The Strategy Process (L3 ??)

What questions must be addressed during a Competitive Advantage Test?

- In regards to sustainable competitive advantage, is it difficult for rivals to imitate the strategy? - Is the competitive advantage durable and long lasting?

What is corporate strategy and who orchestrates it?

- The overall companywide game plan for managing a set of businesses - Orchestrated by the CEO and other senior executives

What questions must be asked to define the mission of a business?

- Who are our customers? - What customer needs are being satisfied? - How are we satisfying customer needs?

What are some examples of financial objectives?

- an x percent increase in annual revenues - annual increases in after tax profits of x percent - annual increases in earnings per share of x percent - annual dividend increases of x percent - increased shareholder value in the form of an upward trending stock price

What are three areas of the Fit Test?

External Fit: - does the strategy fit the current competitive and market environment? Internal Fit: - How efficiently are the companies resources and competencies exploited? Dynamic Fit: - Can the strategy be adapted to changing circumstances

Managing strategy, in regards to progression--including its vision, mission, objectives, and approach to strategy implementation-- is what?

Never final, an ongoing process

What two strengths does a performance test focus on? What questions are asked therein?

Profitability and financial strength: - does the strategy lead to profits? - is the financial strength of a firm enhanced? Competitive strength and market share: - does the strategy strengthen the competitive position of the firm compared to its rivals? - is the extension of market share supported by the strategy?

What are objectives?

an organization's performance targets - the results and outcomes management wants to achieve

What are some examples of sources of sustainable and competitive advantages, of which can be defined by the competitive advantage test?

brands, exclusive access to resources, knowledge about processes and technologies (patents)

How do you create a balanced scorecard?

by augmenting traditional financial objectives with: - the company's relationship with its customers - its key internal processes - its learning and growth NOTE: - these all comprise strategic objectives - different market situations, strategies, and environments require different scorecards

What are two main objective areas?

financial and strategic objectives

What are values?

guiding principles, beliefs, traits and behavioral norms (explicit or implicit) that serve as guidelines for employees' behavior and company operations in pursuing its strategic vision and strategy

When do strategic visions become real?

only when the vision statement is imprinted in the minds of organization members and then translated into hard objectives and strategies

What does a mission describe?

the company's present state and purpose

Why can a balanced scorecard be used for the various levels of an organization, ranging from a SBU to the individual?

to ensure the alignment on long-term organizational goals

What are some key characteristics value should have in relation to an organization's strategy?

- strategic alignment of employee behavior to corporate vision and mission - integration into corporate culture, supported by the top management (degree of relevance varies between firms) - communicated effectively to employees - motivating effect

Why should we establish major goals?

- they provide the organization with a sense of direction - they stretch the organization to higher levels of performance

What questions are asked for the action agenda for implementing and executing strategy?

- what to change/improve? - how to get it done?

What are some examples of strategic objectives?

- winning an x percent market share - achieving lower overall costs than rivals - overtaking key competitors on product performance or quality or customer service - surpass rivals performance (in technology capabilities, product variety and scope, brand reputation, etc.)

What are three functions a vision serves?

1) it helps to make sense - for the organization and the individuals - reduces complexity and structural requirements 2) it needs to be motivating - it can help to realize a specific desired image of the future state of the firm 3) it is guiding actions and activities - it allows the pursuit of behavior of each individual

What are the five stages of the strategic process?

1) vision and objective building 2) strategic analysis 3) strategy formulation 4) strategy implementation 5) evaluation

What does a performance test evaluate?

whether the strategy contributes to company performance

What does a Competitive Advantage Test evaluate?

whether the strategy is generating a sustainable competitive advantage

What is does the Fit Test evaluate?

whether the strategy matches the external and internal conditions

What should objectives be?

- specific, measurable and ambitious goals the management wants to fulfill at a fixed point in time - concrete steps towards achieving the company's vision

What does a vision describe?

a route a company intends to take in developing a better future state and lays out the future strategic course. It is a "dream with expiration date". After that you need a new vision.

What do operating strategies do and who orchestrates them?

- add detail and completeness to business and functional strategies - provide a game plan for managing specific operating activities with strategic significance - orchestrated e.g. by brand managers, operating managers of plants, distribution centers, etc.

What do functional area strategies do and who orchestrates them?

- add relevant detail to the hows of overall business strategy within each business - provide a game plan for managing a particular activity in ways that support the overall business strategy - orchestrated by the heads of major functional activities within a particular business

Managing the strategy implementation process includes what?

- building an organization with competencies, capabilities, and resources to execute strategy - marshaling resources behind the drive for strategy execution - instituting policies and procedures that facilitate strategy execution - adopting best practices and striving for continuous improvement - installing information and operating systems that enable personnel to carry out strategic roles proficiently - tying rewards and incentives directly to the achievement of strategic and financial targets - instilling a corporate culture that promotes good strategy execution - exercising strong leadership to drive execution forward and attain operating excellence

What do you look at in an external analysis?

- competitive environment - market conditions - customer demand - opportunities and threats

What observations are made during the evaluation of performance?

- failures in strategy formulation and/or implementation - changing external conditions - new opportunities of which can lead to initiative corrective adjustments

What are the benefits of objectives?

- focused efforts and alignment to overall strategy - control of company performance - employee motivation

What is business strategy and who orchestrates it?

- one for each business unit the company has been diversified into - how to strengthen market position position and gain competitive advantage - actions to build competitive capabilities -orchestrated by the general managers of each business unit often with input from the heads of functional areas

What do you look at in an internal analysis?

- resources - competencies - internal systems and processes - strengths and weaknesses

What are the further components of Stage 1?

Vision Mission (and purpose) Values (e.g. guiding principles) - which all comprise the vision and mission statement Objectives - which comprises target planning, and is the hoped outcome of VMV