Lecture 1 - Principles of Strategic Planning

Question 1

What is strategy?

Answer 1

• Strategy is the overall plan for deploying resources to establish a favourable position
• Characteristics of strategic decisions:
  
  • Important
  • Involve a significant commitment of resources
  • Not easily reversible

Question 2

What makes a succesful strategy?

Answer 2

Question 3

Illustrate the thought process of deciding between going for a business strategy or corporate strategy.

Answer 3

Question 4

Explain what is meant as strategy as positioning and strategy as a direction.

Answer 4

Question 5

Draw the industry life cycle graph ( x: Time, y: Industry shares)

Answer 5

Question 6

Draw a graph showing how product and process innovation varies over time.

Answer 6

Question 7

How typical is the life cycle pattern?

illustrate this with life cycles of television (x: time, y: sales)

Answer 7

• Industry life cycles have become increasingly compressed (e.g., e-commerce) and patterns of evolution might differ.
• Some industries (especially those providing basic necessities, e.g. food processing, construction, apparel) reach maturity, but not decline
• Industries may experience life cycle regeneration

Question 8

In many industries, what percentage of companies are started as spin offs from employees?

Answer 8

• 20%
• outperform de novo entrants
• a large proportion of the industry leaders
• play a major part in shaping business models and industrial structure

Question 9

Draw a bar chart showing the UK productivity by sector. ( x: sector, y: output per worker)

Answer 9

Question 10

What is the UK industry poor at? (or doesn’t do much of it)

Answer 10

• Patent Grants low
• UK’s R&D as percentage of GDP low

Question 11

Give some facts about the UK’s research compared to the world.

Answer 11

The UK accounts for:

• 1% of Global population
• 3.2 per cent of global R&D expenditure
• 4.1% per cent of global researches
• 8% of papers published
• produce 6.4% of worlds research articles
• 16% per cent of the worlds most highly cited papers

Question 12

UK is one of the best places to start and grow a business.

Answer 12

Question 13

What needs to be overcome in the productivity paradox?

Answer 13

• Slowdow in technological diffusions across firms
• Skills mismatch due to changes in the product market structures
• Legacy of financial crisis
• Mismeasurement due to digital economy
  
  • As digital economy grows it is harder to add value intangibles
• Lack of business model innovation

Question 14

What are the impacts of brexit for the UK

Answer 14

• Vision of ‘Global Britain’
• Single market
  
  • free movements of goods, capital, services and people
  • economic policy harmonisation (e.g. health and safety legislation and monopoly & competition policy)
• Customs union
  
  • no customs duties are levied on goods moving within the member states
  • members of the customs union impose a common external tariff on all goods entering the area
• Impact on
  
  • R&D spending and scientific research
  • foreign investment in the UK
  • supply chain
  • demand for goods
• Negotations about wether UK should still be part of the customs union despite brexit so it doesnt experience tax on imports/exports.
• If UK exports/imports outside of the EU thennot being part of customs union will be beneficial.

Question 15

What is the planning perspective?

Answer 15

• Driven by senior management who set strategic direction for the whole company
• Rational process heavily driven by empirical models and concepts
• Intentionally designed
• Formally structured and comprehensive
• Future to be predicted and anticipated

Question 16

What is the emergence perspective?

Answer 16

• Driven by vision and organisational learning
• Process of adaptive persistence where strategic direction evolves from incremental adjustments to evolving events
• Unstructured and gradually shaped
• Experimentation and parallel initiatives
• Future partially unknown and unpredictable

Question 17

Give the Intel story of how it moved from being a DRAM to a microprocessor manufacturer.

(DRAM = Dynamic Random Access Memory)

Answer 17

• Japanese calculator company, Busicome wanted a chipset designed for its calculator.
• Intel purchased the rights from Busicom
• IBM chose 8088 microprocessor for its first personal computers.
• Intel saw the margins for the memory business shrinking and the computer industry growing.
• The memory and semiconductor business shared fabrication plants (Intel didn’t need new factories to make microprocessors)
• Margin-per-wafer start did not maximize immediate profits but selected niche over commodity markets ( PC market was niche at the time)
• Since microprocessor had a higher margin it gradually was provided more resources in factories - resulting in exit from DRAM.

Question 18

Describe the HONDA story, from both BCG and Pascale interpretations.

(BCG = Boston consulting group)

Answer 18

• BCG: Honda entered the US Market with the small 50cc which it used to establish a foothold.
• Pascale: Honda tried to sell larger bikes, but couldnt so it started to sell the 50cc.
• BCG: Honda redefined the motorcycle market by targeting the ordinary person and distributing them through bicycle shops
• Pascale: Honda reluctantly chose the “nicest people campaign” developed by a UCLA undergraduate. Sold through bicycle shops because results were not good through traditional channels.
• BCG: Honda followed a policy of developing the market region, by region. The started on the west coast and moved eastward.
• Pascale: Honda chose LA where there wa a large second & third generation Japanese community, a suitable climate and a growing population.

Some people say there where successful because they had a rational strategy. Others say they learnt from mistakes through an emergent strategy.

Question 19

What are Mintzberg’s critique of formal strategic planning?

Answer 19

• The fallacy of prediction – The future is unknown
• The fallacy of detachment – Impossible to divorce formulation from implementation
• The fallacy of formalisation – Inhibits flexibility, spontaneity, intuition and learning