Fundamentals of strategy

by (2009)
ISBN-10 1408221195 ISBN-13 9781408221198
132 Flashcards & Notes
1 Students
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Summary - Fundamentals of strategy

  • 1 Introducing Strategy

  • Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations

  • Strategic decisions are likely to 

    • be complex in nature
    • be made in situations of uncertainty
    • affect operational decisions
    • require an integrated approach
    • involve considerable change
  • 3 levels of strategy: corporate, business and operational level

  • corporate strategy

    overall purpose and scope of the organisation, and how value is added to the constituent businesses of the organisational whole

  • business strategy

    how the individual businesses should competer in their particular markets -> competitive strategy

  • operational strategy

    how the component parts of an organisation deliver effectively the strategies in terms of resources, processes and people

  • strategic management

    • organisation-wide, holistic
    • conceptualisation of issues
    • creating new directions
    • developing new resources
    • ambiguous/uncertain
    • long term orientation
  • operational management

    • routinised
    • techniques and actions
    • managing existing resources
    • operating within existing strategy
    • operationally specific
    • day to day issues
  • 3 horizons for strategy

    1. extend and defend core business
    2. build emerging buisinesses
    3. create viable options
  • strategy statements

    three main themes:

    • the fundamental goals (mission, vision objectives) of the organization
    • the scope or domain of the organisation's activities
    • the particular advantages or competitive superiority
  • mission

    the overriding purpose of the organization 

    (what business are we in?)

  • vision (or strategic intent)

     

    desired future state of the organization

    (what do we want to achieve?)

  • objectives

    statements of specific outcomes that are to be achieved (often financial)

  • scope

    domain of the organization's activities

     

    refers to three domains

    • customers
    • geographical location
    • extend of internal acitivities  -> vertical integration
  • advantage

    how the organization will achieve the objectives set regarding its chosen scope

     

    commercial -> competitive advantage

  • exploring strategy includes understanding the trategic position of an organization, assessing strategic choices for the future and managing strategy in action

  • 2 The Environment

    1. Macro -> what broad factors impact almost all firms?
      - PESTEL
      - scenarios
    2. Meso -> what are (changes in) the competitive forces (of your industries)
      - Porter's five forces model
      - industry life cycle
      - comparative industry structure analysis
    3. Micro -> What dominates the inner layer of the business environment?
      - strategic groups
      - market segments
      - blue ocean thinking
  • PESTEL

    • Political
    • Economic
    • Sociocultural
    • Technological
    • Environmental
    • Legal

    what environmental factors are affecting the organisation?

    which of these are the most important at the present time? In the next few years?

     

  • Macro: PESTEL

    • it categorizes societal influences into six main types
    • the focus should be on their future impact
    • the prioritised key drivers of change have differential impact on industries, markets, and companies
    • assumes that the combined impact of some factors will be more important than other factors
  • Macro: Building scenarios

    • identify the (opposing) key drivers
      'the macro-environmental factors that are likely to have a high impact on the success or failure of a strategy'
    • develop scenario 'stories'
      = plausible alternative views of how the business environment might develop in the future, based on the key drivers for change about which there is a high level of uncertainty
    • identify impacts -> firm contingency plans
  • Meso: Static industry structure

    Porter's Five Forces Model on the industry

    • to determine the attractiveness of an industry
    • affects the way individual companies compete
    • influences decisions on product/market strategy

    management questions:

    • which industries should we enter or leave?
    • what influence can we exert on the industry
    • how are competitors differently affected?
  • Threat of Potential entrants (high), inverse to barries to entry (low)

    • scale and experience
    • acces to supply and distribution channels
    • expected retaliation
    • legislation or government action
    • differentiation
  • the power of buyers/suppliers

    • are buyers/suppliers concentrated?
    • what are the costs of switching (by suppliers/buyers)
    • does backward/forward vertical integration exist?
  • Meso: Dynamic industry structure
    The comparative five forces analysis
     

    why?

    • Erosion of competitive advantage
      - Changes in five forces
      - competitors overcoming adverse forces
    • cycles of competitive response
      - when slow: long periods of established pattern of competition -> built imitation barriers
      - when fast: hyper competition, constant disequilibrium and change -> sequence of short-lived moves
  • Micro: to differentiate customers

    Blue Ocean Thinking

    Find new market spaces where competition is minimised -> find strategic gaps

     

  • Strategy canvas compares competitors according to their performance on CSFs, to develop strategies, based on creating new market spaces

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Example questions in this summary

corporate strategy
1
business strategy
1
operational strategy
1
mission
1
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