' ?
RAPID CHANGING CONSUMER DEMANDS AND EMERGING TECH - always prepared to adapt
Before developing a new product, get a deep understanding of the market and the user needs
This lays the groundwork for the development of the new product
99
How would a business conduct R&D to look at 'improving existing products and processes' ?
- Continual evaluation of existing products/processes is key
| - Legislative changes / shifts in user-wants can mean a product/process must evolve to remain viable
100
Advantages of R&D
- Keeps business innovative: facilitate dynamic market
- Effective use of time and resources
- Tax incentives (tax relief)
- Positively impact the wider economy (hence the tax incentives)
101
Disadvantages of R&D
- Very costly: global spending $1.7T
- Time consuming: may waste time
- No guarantee of success
- Staff training required?
102
What are the two approaches to 'R&D' ?
- Independently
| - Outsource it
103
Research and development should be factored into...
the budget
104
Contextual example of successful 'R&D' and being innovative
Apple spend BILLIONS on R&D
Innovate their iPhone product (existing) to be better each year
Adjusting to competitor actions and adapting to customer expectations and tastes
R&D products years in advance to gain competitive advantage - LONG-TERMISTIC
105
How are 'R&D' and 'innovation' linked?
Innovation is a broad term: refers to those ideas, products and methods/processes that are new and different
^ R&D is about acting on this and making it a reality
A product can not be fully innovated without R&D - it develops the product
106
Contextual example of R&D failure
GoogleGlass
107
(a) leads to (b)
[R&D]
What are A and B?
a = R&D
b = Innovation
108
Contextual example of data mining
Cambridge analytica
109
Why may the 'experience curve' happen?
- More efficient and better-skilled labour
- More standardisation of production and specialisation: process
- Better use of technology (automation)
- Product improvements / design
110
Implications of the 'Experience Curve'
- Business with most experience will have a significant cost advantage
- Business with highest market share likely to have most/best experience
Therefore...
- Experience is a barrier to entry
- Try to maximise market share
111
Likely features of low-cost operators/businesses
| That leads to them being experienced
- High levels of productivity and efficiency
- High capacity utilisation
- Large scale = economies of scale
- Use bargaining power to negotiate lower prices from suppliers
- Lean production methods and culture (reducing waste)
- Access to the widest and most important distribution channels
112
Criticism of the 'Experience Curve'
- Model developed in 1960's... long ago! (Limited in a modern business world)
- Experience isn't everything when seeking competitive advantage
- Market leaders become complacent
- Experience may cause loss of innovation (think they are too experienced to innovate) - (experience leads to R&D which leads to innovation, so is IMPORTANT)
113
Context of 'Experience Curve'
Kodak and Nokia
Had high market share, but became complacent, perhaps consequent to their expertise
114
Concepts associated with synergy
- Takeovers
- Mergers
- Joint ventures
- Strategic alliances
115
'Synergy' context
Sainsbury's trying to take over Argos
Synergies from doing this:
- £500m in cost savings
- Generate around £160m in revenue synergies from deal
116
What are the 2 main reasons for synergy?
- Cost savings
| - Higher sales / revenue
117
Cost savings synergy (benefits from taking over for cost saving purposes)
- Better deals with suppliers
- Higher productivity and efficiency from shared assets
- Economies of scale!!!
- Easiest to achieve
118
Higher sales / Revenue synergy (benefits from taking over higher sales / revenue purposes)
- Cross-selling for customers of both businesses
- Access to new distribution
- Brand extension
- New geographic markets opened up
119
Define 'internationalisation'
Designing a product in a way that it may be readily consumed across multiple countries.
This process is used by companies looking to expand their global footprint beyond their own domestic market understanding consumers abroad may have different tastes or habits.
120
List methods use to enter international markets
- Export
- Licencing
- Alliances
- Direct investment
121
Define 'exportation' (entering international markets)
Selling goods and services produced in one country to another country
122
Define 'licensing' (entering international markets)
Business gives permission to a 3rd party to sell their goods + services abroad
123
Define 'alliances' (entering international markets)
Forming partnerships with one or more businesses operating in another country
124
Define 'direct investment' (entering international markets)
Capital expenditure to establish physical presence in another country
e.g. setting up a manufacturing plant
(Only very established businesses tend to do this)
125
Define 'reshoring'
Opposite of 'off-shoring'
Relocating to domestic country, following
126
Why may 'reshoring' happen?
- Cost saving no longer significant
- Quality issues
- Shorter lead times
- Government incentives (grants+taxes)
- Infringement of intellectual property
127
Pressures for local responsiveness (managing international businesses)
- Responding to cultural diversity (e.g. changing menu)
- Ease with which products can be altered for this
- Unintended meanings / inappropriate marketing
128
Pressure for cost reductions (managing international businesses)
- Ability to benefit from economies of scale
| - Whether a business competes by being low cost or highly differentiated
129
What is a contextual example of a business which is not pressured by cost not local responsiveness?(managing international businesses)
APPLE!
Works on added value
130
Axis on 'Bartlett and Ghoshal' model
X: Pressures for local responsiveness
Y: Cost Pressure
WORKS ON LOW AND HIGH BASIS
131
Contextual example of local responsiveness (cultural diversity)
McDonald's menu
MCCURRY (India)
132
Describe the layout of 'Bartlett and Ghoshal' model
Top left: Global
Bottom left: International
Top right: Transnational
Bottom right: Multi-domestic
133
What does the 'Bartlett and Ghoshal' model indicate?
Strategic options for businesses wanting to manage their international operations based on two pressures
134
Describe 'Global'
(CP: High // LR: Low)
Bartlett and Ghoshal
- Pressure to achieve cost savings through global integration
- Little pressure to adapt products to meet local differences
- Therefore, the business sells largely homogeneous products
- Subsidiaries abroad have limited functions e.g. marketing
- Product design / innovation remains the responsibility of HQ in origin country
135
Describe 'International'
(CP: Low // LR: Low)
Bartlett and Ghoshal
- Little pressure to achieve cost savings through global integration
- Little pressure to adapt to meet local differences
- The business primarily runs from home country
Context: APPLE!!!
136
Describe 'Transnational'
(CP: High // LR: High)
Bartlett and Ghoshal
- Pressure to achieve cost savings through global integration
- Pressure to respond to local differences
- Business encourages sharing of ideas and expertise between subsidiaries
- Foreign subsidiaries enjoy a relatively high level of autonomy
137
Describe 'Multi-Domestic'
(CP: High // LR: Low)
Bartlett and Ghoshal
- Little pressure to achieve cost savings through global integration
- Little pressure to adapt products to meet local differences
- The business operates a portfolio of relatively autonomous organisations
138
Context for 'intrapreneurship'
Gmail: employees at Google allowed time for personal projects
(20% of their time)
139
Differences between 'Entrepreneurship' and 'Intrapreneurship'
E:
- Entrepreneurial activity by entrepreneur
- Rewards go to entrepreneur
- Risks taken by entrepreneur
I:
- Entrepreneurial activity by employees and managers
- Most rewards go to company
- Risk taken by company
140
Ways to encourage / facilitate intrapreneruship
- Structured time away from normal day-to-day work, allowing employees to develop ideas
- Cross functional teams to lead innovation projects (bringing teams together)
- Secondment of staff to smaller businesses/startups
- Staff competition and innovation days
141
Define 'secondment'
A chance to temporarily work on a different team within an organisation
142
Reasons why large businesses are often NOT entreprenuerial
- Complacency / arrogance
- Bureaucracy
- Reward systems do not provide an incentive to innovate
- Short-termism
143
Define 'bureaucracy'
Means of state control
Lack of innovation in a business
Hierarchy of an organisation
144
What large businesses need for successful intrapreneurship
- Senior management support (e.g. mentoring)
- Communication
- Culture of innovation and creativity (building this culture)
- Reward systems for innovations
- Resources: business needs to show that it can back its ideas
145
Possible levels of Kaizen
- Individual levels
| - Groups: Kaizen Groups / Quality Circles
Kaizen is compatible with team working and cell production
146
Why is Kaizen cheap to manage?
Small improvements are less likely to require major capital investment than major process changes
147
How will a business may Kaizen effective?
Has to be a culture of trust between staff and managers
Good two-way communications and de-layered organisations would also support this approach
148
What may force a business into retrenchment? (causes)
- New leadership
- Low ROCE
- High costs + low profitability
- Loss of market share
- Failed takeovers and mergers
- Economies downturn (external)
- Change of ownership
149
What is a disadvantage of significant retrenchment, in a large business?
- Associated with fundamental reappraisal, therefore complex + costly
150
Suggest 3 retrenchment actions
- Change organisational structure
- New leadership
- Fewer people
151
Possible implications of 'changing organisational structure' (as a retrenchment action)
- Greater workload = higher stress
- New, unfamiliar teams/colleagues
- Different reporting structure
152
Possible implications of 'new leadership/ownership' (as a retrenchment action)
- Different leadership style
- Uncertainty
- New priorities, aims and objectives
- Previous projects abandoned (fresh start)
153
Possible implications of 'fewer people' (as a retrenchment action)
- Loss morale / increased de-motivation
| - Bad news for external stakeholders (e.g. local community / local suppliers)
