Section 6 Flashcards
Strategic management
The highest level of managerial activity (CEO/ board of directors)
- Assess business position
- Mission + objectives
- Make long term decision + objectives
- Integrate/coordinate activities for functional areas
- Allocate resources
- Evaluate
Hierarchy :
1. Corporate strategy - strategy development of entire organisation
2. Business strategy - strategy development for different divisions of business for competitors advantage
3. Functional strategy - strategy plans form functional departments
Establishing corporate strategy
Resource availability
Strength of business
Competitive environment
Objectives
Competitive advantage
Superiority gained by business when it can provide same value product as competitors or lower prices or can charge higher price by providing greater value through differentiation.
Can be achieved through to get value creation:
~ Automation
~ Rationalisation
~ Innovation
Strategic analysis
SWOT analysis
PEST analysis
Process of conducting research into the business environment to help form future strategies.
Strategic analysis that identifies main internal strengths and weaknesses with external opportunities and threats that will influence future direction and success of business.
Strategic analysis of a firm’s macro environment including political, economic, social and technological factors.
Mission statement
Statement of a business’s core purpose and focus - phrased to motivate employees and stimulate interest by outside groups
Vision statement
Statement of what the organisation would like to achieve in the long term
Boston matrix
• Highlights position of every product, by measured in terms of market growth/share
• Analysis of existing portfolio
• indicates possible future strategies
Boston matrix and strategic analysis
Building:
~> support problems child product with cash from cash cow
Holding:
~> support star products to maintain good market position (might need to remind customers)
Milking
~> take positive cash flow from good products and investigating in other products
Divesting
~> identifying dogs and stops supplying products (can’t be done lightly)
Porter’s 5 forces
• Rivalry among existing comnpetitors
• Threat of new entrants
• Bargaining power of buyers
• Threat of substitutes
• Bargaining power of suppliers
In terms of business strategy:
~ Help decide whether to enter a market
~ Help decide whether to stay in current market
~ Help develop strategies to gain competitive position
Core competency
Business capability that gives a firm a competitive advantage
To be profitable/commercial:
• Provide recognisable benefit to customer
• Not easy to duplicate
• Applicable to range of products/markets
Developing CC:
~ Lead to development of core products - helps the production of products for final consumers
~ Depends on integrating multiple technologies + different product skills
~ Once developed, allows for strategic opportunity
Core product
Product based on business’ core competencies not necessarily for a final consumer
Strategic choice
Have to be challenging enough to gain competitive advantage; yet achievable with given resources
Ansoff’s matrix
Used to show the degree of risk associated with the four growth strategies of market penetration, market development, product development and diversification
~> Different options available to marketing manager for sales growth
Variables in strategic marketing decisions:
• The market
~ Remain in same one
~ Enter new one
• The product
~ Sell existing products
~ Develop new ones
Market penetration
Achieving higher market shares in existing markets with existing products
Product development
Development and sales of new products/development of existing products in existing markets
Market development
Strategy of selling existing products in new markets
Diversification
Process of selling different unrelated goods/services in new markets
Most to least risky:
• Diversification
• Market + product development
• Market penetration
Notes:
• Risks differ in each strategy
• Allows for analysing the degree of risk associated with each option
• Managers will do cost benefit assessment
• Reality = combination of strategies used
• Requires more situational analysis info
• Managerial experience plays a role
Force-field analysis
Technique for identifying/analysing the positive factors that support a decision and negative factors that constrain it
~> Strengthen forces that support decision and reduce forces
Notes
• Driving forces = Positive factors
• Restraining forces = Negative factors
Conducting:
1. Analyse current + desired situation
2. List driving factors
3. List constraining factors
4. Allocate numerical score to each factor to indicate significance (1 = weak)
5. Chart forces ( left = positive ; right = negative)
6. Total scores and establish wether change is viable
7. How will change be affected by. Decreasing the restraint factors/increasing the driving force
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Decision tree
Diagram that sets out the options connected with a decision and the outcomes and economic returns that may result.
4 main features of business decisions:
1. All options open to the manager
2. Different possible outcomes resulting from these options
3. Chance of these outcomes occurring
4. Economic returns from these outcomes
~> Analysis of info should result in decreased risk
Construction:
1. Constructed from left to right
2. Each branch of tree represents an option and chance
3. Decision points are ‘square’ and called decision nodes
4. ‘O’ is known as chance nodes -shows the outcome of a decision tree
5. Probabilities shown alongside each possible outcome
6. Gains/losses shown at the end of each outcome
Expected value
Likely financial results of an outcome .
Calculation of each chance node:
~> Multiplying probability by the forecasted economic return of both branches
Strategic implementation
Process of planning, allocating and controlling resources.
Needs to be in place:
• Appropriate organisational structure to deal with change
• Adequate resources to make change happen
• Well motivated staff, -want change to be successful
• Supportive organisational culture/leadership style
• Control and review systems
Business plans
Written document that describes a business, objectives,strategies,market its in and financial forecasts.
~> Often assists lenders to finance a business proposal
~> Gives sense of purpose/direction
~> Provides targets to aim and monitor
~> Adapt and rewrite strategies
~> Use financial forecasts as benchmarks/budgets
~> Apply for additional funding
Describes the following:
• Executive summary
• Opportunity
• The market
• Management team + personnel
• Operations
• Financial forecast
Executive summary - Business plans
The entrepreneur, business idea, info about workers needed
Opportunity - Business plans
Product/service + why be a success (market research)