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Definition
suggests organisations should think of themselves as comprising three types of business or activity. Managers need to avoid focusing on the short-term issues of their existing activities. Strategy involves pushing out Horizon 1 as far as possible, at the same time as looking to Horizons 2 and 3.
• Horizon 1 businesses are basically the current core activities. Extend and defend core businesses
• Horizon 2 businesses are emerging activities that should provide new sources of profit.
• Horizon 3 possibilities, for which nothing is sure. These are typically risky research and development (R&D) projects, start-up ventures, test-market pilots or similar. |
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Definition
| is concerned with the overall scope of an organisation and how value is added to the constituent businesses of the organisational whole. Issues include geographical scope, diversity of products or services, acquisitions of new businesses, and how resources are allocated between the different elements of the organisation. |
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Definition
| is about how the individual businesses should compete in their particular markets (this is often called ‘competitive strategy’). These might be stand-alone businesses, for instance entrepreneurial start-ups, or ‘business units’ within a larger corporation. Business-level strategy typically concerns issues such as innovation, appropriate scale and response to competitors’ moves. |
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| are concerned with how the components of an organisation deliver effectively the corporate- and business-level strategies in terms of resources, processes and people. Functional decisions need to be linked to business-level strategy. They are vital to successful strategy implementation. This need to link the corporate, business and functional levels underlines the importance of integration in strategy. Each level needs to be aligned with the others. |
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Definition
| refers to multiple layers of environment, internal and external to organisations. All organisations need to take into account the opportunities and threats of their external environments. Resource-based view researchers focus on internal context, looking for the unique characteristics of each organisation. |
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| concerns the content (or nature) of different strategies and their probability of success. Here the focus is on the merits of different strategic options. Strategy and performance researchers started by using economic analysis to understand the success of different types of diversification strategies. |
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| , broadly conceived, examines how strategies are formed and implemented. Research here provides a range of insights to help managers in the practical processes of managing strategy. However, strategy involves people. Finally, strategy-as-practice researchers have recently been using micro-sociological approaches to closely examine the human realities of formal and informal strategy processes. This tradition focuses attention on how people do strategy work, and the importance of having the right tools and skills. From the above, it should be clear that studying strategy involves perspectives and insights from a range of academic disciplines. Issues need to be ‘explored’ from different points of view. |
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| Strategy's three branches |
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Definition
1. Strategy context
2. Strategy content
3. Strategy process |
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1. Strategy as design
2. Strategy as experience
3. Strategy as variety
4. Strategy as discourse |
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| views strategy development as ‘designed’ in the abstract, as an architect might design a building using pens, rulers and paper. Taking a design lens to a strategic problem means valuing hard facts and objectivity. It’s about being systematic, analytical and logical. |
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Definition
| recognises that an organisation’s future strategy is often heavily influenced by its experience and that of its managers. Taken-for-granted assumptions and ways of doing things, embedded in people’s personal experience and in organisational culture, will drive strategy. Strategy is likely to build on rules of thumb, appeals to precedent, standard fixes, biases and routines of key decision-makers. |
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Definition
| lens sees strategy as emergent from within and around organisations as new ideas bubble up through an unpredictable process in response to an uncertain and changing environment. |
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| focuses attention on the ways managers use language to frame strategic problems, make strategy proposals, debate issues and then finally communicate strategic decisions. Strategy discourse becomes a tool for managers to shape ‘objective’ strategic analyses in their favour and to gain influence, power and legitimacy – strategy ‘talk’ matters. None of these lenses is likely to offer a complete view of a strategic situation. The point of the lenses is to encourage the exploration of different perspectives: first from one point of view and then from another |
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Definition
| consists of broad environmental factors that impact to a greater or lesser extent many organisations, industries, and sectors. |
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Definition
| highlights six environmental factors in particular: political, economic, social, technological, ecological, and legal. Organisations need to consider both market and nonmarket aspects of strategy. |
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Definition
| environmental participants (suppliers, customers, and competitors) with whom interactions are primarily economic. Companies compete for resources, revenues, and profits. Key strategies: pricing and innovation. |
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| The nonmarket environment |
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Definition
social, political, legal, and ecological factors, but also economic factors. Key participants are other businesses, non-governmental organisations (NGOs), politicians, government departments, regulators, political activists, campaign groups and the media. Organisations need to build reputation, connections, influence and legitimacy. Key strategies: lobbying, public relations, networking and collaboration.
Nonmarket factors are important for government and organisations reliant on grants or subsidies (schools, hospitals, charities) but also for business organisations. Particularly where the government or regulators are powerful (defence and healthcare); where consumer sensitivities are high (food business); or in societies where political, business and media elites are closely interconnected (typically smaller countries, or countries where the state is powerful) |
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Term
| Two steps in political analysis: |
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Definition
1. identifying the importance of political factors
2. carrying out political risk analysis. |
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Term
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Definition
| In many countries and sectors, the state is often important as a direct economic actor, for instance as a customer, supplier, owner or regulator of businesses. |
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Term
| Exposure to civil society organisations. |
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Definition
| Civil society comprises a whole range of organisations that are liable to raise political issues, including political lobbyists, campaign groups, social media or traditional media. |
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Term
| two variables helpful to identifying the importance of political factors: |
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Definition
1. The role of the state.
2. Exposure to civil society organisations. |
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Term
| The macro dimension of political risk |
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Definition
| risks whole countries. There are ‘rankings of countries’ in terms of macro political risks. Western European countries: rank low meaning changes of government following elections do not bring fundamental change. Middle Eastern countries: rank high meaning changes of government can be sudden and radical. |
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| The micro dimension of political risk |
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Definition
| risk of organisations or sectors within a country. |
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Term
| The internal dimension of political risk: |
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Definition
| factors within the countries (government change or pressure from local campaigning groups). These can be relatively easy to monitor, requiring attention to election dates and opinion polls, for example. |
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Term
| The external political risks: |
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Definition
| the knock-on effects of events occurring outside particular countries’ national boundaries. For example, a fall in oil prices driven by the internal politics of Saudi Arabia is liable to have negative economic and political impacts on other big oilproducing countries such as Russia and Venezuela. On the other hand, oil price falls can produce political benefits in energy-importing countries such as India or Japan. External political risk analysis involves careful analysis of economic, political, and other linkages between countries around the world. |
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| Two key dimensions to political risk analysis: |
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Definition
• The macro–micro dimension
• The internal–external dimension |
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Term
| The Kitchin or ‘stock’ cycle |
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Definition
| last from one cyclical peak to the next. It is driven by the need for firms to build up stocks of raw materials and parts as economies emerge from recessions. The build-up of stocks gives an additional boost to economic growth for a year or so, but the boost fades as firms no longer need to build their stocks. As economic growth slows, firms tend to run down their stocks by buying-in less, which reinforces the downward trend. A Kitchin cycle turning point comes when stocks are totally run down and firms fuel the upturn by building-up stocks again. |
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Term
| The Juglar or ‘investment’ cycle |
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Definition
| is a medium-term cycle. It is driven by surges of investment in capital equipment (plant, machinery,… ). The downturn comes when investments have been made across an economy and firms are able to cut back on further investment until the equipment is worn out. These investment cut-backs drain demand from the economy. The economy only reaches a new turning-point when wear and tear or innovation forces firms to spend again by investing in a new generation of capital equipment. |
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Term
| The Kuznets or ‘infrastructure’ cycle |
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Definition
| It follows the life-spans of infrastructural investments, for example in housing or transport. Triggered by initial surges of infrastructure investment, which then ease off as infrastructural needs are met, perhaps for a decade or so. The cyclical upturn comes when the last generation of infrastructure is worn out or outdated, and a new surge of investment is required. |
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Term
| three principal sub-cycles that make up overall cycles in economic growth |
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Definition
• The Kitchin or ‘stock’ cycle
• The Juglar or ‘investment’ cycle
• The Kuznets or ‘infrastructure’ cycle. |
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Term
| Two impacts of social elements upon organisations: |
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Definition
1. key aspects of the social environment that can shape the specific nature of demand and supply.
2. organisational networks, with implications for innovativeness, power, and effectiveness. |
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Term
| key aspects of the social environment that can shape the specific nature of demand and supply. |
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Definition
• Demographics.
• Distribution. Changes in wealth distribution influence the relative sizes of markets.
• Geography.
• Culture. |
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Term
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Definition
is a community of organisations that interact more frequently with one another than with those outside the field. These organisational fields are partly economic as they include competing organisations within the industry or sector, as well as customers and suppliers in the marketplace.
It also emphasises social interactions with other organisations and actors that exercise an influence on the focal organisation. These can be political organisations (governments and campaign groups), legal entities (regulators), and other social groups (professions and trade unions). Key actors could be influential individuals (politicians). |
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Term
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Definition
| Help with analyzing networks and organisational fields. They are maps of potentially important social (or economic) connections. |
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Term
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Definition
| number of interconnections between members in the network map. Higher effectiveness: more interconnections there are, the better the communication of new ideas between network members. Everybody is talking to each other, and nobody with potentially useful information is isolated. |
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Term
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Definition
| when an organisation connects many network members. Hubs have power because network members rely on them for interconnection with other members. Hubs are innovative because they can collect ideas from the whole network, and they hear about what is going on in one part of the network before most other parts. |
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Term
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Definition
| where an organisation connects otherwise separate groups of organisations, are associated with innovativeness. Brokers’ innovation advantage stems from their ability to link the most valuable information from one group of organisations with the most valuable information from the other group. Because they provide the connection between the two groups, they can exploit this combination of information before anybody else. |
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Term
| Three concepts help to understand effectiveness, power, and innovativeness: |
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Definition
• Network density
• Central hub positions
• Broker positions |
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Term
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Definition
| are organizational fiels where most of network’s members are closely connected (1 or 2 steps away). They give members protection and effectiveness, due to their density. However, outsider organisations will have difficulty penetrating the networks on their own, and will require the help of insiders. |
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Term
| five primary indicators of innovative activity |
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Definition
• Research & development budgets.
• Patenting activity.
• Citation analysis
• New product announcements.
• Media coverage |
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Term
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Definition
| project into the future various product or service demands, identify technology alternatives to meet these demands, select the most promising alternatives and then offer a timeline for their development. Thus, they provide good indicators of future technological developments. |
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Term
| Three Ecological challenges for organisations: |
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Definition
• Direct pollution obligations
• Product stewardship
• Sustainable development |
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Term
| Direct pollution obligations |
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Definition
| involve not just cleaning up ‘at the end of the pipe’ (disposing of waste byproducts safely), but also minimising the production of pollutants in the first place. |
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Term
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Definition
| refers to managing ecological issues through both the organisation’s entire value chain and the whole life cycle of the firm’s products. Involve responsibility for the ecological impact of external suppliers or final end-users and for what happens to products at ‘end of life’. |
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Term
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Definition
| reducing environmental damage and see whether the product or service can be produced indefinitely into the future. - > constraints on the over-exploitation of raw materials + ↗ issues regarding the economic and social well-being of local communities. |
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Term
| Three contextual sources of pressure influencing the importance of ecological criteria to organisations: |
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Definition
• Impact, salience, emotivity
• Organizational field: active regulators or campaign groups, interconnectedness
• Internal organization: leadership’s personal values, managerial systems |
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Term
| Organisational motives for responding to ecological issues: |
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Definition
• Ecological responsibility:
thus the leader values might stimulate ecological initiatives, or routine production systems might reduce pollution.
• Legitimacy,
as reflected in regulatory compliance and a good reputation with consumers.
• Enhanced competitiveness.
For example, minimising waste in production processes for pollution reasons can reduce costs. Green products are attractive in the marketplace and often command a price premium. |
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Term
| institutional environment |
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Definition
| formal and informal ‘rules of the game’. Legal issues are part of this environment. Important to consider formal laws and regulations but also informal norms. Informal rules: patterns of expected (‘normal’) behaviour hard to ignore. Fairly explicit norms about proper respect for the ecological environment. Organisations shouldn’t ignore these norms. |
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Term
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Definition
have implications for the ways in which business and management are done in those environments and the prospects for success, both for insiders and for outsiders. Although every country differs in detail, three varieties of capitalism have been identified:
• Liberal market economies
• Coordinated market economies
• Developmental market economies |
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Term
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Definition
| F&I rules favour competition between companies, aggressive acquisitions of one company and free bargaining between management and labour. Companies tend to raise funds from the financial markets and company ownership is either entrepreneurial or, for older companies, widely dispersed amongst many shareholders. These economies tend to support radical innovation and are receptive to foreign firms. (USA and UK) |
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Term
| Coordinated market economies |
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Definition
| more coordination between companies, supported by industry associations or similar frameworks. There are legal and normative constraints on hostile acquisitions, but various supports for consensual and collective arrangements between management and labour. Companies tend to rely on banks for funding, while family ownership is often common. These economies support innovation over the long run and, because of coordination networks, are less easy for foreign firms to penetrate. (Germany and Japan) |
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Term
| Developmental market economies |
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Definition
| strong roles for the state, which will either own or heavily influence companies that are important for national economic development. Formally or informally, the state will often encourage private-sector firms to coordinate between themselves and with national economic policy-makers. Labour relations may be highly regulated. Banks, often state-owned, will be a key source of funding. Long-term, infrastructural and capital-intensive projects may be favoured, but foreign firms will often be at a disadvantage. (Brazil, China and India) |
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Term
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Definition
| are the environmental factors likely to have a high impact on industries and sectors, and the success or failure of strategies within them. They translate macro-environmental factors to the level of the specific industry or sector. Identifying them helps managers to focus on the PESTEL factors that must be addressed most urgently |
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Term
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Definition
offer plausible alternative views of how the macro-environment might develop in the long term future. They are not strategies in themselves, but alternative possible environments which strategies have to deal with. They are used in conditions of high uncertainty.
However, they differ from alternative futures forecasting: scenario planners usually avoid presenting alternatives in terms of probabilities. They are too far into the future to allow probability calculations. Furthermore, probabilities direct attention to the most likely scenario rather than to the whole range. The point of scenarios is more to learn than to predict. |
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Term
| Five basic steps in scenario development: |
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Definition
• Defining scenario scope
• Identifying the key drivers for change.
• Developing scenario ‘stories’.
• Identifying impacts of alternative scenarios on organisations
• Monitor progress |
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Term
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Definition
| helps identify the most significant key drivers. As well as the size of impact, it underlines two additional criteria for key drivers: uncertainty, in order to make different scenarios worthwhile; and mutual independence, so that the drivers are capable of producing significantly divergent or opposing outcomes. |
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Term
| Porter’s Five Force Framework |
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Definition
| helps to analyse an industry and identify the attractiveness of it in terms of five competitive forces: (i) extent of rivalry between competitors (ii) threat of entry, (ii) threat of substitutes, (iv) power of buyers and (v) power of suppliers. |
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Term
| Five factors who define the extent of rivalry: |
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Definition
• Competitor concentration and balance: where competitors are numerous or of roughly equal size or power
• Industry growth rate
• High fixed costs: industries require high investments in capital equipment or initial research
• High exit barriers
• Low differentiation |
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Term
| 5 important entry barriers are: |
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Definition
• Scale and experience. E.g. high capital investment requirements for entry, experience curve effects
• Access to supply or distribution channels through direct ownership (vertical integration) or/and through customer or supplier loyalty.
• Expected retaliation. Retaliation could take the form of a price war or a marketing blitz.
• Legislation or government action from patent protection, to regulation of markets or/and
through to direct government action.
• Incumbency advantages like access to proprietary technology, raw materials sources and
geographical locations or an established brand identity. |
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Term
| 2 important points to bear in mind about substitutes: |
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Definition
• The price/performance ratio. A substitute is still an effective threat even if more expensive, so long as it offers performance advantages that customers value.
• Extra-industry effects. Substitutes come from outside the incumbents’ industry and should not be confused with competitors’ threats from within the industry. |
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Term
| Buyer power is likely to be high when: |
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Definition
• Concentrated buyers.
If a product/service accounts for a high percentage of total purchases of the buyer their power is also likely to increase as they are more likely to ‘shop around’ to get the best price and therefore ‘squeeze’ suppliers more than they would for more trivial purchases.
• Low switching costs because buyers have a strong negotiating position.
Switching costs are typically low for standardised and undifferentiated products like commodities. They are also likely to be low when the buyers are fully informed about prices and product performance.
• Buyer competition threat.
Backward vertical integration is the act of moving back to sources of supply, and might occur if satisfactory prices or quality from suppliers cannot be obtained
• Low buyer profits and impact on quality. |
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Term
| Supplier power is likely to be high where there are: |
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Definition
• Concentrated suppliers.
Where just a few producers dominate supply, suppliers have more power over buyers.
• High switching costs.
If it is expensive or disruptive to move from one supplier to another, then the buyer becomes relatively dependent and correspondingly weak.
• Supplier competition threat.
Suppliers have increased power where they are able to enter the industry themselves or cut out buyers who are acting as intermediaries. Forward vertical integration means moving up closer to the ultimate customer.
• Differentiated products.
When the products/services are highly differentiated, suppliers will be more powerful. |
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Term
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Definition
| Considered as a ‘sixth force’. An organisation that enhances your business attractiveness to customers or suppliers. On the demand side, if customers value a product or service more when they also have the other organisation’s product there is a complementarity with respect to customers. On the supply side, another organization is a complementor with respect to suppliers if it is more attractive for a supplier to deliver when it also supplies the other organisation. |
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Term
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Definition
| When one customer of a product/service has a positive effect on the value of that product for other customers. They have the potential to make an industry structurally attractive with high barriers to entry, low intensity of rivalry and power over buyers as entrants and rivals can’t compete with other companies’ largest networks and buyers become locked into them |
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Term
| hypercompetitive industries |
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Definition
| Where the frequency, boldness and aggression of competitor interactions accelerate to create a condition of constant disequilibrium and change. Rivals tend to invest heavily in destabilising innovation, expensive marketing initiatives and aggressive price cuts, with negative impacts on profits |
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Term
| two different approaches to understanding change in industry structure: |
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Definition
• Industry Life Cycle
• Comparative industry structure analysis |
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Term
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Definition
| are organisations within the same industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases. |
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Term
| The strategic group concept is useful in at least 3 ways: |
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Definition
• Understanding competition. Managers can focus on their direct competitors within their particular strategic group, rather than the whole industry, as rivalry often is strongest between these. This focus allows for a more specific industry structure analysis.
• Analysis of strategic opportunities. Strategic group maps can identify the most attractive ‘strategic spaces’ within an industry.
• Analysis of mobility barriers. Strategic groups are characterised by ‘mobility barriers’, obstacles to movement from one strategic to another |
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Term
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Definition
| is a group of customers who have similar need that are different from customer needs in other parts of the market. |
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Term
| 2 Issues are particularly important in market segment analysis: |
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Definition
• Variation in customer needs. Customer needs vary for a whole variety of reasons. Being able to serve a highly distinctive segment that other organisations find difficult to service is often the basis for a secure long-term strategy.
• Specialisation. This is sometimes called a ‘niche strategy’. Organisations that have built up most experience in servicing a particular market segment should not only have lower costs in so doing, but also should have built relationship which lay be difficult for others to break down. |
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Term
| Two concepts that help think creatively about the relative positioning of competitors in the environment and finding uncontested market spaces: |
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Definition
| the strategy canvas and ‘Blue Oceans’. |
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Term
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Definition
| compares competitors according to their performance on key success factors in order to establish the extent of differentiation. It captures the current factors of competition of the industry, but also offers ways of challenging these and creatively trying to identify new competitive offerings. |
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Term
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Definition
| are those factors that either are particularly valued by customers (i.e. strategic customers) or provide a significant advantage in terms of cost. |
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Term
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Definition
| are a graphic depiction of how customers perceive competitors’ relative performance across the critical success factors. |
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Term
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Definition
| is the creation of new market space by excelling on established critical success factors on which competitors are performing badly and/or by creating new critical success factors representing previously unrecognised customer wants. |
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Term
| A strategy canvas highlights 3 factors: |
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Definition
• Critical success factors
• Value curves
• Value innovation |
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Term
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Definition
| is a company that competes in ‘Blue Oceans’. |
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Term
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Definition
| are new market spaces where competition is minimised; They are strategic gaps in the marketplace |
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Term
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Definition
| where industries are already well defined and rivalry is intense. |
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Term
| Two critical principles of Blue Ocean thinking |
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Definition
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Term
| resource-based view (RBV) of strategy |
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Definition
| (also called ‘capabilities view’) posits that the competitive advantage and superior performance of an organization are explained by the distinctiveness of its resources and capabilities. |
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Term
| Threshold resources and capabilities |
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Definition
| are those needed for an organization to meet the necessary requirements to compete in a given market and achieve parity with competitors in that market. Without these, the organization could not survive over time. Identifying and managing threshold resources and capabilities raises a significant challenge because threshold levels will change as critical success factors change or through the activities of competitors and new entrants. While threshold resources and capabilities are important, they do not of themselves create competitive advantage or the basis of superior performance. They can be thought of as ‘qualifiers’ to be able to compete at all with competitors |
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Term
| Distinctive resources and capabilities |
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Definition
| are ‘winners’ required to triumph over competitors. Distinctive resources and capabilities are required to achieve competitive advantage. These are dependent on an organization having a distinctiveness or uniqueness that are of value to customers and which competitors find difficult to imitate |
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Term
| V - Valuable resources and capabilities |
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Definition
| are those which create a product or a service that is of value to customers and enables the organisation to respond to environmental opportunities or threats. |
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Term
| There are 3 components to consider with regards to Value of resources and capabilities: |
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Definition
• Taking advantage of opportunities and neutralising threats.
• Value to customers.
• Cost. The product or service needs to be provided at a cost that still allows the organisation to make the returns expected of it. |
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Term
| R- Rare resources and capabilities |
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Definition
| are those possessed uniquely by one organisation or by a few others. |
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Term
| I - inimitable resources and capabilities: |
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Definition
| those that competitors find difficult and costly to imitate or obtain or substitute. 3 factors: Complexity, Causal ambiguity, and Culture and history |
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Term
| two main reasons for complexity of inimitable R&C: |
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Definition
• Internal linkages. There may be linked activities and processes that, together, deliver customer value. This is not only because of the complexity itself but because, very likely, it has developed based on custom and practice built up over years and is specific to the organisation concerned.
• External interconnectedness. Organisations can make it difficult for others to imitate or obtain their bases of competitive advantage by developing activities together with customers or partners such that they become dependent on them. |
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Term
| Causal ambiguity may exist in 2 different forms: |
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Definition
• Characteristic ambiguity.
Where the significance of the characteristic itself is difficult to discern or comprehend, perhaps because it is based on tacit knowledge or rooted in the rganization’s culture.
• Linkage ambiguity.
Where competitors cannot discern which activities and processes are dependent on which others to form linkages that create distinctiveness |
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Term
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Definition
| The origins and history by which capabilities and resources have developed over time |
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Term
| O – organisational support |
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Definition
| Even though an organisation has valuable, rare and inimitable capabilities some of its potential competitive advantage may not be realised if it lacks the organisational arrangements to fully exploit these. |
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Term
| complementary capabilities |
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Definition
| , by themselves, they are often not enough to provide for competitive advantage, but they are useful in the exploitation of other capabilities that can provide for competitive advantage. |
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Term
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Definition
| is organisation-specific, collective intelligence, accumulated through formal systems and people’s shared experience. They can be a basis of competitive advantage. |
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Term
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Definition
| helps to evaluate if, how and to what extent an organisation or company has resources and capabilities that are valuable, rare, inimitable and supported by the organisation. |
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Term
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Definition
| describes the categories of activities within an organisation which, together, create a product or service. It invites the strategist to think of an organisation in terms of sets of activities. It can be used to understand the strategic position of an organisation and analyse resources and capabilities. It identifies 2 main categories: Primary and support activities. |
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Term
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Definition
are directly concerned with the creation or delivery of a product or service
• Inbound logistics are activities concerned with receiving, storing and distributing inputs to the product or service.
• Operations transform these inputs into the final product or service.
• Outbound logistics collect, store and distribute the product or service to customers.
• Marketing and sales provide the means whereby consumers or users are made aware of the product or service and can purchase it.
• Service includes those activities that enhance or maintain the value of a product or service. |
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Term
|
Definition
help to improve the effectiveness or efficiency of primary activities:
• Procurement. Processes that occur in many parts of the organisation for acquiring the resource inputs to primary activities. Can be vitally important in achieving scale advantages.
• Technology development. Technologies may be concerned directly with a product or with processes or with a resource.
• Human resource management. This transcends all primary activities and is concerned with recruiting, managing, training, developing and rewarding people within the organisation.
• Infrastructure. The formal systems of planning, finance, quality control, information management and the structure of an organisation. |
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Term
| The value chain analyse can be used to understand the strategic pasotion of an organization and resources and capabilities in three ways: |
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Definition
• As a generic description of activities.
It can help managers understand if there is a cluster of activities providing benefit to customers located within areas of the value chain.
• In analysing the competitive position of the organisation by using the VRIO analysis for individual value chain activities and functions.
• To analyse the cost and value of activities of an organisation. Involving the following steps:
o Identify sets of value activities.
o Assess the relative importance of activity costs internally.
• Assess the relative importance of activities externally. How does value and the cost of a set of activities compare with the similar activities of competitors?
• Identify where and how can costs be reduced? Questions about the cost structure of the organisation in terms of the strategy being followed (or that needs to be followed in the future). |
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Term
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Definition
| is the set of inter-organisational links and relationships that are necessary to create a product or service. (this is wider). |
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Term
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Definition
| refer to the different levels of profit available at different parts of the value system. Some parts of a value system can be inherently more profitable than others because of the differences in competitive intensity. The strategic question becomes whether it is possible to focus on the areas of greatest profit potential. |
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Term
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Definition
| analyses the variable configuration that makes an organisation and its strategy more or less unique. The starting point is to identify what Porter refers to as ‘higher order strategic themes’. The next step is to identify the clusters of activities that underpin each of these themes and how these do or do not fit together. The result is a picture of the organisation represented in terms of activity systems. |
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Term
| higher order strategic themes |
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Definition
| these are the ways in which the organisation meets the critical success factors determining them in the industry. |
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Term
| When mapping activity systems four points need to be emphasised: |
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Definition
• Relationship to the value chain.
• The importance of linkages and fit.
• Relationship to VRIO.
• Superfluous activities. |
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Term
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Definition
| is used as a means of understanding how an organisation compares with others. The importance of benchmarking is in the impact that these comparisons might have on reviewing resources and capabilities underlying performance. |
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Term
| two approaches to benchmarking: |
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Definition
• Industry/sector benchmarking.
• Best-in-class benchmarking. |
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Term
| Industry/sector benchmarking |
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Definition
| Insights about performance standards can be gleaned by comparing performance against other organisations in the same industry sector or between similar service providers against a set of performance indicators. |
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Term
| Best-in-class benchmarking |
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Definition
| compares an organisation’s performance or capabilities against ‘best-in-class’ performance – from whichever industry – and therefore seeks to overcome some of the above limitations. It may also help challenge managers’ mindsets that acceptable improvements in performance will result from incremental changes in resources or capabilities. |
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Term
| Two potential limitations of benchmarking: |
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Definition
• Surface comparisons.
If benchmarking is limited to comparing outputs, it does not directly identify the reasons for relative performance in terms of underlying resources and capabilities.
• Simply achieving competitive parity.
Benchmarking can help an organisation to develop capabilities and create value in the same way as its competitors and those best-in-class. However, the best performance that can be expected out of this exercise is to achieve a threshold level and competitive parity |
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Term
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Definition
| provides a general summary of the Strengths and Weaknesses explored in an analysis of resources and capabilities and the Opportunities and Threats explored in an analysis of the environment. This analysis can also be useful as a basis for generating strategic options and assessing future courses of action. |
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Term
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Definition
| an organisation’s ability to renew and recreate its resources and capabilities to meet the needs of changing environments. They can help firms sense and seize opportunities and reconfigure ordinary capabilities in changing environments. |
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Term
| Three generic types of dynamic capabilities: |
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Definition
• Sensing.
Sensing implies that organisations must constantly scan, search and explore opportunities across various markets and technologies.
• Seizing.
Once an opportunity is sensed it must be seized and addressed through new products or services, processes, activities, etc.
• Reconfiguring.
To seize an opportunity may require renewal and reconfiguration of organizational capabilities and investments in technologies, manufacturing, markets, etc. |
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Term
| Several approaches to manage resources and capabilities: |
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Definition
• Internal capability development.
- Building and recombining capabilities.
- Leveraging capabilities.
- Stretching capabilities.
• External capability development.
- Ceasing activities.
- Awareness development. |
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Term
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Definition
| individuals or groups that depend on an organisation to fulfil their own goals and on whom, in turn, the organisation depends. They can be owners, employees, customers, suppliers and communities. |
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Term
| Stakeholders groups can be divided into five types |
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Definition
categorized according to the nature of their relationship with the organisation and how they might affect the success or failure of a strategy:
• Economic stakeholders
• Social/political stakeholders
• Technological stakeholders
• Community stakeholders
• Internal stakeholders |
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Term
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Definition
| identifies stakeholder power and attention in order to understand political priorities. |
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Term
| The power/attention matrix : |
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Definition
| The matrix classifies stakeholders in relation to the power they hold and the extent to which they are likely to attend actively to a particular strategic issue. The positions of different stakeholders on the matrix are likely to vary according to each issue: stakeholders may have more power in some domains than others, and will care more about some issues than others. |
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Term
| In assessing the attention that stakeholders are likely to pay, three factors are particularly important: |
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Definition
• Criticality :
Stakeholders will pay more attention to issues that are critical for them. For example, shareholders might not see health and safety at work as critical, but employees very likely will.
• Channels :
Stakeholders will pay more attention where there are good channels of information and communication. Where channels are poor, stakeholders may be unable to pay sufficient attention even to issues they regard as critical.
• Cognitive capacity :
Sometimes stakeholders simply do not have the cognitive capacity to process all the information they have. |
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Term
| Stakeholder mapping can help in three aspects of the coalition-building process: |
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Definition
• Analysing who the key blockers and facilitators of a strategy are likely to be and the appropriate response.
• Repositioning of certain stakeholders is desirable and/or feasible
• Maintaining the level of attention or power of some key stakeholders |
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Term
| four main ownership models and 3 less significant ones : |
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Definition
• Publicly-quoted
• State-owned enterprises
• Entrepreneurial businesses
• Family businesses
- Not-for-profit
- The partnership
- Employee-owned firms |
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Term
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Definition
| is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation. |
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Term
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Definition
| shows the roles and relationships of different groups involved in the governance of an organisation. |
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Term
| The principal-agent model |
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Definition
| helps understanding relationships in governance chains. ‘Principals’ pay ‘agents’ to act on their behalf. Beneficiaries are the ultimate principals and fund trustees and investment managers are their agents. The reporting mechanism between all these entities is liable to be imperfect. The theory assumes that agents will not work diligently for principles unless incentives are carefully and appropriately aligned. However, in large companies, board members and other managers driving strategy are likely to be very remote from the ultimate beneficiaries of the company’s performance. |
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Term
| The governance issues in principal–agent theory arise from three problems: |
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Definition
• Knowledge imbalances.
Agents typically know more than principals about what can and should be done.
• Monitoring limits.
It is very difficult for principals to monitor closely the performance of their agents. This limit is made worse because principals usually have many investments, so their attention is likely to be split several ways.
• Misaligned incentives.
Unless their incentives are closely aligned to principals’ interests, agents are liable to pursue other objectives that reward them better. Principals might introduce bonus schemes in order to incentivise desired performance, but then agents may game the system: for example, they might use their superior knowledge to negotiate bonus targets that are in reality easy to meet. |
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Term
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Definition
• Shareholder model
• Stakholder model |
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Term
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Definition
• prioritize shareholder interests (than employee for example)
• dominant in publicly-quoted companies
• shareholders can vote for the board of directors according to the number of their shares
• shareholders can also exert control indirectly through the trading of shares. |
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Term
| Advantages of the shareholder model |
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Definition
• Higher rates of return:
Managers are not distracted by the interests of other stakeholders, and potentially have more money to invest in the future of the organisation.
• Reduced risk:
Shareholders can diversify their risk by using the stock market to buy shares in many different companies
• Increased innovation and entrepreneurship
• Better decision-making:
the separation of ownership and management makes strategic decisions more objective in relation to the potentially different demands of various owners. |
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Term
| Disadvantages of the shareholder model |
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Definition
• Diluted attention:
Where there are many shareholders, each with small stakes and often with many other investments, the principal–agent problem is exacerbated
• Vulnerable minority shareholders.
• Short-termism :
The need to make profits for shareholders may encourage managers to focus on short-term gains at the expense of long-term projects, such as research and development |
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Term
| Advantages of the stakeholder model |
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Definition
• Long-term horizons :
The predominance of large investors in the stakeholder model reduces the pressure for short-term results as against longer-term performance.
• Less reckless risk-taking :
Employees as stakeholders depend entirely on their particular organisation for income and so may avoid risky projects because they fear losing their jobs. Major shareholders have more to lose, and find it harder to exit in the case of difficulty. Local government bodies may face the loss of major employers in their regions. The stakeholder model therefore discourages excessive risk-taking
• Better management :
Given stakeholders’ concern for the long-term prosperity of the company, there may be a closer level of monitoring of management and greater demands for information from within the firm. |
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Term
| Disadvantages of the stakeholder model |
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Definition
• Weaker decision-making :
Intervention by powerful stakeholders with different interests could lead to confusion, slowing down of decision processes and the loss of management objectivity when critical decisions have to be made.
• Uneconomic investments :
Due to lack of financial pressure from shareholders, longterm investments may also be made in projects where the returns may be below market expectations.
• Reduced innovation and entrepreneurship :
Because investors fear conflicts with the interests of other stakeholders, and because selling shares may be harder, they are less likely to provide capital for risky new opportunities. |
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Term
| Corporate social responsibility (CSR) |
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Definition
| the commitment by organisations to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large. |
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Term
| Different corporate responsibility stances |
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Definition
• Laissez-faire
• Enlightend self-interest
• Forum for stakeholder interaction
• Shaper of society |
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Term
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Definition
| argues that the only responsibility of business is to make proft and provide for the interest of shareholders. It is for governments to prescribe restraints which society chooses to impose on businesses in their pusuit of economic efficiency. Minimum obligations are met. |
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Term
| Enlightened self-interest |
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Definition
| is tempered with recognition of the long-term financial benefit to the shareholder of well-managed relationships with other stakeholders. Social action makes good business sense. Communication with stakeholder groups is more interactive than for the laissez-faire-type organisations. |
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Term
| A forum for stakeholder interaction |
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Definition
| incoporates multiple stakeholder interests and expectations rather than just shareholders as influences on organisation purposes and strategies. Performance should be measured in a more pluralistic way than just through financial bottom line. Companies of this category might retain uneconomic units to preserve jobs, avoid manufacturing or selling 'anti-social' products and be prepared to bear reductions in profitability for the social good. Structures may be set up for monitioring social performance across its global operations. Such companies take longer over development of new strategies as they are committed to wide consultation with stakeholders and managing conflict between stakeholder expectations. |
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Term
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Definition
| regard financial considerations of secondary importance or a constraint. They are activists, seeking to change society and social norms, and such firms may have been founded for this exact purpose. The viability of this stance depends upon issues of regulation, corporate governance and accountability. This is better achieved by privately owned organisations, which are not accountable to external to external shareholders. However, public services have achieved to transform the quality of life for millions of people because they were mission-driven and supported by a political framework. Such organisations have to improve the interests of particular groups in society but also need to remain financially viable. |
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Term
| A strategic business unit (SBU) |
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Definition
| supplies goods or services for a distinct domain of activity. SBUs refer to the distinct businesses within a large diversified corporation (they are also called ‘divisions’ or ‘profit centres’). Each SBU will have responsibility for its own business strategy. |
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Term
| The SBU concept has three effects within large organizations: |
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Definition
(1) SBUs decentralize initiative to smaller units within the corporation as a whole.
(2) SBUs allow large corporations to vary their business strategies according to the different needs of the various external markets they serve.
(3) SBUs encourage accountability (managers can be held responsible for the success or failure of a business strategy they have determined). |
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Term
| There are two basic criteria that can help in identifying appropriate SBUs: |
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Definition
• Market-based criteria.
Different parts of an organization might be regarded as the same SBU if they are targeting the same customer types, through the same sorts of channels and facing similar competitors.
• Capabilities-based criteria.
Parts of an organization should only be regarded as the same SBU if they have similar strategic capabilities (e.g. internet services are operated as distinct SBUs) |
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Term
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Definition
| is concerned with how a strategic business unit achieves competitive advantage in its domain of activity. |
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Term
|
Definition
| is about how an SBU creates value for its users both greater than the costs of supplying them and superior to that of rival SBUs. To be competitive, SBUs must ensure that customers or funders see sufficient value that they are prepared to pay more than the costs of supply. To have an advantage, the SBU must be able to create greater value than competitors. |
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Term
| According to Michael Porter, there are two fundamental means of achieving competitive advantage: |
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Definition
• An SBU can have lower costs than its competitors.
• An SBU can have products or services that are differentiates from competitors. So they are exceptionally valuable to customers that it can charge higher prices than competitors. |
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Term
| Porter defines three generic strategies: |
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Definition
| cost-leadership strategy, differentiation, focus strategy |
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Term
|
Definition
| Involves becoming the lowest-cost organisation in a domain or activity. |
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Term
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Definition
| They refer to how increasing scale usually reduces the average costs of operation over a particular time period. Economies of scale are important wherever there are high fixed costs. Fixed costs are those necessary for a level of out- put, and economies of scale come from spreading those fixed costs over high levels of output. Economies of scale in purchasing can also reduce input costs. Diseconomies of scale are also possible. |
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Term
|
Definition
| implies that the cumulative experience gained by an organisation with each unit of output leads to re- ductions in unit costs. There is no time limit: the more experience a company has in an activity, the more efficient it gets at doing it. However, entry timing into a market is important because early entrants will have experience that late entrants do not have (advantage). Also, gaining and holding market shares allows companies to have more ‘cumulative experience’ because of greater volumes. Finally, improvements normally continue over time and opportunities for cost reduction are theoretically endless. |
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Term
| There are 4 key cost drivers that can help deliver cost leadership: |
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Definition
• Input costs.
• Economies of scale.
• Experience.
• Product/process design |
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Term
| There are two types of efficiencies within cost-leadership strategy: |
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Definition
• Gains in labour productivity (staff learn to do things more cheaply over time, which is demonstrated through the learning curve)
• Costs are saved through more efficient designs or equipment as experience shows what works best. |
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Term
| Porter underlines two tough requirements for cost-based strategies: |
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Definition
• Competitors with higher costs than the cost-leader are always at risk of being undercut on price. Having cost leadership allows the company to avoid competitive disadvantage.
• Low cost should not be pursued in total disregard for quality. Products by cost-leader have to be able to meet market standards. |
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Term
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Definition
| which allows the cost-leader to charge the same prices as the average competitor in the marketplace. The cost advantage will be wholly translated into extra profit. |
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Term
| Proximity to competitors in terms of features |
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Definition
| Where a competitor is sufficiently close to competitors in terms of product or service features, customers may only require small cuts in prices to compensate for the slightly lower quality. |
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Term
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Definition
| involves uniqueness along some dimension that is sufficiently valued by customers to allow a price premium. Where there are many alternative dimensions that are valued by customers, it is possible to have many different types of differentiation strategy in a market. Managers can identify potential for differentiation by using perceptual mapping of their products or services against those of competitors. However, the attributes on which to differentiate need to be chosen carefully. |
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Term
| Differentiation strategies consider drivers : |
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Definition
• Product and services attributes:
some products or services attributes can provide better or unique features for the customer. Possibilities of product differentiation are endless and only limited by the creativity of an organization. So the company must identify the customer on whose needs the differentiation is based. But it is not always straightforward.
• Customer relationships:
relation between the organization providing the product/service and its customers. How the product/service is perceived by customers. Ex: distribution service, payment service, SAV,…
• Complements:
linkages to other products or services.
• Attention:
Differentiation allows higher prices but usually this comes at a cost. It can create additional investments for instance for R&D, staff, quality, … |
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Term
|
Definition
| targets a narrow segment or domain of activity and tailors its products or services to the needs of that specific segment to the exclusion of others. |
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Term
|
Definition
| identify areas where broader cost-based strategies fail because of the added costs of trying to satisfy a wide range of needs. |
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Term
|
Definition
| look for specific needs that broader differentiators do not serve so well. Focus on one particular need helps build specialist knowledge and technology, increases commitment to service and can improve brand recognition and customer loyalty. |
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Term
| Successful focus strategies depend on at least one of three key factors: |
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Definition
• Distinct segment needs.
If segment distinctiveness erodes, it becomes harder to defend the segment against broader competitors.
• Distinct segment value chains.
Distinctive value chains that are difficult or costly for rivals to construct strengthen focus strategies (e.g. with similar production processes and distribution channels, it is possible to push specialised products through standard- ised value chain at lower costs).
• Viable segment economies.
Segments can easily become too small to serve economically as demand or supply conditions change. |
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Term
| circumstances in which strategies (Porters) can be combined: |
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Definition
• Organisational separation.
A company can create different SBUs pursuing different generic strategies with different cost structures. The challenge is to prevent negative spill-overs (consequences) from one SBU to another.
• Technological or managerial innovation.
Technological innovations can allow radical improvements in both costs and quality.
• Competitive failures.
When competitors are also stuck in the middle, there is less competitive pressure to remove competitive disadvantage. |
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Term
| Strategy clock has two distinctive features: |
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Definition
(1) It is more market-focused than generic strategies (focus on price to consumers)
(2) The circular design of the clock allows for more continuous choices (full range of incre- mental adjustments that can be made between the 7 o’clock position and the 2 o’clock position. |
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Term
| The differentiation zone (Bowman) |
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Definition
| This zone contains a range of feasible strategies for building on high perceptions of product or service benefits amongst customers. Differentiation without price premium (close to 12) combines high perceived benefits and moderate prices to gain market shares. Once the market share gained, it might be logical to move to differentiation with price premium (close to 1 or 2). |
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Term
| The low-price zone. (Bowman) |
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Definition
| This zone allows for different combinations of low- prices and low perceived value. A standard low price strategy (close to 9) would gain market share by combining low prices with reasonable value. The no frills strategy (close to 7) involves both low benefits and low prices. |
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Term
| The hybrid strategy zone (Bowman) |
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Definition
| There are possibilities for low-price and differentiation strategies. Hybrid strategies are often used to make aggressive bids for increased market- share. They can also be an effective way of entering a new market. _x000B_The dynamic clock provides a more dynamic view on strategy than Porter’s generic strategies. Instead of being fixed on one strategy, organisations can move around the clock. |
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Term
| Non-competitive strategies (Bowman) |
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Definition
| unfeasible economics with low benefits and hig prices. Combinations rejected. |
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Term
|
Definition
provides another way of approaching the generic strategies. It identifies three zones of feasible strategies and one zone likely to lead to ultimate failure:
• The differentiation zone.
• The low-price zone.
• The hybrid strategy zone.
• Non-competitive strategies |
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Term
|
Definition
| Interact with other competitors. Addresses the option of cooperation and closes with game theory, which helps managers choose between competition and more cooperative strategies. |
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Term
| When a high-cost company is facing a low-price competitor, there are three key decisions: |
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Definition
• Threat assessment.
If the threat is substantial, the first response by the high-cost organization should not be to try to match prices, because it is likely to lose a price war.
• Differentiation response.
If there are enough customers who value them, the high-cost organisation can seek out new points of differentiation. If this does not suffice, more radical cost solutions should be sought.
• Cost response.
Merger with other high-cost organisations may help reduce costs and match prices through economies of scale. The high-cost organisation can aggressively counter-attack the low-cost business on cost base if it is synergistic with the high-cost company. In case of no synergy or possible further differentiation, the high-cost company has come to an end |
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Term
|
Definition
| describes markets with continuous disequilibrium and change, where it may no longer be possible to play for sustainable positions of competitive advantage without slowing down response. |
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Term
| There are 4 key principles for successful competitive interaction in hypercompetition: |
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Definition
• Cannibalise bases of success.
• Series of small moves rather than big moves.
• Be unpredictable.
• Mislead the competition. |
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Term
|
Definition
| companies agree on a certain strategy without explicit communication between them |
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Term
|
Definition
| encourages an organisation to consider competitors’ likely moves and the implications of these moves for its own strategy. They are alert to 2 kinds of interaction: a competitor response to a strategic move might change the original assumptions behind that move, and the strategic signals their moves might convey to competitors. They usually advise a more cooperative approach than head-to-head competition. The theory is relevant where competitors are independent, meaning that the outcome of choices made by one competitor is dependent on the choices made by other competitors. |
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Term
| Two guiding principles arise from interdependence: (game theory) |
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Definition
1) Get in the mind of competitors. Strategists need to take a view about what competitors are likely to do and choose their own strategy in this light.
2) Think forwards and reason backwards. Strategists should choose their competitive moves on the basis of understanding the likely responses of competitors. |
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Term
| In order to go from lose-lose competition to win-win cooperation, there are 4 principles that can help: |
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Definition
• Ensure repetition.
The prisoner’s dilemma assumes just one interaction, but cooperation is easier if both players know they will most likely be making similar interdependent decisions over time.
• Signaling.
Strategic moves are signals to competitors, and strategists need to be aware of these messages sent by competitors’ moves.
• Deterrence.
Signaling can clearly be about deterring unwanted strategic moves by competitors. Interdependent competitors have to demonstrate that the costs of an unwanted move will be very high. Two forms of deterrent would be maintaining extra capacity that could be used to flood the market, or holding a minor position in a competitor’s key market that could easily be expanded.
• Commitment.
Signaling commitment is also important: if a company invests heavily in brand development or in building a portfolio of patents, competitors will know that it is highly committed and be less likely to attack head-on. |
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Term
|
Definition
describes a value proposition for customers and other participants, an arrangement of activities that produces this value, and associated revenue and cost structures.
The new models often involve more complex interrelationships than traditional models and create value for participants besides the customer and generate profits for more parties than the seller. |
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Term
|
Definition
| is concerned with how far an organisation should be diversified in terms of products and markets. |
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Term
| To increase the scope, we have: |
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Definition
• Vertical integration : the organisation acts as an internal supplier/customer for itself
• Outsourcing: subcontracting an internal activity to an external supplier. |
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Term
|
Definition
| help to make choices about which businesses to invest and which to divest |
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Term
| Ansoff’s product/market growth matrix |
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Definition
| is a classic corporate framework for generating fous basic directions for organizational growth. This matrix provides the directions for corporate strategy. An organisation typically starts with the market penetration. According to Ansoff, the company has the choice to penetrate further or increase its diversity (market development or product development). |
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Term
|
Definition
| involves increasing the range of products or markets served by an organisation. |
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Term
|
Definition
| involves diversifying into products or services with relationships to the existing business. The related diversification involves product development (developing new products & services for its existing markets) or market development (bringing its existing products into new markets). |
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Term
| Conglomerate (unrelated) diversification |
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Definition
| involves diversifying into products or services with no relationships to the existing businesses. It’s applying a market + product development! |
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Term
|
Definition
| concentrate on the most valuable segment, withdrawal from marginal activities. |
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Term
|
Definition
| implies increasing share of current markets with the current product range. The organisation will use its existing capabilities. The most obvious strategic option is often increased penetration of its existing market, with existing products. |
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Term
| Advantages of market penetration: |
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Definition
• Increased power vis-à-vis buyers and suppliers
• Greater economies of scales
• Experience curve benefits |
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Term
| Constraints of market penetration: |
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Definition
• Retaliation from competitors:
the competitors defend the shares, so increase rivalry (price or marketing wars). The danger is greater in low-growth market (any gain of volume will decrease competitors ‘market shares). Hence, companies should use strategic capabilities that give a competitive advantage.
• Legal constraints:
Most countries have regulators concerning excessive market power (prevent mergers and acquisition). The European Commission can intervene.
• During a downturn or public-sector funding crisis, market penetration is not an option. Organisations should choose the retrenchment strategy |
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Term
| Product development is expensive and high risk for 2 reasons: |
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Definition
• New resources and capabilities:
new processes that are unfamiliar with the _x000B_organisation are developed. Success is linked to marketing and information technology. High investments + high risk of project failure
• Project management risk:
Risk of delays and increased costs due to project complexity and changing project specifications over time. |
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Term
|
Definition
| If product development is too risk or too expensive, This is an alternative. It involves offering existing products to new markets and the degree of diversification varies (it often includes product development as well). It’s essential that market development strategies be based on products or services that meet the critical success factors of the new market. Usually, market developers often lack the right marketing skills and brands in a market with unfamiliar customers. |
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Term
| Two forms of market development: |
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Definition
1) New users
2) New geographies (eg: internationalisation)
Challenge: coordinating different users and geographies that have different needs. |
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Term
| the conglomerate discount’ |
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Definition
| a lower valuation than the combined individual constituent businesses would have on their own |
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Term
|
Definition
| It refers to efficiency gains through applying the organisation’s existing resources or competences to new markets and services. In other words, there are economies to be gained by extending the scope of the organisation’s activities. Economies of scope may apply to both tangible resources and intangible resources (brands, staff skills). |
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Term
|
Definition
| . is the set of corporatelevel managerial competences applied across the portfolio of businesses. |
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Term
| The drivers for diversification are: |
|
Definition
1) Exploiting economies of scope
2) Stretching corporate management competences (dominant logics)
3) Exploiting superior internal processes
4) Increasing market power |
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|
Term
| Some drivers for diversification involve negative synergies (= value destruction): |
|
Definition
1) Responding to market decline:
rather than let the managers of a declining business invest spare funds in a new business, shareholders find new growth investment opportunities. Their new investments are not a good driver for diversification!
2) Spreading risk across a range of markets:
Shareholders spread their risk by taking small stakes of different companies but diversification strategies are likely to involve a limited range of fairly related markets (this is not applied for small businesses: it makes sense to diversify risk so that if one part is in trouble, the whole business is not pulled down).
3) Managerial ambition can sometimes drive inappropriate diversification. Growth and diversification gave managers short-term benefits (bonuses and prestige) but lead to financial disaster. |
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Term
|
Definition
| refers to development into activities concerned with the inputs into the company’s current business (eg: car manufacturer acquires a component supplier) |
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Term
|
Definition
| refers to development into activities concerned with the outputs of a company’s current business (eg: car manufacturer integrates retail and servicing). |
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Term
| Value-adding Corporate parent activities: |
|
Definition
• Envisioning:
Corporate parent needs to provide a clear overall vision or strategic intent for its business units. This should guide and motivate business unit managers to maximize corporation -wide performance through commitment to a common purpose. It must also provide a clear external image about what the organization as a whom is about to reassure stakeholders.
• Facilitating synergies:
the corporate parent can facilitate cooperation and sharing across business units so improving synergies from being within the same corporate organization. This can be achieved through incentives, rewards and remunerations schemes.
• Coaching:
Corporate parent can help business unit managers develop strategic capabilities by coaching them + improve the synergies by improving cooperation.
• Providing central services and resources:
Corporate parent is a provider for investment, treasury, HR, tax... All those things provide a sufficient scale if they are centralised and have greater leverage (eg: combining purchases of different business units increases the bargaining power). It can also be helpful in brokering with external bodies such as government. Finally, it brings overall management knowledge and can transfer managers from one unit to the other.
• Intervening:
Corporate parent can intervene within the business units in order to ensure a good performance (monitors, improves performance and challenge/develop strategic ambitions). |
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Term
| Value-destroying Corporate parent activities: |
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Definition
• Adding management costs
• Adding bureaucratic complexity
• Obscuring financial performance |
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Term
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Definition
• Portfolio manager:
Small corporate office and downward, intervening and investing emphasis
• Synergy manager:
Medium corporate office and cooperation emphasis
• Parental developer:
Large corporate office and downward, parental capabilities emphasis. |
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Term
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Definition
| operates as an active investor in a way that shareholders in the stock market are either too dispersed or too inexpert to be able to do. Its role is to identify and acquire under-valued assets or businesses and improve them. They seek to keep the costs of the center low, give autonomy to chief executives but set clear financial targets. Improving financial markets mean that the scope for finding and investing cheaply in underperforming companies is much reduced. |
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Term
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Definition
| is a corporate parent seeking to enhance value for business units by managing synergies across business units. Synergies are rich in the case of related diversification. They want to build a common purpose, facilitate cooperation between business units and provide central services and resources. |
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Term
| 3 challenges of the synergy manager: |
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Definition
• excessive costs (direct financial costs and opportunity costs),
• over-coming selfinterest (to be unwilling to sacrifice their time and resources for the common good)
• illusory synergies (easy to overestimate the value of skills ore resources to other businesses, managers do not succeed to put synergies into practice).There have been a lot of failures and the notion of synergy has led to a growing scepticism. |
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Term
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Definition
| seeks to employ its own central capabilities to add value to its businesses. They focus on the resources or capabilities which they can transfer downwards to enhance the potential of business units. Hence, they need to identify a parenting opportunity (= business which is not fulfilling its potential and which could be improved by applying the parenting capability). |
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Term
| Two challenges of the parental developer: |
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Definition
• Parental focus: They need to be rigorous and focused in identifying their unique value-adding capabilities.
• The “crown jewel” problem: Companies can have business units that perform well but to which the parent adds little value and is attached to them ( as a crown). Those businesses should be divested. |
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Term
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Definition
| uses market share and market growth criteria for determining the attractiveness and balance of a business portfolio. If there is a high growth, the company will need heavy investments. |
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Term
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Definition
| is a business unit within a portfolio which has a high market share in a growing market. They spend a lot of money to keep up growth but, at the same time, high market shares bring a lot of profit. |
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Term
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Definition
| is a business unit within a portfolio that is in a growing market, but does not yet have high market share. It needs a high investment to become star. |
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Term
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Definition
| is a business unit within a portfolio that has a high market share in a mature market. It needs less investment because the growth is low. It should be a cash provider, helping to fund investments. |
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Term
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Definition
| are business units within a portfolio that have low share in static or declining markets. They should be divested or closed. |
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Term
| Advantages of the BCG-matrix : |
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Definition
• Good way of visualizing different needs and potentials of all the diverse businesses within the corporate portfolio.
• It warns corporate parents of the financial demands of what might otherwise look like a desirable portfolio of high-growth businesses.
• Reminds corporate parents that stars are likely eventually to wane.
• Provides useful discipline to business unit managers, underlining the fact that the corporate parent ultimately owns the surplus resources they generate and can allocate them according to what is best for the corporate whole. |
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Term
| Disadvantages of the BCG-matrix: |
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Definition
• Definitional vagueness: hard to decide what high and low growth or share mean in particular situations.
• Capital market assumptions: It’s assumed that the capital cannot be raised in external markets.
• Unkind to animals: Cash cows are milked and dogs are cast. Both impact the motivation of managers. If a dog can be closed, it implies there is no link with other business units whose performance depend in part on keeping the dog alive.
• Ignore commercial linkages: the matrix assumes there are no commercial ties to other business units in the portfolio. |
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Term
| The directional policy matrix |
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Definition
| categorizes business units into those with good prospects and those with less good prospects. It positions business units according to a) the attractiveness of the market and b) the competitive strength of the SBU in that market. It also offers strategy guidelines given the positioning of the business units. |
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Term
| Advantages of the directional policy matrix : |
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Definition
| less mechanistic than the BCG matrix: encourages debate + two axes are not based on single measures (there are several ways to calculate the attractiveness and the strengths of a market). |
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Term
| Disadvantages of the directional policy matrix: |
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Definition
| vagueness, problem with motivation of managers, market assumptions,… |
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Term
|
Definition
| introduces parental fit as an important criterion for including businesses in the portfolio. If the parent doesn’t add value, it shouldn’t be included in the portfolio. It’s a very relevant analysis for the public-sector. |
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Term
| There are two key dimensions of the Parenting mix: |
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Definition
1) Feel : measures the fit between each business unit’s critical success factors and the capabilities(competences and resources) of the corporate parent.
2) Benefit: measures the fit between the parenting opportunities and the capabilities of the parent. |
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Term
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Definition
| the parents understand them well and can continue to add value. They should be at the core of future strategy. |
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Term
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Definition
| The parents understand them well but can do little for. If not divested, they should be spared as much corporate bureaucracy. |
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Term
| Value-trap business units |
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Definition
| are dangerous. They seem attractive because there are opportunities to add value but there is a lack of feel from the parent (parent need more capabilities to add value correctly to that kind of business) |
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Term
|
Definition
| units are clear misfits (little opportunities + not understood by parents). EXIT |
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Term
| There are four kind of business along these two dimensions of feel and benefit within the Parenting mix: |
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Definition
• Heartland business units
• Ballast business units
• Value-trap business units
• Alien business |
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Term
| Mergers, acquisitions and alliances |
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Definition
| are all common methods for achieving growth strategies and often in the news. They are big business with major implications for the strategic development of the companies. They are key methods for pursuing strategic options. Diversification, internationalisation and innovation can all be achieved through mergers and acquisitions, alliances and organic development. These three methods can also be used for other strategies |
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Term
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Definition
| is where a strategy is pursued by building on, and developing, an organisation’s own capabilities. |
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Term
| There are five principal advantages to relying on organic development: |
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Definition
• Knowledge and learning.
• Spreading investment over time.
• No availability constraints.
• Strategic independence
• Culture management. |
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Term
| Corporate entrepreneurship |
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Definition
| refers to radical change in the organisation’s business, driven principally by the organisation’s own capabilities. |
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Term
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Definition
| is achieved by purchasing a majority of shares in a target company. An acquirer takes control of another company through share purchase. |
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Term
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Definition
| is the combination of two previously separate organisations in order to form a new company. Merger partners are often of similar size, with expectations of broadly equal status, unlike an acquisition where the acquirer generally dominates. |
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Term
| Strategic motives for M&A |
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Definition
Involve improving the competitive advantage of the organisation. They are related to the reasons for diversification in general.
• Extension. To extend the reach of a firm in terms of geography, products or markets.
• Consolidation. To consolidate the competitors in an industry.
• Capabilities. Instead of researching a new technology from scratch, they allow entrepreneurial start-ups to prove the idea, and then take over these companies in order to incorporate the technological capability within their own portfolio. Capabilities-driven acquisitions are often useful where industries are converging. |
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Term
| Bringing together two competitors can have three beneficial effects: |
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Definition
• It increases market power by reducing competition and enable the newly consolidated company to raise prices.
• It increases efficiency through reducing surplus capacity or sharing resources.
• It increases production efficiency or increase bargaining power with suppliers, forcing them to reduce their prices. |
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Term
| Financial motives for M&A |
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Definition
Concerns optimal use of financial resources, rather than directly improving the actual business.
• Financial efficiency.
An acquirer with a strong balance sheet (i.e. has plenty of cash) may help improve a highly indebted target company (i.e. a weak balance sheet). The target can pay off its debt and get investment funds by using the acquirer’s assets.
• Tax efficiency.
Tax advantages. For example, profits or tax losses may be transferable within the organisation to benefit from different tax regimes between industries or countries. Naturally, there are legal restrictions on this strategy and governments may also adjust their tax rates later on.
• Asset stripping or unbundling.
Spotting other companies whose underlying assets are worth more than the price of the company as a whole. Æ buy such companies and then rapidly sell off (‘unbundle’) different business units to various buyers for a total price in excess of what was originally paid. opportunistic profiteering (‘asset stripping’), if the business units find better corporate parents through this unbundling process, there can be a real gain in economic effectiveness |
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Term
| Managerial motives for M&A |
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Definition
Sometimes serve managers’ more than shareholders’ interests. These motives are therefore self-serving rather than efficiency-driven.
• Personal ambition.
• Bandwagon effects. |
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Term
| Three kinds of pressure on senior managers to join the acquisition bandwagon: |
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Definition
• When many other firms are making acquisitions, financial analysts and media may criticize managers for undue conservatism.
• Shareholders will fear that their company is being left behind.
• Managers may worry that if their company is not acquiring, it’ll become the target of a hostile bid itself. |
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Term
| Three 3 ways to satisfy the managers’ personal ambition: |
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Definition
• Senior managers’ personal financial incentives may be tied to short-term growth targets or share-price targets (more easily achieved by large acquisitions).
• Large acquisitions attract media, so interview and appearances in turn boost personal reputations
• Acquisitions provide opportunities to give friends and colleagues greater responsibility, helping to cement personal loyalty by developing individuals’ careers. |
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Term
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Definition
| The extent to which the target firm strengthens or complements the acquiring firm’s strategy. It relates to the original strategic motives for the acquisition (extension, consolidation and capabilities). |
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Term
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Definition
| The match between the management practices, cultural practices and staff of characteristics between the target and the acquiring firms. International acquisitions are particularly liable to organisational misfits, because of cultural and language differences. |
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Term
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Definition
| additional amount an acquirer has to pay to win control compared to the ordinary valuation of the target’s shares as an independent company. |
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Term
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Definition
| high level of strategic interdependence is necessary + little need for organisational autonomy. It requires rapid adjustment of the acquired company’s old strategies and structures to the needs of the new owner. - > to appoint a new top manager in order to manage the organisation differently. |
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Term
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Definition
| acquired company is well run but not very compatible with the acquirer. High need for autonomy and low need for integration. It depends on allowing old strategies, cultures and systems to continue in the acquired company much as before. - > to retain the incumbent top manager. |
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Term
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Definition
| Strong need for strategic interdependence. Need for high autonomy. It implies that both acquired firm and acquiring firm learn the best qualities from the other. It takes time - > to retain the incumbent top manager in the early stages to stabilise the acquisition before bringing in a new top manager to make far-reaching changes. |
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Term
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Definition
| little to be gained by integration. When the acquired company is in poor financial health. The acquirer will not integrate the company into its own business to avoid contamination but will impose short-term targets and strategies to solve its problems. The incumbent top manager will be replaced. |
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Term
| Reorientation acquisitions (M&A) |
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Definition
| the acquired company is in good health and well run. Need to integrate central administrative areas and align marketing and sales functions. Distinctive resources of the acquired company though are left alone and there are few changes to internal operations. - > a new top manager is generally brought in to run the acquired company. |
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Term
| Five integration approaches which have important implications for the length of integration period and choice of top management for the acquired company: |
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Definition
• Absorption
• Preservation
• Symbiosis
• Intensive care
• Reorientation acquisitions |
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Term
|
Definition
| is where two or more organisations share resources and activities to pursue a common strategy. |
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Term
|
Definition
| is about how the whole network of alliances, of which an organisation is a member, competes against rival networks of alliances. |
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Term
|
Definition
| is about managing alliances better than competitors. |
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Term
|
Definition
| involve the creation of a new entity that is owned separately by the partners involved. The most common form of equity alliance is the joint venture, where two organisations remain independent but set up a new organisation jointly owned by the parents. |
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Term
|
Definition
| are typically looser, without the commitment implied by ownership. Non-equity alliances are often based on contracts. One common form of contractual alliance is franchising, where one organisation (the franchisor) gives another organisation (the franchisee) the right to sell the franchisor’s products or services in a particular location in return for a fee or royalty |
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Term
| In terms of ownership, there are two main kinds of strategic alliance: |
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Definition
• Equity alliances
• Non-equity alliances |
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Term
|
Definition
| To achieve necessary scale. Together they can achieve advantages that they could not easily manage on their own. - > provide economies of scale in the production of outputs or in terms of inputs. To share risk as well. |
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Term
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Definition
| To access the capabilities of another organisation that are required in order to produce or sell its products and services. Access can be about tangible resources (distribution channels or products) as well as intangible resources (knowledge and social/political connections). |
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Term
|
Definition
| Form of access alliance. Involve organisations at similar points in the value network combining their distinctive resources so that they bolster each partner’s particular gaps or weaknesses. By partnering, the two organisations can bring together complementary strengths in order to overcome their individual weaknesses. |
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Term
|
Definition
| To increase their market power. By combining together into cartels, they reduce competition in the marketplace, enabling them to extract higher prices from their customers or lower prices from suppliers. Such collusive cartels amongst for-profit businesses are generally illegal, so there is no public agreement between them and regulators will act to discourage this activity. |
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Term
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Definition
• Scale alliances.
• Access alliances.
• Complementary alliances.
• Collusive alliances. |
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Term
|
Definition
| It underlines the way in which partners, strategies, and capabilities need to evolve in harmony in order to reflect constantly changing environments. To evolve in harmony, they need realignment. Emphasis on flexibility and change. At completion, an alliance is unlikely to be the same as envisaged at the start. |
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Term
| Courtship. (strategic alliance) |
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Definition
| Courting potential partners, where the main resource commitment is managerial time. The willingness of both partners is required. Each partner has to see a strategic and organisational fit. |
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Term
| Negotiation. (strategic alliances |
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Definition
| To negotiate mutual roles at the outset. In equity alliances, partners negotiate the proportion of ownership each will have in the final joint venture, the profit share and managerial responsibilities. Although the negotiation of ownership proportions in a joint venture is similar to the valuation process in acquisitions, strategic alliance contracts generally involve a great deal more. |
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Term
| Start-up. (strategic alliance) |
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Definition
| . Investment of material and human resources: trust is very important. To put the original alliance agreements to the test. Informal adjustments to working realities are likely to be required. This early period in an alliance’s evolution is the one with the highest rate of failure. |
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Term
| Maintenance. (strategic alliance) |
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Definition
| This refers to the ongoing operation of the strategic alliance, with increasing resources likely to be committed. Trust is extremely important. Partners can begin to learn each other’s particular competences this could lead that one of them become more powerful which could lead to renegotiate or even break the alliance. |
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Term
| Termination. (strategic alliances) |
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Definition
| Extension (the alliance has been so successful that the partners will wish to extend the alliance by agreeing a new alliance); Amicable separation (termination is a matter of completion rather than failure) ; Sale (one partner wishes to buy the other’s share in order to commit fully to a particular market, while the other partner is happy to sell. It’s not a failure) ; Divorce (“failure”) |
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Term
| Strategic alliance processes |
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Definition
The themes of trust and co-evolution surface in various ways at different stages in the lifespan of a strategic alliance. The amount of committed resources changes at each stage, but issues of trust and coevolution recur throughout:
• Courtship.
• Negotiation.
• Start-up
• Maintenance.
• Termination. Extension, Amicable separation, Sale, Divorce (“failure”) |
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Term
| Four key factors helps in choosing between acquisitions, alliances and organic development: (Buy, ally or DIY?) |
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Definition
• Urgency.
Acquisitions are a rapid method for pursuing a strategy. Alliances too may accelerate strategy delivery by accessing additional resources or skills. Organic development (DIY) is slowest: everything has to be made from scratch.
• Uncertainty.
Often better to choose the alliance where there is high uncertainty in terms of the markets or technologies involved. If the markets or technologies turn out to be a success, it might be possible to turn the alliance into a full acquisition (especially if a buy option has been included in the initial alliance contract). Acquisitions may also be resold if they fail (at a lower price). On the other hand, a failed organic development might have to be written off entirely, with no sale value, because the business unit involved has never been on the market beforehand.
• Type of capabilities.
Acquisitions work best when the desired capabilities (resources of competences) are ‘hard’ (i.e. physical investment in manufacturing facilities). ‘Soft’ resources are for example people, skill or brands. The DIY organic method is typically the most effective with sensitive soft capabilities. Alliances can involve culture clashes between people from the 2 sides, and it’s harder in control an alliance partner than an acquired unit.
• Modularity of capabilities.
Highly modular’ = capabilities are distributed in clearly distinct sections or divisions of the proposed partners. Then, an alliance tends to make sense. An acquisition can be problematic if it means buying the whole company, not just modules that the acquirer is interested in. The DIY organic method can be effective under conditions of modularity, as the new business can be developed under the umbrella of a distinct ‘new venture division’, rather than embroiling the whole organization. |
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Term
| Economic performance outcomes have 3 main dimensions: |
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Definition
• Performance in product markets (e.g. sales growth or market share)
• Accounting measures of profitability (e.g. profit margin or return on capital employed)
• Economic performance reflected in financial market measures (e.g. movements in share price) |
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Term
|
Definition
considers 4 perspectives on performance simultaneously.
1) Customer perspective (e.g. customer satisfaction or product quality)
2) Internal business perspective (e.g. productivity measures or project management measures)
3) Innovation and learning perspective (e.g. new product introductions or employee skills)
4) Financial perspective (e.g. profitability or share-price performance) |
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Term
|
Definition
pays explicit attention to corporate social responsibility and the environment.
1) Economic measures of performance (e.g. sales, profits and share price)
2) Social measures (e.g. employee training, health and safety and contributions to the local community)
3) Environmental measures (e.g. pollution, recycling and wastage targets) |
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Term
| Performance measure, 2 basic approaches: |
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Definition
• Economic performance refers to direct measures of success in terms of economic outcomes.
• Effectiveness refers to broader set of performance criteria than just economic. |
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Term
| There are 3 main performance comparisons to consider: |
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Definition
• Organisational targets. A key set of performance criteria are management’s own targets, whether expressed in terms of overall vision and mission or more specific objectives (= economic outcomes such as sales growth or profitability). Performance against organizational targets can be approached via gap analysis.
• Trends over time. Is performance improving or declining over time? It is important to take a relevant time period for comparing trends, except in fast changing markets.
• Comparator organisations. It’s performance relative to other comparable organisations, as in benchmarking. |
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Term
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Definition
| compares actual or projected performance with desired performance. It is useful for identifying performance shortfalls (gaps) and, when involving projections, can help in anticipating future problems. The size of the gap provides a guide to the extent to which strategy needs to be changed. Gap analysis shows when new initiatives are required to meet desired performance targets |
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Term
| 3 sources of possible complexities of performance analysis. |
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Definition
First, organisations are liable to manipulate outcomes in order to meet key performance indicators.
Second, organisations can legitimately manage performance, perceptions and expectations: they are not wholly objective and fixed.
Finally, what matters in terms of performance often changes over time. |
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Term
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Definition
| suitability, acceptability and feasibility |
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Term
|
Definition
| is concerned with assessing which proposed strategies address the key opportunities and threats an organisation faces through an understanding of the strategic position of an organisation. |
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Term
|
Definition
involves assessing the extent to which a proposed strategy:
• exploits the opportunities in the environment and avoids the threats,
• capitalises on the organisation’s strengths and avoids or remedies the weaknesses |
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Term
|
Definition
| helps overcome the unconscious biases of each individual manager. However, any scoring or weighting is only a reflection of the quality of the analysis and debate that goes into the scoring. |
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Term
| Screening through scenarios |
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Definition
| Strategic options are considered against a range of future scenarios. This is especially useful where a high degree of uncertainty exists. A manager screens the possible strategies in terms of the different scenarios, they come to see which would be more suitable in different environmental contexts. |
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Term
| Screening for bases of competitive advantage |
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Definition
| requires an analysis of how the proposed strategy is underpinned by resources and capabilities that satisfy the VRIO criteria (value-rarity-inimitability -organisational support). |
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Term
|
Definition
| Options are ‘eliminated’ and preferred options emerge by progressively introducing requirements that must be met. The end point of the decision tree is a number of discrete development opportunities |
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Term
|
Definition
| is concerned with whether the expected performance outcomes of a proposed strategy meet expectations of stakeholders. These can be of 3 types, the ‘3Rs’: Risk, Return and stakeholder Reactions. |
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Term
|
Definition
| concerns the extent to which strategic outcomes are unpredictable, especially with regard to possible negative outcomes. Chosen strategies should be within the limits of acceptable risk for the organisation. Developing a good understanding of an organisation’s strategic position is at the core of good risk assessment. |
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Term
| Tools that can be helpful in a risk assessment are: |
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Definition
• Sensitivity analysis.
• Financial risk. Level of gearing (or ‘leverage’), Organisation’s liquidity
• Break-even analysis |
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Term
|
Definition
| Also known as the what-if analysis, allows each of the important assumptions underlying a particular strategy to be questioned and challenged. Sensitive analysis asks what would be the effect on performance (e.g. profitability) of various on these assumptions. |
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Term
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Definition
| It refers to the possibility that the organisation may not be able to meet the key financial obligations necessary for survival. Managers need to ensure that strategies meet acceptable levels of financial risk. |
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Term
|
Definition
| is a simple and widely used approach that allows variations in assumptions about key variables in a strategy to be examined. It demonstrate at what point in terms of revenue the business will recover its fixed and variable costs. |
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Term
| The 2 key measures of financial risk are: |
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Definition
• Level of gearing (or ‘leverage’) = the amount of debt the company has relative to its equity.
• Organisation’s liquidity = the amount of liquid assets that is available to pay immediate bills. |
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Term
|
Definition
| is measure of the financial effectiveness of a strategy |
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Term
| Return on capital employed (ROCE) |
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Definition
| calculates profitability in relation to capital for a specific time period after a new strategy is in place. Its weakness is that it does not focus on cash flow or the timing of cash flows. |
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Term
|
Definition
| assesses the length of time it takes before cumulative cash flows for a strategic option become positive. |
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Term
| Discounted cash flow (DCF) |
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Definition
| uses common cash-flow forecasting techniques, which ‘discounts’ earnings the further into the future they are. The resulting measure is the net present value of the project, one of the most widely used criteria for assessing the financial viability of a project. |
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Term
| Financial analysis can be done by: |
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Definition
• Return on capital employed (ROCE)
• The payback period
• Discounted cash flow (DCF) |
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Term
| The 3 problems of financial analysis are: |
|
Definition
1) The problem of uncertainty
2) The problem of specificity
3) Assumptions |
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Term
| Total shareholder return (TSR) |
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Definition
| makes use of share price and divided measures. It’s equal to the increase in the price of a share, plus the dividends received per share in that year. This is then divided by the share price at the start of the financial year. |
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Term
| Economic value added (EVA) |
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Definition
| or economic profit relies on accounting data but also includes implicit costs such as opportunity cost of the firm’s capital. EVA = net operating profit after tax – cost of capital |
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Term
| Shareholder value analysis |
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Definition
poses very directly the question: which proposed strategies would most increase shareholder value?
• Total shareholder return (TSR)
• Economic value added (EVA) |
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Term
|
Definition
| suggests that a money value should be put on all the costs and benefits of a strategy, including tangible and intangible returns to people and organisations other than the one ‘sponsoring’ the project or strategy. |
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Term
|
Definition
| a strategy should be seen as a series of ‘real’ options that should be evaluated as such. Such an approach increases the expected value of a project because it adds the expected value of possible future options created by that project going forward. |
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Term
|
Definition
• Financial analysis
• Shareholder value analysis
• Cost-benefit concept
• Real options |
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Term
|
Definition
| is concerned with whether a strategy could work in practice: in other words, whether an organisation has the capacity to deliver a strategy. |
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Term
| There are 2 main views of strategy development: |
|
Definition
• strategy as deliberate
• strategy as emergent
These two main views of how strategies develop are not mutually exclusive, they are both likely to influence the eventual strategy that comes about: the realised strategy. |
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Term
| The deliberate strategy development view |
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Definition
| is that strategies come about as the result of the considered intentions of top management. It is related to the design view of strategy development. |
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Term
| The emergent strategy development |
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Definition
| is that strategies do not develop based on a grand plan, but tend to emerge in organisations over time. |
|
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Term
| deliberate intention of strategic leader can be manifested in different ways: |
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Definition
• Strategic leadership as command (strategy of an organization might be dictated by an individual)
• Strategic leadership as vision (the strategic leader determines the overall vision, mission and that motivates others)
• Strategic leadership as decision making (strategy development process exists and there are many different view: weigh such different views, interpret data…)
• Strategic leadership as the embodiment of strategy (the founfer or CEO represent its strategy (unintentional or deliberate)) |
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Term
| Cycle of the strategic planning in 4 steps: |
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Definition
• Initial guidelines: starting point = set of guidelines or assumptions about the external environment
• Business-level planning: business units or divisions draw up strategic plans to present to the corporate center.
• Corporate-level planning: The corporate plan results from the aggregation of the business plans.
• Financial and strategic targets: are then likely to be extracted to provide a basis for performance monitoring of businesses and key strategic priorities based on the plan. |
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Term
| Strategic planning may play several roles and typically 4 are emphasized: |
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Definition
1) Formulating strategy by providing means by which managers can understand strategic issues, for example competitive positions and distinctive capabilities Formulation to a longer-term view of strategy.
2) Learning. Managers can benefit from planning if they see it as a means of learning rather than a means of ‘getting the right answers’.
3) Integration. Strategic planning systems may have the explicit purpose of coordinating business-level strategies within an overall corporate strategy.
4) Communicating intended strategy throughout an organization and providing clarity on the purpose and objectives of a strategy or strategic milestones against which performance and progress can be reviewed. Communicating strategy is also a very first step towards strategy implementation. |
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Term
| There are 5 main dangers in the way in which formal systems of strategic planning have been employed: |
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Definition
1) Confusing managing strategy with planning
2) Detachment from reality
3) Paralysis by analysis
4) Over-complex planning processes
5) Dampening of innovation |
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Term
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Definition
It is the development of strategy by experimentation and learning. There are 3 main characteristics of strategy development in this way:
1. Environmental uncertainty (managers can’t do away with uncertainty of their environment)
2. General goals
3. Experimentation |
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Term
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Definition
| (continual readjustment makes sense because of a continually changing environment) is an organization that is capable of continual regeneration from the variety of knowledge, experience and skills within a culture that encourages questioning and challenge. |
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Term
| Political view of strategy development: |
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Definition
| is that strategies develop as the outcome of bargaining and negotiation among powerful interest groups (or stakeholders). |
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Term
| Approaching strategic problems within the political view, people are likely to be differently influenced by at least: |
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Definition
i. Position and personal experience from their roles within the organisation.
ii. Competition for resources and influence between the different subsystems in the organization and people within them who are likely to be interested in preserving or enhancing their positions.
iii. The relative influence of stakeholders on different parts of the organisation.
iv. Different access to information given their roles and functional affiliations. |
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Term
| Strategy as the product of structures and systems |
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Definition
A. Organisational systems as a basis for making sense of issues: Managers are likely to make sense of issues they face based on the systems and routines with which they are familiar and which directly affect them.
B. Organisational systems provide bases of solutions to strategic issues: Systems and routines also provide solutions that managers can draw on when faced with problems. However, responses may differ depending on the context the managers are in and the associated systems and routines |
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Term
| Managing deliberate and emergent strategy: |
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Definition
I. Unrealised strategy.
II. Managing deliberate strategy.
III. Managing emergent strategy.
IV. The challenge of strategic drift. |
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Term
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Definition
| the tendency for strategies to develop incrementally based on historical and cultural influences, but fail to keep pace with a changing environment. |
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Term
| The pyramid of strategy practice |
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Definition
1) The strategists (who ?)
2) Strategising activities (what?)
3) Strategising methodologies (Which?) |
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Term
| 3 important tasks of strategic planners: |
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Definition
• Information and analysis: They have the time, skills and resources to provide information and analysis for key decision-makers.
• Managers of the strategy process: They can assist and guide other managers through their strategic planning cycles.
• Special projects: they can be a useful resource to support top management on special projects. |
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Term
| 4 roles of middle managers: |
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Definition
• Information source: Better knowledge of the organization and its market than top managers.
• “Sense making” of strategy: Top management set down a strategic direction and middle managers have to explain/apply it in specific contexts.
• Reinterpretation and adjustment of strategic responses as events unfold. Middle managers are necessarily involved in strategy adaptation because of their day-to-day responsibilities in strategy implementation.
• Champions of ideas. Given their closeness to markets and operations, middle managers may not only provide information but give new ideas that can be the foundation of new strategies. |
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Term
| Middle manager’s influence on strategy increases when they have: |
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Definition
• Key organisational positions.
• Access to organisational networks
• Access to the organisation’s ‘strategic conversation’ |
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Term
| Consultants play different roles in strategy development in organisations: |
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Definition
• Analysing, prioritising and generating options. Consultants bring a fresh external perspective to help prioritise issues or generate options for executives to consider. This may challenge executives’ preconceptions about the strategic issues.
• Transferring knowledge
• Promoting strategic decisions.
• Implementing strategic change. Consultants play a significant role in project planning, coaching and training often associated with strategic change. |
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Term
| To improve strategy-consulting outcomes, client organisations can take three measures: |
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Definition
• Avoid choosing consulting services based on personal relationships
• Develop supervisory skills to manage portfolios of consulting projects.
• Partner effectively with consultants to improve both effectiveness in carrying out the project and knowledge transfer at the end of it. |
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Term
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Definition
| is the process of gaining the attention and support of top management and other important stakeholders. |
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Term
| To gain attention and support of top management, managers need to consider at least four issues: |
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Definition
• Issue packaging. Care should be taken with how issues are packaged or framed. _x000B_
• Formal and informal channel: They need to balance formal (corporate, line and staff) and informal channels (Ad hoc conversations, meals, journeys,...) of influence.
• Sell alone or in coalitions: Do they want to press their issue on their own or to assemble a coalition of supporters?
• Timing |
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Term
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Definition
| involve groups of executives (typically senior managers) working intensively for one or two days, often away from the office, on organisational strategy. The purpose is to question existing strategy or develop new strategy, address strategy implementation issues and communicate strategic decisions to a larger audience. |
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Term
| If the goal is to question existing strategy, workshops need: |
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Definition
• Strategy concepts and tools to promote questioning of the current strategy
• Specialist facilitator to guide participants in the use of tools and concepts
• Visible support of the workshop sponsor (e.g.:CEO)
• Diminishing of everyday functional and hierarchical roles |
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Term
| If the goal is to review the progress of current strategy, the workshop needs a more operational agenda. To connect the workshop to action, it needs: |
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Definition
• Identifying agreed actions to be taken
• Establishing project groups to allow cohesion around particular issue
• Nesting of workshops = a series of workshop
• Making visible communication by the top management (e.g.: CEO has to be there). |
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Term
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Definition
| involve teams of people assigned to work on particular strategic issues over a defined period of time. |
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Term
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Definition
• A clear brief or mandate. The project’s objectives should be agreed and carefully man- aged.
• Top management commitment.
• Milestones and reviews
• Appropriate resources (people). |
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Term
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Definition
| usually provides the data and argument in support of a particular strategy proposal, e.g. investment in new equipment. |
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Term
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Definition
| provides the data and argument in support of a strategy for the whole organisation. |
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Term
| To make a business case, we need these criteria: |
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Definition
• Focus on strategic needs: identify the organisation’s strategy and relate the needs _x000B_to that.
• Supported by key data: appropriate and financial data
• Provide a clear rationale: analysis and data are not enough: make it clear why the proposals are being made.
• Demonstrate solutions and actions: issues attached with solutions get the most attention
• Provide clear progress measures: provide regular progress monitoring and review mechanisms. |
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Term
| A typical strategic plan has the following elements: |
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Definition
• Mission, goals and objectives statement.
• Environmental analysis
• Capability analysis: key strengths and weaknesses of the organization and its products relative to its competitors, clear statement of competitive advantage
• Proposed strategy: related to the environment and organizational analyses and support the mission, goals and objectives.
• Resources: They have to provide a detailed analysis of the resources required, with options for acquiring them.
• Key changes: What are the key changes in structures, systems and culture and how to manage them? |
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