184153237 ADL 17 Strategic Management V3 2 1 PDF

Strategic Management Assignment – A Question 1: Describe the benefits of Good Strategic Planning? Define and give ex amples of key terms of Strategic Management? Answer: Strategic planning provides a variety of benefits in the organization. Below are some of the benefits: 1. C learly define the purpose of the organization and to establish realistic goals a nd objectives consistent with that of the mission in defined time frame within t he organization’s capacity for implementation. 2. Communicate those goals and obje ctives 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 focus ing 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 c onsensus about where an organization is going. Key terms of Strategic Management 1. Purpose – this includes the reason why an organization exists. It includes a d escription of its current and future business. The purpose of an organization is its primary role in society, a broadly defined aim (such as manufacturing elect ronic 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 s ets it apart from all others. The organization s mission describes why the organ ization exists and guides what it should be doing. Often, the organization s mis sion is defined in a formal, written mission statement. Decisions on mission are the most important strategic decisions, because the mission is meant to guide t he entire organization. Although the terms "purpose" and "mission" are often use d interchangeably, to distinguish between them may help in understanding organiz ational goals. 3. Goals – this is the desired future state that the organization a ttempts 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 finit e 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 1

5. 6. 7. 8. seeks to achieve through its existence and operations. What the organization hop es to accomplish. Strategy – are means by which long term objectives will be achie ved. Its role is to identify the general approaches that the organization utiliz e to achieve its organizational objectives. Tactics – are specific actions, sequen ces of actions and schedules an organization uses to fulfill its strategy. It is also considered as game plan. Policy - Policies include guidelines, procedures, rules, programs, and budgets established to support efforts to achieve stated o bjectives. Therefore, policies become important management tools for implementin g them. Strategists - are the individuals who are involved in the strategic mana gement process. Several levels of management may be involved in strategic decisi on 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. Identif y 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 busin ess unit is a significant organization segment that is analyzed to develop organ izational strategy aimed at generating future business or revenue. Corporate Strategy level is fundamentally concerned with the selection of busine sses in which the company should compete and with the development and coordinati on of that portfolio of business. The primary items for this level are the follo wing: reach, competitive contact, managing activities and business interrelation ships 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 lev el, the strategic issues are less about coordination of operating units and more about developing and sustaining competitive advantage for the goods and service s they produced. The third is Functional level, where it is the operating divisi ons and departments. The strategic issues at the functional level are related to business processes and value chain. It involves the development and coordinatio n of resources through which business unit level strategies can be executed effe ctively. Functional units of an organization are involved in higher level strate gies by providing input into the business unit level and corporate level strateg y such as providing information on resources and capabilities on which the highe r level can be based. 2

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 mean s by which to get there. The means are needed to be quantifiable to gather accur ate interpretations. Question 3: What should be the key Traits of a CEO? What ar e the forces that design the Strategic Management Systems? Answer: It is noted t hat 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 t he traits a CEO should possess to effectively run his/her organization. 1. 2. 3. 4. 5. 6. 7. 8. 9. Conveys strong sense of vision Links compensation to performa nce Communicates frequently with employees Emphasizes ethics Plans for managemen t succession Communicates frequently with customers Reassigns or Terminates Rewa rds loyalty 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 conduc ts its business and style of doing its business affects the design towards strat egic management. Policy making is part of the management style that most large a nd 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 ty pe 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 ques tions. Complexity of Production process – entails how effective is the process its elf. Takes into consideration the following factors: o Production lead time o Ca pital intensive o Labor intensive o Manufacturing process 3

o o Technology Market reaction time Nature of problems – determining nature of problems help in the design of the syst em 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. Sta bility, Growth and Retrenchment. Answer: In Growth, the company seeking growth f aces different subgroups for it: horizontal growth (concentration), diversificat ion and vertical growth. Horizontal growth – there are 3 components to horizontal growth. First a companymay decide to look for new customers. Second, a company m ay decide to pursue new product. Third, the company may pursue new locations. Ve rtical Integration – it is an integration along a supply chain. An example would b e if a retailer now manufactures the products it sells, that is considered as in creasing its level of vertical integration. Diversification – there are 2 types of diversification. First is related diversification, which is a common core of on e’s resources and capabilities. With this, synergy rises because the related activ ity 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 s everal markets to hedge risk of failure. In Stability, when a company is seeking slow growth or stagnation, management usually seeks strategies geared towards s tability. There are 3 elements to which stability is used to strategize. Pause – i f the internal resources are already stretched thin, organizations will often sc ale down a bit and focus on control. Proceeding with caution – if there are proble ms 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 s trategy is to go for research and development. Retrenchment – this strategy revolv es around cutting sales. It is also a strategy that seeks to reduce size or dive rsity of an organization’s operations. Expenditures are also cut off or minimize t o become financially stable. Manpower headcount is also 4

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 •Am bition of CEO / owners •Company culture •Firm’s capacity to execute the strategy. •Resou rce allocation Answer: •Nature of environment –stable? Organizations conduct an environmental analysis to d etermine 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 stren gth, opportunities, weakness and threats present in the environment being planne d for. •Firm’s internal realities Top management of every organization has its inbound real ities that generally influence how they conduct their businesses. It’s in this tha t they come up with strategies to strengthen said realities and bolster to the s uccess of the organization as a whole. •Ambition of CEO / owners CEO’s ambition towards their business is for it to be a pr ofitable and very successful venture. They are the ones who are very active in f ormulating 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 so me to diversify to other markets so as to increase profits and make the organiza tion grow. •Company culture Strategic choices are normally grounded on the culture of the com pany. This is brought about by the types of people presently employed or involve d in the organization. Any strategy to be undertaken has to take into considerat ion if 5

it is acceptable to the whole organization or it will spell doom as this will no t progress. •Firm’s capacity to execute the strategy. Planning strategies is very different from acting on them. This will require com mitment 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 choice s as this will be considered as the organizations lifeline. Without resources th e 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. 6

Assignment – B Question: Explain the concept of Porter’s five forces Model used for Industry Anal ysis? What are the major factors that become barriers to entry in the New Indust ry? Answer: Porter’s model draws upon the 5 forces to determine the competitive in tensity and attractiveness of a market. The term attractiveness is descriptive t owards the overall profitability of an industry or organization. Major factors t hat 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 cont rol over companies that can cause as barriers. Organizations are required to app ly for licenses and permits to operate which also asks them to pay a rather larg e sum of money. Capital – considered being one of the important factors that a com pany/organization must have for its business to succeed. Capital is already incl uded prior to coming up with the rest of the organization. This includes: resour ces to facilities, manpower, inventory, salaries, and benefits among others. Cap ital investments differ on the type of business being planned or put up. Switchi ng cost – this is a cost wherein a customer changes from one supplier or marketpla ce to another. The higher these costs are, the more difficult it is to execute c hange. Since most of the consumers are bent straight on a product they have grow n accustomed to, when a new product comes along almost the same features, they t end 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 produc t. Economies of Scale – this comes as a barrier for new entrants because establish ed 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 prod uct at a smaller quantity but of higher cost. Suppliers and customers will not d o business with the new entrant due to high cost per product. Product Differenti ation – brand loyalty plays a factor to this barrier. Many customers who have alre ady 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 t erms of advertising and enticing the loyal customers to try their product and ho pe to get them aboard. This is difficult for new entrants as they need to have e xtra resources and capital to make this possible. 7

Cost disadvantages independent of scale – a barrier for new entrants as the materi als needed for the production of a specific goods are either patented to an orga nization or the raw materials are exclusive to its competitors. Also, the techno logy to produce commodities is also inherent to an organization. Access to Distr ibution 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. Questi on 2: What used to be national markets with local companies competing for busine ss has become a global market with everyone competing for everyone s business ev erywhere. Explain the 3 generic strategies by Porter for Competitive advantage i n the light of above statement. Answer: Globalization has hit firms harder as th ey now compete with products that can be considered as of more durability and ch eap. The mindset of most of the consumers is that if it’s foreign made or made fro m 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 globaliz ation and the entry of competitors. Changing prices will provide a temporary advantage towards the competitors. By i mproving product differentiation, features, implementing innovations in the manu facturing process provides a positive advantage as well. Using vertical integrat ion or a well known distribution channel to corner other market brackets is a so und strategy to combat globalization Exploiting relationship with suppliers is a nother way to compete wherein the organization can set quality standards and thu s requiring its suppliers to follow suit. This increases the credibility and inc reases the reputation of the organization as one who sells high quality goods. L ocal companies need to step up and come up with revolutionary and innovative ide as 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 b ig market. Diversification can also be done so as to make the organization survi ve on different types of market rather than concentrate on one. 8

Question 3: What do you understand by the term Business Portfolio? How do BCG an d GE matrix help a multi-business organization analyze its current business port folio 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 t heory 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 h aving a “one-size-fits-all” approach. To ensure long term value creation, the compan y 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 ide a 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 s ervice strengths and weaknesses at least in terms of current profitability as we ll as the likely cash flows. The GE Matrix is an alternative technique used in b rand 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 i nvestment. 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 s trategic implications can lead to resource allocation recommendations to help gr ow, harvest or hold a business unit. The planning of the company should invest i n the opportunities or segments that are both attractive and in which it has est ablished some measure of competitive advantage. It cross references market attra ctiveness 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 toenterin g the market, the number and size of competitors, the actual profit margins curr ently 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, a nd the business’s ability to handle product research, development and ultimate pro duction. It also considers how well placed the management is to deploy these res ources 9

Case Study Question 1: The Company foresees continued growth and expansion in the coming fe w years globally driven by it’s operations in India and hopes to realign India’s str engths 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 Convenient geographic location Established distribution channel Understanding of Indian market Diversification Huge cash flow Innovative Strong mission and vision Opportunities Research and Development Consolidation of othe r distribution channels Aggressive marketing and brand management Weaknesses Not yet well known in India unlike its competitors. Threats Discrimination – the company is identified as a Chinese company. Low marke t share 10

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 leaders hip behaviors and leadership effectiveness? a) Leader-oriented approach. b) Cont ingency approach. c) Transactional approach. d) Transformational approach 2. Por ter has designed a framework to help understand why certain countries achieve gl obal competitive advantage in certain industries. It also helps internationalizi ng 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 ser vices d) Achieve competitive advantage 4. Kay (1993) sees the strategy of an org anization 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 environm ent and: a) The internal environment b) The competitive environment c) The speci fic environment d) The micro-environment 6. The term corporate strategy concer ns strategy and strategic decisions a) In the private sector only. b) Developed by the senior management in an organization. c) In certain types of organization s. d) At all levels in an organization. 7. A key characteristic of strategic dec isions is: a) They are normally definite decisions about the future of the organ ization. 11

b) They identify specific areas of strategic interest for the management of an o rganization. c) They result in better organizational performance. d) They are li kely 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, t hese are: a) Corporate and functional. b) Corporate and Business c) Strategic an d tactical. d) Corporate; strategic business unit; operational. 9. An organisati on s mission can be defined as: a) The overriding purpose in line with the value s or expectations of stakeholders. b) The overriding purpose regardless of the v alues or expectations of stakeholders. c) The organisation s business plan. d) T he desired future state of the organisation. 10. Strategic choices require an un derstanding of: a) the business environment, the competition and the strategic c apability of the organisation. b) The key drivers of change. c) The organisation al strengths and weaknesses. d) The underlying bases for future strategy at busi ness 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 hi gh if: a) Switching costs are low b) Differentiation is low c) Access to distrib ution channels is high d) Requirement for economies of scale is high 14. Buyer p ower is high if: a) They have little information b) The buyer requires a high qu ality product for their own production c) Differentiation is low 12

d) Switching costs are low 15. Competitive rivalry will be high if: a) There are a few strong players in th e industry b) There is a high degree of differentiation c) The industry is in it s 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 compe titive 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 simi lar 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) Va lues and operational d) Corporate and business 20. The Policies of an organizati on derive from its: a) Purpose b) Vision c) Objectives d) Strategy 21. The state ment of an organization s aspirations can be found in the organization s: a) Pol icies 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 sa me need 13

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 gr oup of people who come together to resolve business unit issues. d) A small grou p 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 stat ements c) marketing, advertising and pricing objectives d) mission, business uni t goals, and competencies 25. Disney is in the business of: a) Building theme pa rks. b) Designing new imaginative characters. c) Making money. d) Creating enter tainment, fun and fantasy. 26. A useful framework used to assess a company s inv estments/divisions is called: a) corporate insight analysis b) company productiv ity analysis c) SBU knowledge analysis d) business portfolio analysis 27. Cash cows are SBU s that typically generate: a) b) c) d) large awareness lev els but few sales paper losses in the long run problems for product managers lar ge 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 satisf y customer needs by using the concept of a) reverse brainstorming b) brainstormi ng c) product life cycle analysis d) benchmarking 30. Firms may view growth oppo rtunities in these terms: a) New markets, and current and new products b) New ma rkets and new products c) Current markets and current products d) Current and ne w markets, and current and new products 14

31. The strategic marketing process is how an organization allocates its marketi ng mix resources to reach its: a) target markets b) area of expertise c) competi tion d) stated business ideas 32. An effective short-hand summary of the situation analysis is a: a) SWOT anal ysis b) SBU analysis c) BCG analysis d) Competition analysis 33. In the strategi c marketing process, once you get results you go into the: a) control phase b) m arketing plan c) planning phase d) marketing program 34. Ansoff had four marketproduct strategies to expand sales. They included (1) market penetration, (2) pr oduct development, (3) market development and: a) b) c) d) diversification curre nt customer retention distribution enhancement 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 effe ctive implementation is setting: a) schedule of events b) milestones c) good man agers in motion d) goals 37. When actual performance results are better than wha t the plan called for, managers should: a) Find creative ways to exploit the sit uation. 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 an d profitability b) sales revenue c) satisfactory employee targets d) profitable year-end balance sheet 15

39. The _____ for PepsiCo is "We believe our commercial success depends upon off ering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and provi ding a fair return to our investors while adhering to the highest standards of q uality." a) b) c) d) mission organizational code of conduct functional code bene fits statement 40. A firm can acknowledge the critical importance of its _____, by having expli cit goals that state its intention to improve work conditions by adding more lig hting and providing the workers with more and better safety equipment. a) employ ee welfare b) market share c) sales revenue d) satisfaction 16