BST - ICAEW

Strategy

The direction and scope of an organisation over the long term which achieves advantage for the organisation

The rational approach

Traditional, formal, top down

Benefits of strategic planning

- Provides a framework

- Encourages LT planning

- Goal congruence

- Considers the needs of stakeholders

- Optimised use of resources

- Considers changes in business environment

- Monitors progress

Drawbacks if strategic planning

- Lacks evidence to prove it leads to success

- Businesses may need to be more dynamic and react to problems as they occur

- Formal planning reduces initiative and innovate thinking

- Political infighting can disrupt the process

Emergent strategy

Behaviours which are aspirated and which have a strategic impact. Emerge over time in response to the environment. Tried and developed as implemented

Mintzbergs different grades of strategy

Intended - conscious

Deliberate - put into practice

Realised - resultant

Who/ what business would benefit from emergent strategies

- Operate in dynamic environments and require quick decision making

- Have flexible, decentralised organisational structures

What is resource based strategic advantage

Inside out - Focus on developing internal resources and competencies which are hard to imitate and find or create markets to exploit these strengths

What is a positioning based strategic advantage

Outside in - Focus on analysing the external environment to identify customer needs and adapting to meet these needs

What is the risk of a resource based strategic advantage

Organisation may fail to react to long term industry trends

What is the risk of a positioning based strategic advantage

Customers needs changed so organisation is forced to constantly evolve

What are the 5 things that would influence planning horizons

- Nature of ownership

- Capital structure

- Nature of industry

- Business environment

- Nature of management

Benefits of sustainability

- Attracting customers who are committed to sustainable practice

- Attracting and retaining skilled staff

- Building positive relationships with like-minded suppliers

- Demonstrating to shareholders an ability to deliver reliable returns

What does ESG stand for

Environmental, Social, Governance

What is a mission

The most generalised type of objective which can be thought of an a reason for existence

What are the 4 elements of a successful mission statement (Ashridge College Model)

Purpose, Strategy, Policies, Values

Advantages of mission statements

- Help resolve stakeholder conflict.

- Set the direction of the organisation and so help formulate strategy.

- Help communicate the values and direction of the organisation to stakeholders.

Criticisms of mission statements

- Often full of meaningless terms like 'the best', which give staff little idea of what to aim at. - Often ignored by managers.

- Often considered to just be a public relations exercise.

Primary objective of profit making business

Maximise shareholder wealth

Primary objective for not for profit entities

Maximise the benefit to target stakeholder

Secondary objectives for profit making entities

- Customer satisfaction

- Social responsibility

- Innovation

- Meaningful employment

Secondary objectives of not for profit entities

- Investing in staff

- Minimal impact on local environment

- Economy, efficiency, effectiveness

Mendlow's stakeholder mapping

Low interest, low power = Minimal effort

Low interest, high power = Keep satisfied

High interest, low power = Keep informed

High interest, high power = Key players

What does PESTLE stand for

Political, Economic, Social, Technological, Legal, Environmental

What is scenario planning

Concerns the development of pictures of potential futures for the purpose of managerial learning and the development of strategic responses

What are the 4 elements of porters diamond and what do they contribute to

Demand conditions, Rivalry, Related industry, factor conditions

Contribute to - Competitive advantage

What are factor conditions

Availability of factors of production (resources needed to operate)

What are demand conditions

Demanding local consumers force firms to become more innovative. Trend setting local consumers help local producers to anticipate future global trends.

What are the phases of the industry life cycle

introduction, growth, maturity, decline

What are Porter's 5 forces?

Competitive revelry, threat of new entrants, bargaining power of suppliers, threat of substitutes, bargaining power of customers

What will impact level of competition

Number of existing competitors

level of fixed costs

industry growth

switching costs

exit barriers

entry barriers

strategic importance

What will influence the power of customers

Whether there are large customers

Number of customers

Number of competitors

Product Differentiation

Switching costs

Profitability of customers

Price transparency

What will influence bargaining power if suppliers

How many large suppliers

Switching costs for customers

Other buyers can sell to instead

What are critical success factors

Small number of key goals vital to the success of an organisation

What are threshold resources

Basic resources needed by all firms in the market

What are unique resources

Resources which are better than those of the competition and difficult to replicate, giving the firm a sustainable competitive advantage

What are the 9M's

Men, machines, money, material, markets, make up, management, methods, MIS

What is human capital

Collective attributes of an organisations human resources

What are core competencies

Critical activities and processes which enable the firm to meet the critical success factors and therefore obtain a sustainable competitive advantage

What are Kay's Core Competencies

Reputation, Competitive architecture, innovative ability

What is competitive architecture made up of

Internal architecture, external architecture and network architecture

What are the primary activities of Porters value chain analysis

Inbound logistics, operations, outbound logistics, marketing and sales, services

What are the 4 support activities in porters value chain

Firm infrastructure, HR management, tech development, procurement

What is optimisation

Strength in one area may enable firm to commit fewer resources to another area

What is Harmons process strategy matrix made up of

Strategic Importance and Process complexity and dynamics

Low SI, Low PCD - Automate/ outsource

Low SI, High PCD - Outsource

High SI, Low PCD - Automate

High SI, High PCD - Improve

How to calculate relative market share

Your sales/ largest competitors sales

What makes up the boston consulting group (BGC Matrix)

Market growth and Market share

Low MS, Low MG - Problem Child

Low MS, High MG - Question mark

High MS, Low MG - Cash cow

High MS, High MG - Star

What does SWOT stand for and which parts are internal analysis and which are external

S - Stengths

W - Weaknesses

O - Opportunities

T - Threats

S&W - Internal

O&T - External

What is Gap analysis

Comparison between an entities ultimate objective and the expected performance from both projects

What is Porters generic strategies model made up of

Basis of competition and competitive scope

Low cost, broad target - Cost leadership

Low cost, narrow target - Cost focus

Differentiation, broad target - Differentiation

Differentiation, narrow target - Differentiation focus

What does Ansoffs matrix consist of

Products and Markets

- Existing product, existing market - Market penetration

- Existing product, new market - Market development

- New product, existing market - Product development

- New product, new market - Diversification

What is related diversification

Integrating activities into the supply chain (vertical integration) or leveraging technologies or existing competences (horizontal integration)

What is marketing

The management process that identifies, anticipates and supplies customer needs efficiently and profitably

What is market research

The systematic gathering, recording and analysing of data about problems relating to marketing of goods and services

What is desk research

Gathering and analysis of existing secondary data

What is field research

Collection of new primary information directly from respondents

What is market segmentation

Division id the market into homogeneous groups if potential customers who may be treated similarly for marketing purposes

What is the difference between industrial and consumer segmentation

Industrial - business to business sales

Consumer - business to end consumer sales

Impacts on industrial segmentation

- Geographic

- Company size

- Company type

- Purchasing characteristics

Impacts on consumer segmentation

- Geographic

- Demographic

- Purchasing motivation

- Purchasing characteristics

What is market positioning

Giving a product a place relative to its competitors on factors such as quality, price, image etc

What are the 4p's of marketing

Product, Promotion, Place, Price

What are the 3 extra P's in the marketing mix (intangible)

People, process, physical evidence

What does the brand positioning matrix consist of

Price and Quality

- Low price, low qual - Economy brands

- Low price, high qual - Bargain brands

- High price, low qual - Cowboy brands

- High price, high qual - Premium brands

What is a cowboy brand

Overpriced for quality of product

What is push promotion

Ensuring that products or services are available for purchase where and when the ultimate customer requires them

What is pull promotion

Marketing variables set to persuade ultimate customers to purchase

What are the 4c's of pricing

Costs, customers, competition, corporate objectives

What are 6 pricing strategies

Price skimming

Penetration

Price discrimination

Perceived quality

Going rate

Cost plus pricing

What is price skimming

High prices initially to skim off customers willing to get product sooner

What is price penetration

Low price initially to increase market share

What is price discrimination

Different prices charged for same profit to different customer groups

What is perceived quality pricing

Price reflects perceived value placed by customers on product

What is going rate pricing

Match competition or to meet market conditions

What is cost plus pricing

adding a standard markup to the cost of the product

How to calculate price electricity of demand

% change in demand/ % change in price

What values of PED are inelastic, elastic, perfectly inelastic, perfectly elastic and unitary elastic

Inelastic < 1

Elastic > 1

Perfectly inelastic = 0

Perfectly elastic - Infinity

Unitary elastic = 1

5 influences of PED

Availability of substitutes

Time

Competitors pricing

Nature of product

Proportion of income

What are Giffen and Veblen goods

As price increases, demand increases. Giffen is due to NEED to buy, Velben is due to premium status

What is an entrepreneurial structure

Structure built around owner- manager - typically small company. Centralised.

Advantages and disadvantages of entrepreneurial structure

Advantages

- Fast decisions

- More responsive to market

- Good control

- Close bond to workforce

Disadvantages

- Lack of career structure

- Too centralised

- Can't cope with diversification/ growth

What is functional structure

An organizational structure composed of all the departments that an organisation requires to produce its goods or services.

What are advantages and disadvantages of a functional structure

Advantages

- Economies of scale

- Standardisation/ efficiency

- Specialists more comfortable

Disadvantages

- Empire building

- Slow to adapt to market changes

- Conflicts between functions

- Can't cope with diversification

What is a divisionalised structure

Organisation structured in accordance with product lines/ brands or divisions. General managers have responsibility for their own resources

Advantages and disadvantages of divisionalised structure

Advantages

- Enables product growth

- Clear responsibility and accountability for products

- Training if general managers

Disadvantages

- Potential loss of control

- Lack of goal congruence

- Duplication of effort

- Specialists may feel isolated

What is a matrix structure

Combines benefits of the divisionalised structure and functional structure

Advantages and disadvantages of matrix structure

Advantages

- Improves cross- functional communication

- Useful for projects and temporary teams

- Flexibility

Disadvantages

- Dual command

- Dilution of functional authority

- Time consuming meetings

What are the three different forms of network structures

Virtual - Operating predominantly through electronic communication from employees and 3rd parties

Hollow - Non-essential activities are outsourced

Modular - Production processes become separate modules and are outsourced to 3rd parties or subsidiaries

What are the 4 components of Handy's shamrock organisation

- Professional core - permanent key staff

- Contractual fringe - outsourced staff performing non-core services

- Flexible labour force - temp or part time staff covering peak demand

- Customers - may perform some tasks themselves

What are the components of Mintzbergs structural configurations

Ideology

Strategic Apex

Middle Line

Operating core

Technostructure

Support staff

Benefits and drawbacks of decentralisation

Benefits

- Senior management free to concentrate on strategy

- Better local decisions due to local expertise

- Better motivation

- Quicker responses/ flexibility

- Training/ career path

Drawbacks

- Loss of control by senior management

- Dysfunctional decisions due to a lack of goal congruence

- Poor decisions made by inexperienced managers

- Training costs

- Duplication of roles and restocked

- Extra costs for information

What is the difference between a mechanistic and organic structure

Mechanistic - rigid, suitable for stable environments

Organic - fluid and flexible, suitable for dynamic environments

How to calculate return on investment

Annual profit controllable by manager/ capital employed in the division

What are the advantages and disadvantages of ROI

Advantages

- Widely used and accepted

- Should facilitate comparisons

Disadvantages

- Relative measure

- Different accounting policies can make comparisons difficult

- May discourage investment

- NBV may lead to assets being kept for too long

- May lead to inappropriate outsourcing to keep assets off SOFP

- Can lead to dysfunctional decision making

How to calculate residual income

Controllable profit - (Capital employed X target % return

What is a transfer price

The price at which one division in a group sells its products or services to another division in the same group

6 ways to set up a transfer price

- Cost plus pricing

- Opportunity cost

- Negotiated prices

- Two part tariff

- Dual pricing

- Market orices

What is corporate governance

The set of rules which governs the structure and determines the objectives of an organisation and regulates the relationship between the organisations management, it's board and of directors and it's shareholders

What are the general principles of good corporate governance

- Appropriate balance of power

- Independent NEDs

- Established committees

- Effective risk management

What is risk

The possible variation in the outcome from what is expected to happen