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62 Cards in this Set
- Front
- Back
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Strategic Management |
The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organisation and its environment so as to achieve organisational goals |
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Explicit Strategy (first step in strategic management) |
The plan of action that prescribes resource allocation and other activities for dealing with the environment, gaining a competitive advantage and helping the organisation attain its goals |
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Competitive advantage |
What sets the organisation apart from others and provides it with a distinctive edge in the market place |
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Purpose of strategy |
Exploit core competence Build synergy Deliver value for customers |
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Core competence |
A business activity that an organisation does particularly well in comparison to competitors |
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Synergy |
The condition that exists when the organisation's parts interact to produce a joint effect that is greater than the sum of the parts acting alone |
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Value |
Combination of benefits received and costs paid |
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3 levels of strategy |
1. Corporate-level strategy 2. Business-level strategy 3. Functional- level strategy |
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Corporate-level strategy |
- What business are we in? - Relates to the organisation as a whole and the combination of business units and product lines that make up the corporate entity - Divest unwanted business units or acquire or develop new business |
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Business level strategy |
- How do we compete - Relates each unit or product line within the organisation (textiles unit, chemicals unit, auto parts unit) - E.g: Product innovation |
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Functional-level strategy |
- How do we support the business- level strategy - Relates to major functional units with the business - E.g: Finance, Research & Development, Manufacturing and Marketing |
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Strategy formulation |
The stage of strategic management that involves the planning and decision making that lead to the establishment if the organisation's goals and of a specific strategy plan. |
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Strategy execution |
The use of managerial and organisational tools to direct resources towards achieving strategic outcomes |
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SWOT (situation) analysis |
Strengths Weaknesses Opportunities Threats |
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Strengths |
Positive internal characteristics that the organisation can exploit to achieve its strategic performance goals |
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Weaknesses |
Internal characteristics that may inhibit or restrict the organisation's performance |
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Opportunities |
Characteristics of the external environment that have the potential to help the organisation achieve or exceed its strategic goals |
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Threats |
Characteristics of the external environment that may prevent the organisation from achieving its strategic goals |
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Portfolio strategy |
A type of corporate level strategy that relates to the organisation's mix of strategic business units and product lines that fit together in such a way as to provide the organisation with synergy ad competitive advantage |
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Strategic business units (SBUs) |
A division of the organisation that has a unique business mission, product line, competitors and markets relative to other SBUs in the same organisation |
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The BCG Matrix |
A concept developed by the Boston Consulting Group that evaluates strategic business units with respect to the dimensions of business growth rate and market share (star, cash cow, question mark and dog) |
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The star |
- Large market share in rapidly growing industry - Additional growth potential - Profits used as investment for future growth - Visible, attractive and will generate profits and a positive cash flow even as the industry matures and market growth slows |
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The cash cow |
- Exists in a mature, slow-growth industry but its a dominant business in the industry with large market share - Investments in advertising and expansion are no longer required = positive cash flow - Invest in other riskier business' |
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The question mark |
- Exists in a new, rapidly growing industry but has only small market share - Risky (could become a star or fail) - Companies invested in after cash cow |
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The dog |
- A poor performer - Small share of a slow growth market - Provides little profit - May be targeted for divestment or liquidation if turnaround is not possible |
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Diversification strategy |
The strategy of moving into new lines of business
E.g: Apple moving into mobile phone market |
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Related diversification |
The new business is related to current activities |
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Unrelated diversification |
The new business is unrelated to current activities |
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Porter's competitive forces and strategies |
1. Potential new entrants 2. Bargaining power of buyers 3. Bargaining power of suppliers 4. Threat of substitute products 5. Rivalry among competitors |
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Differentiation |
A type of competitive strategy with which the organisation seeks to distinguish its products or services from those of its competitors (flexible, strong coordination, creative flair, rewards employee innovation) |
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Cost Leadership |
The organisation aggressively seeks efficient facilities, cuts costs and employs tight cost controls to be more efficient than competitors (close supervision, finite employee empowerment, frequent detailed control reports) |
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Focus |
Emphasises concentration on a specific regional market or buyer group (values flexibility, customer intimacy, customer loyalty, uses 1 or 2 above) |
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Partnership and cooperation strategies |
- Emphasise on collaboration rather than competition - Range from strategic alliances to organisational combination (mergers) - Joint ventures combine 1 and 2 |
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New trends in strategy |
- Innovation from within - Dynamic capabilities - Strategic partnerships |
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Dynamic capabilities |
Leveraging and developing more from the firm's existing assets, capabilities and core competencies in a way that will provide a sustained competitive advantage |
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Global strategy |
1. Globalisation strategy 2. Export strategy 3. Multinational strategy 4. Transnational strategy |
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Globalisation strategy |
- Treats world as a single global market - Standardises global product/advertising strategies |
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Export strategy |
- Domestically focused - Exports a few domestically produced products to selected countries - Managers have little need to pay attention to issues of local responsiveness or global integration |
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Multinational strategy |
The modification of a product design and advertising strategies to suit the specific needs of individual countries |
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Transnational strategy |
A strategy that combines global coordination to attain efficiency with flexibility to meet specific needs in various countries |
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Strategy execution |
- Leadership - Structural design - Information and control systems - Human resources - Implementing global strategies - Implementation during turbulent times - Testing the quality of strategy |
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Leadership |
The ability to influence people to adopt the new behaviours needed for strategy implementation (persuasion, motivation, culture/values) |
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Structural design |
Pertains to managers' responsibilities, their degree of authority, and the consolidation of facilities, departments, and divisions (organisation charts, teams, centralisation/decentralisation) |
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Information and control systems |
Include reward systems, pay incentives, budgets for allocating resources, information technology systems, and the organisation's rules, policies and procedures |
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Human resouces |
The organisations employees. Recruitment/ selection of employees. Transfers/ promotions / training and layoffs/ recalls |
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Implementing global strategies |
Using the above four strategies |
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Implementation during turbulent times |
- Global mindset - Corporate culture - Information technology |
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Testing the quality of strategy |
1. Does this strategy beat the market 2. Does it tap into our competitive advantage 3. Is the strategy detailed enough about where to compete 4. Is the strategy at the cutting edge of new trends 5. Does the strategy make use of up-to-date info 6. Does the strategy account for uncertainty 7. Does it contain commitment and flexibility 8. Is it unbiased, rational and logical 9. Is there strong commitment to executive strategy 10. Is there an effective action plan |
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Programmed decisions |
A decision made in response to a situation that has occurred often enough to enable decision rules to be developed and applied in the future |
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Non-programmed decisions |
A decision made in response to a situation that is unique, is poorly defined and largely unstructured, and has important consequences for the organisation |
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Classical model: Rational decision making |
- Accomplish known goals. Problems defined. - Strives for conditions of certainty, potential results of all alternatives calculated - Select alternative that will maximise economic return to the organisation -rational and uses logic to assign values, order prefereneces and evaluate alternatives |
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Normative |
An approach that defines how a decision maker should make decisions and provides guidelines for reaching an ideal outcome for the organisation |
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Administrative model |
A decision making model that describes how managers actually make decisions in situations characterised by non-programmed decisions, uncertainty and ambiguity |
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Descriptive |
An approach that describes how managers actually make decisions rather than how they should |
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Bounded rationality |
Th concept that people have the time and cognitive ability to process only a limited amount of information on which to base decisions |
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Satisficing |
To choose the first solution alternative that satisfies minimal decision criteria regardless of whether better solutions are presumed to exist |
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Intuition |
The immediate comprehension of a decision situation based on past experience but without conscious thought |
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Political model |
- Pluralistic, conflicting goals - Condition of uncertainty/ambiguity - Inconsistent viewpoints, ambiguous info - Bargaining and discussion among coalition members |
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Decision making steps |
1. Recognition of decision requirement, 2. Diagnosis and analysis on causes, 3. Development of alternatives, 4. Selection of desired alternative, 5. Implementation of chosen alternative, 6. Evaluation and feedback |
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Innovative group decision making |
- Start with brainstorming - Engage in rigorous debate - Avoid groupthink - Know when to pull the plug |
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Electronic brainstorming |
Brining people together in an interactive group over a computer network to suggest alternatives; sometimes called brain writing |
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Escalating commitment |
Overly supporting a strategy, decision or activity even though rational thought would indicate the contrary |
