BUSINESS 111 FALL 2012 1
MIDTERM REVIEW GUIDE
What are the Critical Success Factors? Why are they important?
Critical success factors are the steps and procedures that an organization must take in order to be
successful in that industry.
Critical Success Factor Why is it important?
Achieving financial When revenue is greater than expenses, cash flow is generated.
performance This is as a result of all other critical success factors being achieved.
Meeting customer needs Customers are your source of revenue, thus by anticipating and
meeting customer needs you can sell products and generate
Building quality products and Business understands their customers needs and being ready to
services meet what they are ready to pay for.
Encouraging innovation and Only way to generate revenue in the long run, since a successful
creativity company means continuous change.
Gaining employee commitment Your employees are able to meet their personal goals while
achieving the businesses goals. When you have people in this
mindset, you can see the connections. When employees can reach
their goals and have a good support system at work then they can
be creative. If you have commitment employees will take pride in
the product. Employees must be in a positive atmosphere to have a
good attitude, and if this is done they will be committed. Once they
are committed they will take better care of their financial
decisions, and to an extent feel ownership over the business.
People carry out the success factors.
Creative a distinctive Companies must differentiate in an applicable way from other
competitive advantage companies to have a competitive advantage and avoid a price war;
its hard on profitability. The difference must be unique and cater
to customer values.
How do the critical success factors connect to one another?
Each critical factor builds up to one another, thus each critical success factor must be completed for the
other one to be successful. Their success depends on the success of the previous factors. For example,
financial performance is achieved as a result of the completion of meeting customer needs, which is
achieved through the building of quality produces by committed employees.
What is the course model? Why is it important?
The course model is an overview of both the external and internal environments and how they interact.
What is the Diamond-E Model? What is the impact of the internal variables on strategy, principal
logic and examples?
Strategy is what opportunities the business is pursuing. It determines and dictates the needed resources,
organizational capabilities and management preferences to complete the plan. Strategy connects the
inside plan of the organization to the outside environment. *note arrows in the Diamond-E Model have
two heads; meaning they affect one another BOTH WAYS.
Key Variable Impact on Strategy
Management Preferences The more aligned the management is, the more successful the strategy
will be due to the level of organization and task completion. Managers BUSINESS 111 FALL 2012 2
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decide what our human resource policies are, what projects run, where
our financials go thus they dictate the effectiveness of the strategy
follow-through. They are the bias of the company so their preference
has to suit the strategy.
Organization The organization refers to the corporate structure and culture and the
leadership and capabilities of the people. With the right leadership
culture, the appropriate/specific strategy can be fulfilled.
Resources Capital and resources can either support or constrain a company and a
strategy can only be fulfilled with the resources to complete it.
Strategy Is the critical linking variable, Any variable can either drive or constrain
strategy. The purpose of a strategy in a firm is to reach the
environment, so by affecting the strategy the other three variables are
Principal Logic Examples
The importance of Inconsistency: P & G Strategy in 2002
consistence between A new CEO that had an aggressive management preference was hired. He
variables believed that P&G should put new products and new brands into the market
because he believed the low economy was an opportunity. P&G had deep
products, however the companies new strategy stretched the resources too
thin. Brand failures and the product launce failure numbers were increasing.
This strategy put a huge strain on the resources and the products were not
being used up by the customers as expected by the CEO. CEO was let go and
new manager was brought in a new strategy to pull back and was able to get
the company back in stable position.
Analysis: The strategy was inconsistent because the new management had a
Consistency: IKEA Strategy
IKEA remains constant with its method to use resources in a proper manner
that gave the companies constant capabilities to provide decently built
affordable products to its customers.
Analysis: For the entire time, IKEA was consistent with everything, thus no
rapid changes in any factor.
* Absolute alignment is not realistic. In reality in order for a company to succeed over time (CSF), they
need to be innovative and change with the changing environment, thus strategy must change over time.
What is an External Analysis? How do you conduct one and what are the challenges? What is the
difference between general and specific environment?
An external analysis is the process of scanning and evaluating the external environment and it is how
managers determine opportunities and threats. You conduct an external analysis by assessing the factors
affecting your business, in the general environment and specific environment. A general environment
affects all businesses whereas the specific environment affects industry participants.
The benefits of an external analysis are as follows; makes managers productive, provides information
used in planning, helps organization to get needed resources, helps organization cope with uncertainty,
and improves consistency and performance.
The problems of an external analysis are as follows; forecasts and trend analysis are imperfect, rapidly
changing environment is hard to keep up with, and its time consuming.
What are the elements of the PEST analysis and its impact on business? BUSINESS 111 FALL 2012 3
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Reflects relationship between business and government, government regulation of business
Affects uncertainty, risk, and constricts/costs faced by firm
New major/provincial leaders can affect many organizations, especially small firms that do business in
a single location and are susceptible to zoning restrictions, property and school taxes, etc.
Government can create incentives, constraints, support/bail out when needed if business closes,
people lose jobs, suppliers suffer, communities suffer; thus easier to just prop up the business
1. Laws, regulations
- determine what companies must and must not do regulation protects consumers (ex: banks)
- Government regulates certain industries wants to ensure that there is an adequate amount of
competition, but prevents too much competition
- The government uses taxes to subsidize things such as education and health care
- Use taxes & the way they tax us to create incentives/disincentives to do certain things
3. Trade agreements or conditions
- When FTA (free trade agreement) was first signed, businesses thought American companies will
take over market but Canadian companies worked hard & overpowered the American market
- Open up opportunities open up new markets
- Can also be a threat due to competition
4. Political system
- At one extreme, there is capitalism: the government is laissez faire allows private ownership
of the FoP and encourages entrepreneurship by offering profits as an incentive