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36 Cards in this Set
- Front
- Back
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What is the purpose of strategy development? |
To bring a business idea successfully to the market, a strategy must be developed. To reach the goals, a plan of action must be designed - mainly to succeed against (potential) competitors. |
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What is strategy and what is a strategist? |
Strategy: how people decide to organize major resources toenhance performance of an enterprise Strategist: hope that their work will enhance performance byclarifying and unifying purpose, reducing uncertainty, linking short-termactions to long-term goals and providing control |
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What is strategic development? (7 points) |
- Involves adapting the organization to its business environment - affects the entire organization by providing direction - Involves both strategy formation (content) and also strategy implementation (process) - partially planned and partially unplanned - done at several levels: overall corporate strategy, and individual business strategies - involves both conceptual and analytical thought process - fluid and complex. Change creates novel combinations of circumstances requiring unstructured non-repetitive responses. |
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What are the three perspectives on the strategy process? |
1. Planning view 2. Learning View 3. Political View |
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What is the planning view? |
Ansoff, 1965 - Systematic process, following a prescribedsequence of steps and makes extensive use of analytical tools and techniques - The complexity of strategic decision requires anexplicit and formalized approach - Events and facts can be expressed or observedobjectively and people respond rationally to information - Developed during a period of stability, anddesigned for the centralized bureaucracy |
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What is the learning view? |
Mintzberg, 1994 - Emergent or adaptive process which isappropriate for businesses in rapidly changing sector - The essence of the learning view is adaption,reacting to unexpected events, experimenting with new ideas on the ground - Emergent strategies are those that result fromactions taken one by one that converge in time in some sort of consistencypattern
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What is the political view? |
Lindblom, 1959 - Like the learning view, the political view drawson the concept of bounded rationality and satisficing behavior - It is an iterative, incremental process,characterized by restricted analysis and bargaining between the players - It is not a comprehensive, objective process buta limited comparison of options, restricted to those that are politicallyaccepted and possible to implement |
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How to not mix up strategy and planning: |
- Strategy is the vision or the destination - Planning is how you get there (not linear) - Good businesses get distracted but great businesses are always focused on their strategy - First find out where you want to go and then figure out how |
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What levels of strategy exist? |
1. Corporate level 2. Business level 3. Functional level |
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What is strategy at a a corporate level? |
The strategy at corporate level reflects theoverall direction of the organization |
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What directions (a) are there when it comes to strategy development? |
Options = (a) Directions + (b) Method of strategydevelopment (a) Directions = TOWS + Ansoff Matrix + Porter TOWS: SO-, WO-, ST- and WT- strategic options Ansoff: Product or market development or diversification Porter: cost leadership, differentiation and focus (b) Methods = Internal growth, M&A or strategicalliance |
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What is a TOWS-Analysis? |
After a SWOT-Analysis, the output can be used to develop and evaluate strategic alternatives, aiming to select those that make the most if internal strengths and external opportunities. SO: Generate options that use strength to takeadvantage of opportunities WO: Generate options that take advantage ofopportunities by overcoming weaknesses ST: Generate options that use strength to avoidthreats WT: Generate options that minimize weaknesses andavoid threats |
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Explain the Ansoff Matrix (part 1)
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The Ansoff matrix summarizes the possible directions of astrategic development in context of products and markets. Strategy can aim for Growth: expanding the number of products andentering new markets Stability: Remaining within the same products inthe same market/customer segment Renewal: Leaving some markets followed by entryinto others |
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Explain the Ansoff Matrix (part 2) |
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A: Existing markets and products. What are the three options? |
Market penetration: increase the market share, easier in agrowing than in a mature market, could be achieved by reducing price (Ryanair),increasing advertising (GEOX) or improving distribution (Amazon) Consolidation: to protect the company’s share in existingmarket, in growing market through improving efficiency (AMD) and/or service toretain customers (DHL), in declining markets by acquiring other companies(Microsoft-Nokia) or demerger (Daimler-Chrysler) Withdrawal: if unable to match rivals’ abilities(IBM-LENOVO), pulling out of market |
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B: Product / Service development. What options are there? |
Product and Service Development allows a company to retain therelative security of its present markets while altering products or developingnew ones In fashion industry, consumer electronics, financial services continuous change of products meet perceived changes in consumer preferences. Products development is risky and costly |
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C: Market Development. What are the four options? |
New segments: convincing new groups of customers, by age,income, and lifestyle New territories: From local to national or international New uses: e.g. lightweight material developed for use inspacecraft is also used in manufacture for golf clubs With new capabilities: e.g. Internet shopping |
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D: Diversification. What types of diversification are there? |
Horizontal Integration: Developing related or complementaryactivities Vertical Integration: Moving backwards or forwards intoactivities related to the organization’s products or services Unrelated Diversification: Developing into new marketsoutside the present industry |
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What is Horizontal Integration? |
- Acquisition or internal creation of a relatedbusiness - Reasons: to expand internationally, increasecapacity, expand brand equity to new product lines, economies of scale andscope, increased market power - E.g. Facebook buys WhatsApp, Google takes over YouTube |
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What is Vertical Integration? |
- Forward vertical integration: e.g. a mobilephone producer buys electronic stores, can often make more profit by sellingdirectly to consumers than to retailers and saves time (Apple Store, Samsung Store, etc.) - Backward vertical integration: Burger restaurantowns potato farm and ensures constant supply of potatoes |
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Strategy at a Business level. What are Porter's Competitive Strategies? |
Porter developed three generic strategies that a firm can use to develop and maintain competitive advantage |
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What is the Cost Leadership strategy? |
1. Cost Leadership Strategy (e.g. Carrefour,Toyota) - Company uses low price as main competitiveweapon - Typically sell no-frills product and try tominimize cost - Requires economy of scale (producing in largequantities reduces cost of each unit) - Broad target |
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What is the Differentiation Strategy? |
2. Differentiation Strategy (e.g. Miele, Harley) - Company offers product/service that is perceivedas unique or distinctive on a basis other than price - Broad target |
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What is the Focus Strategy? |
3A. Cost Focus (e.g. Aldi) 3B. Differentiation Focus (e.g. Rolls Royce,Umbro) - Company competes by targeting very specific segmentsof the market - Narrow target |
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What is strategy at a Functional Level? |
- Functional level is the level of the operating divisions and departments - strategic issues at this level are related tobusiness processes and value chain - R&D, Marketing, Manufacturing, H&R, Finance: Strategies involve the development and coordination of resourcesthrough which business unit level strategies can be executed efficiently andeffectively |
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What methods (b) are there when it comes to Strategy development? |
Options = (a) Directions + (b) Method of strategy development (a) Directions = TOWS + Ansoff Matrix + PorterTOWS: SO-, WO-, ST- and WT- strategic optionsAnsoff: Product or market development or diversificationPorter: cost leadership, differentiation and focus (b) Methods = Internal growth, M&A or strategic alliance |
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What is internal growth (organic growth) and what are the advantages and disadvantages? |
Exploiting or redeploying relevant resources that thecompany has or can employ, especially when having outstanding products Advantages: - Distributing cost over long period - Development of inimitable competences mainly inhigh technology, being unique in the market - Retaining of traditional corporate culture - Using synergies consequently - Avoidance of political, intercultural problemsand incompatible expectations Disadvantages: - Risk of undesirable strategic development - Long time to develop new products - No external inputs |
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What is a Strategic Alliance? |
External Growth Companies turn to partners to co-operate in developingproducts or services. Both of the parties gain advantages of such a collaboration(pool resources) Motives: - Cost reduction - Improving customer offerings - Co-Specialization - Learning |
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What types of Strategic Alliances are there? |
Joint Venture (Cisalpino: SBB & Italian FS) Networks(One World, Star Alliance) Franchising (Coca Cola, McDonalds) Licensing(Microsoft Software) Subcontracting (ZHAW Cafeteria, Cleaning Companies,temporary employment companies (Adecco, Manpower) Co-Production (Renault –Nissan / Fiat – Chrysler -> joinforces to produce something together, not Joint Venture!) Sponsoring (FIFA,Olympics) |
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What are the advantages and disadvantages of Strategic Alliances? |
Advantages: - Investment risk share with partner - Combining of complementary resources andknow-how - May be a governmental condition for market entry Disadvantages: - Difficulty of identifying appropriate partnerand agreeing on appropriate contractual terms - Loss of competitive advantage through imitation - Limited benefits from the locational advantagesof host nation |
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What are the preconditions for a successful Strategic Alliance? |
- Contractual arrangements to distribute profitand costs, rights and duties, also when the alliance will be disintegratedagain
- Good interpersonal cooperation, compatibilitybetween the partners - Bridging gap between the cultures - Performance expectations/clear goals,organizational rules and structure of leadership - Simple and flexible structures - Senior management support (of partner company)(makes access to new network easier) - Trustworthiness through character (integrity,openness, discretion, calculable, behavior, competent partnership) - Mutual respect |
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What is Mergers & Acquisitions (External Growth) and what are the advantages and disadvantages? |
Expanding own resources and competencies by acquiring, ormerging with another company Advantages: - Rapid entry into new product or market areas - Fast development of market shares - Keeping up with a changing environment - Avoidance of high development costs - Getting know-how from specialized companies Disadvantages: - Failure of mergers due to cultural gaps betweenthe involved companies - Difficulties in integrating two differentcorporate cultures and problem solving - Too high price (goodwill) for the company takenover - Can be used for self-enrichment of top managers |
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What are the success criteria for a strategic option? |
The selected strategic option must be evaluated in regard to: - Suitability within the context - Acceptability of the expected outcome - Feasibility due to existing resources |
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Explain Suitability. |
Suitability is concerned with wether the strategy addresses the circumstances in whichan organization is operating. Does the strategy make sense? Would theorganization obtain economies of scale or scope? - Fitwith future trends and changes - Useof opportunities, minimize risk - Exploitcapability - Meetexpectations of stakeholders |
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Explain Acceptability. |
Concerned with the expected performance outcomesof a strategy. To what extent is the performance outcome of achosen strategy in line with the expectations of the stakeholders? Will theyembrace it? - Return:benefits expected by stakeholders (fin and non fin), shareholders would expectincrease in wealth, employees improvement in careers, customers better valuefor money - Risk:probability and consequences of failure of strategy (fin and non fin) -> what-if-analysis - Stakeholderreactions: shareholders could oppose the issuing of new shares, employees andunions could oppose outsourcing for fear of losing job, customer could haveconcerns over a merger with regards to quality and support -> stakeholder mapping |
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Explain Feasibility. |
Concerned whether an organization has theresources (funding, people, time, information) and competences to deliver astrategy. Can a strategy be made to work in practice? - Financialfeasibility (Cash Flow or break even analysis) - Forecasting - Resourcedeployment |
