Strategic Management Flashcards
(35 cards)
What is the purpose of strategic planning?
- establishes overall goals for a business and develops a plan to achieve these goals
- is a formal process involving stepping back from the day-to-day operations of the business and deciding on the direction to take the business
- strategic plans need to be controlled through regular monitoring
- assists managers to assess whether they should expand their business
Why Strategic Planning Is Important to Growing Businesses?
businesses can reduce and manage risks
As the size and complexity of the business increases, its strategy will need to become more sophisticated, how do these business manage to grow ?
The business will need to review its strategy, collect and analyze a wide range of business data, such as information about how the business operates, developments in its current and potential markets, PEST information relevant to the particular industry.
The 5 key features to strategic planning are:
- Identify the organisation’s mission and objectives.
- Environmental Scan
- Strategic Formulation
- Strategic Implementation
- Evaluate and control
What is mission statement ?
A business mission statement outlines its purpose of going into business, what it wants to achieve and how it is different to its competitors.
What can be used to set goals ?
SMART Process
What are goals ?
- Goals are expressions of strategic intent.
- Usually long-term
What are objectives ?
- Objectives give more detail to the goals.
- Usually short and medium term
What is Environment scan ?
Environment scan is also known as a situational analysis, a scan that researches and analyses the business environment to identify and anticipate factors that will affect business growth and success.
3 different business environment layers
- Internal
- Operating
- Macro
Internal business layers include :
•culture •employees •management style •business form
Operating business layer includes :
- competitors •customers •suppliers
* local community
Macro business layer includes:
- laws and regulations •technology •economy
* social trends
Factors of PEST analysis
Political, Economic , Social, Technology
Porter’s five forces explains :
Porters Five Forces explains an industry’s level of competition. Analyzing a market on the basis of the five forces assists management to evaluate the viability of entering a new market or expansion into an existing one.
The five forces :
- Rivalry among existing competitors .
- Threat of new entrants .
- Threat of substitutes
- Bargaining power of suppliers
- Bargaining power of buyers
What happens if it is easy for the new businesses to enter a market?
competition will increase
What are the other factors that can affect ease of entry to market?
government policy, capital requirement and customer brand loyalty.
How can bargaining power of suppliers affect the market ?
their ability to change prices of supplies, affecting the cost of production and profitability.
The supplier power typically depends on?
the number of suppliers able to provide the necessary raw materials.
When will the bargaining power of buyers has the strongest effect on pricing ?
When
- the buyers are organised and collectively count for much of the producer’s income
- the buyers are interested in making substantial purchases
- they are interested in products that is in excess supplies
What is a substitute product?
a product from another industry that offers similar benefits to the
consumer as the product produced by the firms within the industry.
If the cost of switching is
low?
then this poses a serious threat
What is the earning of Highly competitive industries ?
Low as cost of competition is high
