Strategic Management - Useful Terms

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Competitive Advantage:

Exists when a firm’s strategy gives it an edge in:

• Defending against competitive forces
• Getting and keeping customers

Key to Gaining a Competitive Advantage - Convince customers firm’s product / service offers superior value:

• Offer buyers a good product at a lower price
• Use differentiation to provide a better product that buyers think is worth a premium price
• Do a better job than rivals of performing value chain activities efficiently and cost effectively
• Revamp value chain to bypass cost-producing activities that add little value from the buyer’s perspective

Core Competencies:

Types  of  Core Competencies:

• Expertise in networks and systems for e-commerce
• Speeding new/next-generation products to market
• Better after-sale service capability
• Skills in manufacturing a high quality product
• Innovativeness in developing product features
• Speed/agility in responding to new market trends
• System to fill customer orders accurately and swiftly
• Expertise in integrating multiple technologies

Distinctive Competencies:

• A company competence is the product of organisational learning and experience and represents real proficiency in performing an internal activity
• A core competence is a well-performed internal activity that is central (not peripheral or incidental) to a company’s competitiveness and profitability
• A distinctive competence is a competitively valuable activity that a company performs better than its rivals

Balanced Scorecard Approach:

This is a technique for turning corporate vision into strategy and action.

The balanced scorecard methodology involves simultaneously taking four different perspectives on the business:

• Financial Perspective monitors such measures as profitability, revenue growth and shareholder value
• Customer Perspective requires measures such as service levels, satisfaction ratings, complaints and the volume of repeat business
• Internal Perspective reports on the efficiency of internal  processes (workflow) and procedures using measures such as the cycle time to record or fulfil a customer order
• Learning and Growth Perspective is the key long-term predictor as it deals with employee issues: indicators here include intellectual assets as well as career and skills development

Objectives are set within each perspective and these objectives are linked together as causes and effects respectively. In this way every measure selected can ultimately be related to financial results.

Business Continuity Management:

According to the Business Continuity Institute ‘a realistic objective is to ensure the survival of your organisation by establishing a culture that will identify and manage those risks that could cause it to suffer’:

• Inability to maintain customer services
• Damage to image, reputation or brand
• Failure to protect the company assets
• Business control failure
• Failure to meet legal requirements

Every business should therefore develop a comprehensive business continuity plan

Business Process:

An inter-related, sequential set of activities and tasks that turns inputs into outputs, and includes the following:

• A beginning and an end
• Inputs and outputs
• A set of tasks (sub processes) that transform the inputs into outputs
• A set of metrics for measuring effectiveness'

Business Process Reengineering (BPR):

Goal is to fundamentally rethink and redesign business processes to achieve radical improvements.

Key aspects of BPR include:

• The need for radical change
• A cross-functional process perspective
• Challenging old assumptions
• Networked (cross-functional) organising
• Empowerment of individuals involved in the process
• Use of metrics tied directly to business goals

Business Process Reengineering (BPR) Failures:

Many companies have attempted reengineering, only to fail to realise the benefits they sought. Radical change is not an easy task.

In general, many companies find that too much change too quickly can do more harm than good. For example:

• Reasons reengineering fails to meet objectives
• Lack of senior management support at the right time and at the right places
• Lack of a coherent communications program
• Introducing unnecessary complexity into the new process design
• Underestimating the amount of effort (and cost) needed to redesign and implement the new processes
• Combining reengineering with downsizing

Business Process Reengineering (BPR) Success Factors:

In general, the success factors for BPR can be placed in three broad categories:

• Organisation readiness and human resourcing
• Methodology that is appropriate and systematic
• Purpose - specifically the clarity and validity of the BPR exercise

BPR must have clear goals in order to succeed. Specifically, there needs to be:

• A convincing business case for change - with measurable objectives
• Alignment between the proposed business processes, the IS that will be developed to support the new processes and a sustained company strategic direction

Business Strategy:

Business strategy is about recognising, creating and using opportunity in a changing environment in order to survive in the marketplace and achieve corporate goals against competition from other businesses  (Chaffey & Wood, 2004).

Company:

A company consists of all the activities and functions it performs in trying to deliver value to its customers.

Company Value Chain:

A company’s value chain shows the linked set of activities, functions, and business processes that it performs in the course of designing, producing, marketing, delivering, and supporting its product / service and thereby creating value for its customers.

A company’s value chain consists of two types of activities:

• Primary activities (where most of the value for customers is created)
• Support activities that are undertaken to aid the individuals ands groups engaged in doing the primary activities

DPA 1998 - Principle 7:

Appropriate technical and organisational measures shall be taken against unauthorised and unlawful processing:

• Technical and Organisational measures
• Encryption
• Digital Signatures - public key encryption can verify identity of authorised users
• Access to personal information (must be restricted, employees must be reliable, processors must offer adequate guarantees and undertake those processors under, contract)

e-Business:

The integration, through the Internet, of all an organisation’s processes from its suppliers through to its customers.

Boddy (2001) distinguishes between four levels of Internet use by a business, with increasing integration into core business processes at each level.  These levels are:

• information
• interaction
• transactions
• integration

e-Commerce:

The process of selling a product or service to the customer (whether a retail customer or another business) over the Internet.

Basic Internet Business Models:

• B-to-B: targets other businesses
• B-to-C: targets consumers
• B-to-E (employee): companies provide service to employees of other companies
• B-to-G: companies provide services to local, state and national governments
• C-to-C: Consumers interact with other consumers.

Web-based business mechanisms

• Auctions: Web-based auction site
• Reverse auctions: sellers offer items at buyer request
• Net markets: a place for buyers to meet sellers
• Portals: combined information, services and links to sites
• Brick & click: storefront plus Web site
• ASPs: business process functionality to customers that use the site for internal business processes

Identifying Key Metrics:

As part of understanding the “as is” process, another key task is to identify key metrics of business success, examples of such metrics include:

• Cost of production
• Cycle time
• Scrap and rework rates
• Customer satisfaction
• Revenues
• Quality

Information as an Asset:

Information assets have value:

• Data is expensive to gather and process
• The systems required for effective information retrieval are expensive
• Knowledge management is a factor in competitive advantage

Information Assets need protecting

• Legislative Requirements
• Intellectual property rights
• Safeguarding of organisational records
• Data protection and privacy of personal information

Some Common Practice

• Information security policy document
• Allocation of information security responsibilities
• Reporting security incidents
• Business continuity management

Policy:

The policy should be written and adhered to as a constant.

The technology itself should be varied and frequently updated. 

The range of software involved, for example: will cover virus-checkers for incoming e-mails, (where the virus checker will need constant updating in respect of newly discovered viruses) through to software that can trace unusual spending patterns and suspect personal details (track down credit card fraud).

Porter’s Competitive Advantage Strategies:

• Cost leadership: be the cheapest
• Differentiation: focus on making your product stand out for non-cost reasons
• Focus: occupy narrow market niche where the products/services can stand out by virtue of their cost leadership or differentiation

Porter’s Value Chain Model:

Porter’s Value Chain Model looks at increasing competitive advantage by reorganising the activities related to create, support and deliver a firm’s product or service.

These activities can be divided into two broad categories:

• Primary activities that relate directly to how value is created for a product or service
• Support activities that make the primary activities possible and that manage the coordinate of different activities

Organisation:

The Huczynski & Buchanan (1991) definition brings out three important aspects of organisations:

• they are social organisations and must cater for the individual needs of people
• organisations require controls and direction in order to succeed
• measurement is required to assess organisational performance

Organisational Behaviour:

The behaviour of an organisation is determined by the relationships within it and by its purpose and by the environment in which it operates.

Organisational Culture:

The culture of an organisation develops over a period of time.  It is not something that is easy to change rapidly.  However, company culture can be a major factor in the success of failure of a newly introduced strategy or technology.

Individual members of organisations tend to conform to the organisation’s formal and informal rules and the ‘company culture’. An organisation's culture is either an important contributor or an obstacle to successful strategy execution. A deeply rooted culture well matched to strategy is a powerful lever for successful strategy execution. A strong culture is a valuable asset when it matches strategy and a serious liability when it doesn't. A ‘weak’ culture may prove to be an organisational opportunity since it can more easily be encouraged to be adaptive. The work climate in adaptive-culture companies is receptive to new ideas, experimentation, innovation, new strategies and new operating practices provided such changes are compatible with core values and beliefs. Adaptive cultures are a valuable competitive asset in rapidly changing environments.

Organisation Hierarchy:

Traditional organisations are hierarchical, flat or matrixes. In hierarchical organisations middle managers tell subordinates what to do and tell superiors  the outcomes. IS supports this hierarchy.

In flat structured organisations work is more flexible and employee do whatever is needed. IS allows off loading extra work and supports intra-firm communications.

In matrix organisations, work is organised in small work groups and integrated regionally and nationally/globally.

IS reduce operating expenses by allowing information to be easily shared among different managerial functions.

Organisation Networked:

The networked organisation is a new form, made possible by IS. Instead of rigid hierarchies, all parts of the company are connected by formal and informal communications.

            Outsourcing: 

For many businesses, the skills required and the risks involved in managing complex IS mean that a viable option is to let an outside organisation manage certain parts of the IT function to:

• Reduce and control operating costs
• Improve company focus

Outsourcing is the strategic use of outside resources to perform activities traditionally handled by internal staff and resources. The management strategy by which an organisation out source's major, non-core functions to specialised, (efficient) service providers. The options:

• Strategic
• Tactical
• Selective
• Joint Venture
• Transitional
• Business Process
• Benefit Process
• Benefit Based
• Offshore

Some related factors driving IS outsourcing:

• Highly qualified IT staff are difficult to find and retain
• By bringing in outside expertise, management can focus less on IS operations and more on the information itself
• Outsourcers are specialists, should understand how to manage IS staff more effectively
• Outsourcers may have larger IS resources that provide greater capacity on demand
• The Internet and the ‘ASP’ model

Some disadvantages of outsourcing:

• Abdication of control
• High switching costs
• Lack of technological innovation
• Loss of ownership

Further considerations to get a balanced view:

• Don’t focus solely on price
• Carefully analyse and negotiate the service levels to be provided by the various suppliers
• Evaluate the possible disadvantages to the organisation and the hidden costs
• Determine if outsourcing relationship produces a net benefit for your company

Stakeholders:

An organisation’s stakeholders include all individuals and groups who have a relationship with the organisation and who are directly and significantly influenced by the activities of the organisation.

These stakeholders vary from organisation to organisation but typically include employees, shareholders and customers.

Stakeholder Analysis:

• Identify stakeholders, pressure groups, interested parties
• Assess their commitment
• Assess their power to help and hinder change
• Assess their interests, what they think and will do about change
• Manage relations with them – to gain support, or contain opposition

Strategy:

Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholder expectations (Johnson & Scholes, 2002).

Strategic Alignment:

Making sure that:

• The IS is a good fit for the business strategy (business strategy leads IS strategy)
• The different functional elements (separate departments) are each integrated with each other, including their individual IS - and jointly serving the overall business needs

This ‘good fit’ does not happen automatically.  Alignment is hard work and requires systematic evaluation, for example:

• Customer Orientation
  • Strategy is driven by customer needs and expectations
  • processes selected for redesign by IS create value for the customer
  • IS supports those processes in a way that supports the strategy
• Contingency Approach (This is based on the idea that IS should reflect the organisation characteristics and business type in which they are used)
  • primary tasks of the organisation – routine or non-routine
  • degree of interdependency between those doing the tasks – high or low
  • environment of the organisation – stable or unstable
• Balanced Scorecard (see above)

Strategic Management:

Strategic management is distinguished from day-to-day operational management by the complexity of influences on decisions, the fundamental, organisation-wide implications that strategic decisions have for the organisation, and their long-term implications (Laudon & Laudon , 2007).

Strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action (Robson, 1996).

Strategic Fit:

Strategic fit is about developing strategy by identifying opportunities in the business environment and adapting resources and competences so as to take advantage of these (Johnson & Scholes, 2002).

Strategic “Stretch”:

Strategy development by stretch is the leverage of the resources and competences of an organisation to provide competitive advantage and/or yield new opportunities (Johnson & Scholes, 2002).

Strategic Position:

The strategic position is concerned with the impact on strategy of the external environment, internal resources and competences, and the expectations and influence of stakeholders (Johnson & Scholes, 2002).

SWOT Analysis:

SWOT represents the first letter in:

• Strengths
• Weaknesses
• Opportunities
• Threats

For a company’s strategy to be well-conceived, it must be matched to both

• Resource strengths and weaknesses
• Best market opportunities and external threats to its well-being

Drawing conclusions about how:

• Company’s strategy can be matched to both its resource capabilities and
  market opportunities
• Urgent it is for company to correct resource weaknesses and guard against external threats

Strength is something a firm does well or a characteristic that enhances its competitiveness:

• Valuable competencies or know-how
• Valuable physical assets
• Valuable human assets
• Valuable organizational assets
• Valuable intangible assets
• Important competitive capabilities
• An attribute that places a company in a position of market advantage
• Alliances or cooperative ventures with capable partners

A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage:

• Deficiencies in know-how or expertise or competencies
• Lack of important physical, organizational, or intangible assets
• Missing capabilities in key areas

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Reference(s)
	Book		Boddy, D. (2004) Managing Projects: Building and Leading the Team. 2nd Edition. Pearson Education: United Kingdom (UK), England, Essex, Harlow. [ISBN: 9780273651284]. [Available on: Amazon: https://amzn.to/3W7jRyp].
	Book		Buchanan, D. A. & Huczynski, A. (2003) Organizational Behaviour: An Introductory Text. 5th Edition. Financial Times Prentice Hall: United Kingdom (UK), England, Essex, Harlow. [ISBN: 9780273682226]. [Available on: Amazon: https://amzn.to/3VLkGwO].
	Book		Chaffey, D. & Wood, S. (2004) Business Information Management: Improving Performance Using Information Systems. Financial Times Prentice Hall: United Kingdom (UK), England, Essex, Harlow. [ISBN: 9780273686552]. [Available on: Amazon: https://amzn.to/3yZ6vdF].
	Book		Johnson, G., Scholes, K. & Whittington, R. (2007) Exploring Corporate Strategy: Text & Cases with Companion Website Student Access Card: Text and Cases. 8th Edition. Financial Times Prentice Hall: United Kingdom (UK), England, Essex, Harlow. [ISBN: 9780273711926]. [Available on: Amazon: https://amzn.to/3f7sg4u].
	Book		Laudon, K. C. & Laudon, J. P. (2007) Management Information Systems: Managing the Digital Firm. 10th Edition. Pearson Prentice Hall: United States of America (USA), New Jersey (NJ), Bergen, Upper Saddle River. [ISBN: 9780132415798]. [Available on: Amazon: https://amzn.to/3UhgqDH].
	Book		Pearlson, K. E. & Saunders, C. S. (2004) Managing and Using Information Systems: A Strategic Approach. 5th Edition. John Wiley & Sons: United States of America (USA), New York (NY). [ISBN: 9781118281734]. [Available on: Amazon: https://amzn.to/3TMqOTZ].
	Book		Robson, W. (1997) Strategic Management and Information Systems: An Integrated Approach. 2nd Edition. Pitman: United Kingdom (UK), England, London. [ISBN: 9780273615910]. [Available on: Amazon: https://amzn.to/3EZNmvZ].
	Book		Thompson, A. A. & Strickland, A. J. (2003) Strategic Management: Concepts and Cases. 13th Edition. Mcgraw-Hill: United Kingdom (UK), England, London. [ISBN: 9780072443714]. [Available on: Amazon: https://amzn.to/3f6Foa7].
	Book		Thompson, P. & McHugh, D. (1995) Work Organisations: A Critical Introduction. 2nd Edition. Palgrave Macmillan: United Kingdom (UK), England, Hampshire, Basingstoke. [ISBN: 9780333641613]. [Available on: Amazon: https://amzn.to/3f4UoFt].
	Book		Ward, J. & Peppard, J. (2002) Strategic Planning for Information Systems. 3rd Edition. John Wiley & Sons: United Kingdom (UK), England, West Sussex, Chichester. [ISBN: 9780470841471]. [Available on: Amazon: https://amzn.to/3NgTQZB].

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Reference (or cite) Article
	Kahlon, R. S. (2013) Strategic Management - Useful Terms [Online]. dkode: United Kingdom, England, London. [Published on: 2013-01-27]. [Article ID: RSK666-0000092]. [Available on: dkode | Ravi - https://ravi.dkode.co/2013/01/strategic-management-useful-terms.html].

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