SBL 7

Disclosure limit of shareholding for financial statement in the UK.

3%

Strategic drift

Strategic drift can be defined as a gradual deterioration of competitive action that results in the failure of an organization to acknowledge and respond to changes in the business environment. Homogeneous mindset at managerial and board levels.

Key factor to consider in PESTEL – political

Changes to government policy

Key factor to consider in PESTEL – economic

Booms or recessions

Key factor to consider in PESTEL – social

Changes to taste and fashion

Key factor to consider in PESTEL – technological

New hardware and software capabilities.

Key factor to consider in PESTEL – environmental

Geographic location.| Use of resources.

Key factor to consider in PESTEL – legal

Restriction or extra regulations

What instrument is used to analyse potential impacts on future growth? It identifies the main drivers in the external environment.

Pestel analysis.

What instrument is used to analyse potential impacts of future margins?

Porter's 5 Forces analysis.

What instrument is used to analyse potential new foreign markets for expansion?

Porter’s diamond.

What instrument is used to analyse the ability to cope with changes in the external environment?

Strategic capabilities

What instrument is used to determine the source of competitive advantage or disadvantage?

Value chain analysis.

What instrument is used to bring together the internal and external analysis in order to understand overall strategic position?

SWOT analysis.

Porter’s diamond factor conditions examples

Basic factors: weather, local raw materials. Advanced: telecommunications, education system.

CSFs

Critical Success Factors

HRM

Human Resources Management

CPD

Continuing professional development

What is an Organisational Profile in case of Baldrige performance excellence?

Relationships, Environment, Challenges.

No frills CSFs

Finding cheaper alternatives | Eliminating all waste.

No frills key threats:

Changes in buyer preferences | Loss of barriers to entry.

Low cost CSFs

Economies of scale | A focus on cost reduction | Eliminating all wastes

Low cost key threat:

Larger rivals

Hybrid CSFs

Economies of scale | Branding | Service levels.

Hybrid - threats:

Loss of brand | Difficult to achieve | Target for all rivals

Differentiation CSFs:

Innovation | Branding | Marketing.

Differentiation key threats:

Being copied by rivals. || New technology.

Focused differentiation CSFs

Market knowledge | Unique products and services.

Focused differentiation key threats:

Recession | Small market size | Few barriers

Existing product and existing market.

Market penetration

Market penetration best use when...?

Best used when market is growing | Introduce a new or improved product

Market penetration risks:

Competitors will react | Can lead to stagnation.

New product and existing market growth strategy

Product development.

Product development is used when we have...?

New and improved products | Copy rivals.

Product development risks:

Unknown demand | Can cannibalise existing products

Existing product and new market.

Market development.

Strategic alliances are often used to...?

... to reduce risk.

Market development risks:

Puts a strain on stratigic capabilities. | Need new external analysis.

New product and new market

Diversification

Diversification risks:

Very different CSFs | Need new external analysis | Can reduce flexibility.

Forward diversification examples:

A farmer who directly sells his crops at a local grocery rather than to a distribution center that controls the placement of foodstuffs to various supermarkets. Or, a clothing label that opens up its own boutiques, selling its designs directly.

Backward diversification example

A company might buy their supplier. Companies often complete backward integration by acquiring or merging with these other businesses, but they can also establish their own subsidiary to accomplish the task.

Horizontal diversification

Horizontal diversification is the acquisition of a business operating at the same level of the value chain in the same industry.

Conglomerate diversification

Conglomerate diversification is unrelated diversification: the businesses which are joined together have no connection whatsoever.

GRI

Global Reporting Initiative

Corporate Social Responsibility short definition and goals.

International private business self-regulation. | Goals of a philanthropic and charitable nature.

Cross directorship

This is when an executive director of Company A serves as a NED in Company B and, at the same time, an executive director of Company B serves as a NED at Company A.

Environmental footprint accounting

It measures the demand on and supply of nature. On the demand side, the Ecological Footprint measures the ecological assets that a given population requires to produce the natural resources it consumes (like food).

Organic growth characteristics

Popular with employees. | Slow but less risky. | no valuation problem

Acquisition characteristic

Quick but expensive.

Leader definition by Buchman and Huczynski:

Someone who exercises influence over other people.

Leadership traditional definition

An interpersonal influence directed toward the achievement of goals.

3 keywords from leadership definition:

Interpersonal | influence | goal

Interpersonal

Interpersonal means between persons. Thus, a leader has more than one person to lead.

Influence

The power to affect others.

Goal

Goal is the end one strives to attain.

Problems with traits theories:

There will always be counter-arguments - one theorist will say a leader should always be courteous whereas another will say that a rude and effective leader was identified.

Behaviour / style theories:

Theory focuses on how leaders behave, and assumes that these traits can be copied by other leaders. | It suggests that leaders aren’t born successful, but can be created based on learnable behavior.

Tells (autocratic) management style:

The manager makes all the decisions and issues instructions which are to be obeyed without question.

Sells (persuasive) management style:

The manager still makes all the decisions, but believes that team members must be motivated to accept them in order to carry then out properly.

Consults (participative) management style:

The manager confers with the team and takes their views into account, although still retains the final say.

Joins (democratic) management style:

The leader and the team members make the decision together on the basis of consensus.

Problems with behavioural theories:

Unfortunately, as with trait theories, it is possible to find counter examples.

Contingency / contextual theories:

The modern consensus is that there is no one best style of leadership that is equally effective for all circumstances. | A theory that is a mixture of both trait and behavioural is the situational approach.

What instrument it is used to respond a risk?

TARA framework

risk response – Transfer

Insurance. | Outsource operations. | Joint ventures (partial transferring).

risk response – Avoid

The risk has been assessed as being so serious that all possibility of the event occurring should be avoided.

risk response – Reduce. Give one example.

Take steps to mitigate the risk. For example, instead of installing a new computer system in every branch over one weekend, run a pilot operation then gradually extend.

risk response – Accept

Don’t do anything about the risk. It’s just part of everyday business.

People role of NEDs

To oversee the appointment and remuneration of executive directors.

Join venture, Strategic Alliance, Partnering characteristic

Share skills | and costs | but difficult to agree.

Cash-cow

Strong position in a low growth (therefore unattractive) market. | Little threat from rivals. | Just keep the product ticking over and collect the cash.

Key advantage of IRR

Tells us the highest acceptable cost of capital.

NPV key disadvantage:

Relies on a cost of capital estimate.

Payback period key disadvantage:

Requires a target or benchmark.

ARR key disadvantage:

Profits are easily manipulated.

IRR key disadvantage:

It is not useful for comparing projects.

Dealing with risk in decision making. An expected value summarises all the different possible outcomes by calculating a...?

_a single weighted average

Complicated scenarios in dealing with risk in decision making could be represented as...?

as decision tree.

Key limitations in dealing with risk in decision making:

Useful only for one-off decisions. | Based on subjective information. | Ignores attitudes to risk.

Who is the ultimate principal in the public organizations?

Tax payer. | Customers.

Ultimate difference between CEO and chairman.

The chairman has the ultimate role of leading the board, | whilst the CEO leads the business.

Efficiency gains

Working with lower costs to make more profit. The usual way is to employ fewer staff by making staff redundant.

The distinction between CSR strategy and strategic CSR with examples.

CSR strategy is to have set of policies which guide CSR activities. | E.g. a company might have a policy to invest in some particular communities. | Strategic CSR is when company support the main business areas. | Bank might favour financial education.

Environmental risk example:

the release of dangerous chemicals into the local river.

Competitor risk example:

a competitor launches a fantastic product.

Product risk example:

you launch a poor product

Economic risk example:

interest rates being increased so that consumer demand is suppressed.

Commodity risk example:

the supply and price of raw materials change adversely.

Political, cultural and legal risk example:

becoming illegal or unpopular

Financial risk example:

you are exporting and the buyer’s currency weakens before you are paid.

Investment risk example:

subsidiary is bought but it turns out that it isn’t as good as you thought it would be.

AC and RC report to...?

to Chairman.