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Strategic Management

Assignment – A

Question 1: Describe the benefits of Good Strategic Planning? Define and

give examples of key terms of Strategic Management?

Answer:

Strategic planning provides a variety of benefits in the organization. Below are some

of the benefits:

1. Clearly define the purpose of the organization and to establish realistic goals and objectives consistent with that of the mission in defined time

frame within the organization’s capacity for implementation.

2. Communicate those goals and objectives to the organization’s employees.

3. Develop sense of ownership of the plan. 4. Ensure the most effective use is made of the organization’s resources by

focusing the resources on key priorities.

5. Provides a base from which progress can be measured and establish a

mechanism for informed change when needed.

6. Brings everyone’s best and most reasoned efforts have an important value

in building a consensus about where an organization is going.

Key terms of Strategic Management

1. Purpose – this includes the reason why an organization exists. It includes a description of its current and future business. The purpose of an

organization is its primary role in society, a broadly defined aim (such as

manufacturing electronic equipment) that it may share with many other

organizations of its type.

2. Mission – it is the unique reason of an organization for its existence and what sets it apart from all others. The organization's mission

describes why the organization exists and guides what it should be doing.

Often, the organization's mission is defined in a formal, written mission

statement. Decisions on mission are the most important strategic

decisions, because the mission is meant to guide the entire organization.

Although the terms "purpose" and "mission" are often used

interchangeably, to distinguish between them may help in understanding

organizational goals.

3. Goals – this is the desired future state that the organization attempts to

realize. It is a personal or organizational desired end-point in some sort of

assumed development. Many people endeavor to reach goals within a

finite time by setting deadlines.

4. Objectives – refers to specific targets for which measurable results can be

obtained. It also points out to the specific kinds of result the organization

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seeks to achieve through its existence and operations. What the

organization hopes to accomplish.

5. Strategy – are means by which long term objectives will be achieved. Its

role is to identify the general approaches that the organization utilize to

achieve its organizational objectives.

6. Tactics – are specific actions, sequences of actions and schedules an organization uses to fulfill its strategy. It is also considered as game plan.

7. Policy - Policies include guidelines, procedures, rules, programs, and

budgets established to support efforts to achieve stated objectives.

Therefore, policies become important management tools for implementing

them.

8. Strategists - are the individuals who are involved in the strategic

management process. Several levels of management may be involved in

strategic decision making. However, the people responsible for major

strategic decisions are the board of director, president, the chief executive

officer, the chief operating officer, and the division managers.

Question 2: Explain the concept of SBU in a Multi Business Organization.

Identify the Three levels of Strategy-Corporate, Business and Functional.

How do Goals and Objectives vary at each Level?

Answer:

The concept is that a strategic business unit is a significant organization segment

that is analyzed to develop organizational strategy aimed at generating future

business or revenue.

Corporate Strategy level is fundamentally concerned with the selection of businesses

in which the company should compete and with the development and coordination of

that portfolio of business. The primary items for this level are the following: reach,

competitive contact, managing activities and business interrelationships and

management practices.

Business level on the other hand is a strategic business unit that may be a division,

product line or profit center that can be planned independently from other business

units of the organization. In this level, the strategic issues are less about

coordination of operating units and more about developing and sustaining

competitive advantage for the goods and services they produced.

The third is Functional level, where it is the operating divisions and departments. The

strategic issues at the functional level are related to business processes and value

chain. It involves the development and coordination of resources through which

business unit level strategies can be executed effectively. Functional units of an

organization are involved in higher level strategies by providing input into the

business unit level and corporate level strategy such as providing information on

resources and capabilities on which the higher level can be based.

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Goals and objectives are often interchanged at each level. Basically it is more geared

towards what the organization would want to be in the future and the means by

which to get there. The means are needed to be quantifiable to gather accurate

interpretations.

Question 3: What should be the key Traits of a CEO? What are the forces

that design the Strategic Management Systems?

Answer:

It is noted that no two persons are alike this is also true with regards to their

personality and how they run their corporations/organizations. However, below are

some of the traits a CEO should possess to effectively run his/her organization.

1. Conveys strong sense of vision 2. Links compensation to performance

3. Communicates frequently with employees

4. Emphasizes ethics

5. Plans for management succession

6. Communicates frequently with customers

7. Reassigns or Terminates

8. Rewards loyalty 9. Makes sound decisions

Forces that design Strategic Management systems are as follows:

Organizations - based on their size are either gearing towards formality and more

details which speaks for large organizations while for small companies, they tend

towards less details and are not too formal.

Management styles – how the top management conducts its business and style of

doing its business affects the design towards strategic management. Policy making is

part of the management style that most large and small scale organizations use in

part of designing their strategic management system.

Complexity of Environment – is the organization in a stable environment? Are there

any competitions to the company’s success? Iis there a market for the type of

service offered? Some of these questions shape how systems are develop for the

organization as strategy will be determined by the answers of the said questions.

Complexity of Production process – entails how effective is the process itself. Takes

into consideration the following factors:

o Production lead time

o Capital intensive

o Labor intensive

o Manufacturing process

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o Technology

o Market reaction time

Nature of problems – determining nature of problems help in the design of the

system as they can come up with counter measures to solve the situation.

Question 4: Discuss the various grand strategies at the Corporate Level i.e.

Stability, Growth and Retrenchment.

Answer:

In Growth, the company seeking growth faces different subgroups for it: horizontal

growth (concentration), diversification and vertical growth.

Horizontal growth – there are 3 components to horizontal growth. First a

companymay decide to look for new customers. Second, a company may

decide to pursue new product. Third, the company may pursue new locations.

Vertical Integration – it is an integration along a supply chain. An example

would be if a retailer now manufactures the products it sells, that is

considered as increasing its level of vertical integration.

Diversification – there are 2 types of diversification. First is related

diversification, which is a common core of one’s resources and capabilities.

With this, synergy rises because the related activity can increase the value

and economies of scale can save money. Second is the unrelated

diversification where it is used to lower the relative risk. Basically it is like a

portfolio, the more different each portfolio is to each other the better. Another

example is that when a product is released. It is done so over several

markets to hedge risk of failure.

In Stability, when a company is seeking slow growth or stagnation, management

usually seeks strategies geared towards stability. There are 3 elements to which

stability is used to strategize.

Pause – if the internal resources are already stretched thin, organizations will

often scale down a bit and focus on control.

Proceeding with caution – if there are problems in the macro environment,

the company may opt for a strategy that goes for a formidable growth..

Profit – if the company has loyal customers, solid base, the strategy is to go

for research and development.

Retrenchment – this strategy revolves around cutting sales. It is also a strategy that

seeks to reduce size or diversity of an organization’s operations. Expenditures are

also cut off or minimize to become financially stable. Manpower headcount is also

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affected when there is retrenchment. As the size of manpower is lowered to meet

viable financial stability.

Question 5: Discuss the following Factors affecting Strategic Choices in

brief:

•Nature of environment –stable? •Firm’s internal realities •Ambition of CEO / owners •Company culture •Firm’s capacity to execute the strategy. •Resource allocation

Answer:

•Nature of environment –stable?

Organizations conduct an environmental analysis to determine if the

business they intend to operate is going to be stable given the present

environment. This will also be an avenue to determine what are the

strength, opportunities, weakness and threats present in the environment

being planned for.

•Firm’s internal realities

Top management of every organization has its inbound realities that generally

influence how they conduct their businesses. It’s in this that they come up

with strategies to strengthen said realities and bolster to the success of the

organization as a whole.

•Ambition of CEO / owners

CEO’s ambition towards their business is for it to be a profitable and very

successful venture. They are the ones who are very active in formulating the

mission and vision of the organization and how it should be ran. They

visualize their products to have an impact on the desired market and for

some to diversify to other markets so as to increase profits and make the

organization grow.

•Company culture

Strategic choices are normally grounded on the culture of the company. This

is brought about by the types of people presently employed or involved in the

organization. Any strategy to be undertaken has to take into consideration if

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it is acceptable to the whole organization or it will spell doom as this will not

progress.

•Firm’s capacity to execute the strategy.

Planning strategies is very different from acting on them. This will require

commitment from personnel of all levels in the organization. The capacity to

enact planned strategies is a testament to the organization’s internal relations

making it simple and effortless.

•Resource allocation

Resources are very important in planning for strategic choices as this will be

considered as the organizations lifeline. Without resources the organization

cannot come up or manufacture products they intend to release to a specific

market. Most strategies are centered on what is the current resource

allocation and is it enough to meet the needs of the organization for

production of goods.

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Assignment – B

Question: Explain the concept of Porter’s five forces Model used for Industry

Analysis? What are the major factors that become barriers to entry in the

New Industry?

Answer:

Porter’s model draws upon the 5 forces to determine the competitive intensity and

attractiveness of a market. The term attractiveness is descriptive towards the overall

profitability of an industry or organization.

Major factors that become barriers to entry by new players are as follows:

Government Policies – with the onset of different government regulations, this poses

as a sort of control over companies that can cause as barriers. Organizations are

required to apply for licenses and permits to operate which also asks them to pay a

rather large sum of money.

Capital – considered being one of the important factors that a company/organization

must have for its business to succeed. Capital is already included prior to coming up

with the rest of the organization. This includes: resources to facilities, manpower,

inventory, salaries, and benefits among others. Capital investments differ on the

type of business being planned or put up.

Switching cost – this is a cost wherein a customer changes from one supplier or

marketplace to another. The higher these costs are, the more difficult it is to execute

change. Since most of the consumers are bent straight on a product they have

grown accustomed to, when a new product comes along almost the same features,

they tend not to switch as they think it is more costly to learn the basics of the new

product and that it will lead to more time spent on figuring out the new product.

Economies of Scale – this comes as a barrier for new entrants because established

companies can produce large scale quantities of their products and sell them much

cheaper than new entrants. In this case, new entrant produces the same product at

a smaller quantity but of higher cost. Suppliers and customers will not do business

with the new entrant due to high cost per product.

Product Differentiation – brand loyalty plays a factor to this barrier. Many

customers who have already accepted a specific product as unique tends to cling to

it. New entrants who try to penetrate the market of the said specific product has to

spend more in terms of advertising and enticing the loyal customers to try their

product and hope to get them aboard. This is difficult for new entrants as they need

to have extra resources and capital to make this possible.

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Cost disadvantages independent of scale – a barrier for new entrants as the

materials needed for the production of a specific goods are either patented to an

organization or the raw materials are exclusive to its competitors. Also, the

technology to produce commodities is also inherent to an organization.

Access to Distribution channels – new entrants are finding it hard to look for

ways to distribute their products as the established organizations already had their

distribution channels identified and has exclusivity. Additional costs will be needed to

look for alternative ways to distribute the products to its expected markets.

Question 2: What used to be national markets with local companies

competing for business has become a global market with everyone

competing for everyone's business everywhere. Explain the 3 generic

strategies by Porter for Competitive advantage in the light of above

statement.

Answer:

Globalization has hit firms harder as they now compete with products that can be

considered as of more durability and cheap. The mindset of most of the consumers is

that if it’s foreign made or made from a 1st world country it must be durable. In

addition that if sold alongside its local competitor, the foreign one is much cheaper.

To pursue an advantage over an organization’s rivals, drastic measures have to be

set up to challenge globalization and the entry of competitors.

Changing prices will provide a temporary advantage towards the competitors. By

improving product differentiation, features, implementing innovations in the

manufacturing process provides a positive advantage as well. Using vertical

integration or a well known distribution channel to corner other market brackets is a

sound strategy to combat globalization

Exploiting relationship with suppliers is another way to compete wherein the

organization can set quality standards and thus requiring its suppliers to follow suit.

This increases the credibility and increases the reputation of the organization as one

who sells high quality goods.

Local companies need to step up and come up with revolutionary and innovative

ideas to rival other competitors from other countries. Advertising and re-thinking the

supplier and customers buying power is a way to help take advantage over a big

market. Diversification can also be done so as to make the organization survive on

different types of market rather than concentrate on one.

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Question 3: What do you understand by the term Business Portfolio? How

do BCG and GE matrix help a multi-business organization analyze its current

business portfolio and decide which businesses should receive more or less

investment.

Answer:

Business portfolio is an appropriate mix or collection of investments held by an

institution or an individual.

BCG Matrix is based on the product life cycle theory that can used to determine what

priorities should be given in a portfolio of a business unit. It can help understand

frequently made strategy mistake of having a “one-size-fits-all” approach. To ensure

long term value creation, the company should have a portfolio of products that

contains both high-growth products in need of cash inputs and low growth products

that generate lots of cash. The idea behind BCG is that the bigger the market share

a product has or the faster the product’s market grows the better it is for the

company.

The practical use of the BCG matrix is that it offers a very useful map of the

organization’s product or service strengths and weaknesses at least in terms of

current profitability as well as the likely cash flows.

The GE Matrix is an alternative technique used in brand marketing and product

management to help the company decide what product/s to add to its portfolio

and which market opportunities are worthy of continued investment. It is plotted on

a 2-dimensional grid wherein the Y-axis makes up the attractive measures while the

X-axis contains business strength measures.

Its strategic implications can lead to resource allocation recommendations to help

grow, harvest or hold a business unit. The planning of the company should invest in

the opportunities or segments that are both attractive and in which it has established

some measure of competitive advantage. It cross references market attractiveness

and business position using three criteria for each: high, medium and low. The

market attractiveness considers variables relating to the market itself, including the

rate of market growth, market size, potential barriers toentering the market, the

number and size of competitors, the actual profit margins currently enjoyed, and the

technological implications of involvement in the market. The business position

criteria look at thebusiness’s strengths and weaknesses in a variety of fields. These

include its position in relation to its competitors, and the business’s ability to handle

product research, development and ultimate production. It also considers how well

placed the management is to deploy these resources

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Case Study

Question 1: The Company foresees continued growth and expansion in the

coming few years globally driven by it’s operations in India and hopes to

realign India’s strengths and world-class market capabilities to deliver

services to its customers. Conduct the SWOT Analysis of Haier’s foray in to

Indian market in light of facts given in the narration .

Answer:

Strength Weaknesses

Convenient geographic location

Established distribution channel

Understanding of Indian market

Diversification

Huge cash flow

Innovative

Strong mission and vision

Not yet well known in India unlike its

competitors.

Opportunities Threats

Research and Development

Consolidation of other distribution

channels

Aggressive marketing and brand

management

Discrimination – the company is

identified as a Chinese company.

Low market share

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Assignment – C

Objective Questions

1. Which approach to the study of leadership emphasizes the role of situational

factors and how these moderate the relationship between leader traits or

leadership behaviors and leadership effectiveness?

a) Leader-oriented approach. b) Contingency approach. c) Transactional approach. d) Transformational approach

2. Porter has designed a framework to help understand why certain countries

achieve global competitive advantage in certain industries. It also helps

internationalizing firms to make location decisions. The framework is called:

a) Porter's value chain b) Porter's Five Forces c) Porter's Generic Strategies d) Porter's Diamond

3. It is generally agreed that the role of strategy is to: a) Make best use of resources b) Make profits for the organization c) Make the best products and services d) Achieve competitive advantage

4. Kay (1993) sees the strategy of an organization as matching internal

capabilities with:

a) Its external relationships b) Its customer needs

c) The industry life cycle d) The external environment

5. An organization's external environment consists of the general or macro

environment and:

a) The internal environment

b) The competitive environment c) The specific environment

d) The micro-environment

6. The term 'corporate strategy' concerns strategy and strategic decisions

a) In the private sector only. b) Developed by the senior management in an organization.

c) In certain types of organizations. d) At all levels in an organization.

7. A key characteristic of strategic decisions is: a) They are normally definite decisions about the future of the

organization.

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b) They identify specific areas of strategic interest for the management of an organization.

c) They result in better organizational performance.

d) They are likely to be concerned with, or affect, the long-term direction

of an organization.

8. It is possible to identify different levels of strategy in an organization, these are:

a) Corporate and functional. b) Corporate and Business c) Strategic and tactical. d) Corporate; strategic business unit; operational.

9. An organisation's mission can be defined as:

a) The overriding purpose in line with the values or expectations of stakeholders.

b) The overriding purpose regardless of the values or expectations of stakeholders.

c) The organisation's business plan. d) The desired future state of the organisation.

10. Strategic choices require an understanding of: a) the business environment, the competition and the strategic capability of the organisation.

b) The key drivers of change. c) The organisational strengths and weaknesses. d) The underlying bases for future strategy at business unit and

corporate levels; the options for developing strategy in terms of

directions and methods of development.

11. In Porter's Five Forces, the 'threat of new entrants' relates to: a) Substitutes b) Switching costs c) Buyer power d) Barriers to entry

12. Brandenburg and Nalebuff added a sixth force to Porter's Five Forces. It is known as:

a) Seller power b) Complementors c) Substitutes d) Government regulation

13. Barriers to entry into an industry are likely to be high if: a) Switching costs are low b) Differentiation is low c) Access to distribution channels is high d) Requirement for economies of scale is high

14. Buyer power is high if: a) They have little information

b) The buyer requires a high quality product for their own production c) Differentiation is low

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d) Switching costs are low

15. Competitive rivalry will be high if:

a) There are a few strong players in the industry b) There is a high degree of differentiation c) The industry is in its infancy d) The industry is fragmented

16. A strategic group can be defined as: a) A group of key resources and competences that are necessary to

achieve competitive advantage

b) A group of customers that have similar characteristics

c) An industry recipe d) A group of firms in an industry following the same or a similar strategy

17. The key activities in the strategic management process are:

a) Analysis, formulation, review

b) Analysis, implementation, review

c) Formulation, analysis, implementation

d) Analysis, formulation, implementation

18. Strategy analysis is also referred to as: a) Strategy diagnosis b) Rational analysis c) Situation analysis d) SWOT analysis

19. Strategy formulation takes place at two levels. These are:

a) Conscious and sub-conscious b) Implicit and explicit c) Values and operational d) Corporate and business

20. The Policies of an organization derive from its:

a) Purpose b) Vision c) Objectives d) Strategy

21. The statement of an organization's aspirations can be found in the

organization's:

a) Policies b) Mission c) Strategy d) Vision

22. A substitute product or service is: a) A new entrant into the industry b) A competitor's product or service

c) A less attractive way of meeting the same need

d) An alternative way of meeting the same need

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23. Cross-functional teams are:

a) The representative voice of senior management.

b) A small group of specialists who collaborate on a task force.

c) A small group of people who come together to resolve business unit

issues.

d) A small group of people from different departments who are mutually accountable to a common set of performance goals.

24. The business unit strategy has three major components:

a) business mission, department mission, and daily plans

b) competencies, abilities, and problem statements

c) marketing, advertising and pricing objectives d) mission, business unit goals, and competencies

25. Disney is in the business of: a) Building theme parks.

b) Designing new imaginative characters.

c) Making money.

d) Creating entertainment, fun and fantasy.

26. A useful framework used to assess a company's investments/divisions is

called:

a) corporate insight analysis b) company productivity analysis

c) SBU knowledge analysis d) business portfolio analysis

27. Cash cows are SBU's that typically generate:

a) large awareness levels but few sales b) paper losses in the long run c) problems for product managers

d) large amounts of cash

28. Business unit competencies should be distinctive enough to provide

a) clear understanding of who you want to lead the company

b) opportunity to compete on a productivity basis

c) additional strategic mission

d) competitive advantage

29. TQM is a strategy that is designed to change the quality of a product to satisfy customer needs by using the concept of

a) reverse brainstorming

b) brainstorming

c) product life cycle analysis d) benchmarking

30. Firms may view growth opportunities in these terms:

a) New markets, and current and new products

b) New markets and new products

c) Current markets and current products

d) Current and new markets, and current and new products

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31. The strategic marketing process is how an organization allocates its

marketing mix resources to reach its:

a) target markets b) area of expertise c) competition

d) stated business ideas

32. An effective short-hand summary of the situation analysis is a:

a) SWOT analysis b) SBU analysis c) BCG analysis d) Competition analysis

33. In the strategic marketing process, once you get results you go into the:

a) control phase b) marketing plan

c) planning phase d) marketing program

34. Ansoff had four market-product strategies to expand sales. They included

(1) market penetration, (2) product development, (3) market

development and:

a) diversification b) current customer retention

c) distribution enhancement

d) product simplification

35. Aggregating prospective buyers into groups is called: a) market segmentation

b) BCG matrix analysis

c) grouping d) market categorization

36. One key to effective implementation is setting:

a) schedule of events b) milestones

c) good managers in motion

d) goals

37. When actual performance results are better than what the plan called for,

managers should:

a) Find creative ways to exploit the situation. b) Issue more stock options to employees.

c) Increase prices. d) Ignore it.

38. Value for shareholders of a firm is measured by:

a) stock performance and profitability b) sales revenue c) satisfactory employee targets

d) profitable year-end balance sheet

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39. The _____ for PepsiCo is "We believe our commercial success depends upon

offering quality and value to our consumers and customers; providing

products that are safe, wholesome, economically efficient and

environmentally sound; and providing a fair return to our investors while

adhering to the highest standards of quality."

a) mission b) organizational code of conduct c) functional code d) benefits statement

40. A firm can acknowledge the critical importance of its _____, by having

explicit goals that state its intention to improve work conditions by adding

more lighting and providing the workers with more and better safety

equipment.

a) employee welfare b) market share

c) sales revenue d) satisfaction