Chapter 2 - Strategy and business Flashcards
(19 cards)
What is strategy
Direction and scope of an organisation over the long term.
Which achieves advantage for the organisation through its configuration of resources within a changing environment.
To meet the needs of the markets and to fulfil stakeholder expectations.
What makes planning STRATEGIC
It considers:
- The long term
- The whole organisation (not just BUs)
- The resources and external environment
- All stakeholders
- Looks at how to gain sustainable competitive advantage
What are the two approaches to strategic planning
Rational approach
Emergent approach
What are the characteristics of the rational approach?
Traditional, formal or top down approach.
Adopts a formal and systematic process of identifying goals and then selecting strategies to achieve those goals.
Merits of Rational approach:
Provides a framework
Encourages long-term planning
Goal congruence (same goal)
Considers the need of stakeholders
Optimised use of resources
Considers changes in the business environment
Monitors progress
Demerits (Mintxberg) of Rational approach
- Lack of evidence to prove it leads to success
- Businesses may need to be more dynamic and react to problems as they occur (first mover problem)
- Formal planning reduces initiative and innovative thinking
- Political infighting can disrupt the process
What is the rational approach to strategy. What steps?
Both internal and external analysis Leads to V
Corporate appraisal
Mission and objectives
GAP (where they want to go and where they are now)
Strategic choice
Strategy implementation
(with constant review and control)
What are Emergent strategies?
Behaviours which are adopted and which have strategic impact.
These are strategies that emerge over time in response to the environment.
(Bottom UP approach)
Mintzbergs different grades of strategy
Intended strategy (conscious decision)
Deliberate strategy ( put into practice)
Realised strategy (resultant strategy )
Unrealised strategy (Strategy not implemented)
Emergent strategy (Strategies that develop over time)
Suitability of the emergent approach
Often adopted by organisations who:
operate in dynamic environments and require quick decision-making
Have flexible, decentralised organisational structures allowing local managers to make decisions when issues or opportunities arise
Developing a strategic advantage, What must the organisation do?
Must decide whether to
identify opportunities to exploit their existing strengths or to adapt to meet the needs
of the customer.
[Strategic advantage]
Resource based view (Inside out)
Focus on developing internal resources and competences which are difficult to imitate and find
OR
Create markets to exploit these strengths.
Resource based view
RISKS
Organisation may fail to react to long term industry trends and may find their existing resources and competences are no longer valued by the customer.
Use in confluence with rational approach
[Strategic advantage]
Positioning approach (outside in)
Focus on analysing the
external environment to
identify customer needs
and adapting to meet these
needs
Use in confluence with the emergent view
Risks of the positioning based view:
As customer’s needs change over
time the organisation is forced to
constantly evolve and develop
new competences.
What is the planning horizon
About balancing the long term and short term strategic development of the business. This balance can be affected by multiple different things.
Factors affecting the planning horizon
- Nature of ownership – some shareholders may demand quick returns compared to not for profit organisations that are building a charity for long term provision
- Capital structure – banks may expect returns over a longer period of time to match the assets securing the loan
- Nature of industry – industries that require a high level of capital, such as an aircraft developer, would expect returns to be generated over a longer period of
time - Nature of business environment – in a dynamic industry, where emergent strategies are more suitable, it may be better to plan short term and react to the
current market - Nature of management – long term planning is a skill and some entrepreneurial managers may lack the time or skill to plan long-term.
Benefits of being sustainable
Demonstrating a greater commitment to sustainability can increase the competitive
advantage that an organisation enjoys, in the following ways:
Attracting customers who are themselves committed to sustainable practice
Attracting and retaining skilled staff
Building positive relationships with like-minded suppliers
Demonstrating to shareholders an ability to deliver reliable returns
Environmental, Social and Governance (ESG)
Organisations wishing to demonstrate sustainable commitment could incorporate
ESG factors into strategic planning:
Environmental e.g. strategies in respect of harmful emissions, use of renewable energy, waste management
Social e.g. workplace health and safety, labour standards in the supply chain, diversity
Governance e.g. executive pay, business ethics, internal controls
