Strategy Formulation

Lecture 3

Diagram of a framework for developing strategy

What is meant by micro environment?

Factors that directly affect a business

What are some examples of micro environments?

-Customers

-Suppliers

-Competitors

-Intermediaries

True or False: Porter’s model includes five factors used to analyse competition in an industry

True.

-Threat of New Entrants

-Threat of substitution

-Buyer Power

-Supplier Power

-Competitive Rivalry

Diagram of Porter’s Five Forces Model

What is meant by macro environment?

Factors that indirectly affect a business

True or False: PESTLE analysis seeks to help analyse a micro environment.

False. These factors are outside of a businesses control and therefore are used to analyse the macro environment.

Political

Economic

Social

Technological

Legal

Environmental

What political factors should a business consider when analysing its macro environment?

Political stability

Government’s policies and views

Regulations and laws

Industry specific regulations

What economic factors should a business consider when analysing its macro environment?

Current economic climate and direction

Interest, inflation, unemployment and exchange rates

Global economy

What social factors should a business consider when analysing its macro environment?

Buying habits

Generational shifts

Population growth and age demographics

Religious beliefs, taboos and lifestyle choices

Ethics

What technological factors should a business consider when analysing its macro environment?

Rate of technological change

New technology to create advantages

New trends

What legal factors should a business consider when analysing its macro environment?

Employment, common and labour laws

Health and safety regulations

What environmental factors should a business consider when analysing its macro environment?

Environmental restrictions

Transportation

Ethical sourcing

Procurement

Supply chain MGMT

Future pandemics

True or False: Market research and customer opinion’s are necessary in order for business to gain an advantage.

True. Attracting and retaining customers is key to business strategy

What is Customer Perceived Value (Value for money)?

Customer’s overall assessment of the utility of a product or service

What are the two components of Customer Perceived Value?

Perceived Use Value (PUV) - What I get

Perceived Price (PP) - What I give

Perceived Use Value is… A - Universal, B - Subjective, C - Objective, D - Fixed.

B - Subjective. PUV varies across individuals, groups and contexts.

Diagram of PP (x) plotted against PUV (y)

What is the first fundamental strategy for competitive advantage?

Cost leadership - Lowest cost

Achieved by increasing profits, reducing operating costs and charging lower prices.

What is the second fundamental strategy for competitive advantage?

Differentiation - Developing products with unique aspects(s)

What is the third fundamental strategy for competitive advantage?

Focus - Developing products or services for a niche market

Diagram of a Generic Strategies Framework

Diagram of characteristics of Generic Strategies

True or False: Porter’s Generic Strategies framework takes into account the increasing marketplace velocity and turbulence.

False. The New 7S Framework was developed later to handle this.

True or False: The first assumption in the New 7S Framework model states that every advantage is re-created?

False. Every advantage is eroded.

True or False: The second assumption in the New 7S Framework model states that sustaining an advantage is beneficial to a business’ attention.

False. Sustaining an advantage can be a deadly distraction.

True or False: The third assumption in the New 7S Framework states that the goal of an advantage should be sustainability.

False. The goal of an advantage should be disruption.

True or False: The fourth assumption in the New 7S Framework states that a goal should be achieved through small steps.

True

Diagram of D’Aveni’s Disruption and the new 7Ss.

What is meant by superior stakeholder satisfaction in D’Aveni’s new 7Ss?

Understanding how to maximise customer satisfaction by adding value strategically.

What is meant by strategic soothsaying in D’Aveni’s new 7Ss?

Seeking new knowledge can predict or create new windows of opportunity

What is meant by speed positioning in D’Aveni’s new 7Ss?

Preparing the organisation to react ASAP

What is meant by surprise positioning in D’Aveni’s new 7Ss?

Preparing the organisation to respond to the marketplace that will surprise competitors

What is meant by shifting competition rules in D’Aveni’s new 7Ss?

Finding new ways to serve customers that will transform the industry

What is meant by signalling strategic intent in D’Aveni’s new 7Ss?

Communicating intended actions of a company, to stall competitor responses.

What is meant by simultaneous and sequential thrusts in D’Aveni’s new 7Ss?

Taking steps designed to stun competitors to disrupt or block their efforts.

What is meant by value proposition?

Statement that explains what benefits(s) a product or service will provide and how it solves a problem for customers.

True or False: A business model is a framework that describes how companies can create value within a chosen value network.

True

True or False: A mission model canvas is the adapted version of the business model canvas for non-profit organisations

True

Diagram of an example business model canvas for Spotify

Diagram of an empty mission model canvas

What is an asset?

A type of resource

True or False: Entry assets are the most challenging to develop.

False. Strategic assets are the most difficult to develop as they are firm specific.

Often are complex and require tacit knowledge.

What is one source of competitive advantage?

Resources that are:

-Valuable and rare

-Inimitable

-Immobile

-Non-substitutable

Diagram of a strategy formation and formulation