Week 1 - Analysing the external environment

Strategy is the long term director of an organisation

PESTEL Framework identifies opportunities and treats in the external
environment
Porters Five Forces identifies opportunities and treats in the
competitive/external
Analyse level of each force and conclude industry
attractiveness
o Threat of entry
Scale, differentiation, legislation, access to supply/distribution
o Bargaining power of buyers
Concentrated buyers, low switching costs, buyer competition
threat
o Bargaining power of suppliers
Concentrated suppliers, high switching costs, supplier
competition threat
o Competitive rivalry
Competitor balance, industry growth, high fixed costs, high
exit barriers, low differentiation
o Threat of substitutes
Product substitution, substitution of need (teleconferencing vs
travel)
Access to supple, retaliation, legislation, differentiation
Strategic groups to define industries
o Firms emphasising similar strategic dimensions and strategies
Competition between firms in the group is greater
More heterogeneity in the performance of firms
o Value of strategic groups as an analytical tool
Identifies barriers to mobility that protect a group from
attacks by other groups
Identify groups whose competitive position may be marginal
Chart the future direction of firm strategies
Implication of each industry trend for the strategic group as a
whole

Week 2 Analysing the internal environment

Resources are tangible and intangible inputs the firm possess

o Financial, organisational, physical, technological, human, innovation,
reputational
Capabilities represent the firms ability to combine resources and deploy
them to achieve objectives
o Develop over time as a result of complex interactions between firm
resources
o Are based on the development, transmission and sharing of
information and knowledge
o Become important when they are unique combinations that create
competitive advantages
Identify if they are core competences
o Four criteria
Valuable
Enable firm to improve efficiency/effectiveness
Enable a firm to exploit opportunities/neutralise threats
Rare
Possess by few rival firms uncommon resources
Inimitable
Complexity, causal ambiguity (unable to understand
how the competencies can establish a competitive
advantage), culture and history, change
Non-substitutable
Product/service ebusiness vs retail facility
Competence craftsman vs machines
o Benefits
Identifies resources, enables evaluation of adequacy of
resources to take advantage of the external environment
Recognises the interaction of resources in a firm
o Limitations
Does not identify processes to achieve capabilities

Value Chain Analysis

Benefits
Identifies value adding vs non-value adding activities
Interrelationships
Limitations
Does not address resources
Too simplistic and may not be entirely appropriate for service
industries

Week 3 Strategy Development and Analysis

Mintzbergs 5 Ps defines strategy as

o Plan course of action
o Ploy- manoeuvre to outwit an opponent
o Pattern stream of actions consistent
o Position match between organisation and environment
o Perspective organisations character

Corporate Strategies where to compete

o Undiversified
o Related diversification product/market perform the best
Exploits economies of scale
Transfer core competencies between units
Exploit superior internal processes
Increase market power
o Unrelated diversification
Business strategies how to compete in a particular industry
o Porters generic strategies
Differentiation
Cost Leadership
Focus strategies
o Assessing strategies
Suitability compatible with the current and expected
environment

Feasibility does the strategy work in practice

resources/capabilities
Acceptability does it meet stakeholder expectations
Risks, returns and reactions

Week 4 performance measurement systems

PMS measure performance comparing results with targets

o Conventional measures of financial performance
o Contemporary wider variety of measures
Features of good PMS
o Links strategies to goals
o Simple
o Controllability
o Emphasise the positive
o Is timely
o Benchmarking
o Embrace participation and empowerment
o Income only a few performance measures
o Linked to rewards
Financial performance measures represent
o Tool of financial management
o Overall business objective
o Mechanism of motivation and control
Balanced Scorecard
o Strategy Map
Financial, customer, internal business process,
learning/growth perspectives
Choose measures/targets and initiatives to carry out the
strategy
o Limitations
Difficulty in evaluating relative importance of measures
Large number of measure dilute the impact
Too few measures do not represent the whole strategy
Requires quantification of qualitative data
Time and expense
Requires a developed information system
Linkages between measures can be too simplistic
Linkages to reward systems may be tenuous

There are also unfavourable behavioural implications

Week 5 Shareholder value creation

Traditional approach / shareholders
o Accounting methods - simple and commonly used
o Economic value added = NOPAT WACC * capital employed value
added above minimum return
Adjustments NOPAT eliminate effects of gearing and other
distortions
Interest & R&D
Three methods to increase EVA
Improve operating profits
Draw down more capital
Free up capital
o Rappaports SVA
Discounted Cash flow Analysis
7 Drivers
Sales Growth, OP Margin, Tax Rate, NWC, Fixed Capital,
COC, Value Growth Duration
Week 6 Managing Customer Value and Relationships

Potential Costs of CRM

o Resources intensive
o Long lead times in developing
o Required cross functional co-operation

Nuamann suggests 5 dimensions of customer value

o Product quality
o Price
o Service quality
o Image
o Relationship

CPA customer profitability analysis

o Allocated SG&A Costs after Gross Margin

Define as Passive, Savvy, Cheap, Aggressive matrix of gross

margin and cost to serve
o Aids in customer portfolio management and inprove customer
profitability
o Managing unprofitable customers
Reassess, educate, renegotiate, migrate, terminate
o Strength of providing a strategic focus on profitable customers
however provides only a static single period snapshot of profitability
and only informs about historical performance
Managing customers using CLV
o Butterflies, True Friends, Strangers, Barnacles - loyalty/profitability
matrix
o Advantages future oriented, multi=period analysis, considers
profitability changes
o Limitations not a well-grounded and difficult to estimate CLV
factors
o

Week 7 Managing Supplier Relationships

Traditional view arms length transactions to minimise supplier power

Now more emphasis on cooperative buyer-supplier relationships
o Tend to have more superior performance in the long run
o However costly to set up and maintain thus costly to switch away
from an inefficient supplier
Outsourcing reasons
o Greater flexibility for the buyer to focus on other competencies
o Decreased design cycle-times due to specialisation
o Enhanced personnel depth and technical knowledge
o Reduced risk for components and technology development
o Access to new products and processes
What should be outsourced strategic phase
o Look at a matrix of strategic importance of competence and level of
competitiveness relative to the supplier
Transition phase
o Negotiation of contract and ensure smooth supplier integration
Operational phase
o Managing the relationship and reviewing the contract
Risks of outsourcing
o Technical risk

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Commercial risks
Contractual risks
Performance risks

Arms-Length vs Strategic Partnerships

Total Cost of Ownership example

Week 8 Managing Knowledge as a Strategic Resource

There may be a knowledge or strategic gap which are linked

Sveibys Three Asset Categories

o External Structures brand names
o Internal Structure S&A
o Individual Competence professional skills
Intangible Asset Monitor use indicators
Indicators of Growth
Renewal/innovation
Efficiency
Risk/Stability
Human Capital Readiness finds the gap between skills
o Identify Strategic Job Families
o Build a competency Profile
o Assess HCR
o Invest to fill gaps

Week 9 The Environment and Engaging in Corporate Social Responsibility

Carrolls definition of Corporate Social Responsibility

o Economic, Legal, Ethical, Philanthropic

Environmental Quality Cost Model

o Prevention Costs
o Detection Costs
o Internal Failure Costs
o External Failure Costs

Reporting Environmental and Social Performance

o Triple Bottom Line Social, Economic, Environmental
Problems voluntary and unregulated
Sustainability Reporting extension of TBL
o Environmental Reports

Week 10 - Managing Strategic Risks

Operation Risk manufacturing processes

Competitive Risk changes in the competitive environment
Asset Impairment Risk an asset loses a significant portion of its value
o Financial impairment
o Intellectual property rights impairment
o Physical impairment
Risk Consequences
o Franchise Risk
Value of entire business erodes from loss in confidence by
constituents
Simons argues for the use of four levels of control
o Belief Systems
o Boundary Systems rules, explicit guidelines
o Diagnostic Control Systems traditional feedback systems
Measurable outputs of a process, standards and feedback
loops
o Interactive Controls Systems looks at uncertainties
Looks at opportunities and threats