Strategic Planning and Enterprise Risk Management

Flashcards covering strategic management processes, SWOT/PESTLE/Five Forces models, various growth and retrenchment strategies, the Value Chain model, and Strategic Risk Management (SRM) concepts.

Strategic Management

The coordination of interrelated activities of functional areas of a business to achieve an established purpose and fulfill its long-term goals.

Vision Statement

The aspirational description of what an organization will accomplish in the long-term future.

Mission Statement

A broad expression of an entity’s goals used by executives to develop policies and allocate resources.

Three-Stage Strategic Process

A process involving strategy formation (creating the plan), strategy implementation (putting the plan into action), and strategy evaluation (monitoring organization results).

Internal Analysis

A component of strategy formation focused on evaluating the strengths and weaknesses of a business.

External Analysis

The evaluation of competitors, customer needs, the economy, government regulations, and other factors categorized as opportunities or threats.

SWOT Analysis

A method evaluating an organization’s internal environments (strengths, weaknesses) and external environments (opportunities, threats) to evaluate competitive position.

PESTLE Analysis

A framework for assessing the external environment across six categories: political, economic, sociological, technological, legal, and environmental.

Five Forces Model

A method of evaluating external forces: rivalry among competitors, threat of new competitors, bargaining power of suppliers, and threat of substitute products or services.

Long-Term Strategies

Plans intended to direct the activity of an organization for $1$ or more years.

Financial Feasibility

A long-term strategic plan assessment where managers examine resource allocation, costs, break-even time, and opportunity costs.

Strategy Implementation

Also called execution, it is the $5$-step process of making strategies work, usually the responsibility of mid-level or department managers.

Balanced Scorecard Approach

An implementation method that translates strategy into specific goals and actions for each department, balancing financial and nonfinancial goals.

Strategy Evaluation

Also called strategic control, the stage involving monitoring progress toward goal achievement by comparing strategic plans to results.

Strategy Evaluation Process

A structured approach following $4$ steps: establish performance standards, create measurements, compare results to standards, and implement corrective actions.

Corporate Strategy

The highest level of strategy for a diversified organization, determining types of businesses undertaken and global expansion plans.

Strategic Business Unit (SBU)

A separate division within a company that has its own mission, competitors, and unique strategy.

Functional Strategy

Strategies carried out by individual departments performing specific functions, such as marketing, human resources, or finance.

Operational Strategy

Strategies relating to a department’s narrowly defined day-to-day business activities, such as workflow and production processes.

Growth Strategies

Strategies designed to improve an organization’s status via measurements like sales, market share, revenue, or stock price.

Market Penetration

A growth strategy focusing on improving production efficiencies and capturing a larger share of the market with a limited product or service.

Vertical Integration

A strategy focusing on assuming operations formerly performed by suppliers or functions performed by others in the distribution chain.

Diversification

A growth strategy involving entering new markets or broadening the variety of products or services offered.

Stability Strategies

Short-term strategies designed to maintain an organization’s current position when the market is unstable or expansion is considered too risky.

Retrenchment Strategies

Strategies involving significant expense reduction when an organization must reduce the number of products or services it offers.

Turnaround Strategies

A type of retrenchment involving temporary, across-the-board cost-cutting measures such as reducing personnel or selling assets.

Divestiture Strategies

Strategies involving the selling or closing of a business unit to reduce losses or concentrate on core operations.

Liquidation

A strategic process followed by an organization when a business unit is going out of business, including asset divesture and winding down operations.

Cost Leadership

A business-level strategy through which a company seeks cost efficiencies in all operational areas to produce products at a lower cost than competitors.

Differentiation Strategy

A business-level strategy where a company develops distinct products or services for which customers will pay a higher price.

Focus Strategy

A strategy through which a company focuses on one group of customers and competes with either cost leadership or differentiation within that narrow segment.

Value Chain Model

A model consisting of $5$ primary links—inbound logistics, operations, outbound logistics, marketing/sales, and service—that add value and represent profit margin.

Industrial Organizational Approach

A strategic planning approach based on maximizing profit through competition, economies of scale, and effective resource allocation.

Sociological Approach

A strategic planning approach focused primarily on human interaction, community quality, and the quality of services provided to members.

Enterprise Risk Management (ERM)

A broad framework and process to identify and manage the variety of risks throughout all functions that affect an organization’s ability to meet objectives.

Strategic Risk Management (SRM)

A narrow business discipline focused on risks affecting key organizational strategies and driving deliberation regarding uncertainties and untapped opportunities.

Monte Carlo Simulations

A computerized statistical model that simulates the effects of various types of uncertainty; notably used by the LEGO Group.

Scenario Analysis

An analysis involving brainstorming the worst conceivable events, projecting their consequences, and suggest prevention methods.

Strategy Map

A visual diagram showing the plans an organization develops to meet its strategic objectives.

Risk Appetite

How much risk an organization wants to take, articulated through both quantitative financial targets and qualitative measures like reputation.

Risk Tolerance

How much risk an organization is willing to accept, which is always stated in quantitative terms.

Risk Map

A template depicting the likelihood and potential impact or consequences of risks.