Introduction to Strategic Management
what is strategy?
- plan of action by which an organisiation aims to achieve its objectives
what is strategic management?
- Strategic managemnt is the process of identifying a plan of action to enable the organisation to meet its objective
what does it involve ?
-Analysing internal/external enviorment -setting objectives -monitoring of performance
Stages in developing a stratergy
mission--> Aim-->objectives-->strategies--> Tactics
What is Mission?
This means the overall purpose of the organisation - reason for being/exisiting
What is Mission statement?
Sets out purposes and values of the organisaton.
why are mission statement written?
-summerise aims, purposes and values of the business
-helps when coming to plan business activities
Mission statement Examples
excellence in everything
to provide the best customer service to ensure customers feel happy
to make sure our food is delisiously tasty
Aim and Objectives
what is an aim?
Is the prime business objective for example .... survive, grow, make a proffit
what are objectives
specific target an organistion sets for itself
exampe to increase sales by 10% by the end of 2014
Specific - a clear statement what is to be achived
measurable - the desired outcome that can be measured
agreed- staff and departments cocur the rarget attainable
realistic - has to be achivable
Corporate - targets the whole business is trying to achieve
Stakeholder- the aim of any group with an interest in organisations performance
Stategic- long term objectives
Tactical- short term objectives
Business objectives may change through time
- may achieve an objective and will need to move onto another one
(e.g. survival in the first year may lead to an objective of increasing profit in the second year).
- The competitive environment might change, with the launch of new products from competitors.
- Technology might change product designs, so sales and production targets might need to change.
Tactics and strategy
plan by which aims and objectives will be put into action.
importance of these
- helps plan
element of focus
specific programs of work/activites which help to achieve objectives.
strategic - long term tactical- short term
TACTICAL AND STRATEGIC OBJECTIVES
long term ... here is an example
increase sales by 30% by 2014
short term.... here is an example
have point of sale displays in 90% of supermarkets by 2015
Factors influencing startegy
In deciding on a strategy managers take into account of ...............
- stakeholders attitudes to risk and reward
- the mission, aims ect
- maturity of the business
- internal/external envioroment
- risk and reward.
Risk and reward
to take a chance of loosing
something given in return for work done
Factors influencing risk
- nature of market
What is planning?
management process of establishing objectives and selecting strategies/tactics required to achieve them.
purpose of planning
- look ahead
- assess current position
- identify appropiate future actions
done on the 18th march 14
An audit is an investigation into an area of business activity.
types of audits undertaken in situational analysis.
- pest analysis
- competitor analysis
- swot analysis
what is pest analysis <3 ?
pest analysis is an sudit of the political economic social and technoligical factors in the firms external enviorment.
aim of pest
identifies and assesses the likely impact of external factors beyond the control of the firm which may constrain its business activites.
is as assesment of the firms current internal operational strengths and weaknesses and oppertunities and threats.
outcome of swot analysis
used to help inform strategy
relate to the organisations own internal current operations
for example its..
WEAKNESSES (p.s jonny i did do these cards)
Are current the business does less well and cause competitive disadvantage
- poor reputation
- out of date equipment
are external events that offer potentiaal to meet objectives
- economic upturn
-opening up of over seas
external evetns that present a challenge to the firms economic downturn. managers adapt strategy to take action to overcome weaknesses and threats.
Stakeholders are any gruop with an interest in an organisations performance
what does each stakeholder want ?
- something good to one stakeholder but the opposite to another
- price rise may increase profits for ownwer and managers
- however may also dissapoint some customers.
CONFLICT CONFLICT CONFLICT CONFLICT
what is a shareholder?
- shareholder is a part owner of a company.
E.G a business buying a share in another busienss
Risk and Reward
it is important for a busines to asses the potential risks and rewards before carrying out a particualr business activity.
how can risk and uncertainty be reduced
- research and planning can reduce but not eliminate risk and uncerainty
what is market structure?
characteristics of a market e.g the number of firms in an industry, barriers to entry and he extent of the competition.
main catorgories of market structure
perfect competition - firms producing identical products
monoploisitc compettion - firms producing slightly different products
oligopoly - a few large firms dominate the market
monopoly - a single firm supplies the market
barriers to entry
barriers to entry are obstacles that restrict firms breaking into a market and competing with establish firms.
types of this are
- the law
- high entry costs e.g hiring staff, equipment ect
impact of increased competition on consumers
+ more choice
+ lower prices
+ improved products
impact of increased competition on producers
they have to
- maintain low prices
- low prices = higher demand
high prices= lower demand
what is product differentiation?
occurs when firms make their product distinctively diff from good or services offered by rivals.
porters 5 forces model
How can the competitiveness of an industry be assessed?
Porters 5 Forces model
- The threat of entry
- the threat of substitutes
-the bargaining power of buyers
-The bargaining power of suppliers
- the drgree of rivalry between existing competitors
Time Series anallysis
what is forecasting?
attempt to estimate future value of a variable e.g sales
it can be used in planning
Benefits of forecasting
- enables firm to have in place appropriate ....
-- staff cash flow levels
- forcasts are only a prediction
- external factors make forecast uncertain
-- economical factors
-- changing consumer tastes / trends
-- natural disasters.
TYPES OF FORECASTING
two main types of predicting future events
use personal judgement and business eperiences.
use past data
e.g. time series analysis
Time series analysis
what is it ?
- It is a forecasting tool
- it helps businesses to control their stock more effectively.
- helps provide an accurate forecast
- enabales more effective budgeting
- common method used by managers
Limits of time series
- only reliable depending on the quality of the info used.
- assumes history will repeat itself
- doesnt take into account changes in business objectives
- - external enviorment
- its not an ideal forecasting tool.
this method (ts) can create some fluctuations in the data and so make figures appear smoother. technique called moving averages is applied.
trend - underlying movement of data
cyclical variaition- only applied to annual data
seasonal variation- changes during a particualr time of year
its the process of selecting course of action between several alternatives
Examples of decision making
- disributing or retaining profit
- targeting domestic or overseas markets
- locating production in the uk or overseas
- spending it's promotion budget on advertising or direct sales
it involves risk and uncertainty as decisions are taken on the basis of available data and assumptions about the future.
(these below are about where decisions are taken in the chain of commond)
centralisation-decisions are taken at the top of the hierachy.
decentralisation- authority is delegated down the chain of command.
how can risk and uncetainy be reduced?
research analysis and the use of decision tools such as decision trees and forecasts.
involving key stakeholders is motivational and improves the quality of decision.
DECISION MAKING / OPPORUNITY COST
Its the cost of making a certain decision
buying new machines to replace workers
oportunity cost = it will be expensive and other workers may leave due to feeling like business isnt loyal to its workers. but if business didnt replace macinery with workers productivity would remain low.
it outlines potetial growth strategies by increasing sales in existing or new markets with existing or new products.
ansof matrix identifies four options for achieving growth.
- market penetration
- product development
- market penetration
this is where firm focuses its activites on building sales of an exsiting product in a market in which the business is alrady operating
seeks to find a new market for an existing product.
launching a new or improved product to an existing market
e.g orange flavoured KIT KITS
this involves targeting a new market with a new product.
MANAGEMENT INFORMATION SYSTEMS
its the method of collecting processing storing and and communicating data for use in decision making.