(2, 2) - Evaluating the Strategic Options 'Choice'

Question 1

What should be considered when developing a corporate strategy?

Answer 1

• The range and diversity of its products and markets

- The geographical range of the organisation

Question 2

What is the Ansoffs Strategy Matrix?

Answer 2

CORPORATE STRATEGY, A matrix used to help identify directional strategies.

• Existing Market, Existing Products - (Market Penetration) refers to growing the share of an existing market, can be achieved through mergers, acquisitions etc. Competitive reaction to growth plans must be considered.
• Existing Market, New Products - (Product Development) refers to the development of existing products to an organisations existing customer base. This will require investment in new technology which always carries a risk.
• New Market, Existing Products - (Market Development) refers to a strategy for developing new customer markets for existing products. Could be customer segments or geographical sectors. This doesn’t require investment except in promotion or selling and infrastructure to support.
• New Market, New Products - (Diversification) refers to new products for new markets. There is a risk in these options as organisations need to develop new capabilities to implement the strategy. An organisation may diversify into an industry they already have links in to reduce the risk.

Question 3

What is the Boston Consulting Group (BCG) Matrix?

Answer 3

CORPORATE STRATEGY, It is used to plot market growth against market share to help you consider the portfolio of your business. They can then be identified as ‘stars’, ‘cash cows’, ‘dogs’ or ‘question marks’. The size of the circles indicate the sales volumes for each products.

• Low market growth, High market share - Cash Cows (generate excess cash and are milked with as little investment as possible)
• High market growth, High market share - Stars (hope they will become the next cash cows)
• High market growth, Low market share - Question Marks (generate little cash because of low market share but could they become the next stars?)
• Low market growth, Low market share - Dogs (either divest or create a business case for retaining them)

Question 4

What is the Ashridge portfolio display?

Answer 4

CORPORATE STRATEGY, Used to identify strategic options considering the value a parent company might add to a Strategic Business Unit. Sets out two criteria,
‘Feel’ - the fit between an SBU’s critical success factors and the skills and resources available to the parent
‘Benefit’ - the opportunities for helping the SBU achieve its critical success factors
- Alien Territory - Misfits with no feel and no potential to help, should be divested.
- Ballast - SBU’s have good feel but there is no opportunity to help. The SBU may be better off as a separate company
- Value Trap - SBU’s appear attractive however value is seldom realised because problems of management fit
- Edge of Heartland - Still a good fit but the value adding potential is lower or risks are higher
- Heartland - SBU’s are well understood and a good fit

Question 5

What has been driving internationalisation strategies?

Answer 5

Internet - allows instant access to information anywhere in the world
Travel and Communication - low cost travel and instant communication
Logistics - improved trade routes making global sourcing easier

Question 6

What are the two main advantages associated with internationalisation strategies?

Answer 6

Exploit local advantage, where resources and skills are much more accessible in one location than another
Developing a value network, identifying distinctive resources and capabilities of other countries so operations can be conducted in the most efficient location.

Question 7

When a corporate strategy has been identified, an organisation must consider how it should acquire, develop or control the strategic resources it needs to innovate, diversify or internationalise. What are the 3 main choices?

Answer 7

Organic Development
Merger or Acquisition
Strategic Alliance

Question 8

What are the benefits of an ‘organic development’ strategy to harness resources to innovate, diversify and internationalise an organisation?

Answer 8

• Lower investment, spread over longer time periods
• Improved internal skills and innovation, through the learning and development needed to set up the new activities
• Continued strategic independence
• Usually cheaper and more controllable than alternatives

Question 9

What are the benefits of ‘mergers and acquisitions’ strategies to harness resources to innovate, diversify and internationalise an organisation?

Answer 9

• Speed, rapid access to new resources and possibly products and brand names
• Economies of scale from combining two organisations resources
• Greater control than alliances provide

Question 10

What are the benefits of a ‘strategic alliance’ strategy to harness resources to innovate, diversify and internationalise an organisation?

Answer 10

• Joint access to complementary resources and strengths to overcome weaknesses
• Economies of scale from joint activities
  Sharing of risk
• Access to other parties overseas resources and capabilities

There are risks as there is no clear leader and cultural differences may become apparent over time.

Question 11

What 3 headings can be considered and scored against to evaluate a strategy?

Answer 11

1. Sustainability - does it deal with the situation identified in position analysis
2. Acceptability - does it meet expectations of stakeholders
3. Feasibility - can it be implemented