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,CHAPTER 2: OVERALL ORGANISATION PERFORMANCE:
• look at how events in micro/market/macro environments have positive/negative/neutral impact on
business performance —> implement strategies
1. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO IDENTIFY
STRATEGIES TO IMPROVE PERFORMANCE:
• new problem —> new solution
• creative thinking: identifying problem consumer is not aware of yet & finding solution
-if customer is unhappy —> takes business elsewhere (power of buyer)
• aim of finding creative solutions: create & maintain competitive advantage
• fast changing world —> shorter product life cycle —> business must constantly adapt
• possible steps for problem solving process:
-identify resource gap & obtain resource
-explain impact on business & consider different solutions
-choose best solution & explain it in breath & depth
2. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO
IDENTIFY STRATEGIES TO IMPROVE PERFORMANCE:
• pros & cons chart: -decision based on advantages/disadvantages
• decision tree: -flow chart showing different outcomes to 1 event (shows consequences)
• value chain analysis: -aim to add value for customer (satisfied customer -> successful business)
-manufacturing environment: raw material (input) —> valuable product (output)
-service rendered: time/knowledge/systems (input) —> service (intangible product)
-looks at entire business process to decide where value is added
-essential activity but doesn’t add value —> outsourced
• PESTLE: -specific factors impact business —> strategies formed to overcome challenges &
capitalise on opportunities
• SWOT analysis: -internal & external environments (S+W= internal issues // O+T= external issues)
• Delphi technique: -obtaining expert’s opinion without engaging face to face
-anonymous: prevents personal opinions preventing members from expressing
thoughts
• resource based approach:
-business finds out what resources are of strategic importance (help create competitive advantage)
-resources: tangible (property/materials) & intangible (skills/morale)
-business’ problem determines resources needed for solution
,• balanced score card (BSC):
-developed by Kaplan & Norton
-describes key outcomes business wants to evaluate to improve outcomes
-management has to focus on important issues because they create value
-develop plans/strategies to create/maintain/improve comp adv.
-4 elements: >financial perspective: maximum utilisation & minimum costs
>customer perspective: how customer sees business + expectations
>internal business perspective: innovative products/management of operations/social
investments to improve
>learning & growth perspective: employees improve to create value/intangible assets
(intellectual property/info)/leadership, accountability, etc)
3. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO IDENTIFY
STRATEGIES TO IMPROVE PERFORMANCE:
• strategic management: top management analyses events (over time: trend / surprise: crisis) —>
decisions/actions taken in response —> forms business strategies
• to formulate successful POA —> must look at how to create competitive advantage
• must have clear understanding of vision/mission —> business wants to become/what’s being done)
• vision & mission formulated —> must outline long & short term objectives
• business must align present situation & what is desired in future (initiate wanted change)
• objectives formulated —> strategies designed & implemented to achieve
• strategy: POA to achieve desired outcome
GENERIC STRATEGIES:
• low cost strategy:
-business gets access to cheap raw materials
-costs reduced through efficiency (mass production/technology/low cost manufacturing)
-activities that don’t offer cost benefits —> discontinued/outsourced
-strategy works best if business has big market share —> higher turnover volumes —> high revenue
• focus strategy (niche market):
-all efforts aimed at specific market segment based on geography/culture/age/hobbies/etc
-unique group has different needs to rest of target market (customer’s distinct preferences —> catered for)
-niche must be big enough/have growth potential to make it valuable
-business must have expert knowledge of niche market & ability to develop products for them
,• differentiation:
-all efforts aimed at providing unique product/service —> ensure customer loyalty (maybe charge premium)
-uniqueness based on: distribution & marketing efforts/quality/after sales support/product features
-difficult for competitors to copy —> competitive advantage
-continuous redevelopment of product —> stay abreast of changes in environment —> successful
CORPORATE STRATEGIES:
• corporate combination:
-joint venture: 2/more businesses enter agreement to combine resources —> improve both’s functioning
-merge/takeover: 2/more businesses combine & individual businesses don’t exist separately = 1 new
• decline/defensive:
-retrenchment strategy: business size/diversity of products sold reduces —> expenses reduced & improves
financial position
-divestiture: business sells off some operations because assets used in operations are under-utilised &
hampers financial performance
-liquidation: business bankrupt —> all assets sold to pay for debts —> business ceases to exist
• growth:
-aims to grow business turnover & sales volume (Ansoff’s growth matrix)
MARKET PENETRATION PRODUCT DEVELOPMENT
-existing market/products used to expand (get more -new product/modifying product offered to
customers/sell more product) existing market
-tactics: lower pricing/more intensive distribution
MARKET DEVELOPMENT DIVERSIFICATION
-existing product —> new market -new market & new product
existing new
INTEGRATION STRATEGIES:
• forward integration:
-business takes over distributer —> eliminates profit-adding middleman & reduce ultimate selling price
• backward integration:
-business buys out supplier/creates manufacturing plant —> ensures will always have supply & cheaper
because no profit-adding supplier
• horizontal integration: -business takes over one of its competitors
,CHAPTER 2: OVERALL ORGANISATION PERFORMANCE:
• look at how events in micro/market/macro environments have positive/negative/neutral impact on
business performance —> implement strategies
1. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO IDENTIFY
STRATEGIES TO IMPROVE PERFORMANCE:
• new problem —> new solution
• creative thinking: identifying problem consumer is not aware of yet & finding solution
-if customer is unhappy —> takes business elsewhere (power of buyer)
• aim of finding creative solutions: create & maintain competitive advantage
• fast changing world —> shorter product life cycle —> business must constantly adapt
• possible steps for problem solving process:
-identify resource gap & obtain resource
-explain impact on business & consider different solutions
-choose best solution & explain it in breath & depth
2. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO
IDENTIFY STRATEGIES TO IMPROVE PERFORMANCE:
• pros & cons chart: -decision based on advantages/disadvantages
• decision tree: -flow chart showing different outcomes to 1 event (shows consequences)
• value chain analysis: -aim to add value for customer (satisfied customer -> successful business)
-manufacturing environment: raw material (input) —> valuable product (output)
-service rendered: time/knowledge/systems (input) —> service (intangible product)
-looks at entire business process to decide where value is added
-essential activity but doesn’t add value —> outsourced
• PESTLE: -specific factors impact business —> strategies formed to overcome challenges &
capitalise on opportunities
• SWOT analysis: -internal & external environments (S+W= internal issues // O+T= external issues)
• Delphi technique: -obtaining expert’s opinion without engaging face to face
-anonymous: prevents personal opinions preventing members from expressing
thoughts
• resource based approach:
-business finds out what resources are of strategic importance (help create competitive advantage)
-resources: tangible (property/materials) & intangible (skills/morale)
-business’ problem determines resources needed for solution
,• balanced score card (BSC):
-developed by Kaplan & Norton
-describes key outcomes business wants to evaluate to improve outcomes
-management has to focus on important issues because they create value
-develop plans/strategies to create/maintain/improve comp adv.
-4 elements: >financial perspective: maximum utilisation & minimum costs
>customer perspective: how customer sees business + expectations
>internal business perspective: innovative products/management of operations/social
investments to improve
>learning & growth perspective: employees improve to create value/intangible assets
(intellectual property/info)/leadership, accountability, etc)
3. IMPORTANCE OF CREATIVE THINKING & PROBLEM SOLVING TECHNIQUES TO IDENTIFY
STRATEGIES TO IMPROVE PERFORMANCE:
• strategic management: top management analyses events (over time: trend / surprise: crisis) —>
decisions/actions taken in response —> forms business strategies
• to formulate successful POA —> must look at how to create competitive advantage
• must have clear understanding of vision/mission —> business wants to become/what’s being done)
• vision & mission formulated —> must outline long & short term objectives
• business must align present situation & what is desired in future (initiate wanted change)
• objectives formulated —> strategies designed & implemented to achieve
• strategy: POA to achieve desired outcome
GENERIC STRATEGIES:
• low cost strategy:
-business gets access to cheap raw materials
-costs reduced through efficiency (mass production/technology/low cost manufacturing)
-activities that don’t offer cost benefits —> discontinued/outsourced
-strategy works best if business has big market share —> higher turnover volumes —> high revenue
• focus strategy (niche market):
-all efforts aimed at specific market segment based on geography/culture/age/hobbies/etc
-unique group has different needs to rest of target market (customer’s distinct preferences —> catered for)
-niche must be big enough/have growth potential to make it valuable
-business must have expert knowledge of niche market & ability to develop products for them
,• differentiation:
-all efforts aimed at providing unique product/service —> ensure customer loyalty (maybe charge premium)
-uniqueness based on: distribution & marketing efforts/quality/after sales support/product features
-difficult for competitors to copy —> competitive advantage
-continuous redevelopment of product —> stay abreast of changes in environment —> successful
CORPORATE STRATEGIES:
• corporate combination:
-joint venture: 2/more businesses enter agreement to combine resources —> improve both’s functioning
-merge/takeover: 2/more businesses combine & individual businesses don’t exist separately = 1 new
• decline/defensive:
-retrenchment strategy: business size/diversity of products sold reduces —> expenses reduced & improves
financial position
-divestiture: business sells off some operations because assets used in operations are under-utilised &
hampers financial performance
-liquidation: business bankrupt —> all assets sold to pay for debts —> business ceases to exist
• growth:
-aims to grow business turnover & sales volume (Ansoff’s growth matrix)
MARKET PENETRATION PRODUCT DEVELOPMENT
-existing market/products used to expand (get more -new product/modifying product offered to
customers/sell more product) existing market
-tactics: lower pricing/more intensive distribution
MARKET DEVELOPMENT DIVERSIFICATION
-existing product —> new market -new market & new product
existing new
INTEGRATION STRATEGIES:
• forward integration:
-business takes over distributer —> eliminates profit-adding middleman & reduce ultimate selling price
• backward integration:
-business buys out supplier/creates manufacturing plant —> ensures will always have supply & cheaper
because no profit-adding supplier
• horizontal integration: -business takes over one of its competitors
