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Clear objective necessary if the company wants
all its resources to be thinking and working toward the same goals. Not too public about strategic objective’s
because competitors might use this information to their benefit.
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(BM SPEED GAS)
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V: Vision
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Long term high level
view of what the company is about, what markets it should be in and where it should
be going.
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B: Business
definition
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Questions associated
with the business the company is in are: What business do we want to be in?
Is the company in control of all of its production stages? Is the value channel
working effectively? Do we target correct and position ourselves correctly?
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M: Mission
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Vision and Business
definition are building blocks for mission statement. People in company already know it,
description of what the company does.
Trade-off between giving employees some direction and keeping
competitors In the dark
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S: Shareholder
wealth
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primary objective of a company is to
maximise the wealth of those who own it, namely the shareholders.
Shareholder wealth =Expected income stream/
Interest rate
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P: Profit
maximization
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E: Means &
Ends
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The difference between means and ends, i.e.
what is to be achieved ought to be differentiated from how it
is to be achieved;
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E: Ethics
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Act in a way which is consistent with their
moral outlook.
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D: credibility,
quantifiable, disaggregated, economic finance
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Quantifiable - Company objectives can be expressed
in terms of a single variable, such as a target rate of return on investment.
being associated with
·
high
quality products
• having a happy and stable workforce
• having a dominant market share
• generating a specified rate of return on
investment.
Disaggregate - interpret the aggregate
objective in terms which are realisticand achievable, and make sense to
managers at each level in the company.
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G: Growth vector
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strategic and international perspectives
of business research can be brought together. The former refers to the
interactions between firms' capabilities and the threats and opportunities
they encounter in the environment. The latter refers to consideration of the
international options available to firms. A combination of the two approaches
is necessary in analyzing and evaluating international decisions in the light
of strategic goals.
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A: Gap Analysis
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Concerned with the gap
between expected and desired future states.
What if scenarios.
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S: Stake holder
map
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Shareholder’s Managers,
Employees, Suppliers, Customers (Buyers), Creditors, Local community,
Government
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Determination of GNP and business
cycles,GNP elasticity, interest rates, inflation,
unemployment and their
relationship to company costs, revenues and profits
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(FUSE PC)
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F: Forecasting
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Forecasting /
Speculation about the future. Direction
of changes
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U: macroeconomic
analysis: Unemployment, inflation, interest & exchange rate
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Low level unemployment,
worker scarcity puts wages up (push inflation) cost of producing rises. Price
rise – Inflation rise.
Aggregate demand is
larger than aggregate supply, prices will rise companies can clear inventory
at higher prices (pull inflation)
Exchange rate
fluctuation affect currency affected by trade of goods and services.
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S: Scenarios
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Speculating about the future and assessing
the company’s ability to respond
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E: Environmental
scanning
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Takes PEST analysis a step further: it is an
active attempt to predict even large contingencies. Identifying and tracking
potentially important changes
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P: PEST (Political,
Economic, Social, Technical)
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Checklist of factors which may
affect the company in the future
Political
– example legislation
changes, taxation
Economic – inflation rate, exchange rates, forex speculation , market, employed
capital
Social – change in people’s perception
Technological – changes has profound influence on economies
and business. Product life cycle
short
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C: Competitive
advantage of nations
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National market factors which
relate to the source of competitive advantage
Competitive reaction and The economic Environment – Information about what happens in the
economy could prevent company form having deal with a falling market share
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(ODDS SEQ.)
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O: forms of competition: perfect, imperfect, oligopoly, monopoly
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Perfect - product is homogeneous, there are no barriers to entry, no economies
of scale, universal availability of information on prices and quantities and
a large number of sellers and buyers; the result is that no firm can charge
more than the market price and the demand curve horizontal
Imperfect - barriers to entry are a market imperfection
which enable companies
to make monopoly profits. In the personal
computers case one course
of action was to attempt to introduce the imperfection
of nonhomogeneity,
i.e. to differentiate the product further;
Oligopoly there are relatively few competitors in a market the likely reaction
of
competitors to changes in pricing
and marketing strategy
Monopoly the industry is comprised of only one producer, the monopolist, whose
demand curve is the industry demand curve for the product. This demand curve
slopes from left to right because the company is not a price taker, i.e. it
can sell more by lowering the price. barriers to entry and product
differentiation.
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D: Differentiation
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Product positioning
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D: Demand & Supply, price determination, elasticity
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Interpreting the impact of changes
in market conditions
Demand factors:
DETERMINANTS OF MARKET SIZE: position of the demand curve, and
most of these are outside the control of the company.
• Product life cycle
• Business cycle
• Exogenous shocks
• GNP elasticity
• Exchange rates
DETERMINANTS OF MARKET SHARE: shift of the demand curve arising
from an action on the part of the company,
• Price
• Marketing
The factors which influence the total
market
demand curve, all of the variables
except for price affect the
position of the demand curve; it is
useful to think of the direction in which the
demand curve is likely to be
shifted by a particular change
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S: Segmentation
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Identify
groups of consumers with homogenous preferences - Key product variables (supply) Characteristics of the segments
(demand)
Identifiable –
sufficient # of common
features
Demand Related
– segment variables must
translate into demand terms, willingness to pay more for better product
Adequate size
– large enough to
generate a positive cash flow
Attainable – can reach with properly target marketing
campaign
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S: Strategic groups
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sets of firms in an industry which
are similar to one another and different from
firms outside the group on one or
more key dimensions of their characteristics
and strategy.
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E: Barrier of Entry
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structural barriers are outside
the control of the firm while
strategic barriers depend on
specific actions undertaken by the firm
Structural – size of the market, sunk cost
(exit cost), Control by legislation
or tacit agreement, Economies of scale, Experience effect:
Strategic barriers include limit
pricing and predatory pricing
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Q: Quantity
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(CHEFS COVER
BIG CAMPS)
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C: Competence
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Competitive performance at which a company is relatively good at. Pool of experience, knowledge, system that
exists in the whole company
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H: Human resource management
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Power culture:
one small group dominates
decision making does not work in large organizations
Role culture: people play certain roles and take part in
the organization through meetings, committees etc
Take culture: Companies specializing in certain tasks such
as travel agents and consulting companies
Personal
culture: the person architects
or artists, work alone in a larger whole.
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E: Economies of Scale
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As output increase, cost per unit produced decreases
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F: Cash Flow
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S: Shareholder value analysis
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C: experience Curve
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O: Opportunity cost
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Better return than its best alternative, The best alternative forgone is the
opportunity cost of the action chosen.
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V: Value Chain
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Primary
activities:
Inbound logistics, receiving sorting and handling
Operation: transforming inputs to outputs
Outbound logistics: move products to customers
Marketing and sales
Service
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E: Economies of Scope
|
idea refers to a reduction in unit cost as
the number of products is increased rather than the number of units produced.
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R: Ratio
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ROI Return on Investment
RONA Return on Net Assets
ROCE Return on Capital Employed
ROTA Return on Total Assets
Value Added
Earnings per Share
Gearing ratio
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B: Benchmarking
|
Competitive position assessed in relation to other companies in the
industry. Ie delivery time,
stockholding ratio, manpower turnover.
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I: Innovation
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Product portfolio up to date and renewed
steady flow of new products or product innovations ensure varied portfolio
with products in different stages of their lifecycle
Invention
Prototype
Patent
Development
Launch
Market exploitation
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G: Gearing
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C: Culture: power, role, task, personal
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A: Architecture
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M: Marginal Analysis
|
development of the notion that
only relevant costs should be taken into account in making pricing and output
decisions. The marginal cost principle is simple enough, being the change in
costs as output varies. In terms of the basic model:
Marginal cost = Outlayq+1 − Outlayq
where q = level of output
marginal cost excludes fixed cost,
it can be significantly lower than
average cost; thus when making
output and pricing decisions the marginal cost
can be used as a guide to the
minimum acceptable price.
carry on producing and selling so
long as the marginal cost is less
than the price
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P: joint Production
|
classic case of joint production
is that of a sheep, which produces both
wool and mutton
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S: Synergy
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The total is more than the sum of its components. Positive effects on
costs and marketing efforts but it is not clear what they are.
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(MERGED FLAPS)
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M: first Movers
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E: Elements of competitive advantage
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R: competitive Reaction
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G: strategic Groups
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E: ETOP Environmental Threat(-) Opportunity
(+) Profile
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D: perceived Differentiation
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F: Five forces
|
Threat of new entrants, Intensity of Rivalry, Bargaining power of
buyers, bargaining power of suppliers, Threat of substitutes
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L: product Life cycle
|
Introduction, Growth, Shake-out/competitive turbulence, Maturity,
Decline
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A: portfolio Analysis
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P: strategic advantage Profile
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S: market Share
|
Economies of Scale, The experiment effect, Volume effect
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(C FED SC)
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C: Corporate and business strategy
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F: cash Flow
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E: Expansion, entrenchment & Stability
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D: Differentiation
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S: Segmentation
|
segments based on variations from the
average consumer, and the marketing strategies which might be able to exploit
them.
group of
consumers within a broader market who
possess a common set of characteristics,
and consumers in a segment respond to
market mix variables in broadly the
same way. segmented, such as income, social class, geographical location, age,
sex,
family size, educational
background
see above 4 key groups
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C: Cost leadership
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(MAD PI)
|
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M: Mergers & acquisitions
|
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A: joint ventures & alliances
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D: Diversification: related & unrelated
|
There are four main
incentives to diversify: to
minimise risk, to capture economies of scope, to add
value through the parenting
function and to benefit from synergy.
Routine Based Diversification new resources need to be added to those currently available in the
company, but the same routines can be used to manage them
Resource Based Diversification producing outputs which utilise existing
resources but which require
different routines
Replication Based Diversification least risky form of diversification because it is based on an
expansion rather than a change in
the form of the organisation.
Unrelated
Diversification only resource shared is the
financial structure and control system.
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P: Pricing: leadership, limit, predatory
|
Price leadership: the dominant firm in the industry announces its price changes before
all other firms, which then match the leader’s price.
Limit pricing: attempt by a firm to erect an entry barrier by charging
a low price in order to deter entry; this
is only worthwhile if it has a cost
advantage and can set the price low enough
to deter entry but still make a
profit.
Predatory pricing: firm sets a price with the objective of driving new entrants or
existing firms out of business
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I: vertical Integration
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(MS. PET FANS)
|
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M: Managerial perceptions
|
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S: Sensitivity
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P: Payback
|
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E: Elements of competitive advantage
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T: game Theory
|
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S: Scenarios
|
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F: Familiarity
|
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A: risk Analysis
|
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N: NPV (Net Present Value)
|
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S: SWOT (
Strength, weaknesses, Opportunities, Threats)
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