Core Activity A: Develop Business Strategy Flashcards
(58 cards)
What are the three things related to strategy evaluation?
Suitability
Feasibility
Acceptability
What is suitability?
Concerned with whether the strategy addresses the circumstances in which an organisation is operating.
What is Feasibility?
Concerned with whether the strategy could be made to work in practice and as such looks at more detailed practicalities of strategic capability. Resources, Competencies, Implementation.
What is Acceptability?
Concerned with the expected performance outcomes (such as return or risk) of a strategy and the extent to which these would be in line with the expectations of stakeholders.
What are some methods of expansion?
Acquisition
Mergers
Organic Growth
What is acquisition?
Corporate action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm. Reasons can include asset stripping, reduction of competition and big data opportunities.
What is merger?
Business combinations that result from the creation of a new reporting entity formed from the combining parties.
What is organic growth?
growth through internally generated projects, such as increased output, customer base expansion, or new product development.
What are the considerations with acquisition V organic growth?
Speed, cost, economies of scale, risk, synergy, Implementation issues.
What are the benefits of joint methods?
Sharing of costs, benefits and risks. Ownership of resources and control/decision making.
What is a joint venture?
Seperate business entity whose shares are owned by two or more business entities
What is strategic alliance?
Cooperative business activity, formed by two or more separate organisation for strategic purposes, that allocated ownership, operational responsibilities, financial risks, and rewards to each member, while preserving their separate identity.
What is franchising?
Purchase of the right to exploit a business brand in return for a capital sum and a share of profits or turnover.
What is licensing?
Right to exploit an invention or resource in return for a share of proceeds.
What are the reasons for acquisition/merger?
- Increased market share/power
- Economies of scale
- Combining complementary needs
- Improving efficiency
- Lack of profitable investment opportunities – surplus cash
- Tax relief
- Reduced competition
- Asset stripping
- Big data opportunities
- Synergy
What is a synergy?
The advantage to a firm gained by having existing resources which are compatible with new products or markets that the company is developing.
Sources include operating economies, financial synergy, other synergistic effects
Synergy is not automatic and is often overestimated
What are the pre-bid defences against a takeover?
Communicate effectively with shareholders
Re-value non-current assets
Poison Pill
Crown Jewel
Change the article of association to require ‘super majority’ approval for a takeover.
How do we re-value non-current assets as a defence?
revalue to current values to ensure shareholders are aware of true asset value per share.
What is a poison pill?
Target company takes steps before a bid has been made to make itself less attractive to a potential bidder.
What is a crown jewel?
Target company sells of its most attractive assets to another company or spins them off into a separate entity.
What are the post bid defences?
Appeal to their own shareholders
Attack the bidder
White Knight
Counterbid/’Pacman’ defence
Refer the bid to competition authorities
What is attack the bidder?
concentrating on the bidder’s management styles, overall strategy, methods of increasing earnings per share, dubious accounting policies and lack of capital investment.
What is a white knight?
Directors of target company offer themselves to a more friendly outside interest. Tactic should be last resort as it means the company will lose its independence.
What is a pacman defence?
bidding company is itself the subject of a takeover bid by the target company
