Strategy is a plan of action by which an organisation aims to achieve its objectives
Define strategic management
Is the process of identifying a plan of action to enable the organisation to meet its objectives. It involves analysing the external and internal environment, setting objectives, deciding between alternative strategies, implementation, monirorting performance and manging change
Stages in developing a typical strategy
Mission --> Aim --> Objectives --> Strategies --> Tactics
Is the overall purpose of the organisation
Define mission statement
A mission statement sets out the purposes and values of the organisation, providing a focal point for communication and planning
Give 2 factors that influence the content of a mission statement
- Business culture
- Attitude and ethics of dominant stakeholders
Aims and Objectives
An aim is the prime business objective e.g survival, profit or growth
An objective is a specific target an organisation sets itself to achieve through its activity (measurable and timed)
List 3 purposes of objectives
- Provides an organisational framework
- Measure performance and controlling and coordinating individual staff and departments
Explain smart objectives
Specific (clear statement), Measurable ( number value), Agreed ( attainable target) , Realistic (achievable) and Timed (within a given time period)
Aims and Objectives
State and explain the 7 main types of objectives
- Corporate: whole business targets
- Departmental: targets for each functional area
- Staff: individual targets needed to meet team and deaprtmental objectives
- Stakeholder: the aim of any group with an interest in an organisations performance
- Strategic: long term targets set by senior managers
- Tactical: short-term targets set by junior managers to deliver strategic objectives
- SMART: specific, measurable, agreed, realistic and timed targets
Strategy and tactics
Tactics are short-term day-to-day detailed activties to achieve a strategy
Distinguish between strategy and tactics
A strategy is a long-term action plan made by senior managers and affecting the whole organisation. Tactical decisions are taken by junior managers and affect day-to-day part of the organisation
List 7 factors influencing strategy
- Priorities of dominant stakeholders
- Business culture
- Mission, aim and corporate objectives of the organisation
- Maturity of the business
- External environment (competitors)
- Internal environment (finances)
- Risk and reward (do potential rewards justfy risk)
Define Corporate Objectives
Specific targets the entire organisation aims to achieve through the combined activity of staff and departments
How can mangement by objectives (MBO) aid strategic management?
Corporate objectives are cascaded down the organisation, driving department and behavioural objectives. Each functional area, sets deaprtment objectives to help deliver corporate objectives.
Give a disadvantage of MBO
Staff and departments may prioritise ther own objectives, ignoring implications for overall corporate objectives (conflicting objectives)
List 3 strategies to overcome the limitations of MBO
- Selecting individual objectives to ensure they reinforce corporate objectives
- Link bonuses to corporate success as well as individual performance
- Implement a communications strategy to keep everyone informed
What is planning?
Planning is the management process of establishing objectives and selecting strategies and tactics required to achieve them. Planning prepares a course of action to achieve stated objectives given the internal resources of the business and its external environment
List 6 stages in a typical business plan
- Mission: why are we here?
- Aims and objectives: where are we going?
- Situational analysis: where are we now?
- Strategy and tactics: how do we get there?
- Monitoring: are we on course?
- Evaluation: did we get there?
Define external environment
The circumstances in which the organisation operates (state of the economy, legal constraints and social trends beyond the contorl of the business)
Define internal environment
The resources and capabilities of an organisation
What is PEST analysis?
- Political factors
- Economic factors
- Social factors
- Technological factors
What is the aim of a PEST analysis?
Identifies and assesses the likel yimpact of external factors beyond the control of the firm which may constrain its business activities
Define SWOT analysis
An asssessment of the firms current internal operationall strengths, weaknesses and external opportunities and threats
List 8 areas of potential strenghts and weaknesses
- Leadership, management and culture
- Staff skills, attitude, experience and motivation
- Products: range, brand image, quality and life cycle stage
- Supply chain: access to resources, suppliers and distribution network
- Economices of scale and productivity
- Financial resources
- Technology: research and development, patents and copyright
- Capital: equipment and premises
List 3 examples of opportunities
- Economic upturn
- Opening up of overseas
- Market deregulation
List 2 threats
- Economic downturn / entry of a highly competitive rival into the market
Any group with an interest in an organisation's performance
List the 9 typical stakeholders and their objectives
- Owners; profit and capital gain from increasing share price
- Managers: high salaries and benefits from job satisfaction
- Employees: high wages, long holidays and good working conditions
- Customers: low priced, good quality products
- Suppliers: paid on time and repeat business
- Creditors: loan paid back on time, with interest
- Community: jobs and no harmful spillover effects
- Government: employment and a source of taxes to pay for public services
- Competitors; maintain a price and quality advantage over its rival
Identify shareholder objectives
Maximise shareholder value e.g rising dividends and share prices
List 3 stakholder conflicts
- Rise in wages for employees, increases costs and reduces profit for owners
- A price rise may increase profits but disappoint customers
- Delaying the payment of bills, improves cash flow but loses goodwill of suppliers
Define shareholder value
The financial benefits, shareholders gain from holding shares in a company: dividends and capital gains from share price increases
Risk and Reward
Explain the link between risk and reward
Profit is the reward for risk-taking. Low risks offer low profits
Why does decision makiing involve risk and uncertainty?
Decisions are taken on the basis of available data and assumptions about the future.
How can risk and uncertainty be reduced?
Research and planning can reduce risk. Decision makers need to wiegh up the benefits and their probability with costs.
How does the type of product affect the risk culture of a business?
Firms operating in high-tech industries dominated by research and development, take risks by launching new products or fail.