Block 1: Strategy

Question 1

Distinguish between firm and organization

Answer 1

A firm is said to have more than one partner that go in agreement between them. On the other hand an organization is a social arrangement characterized by collective goals and it looks upon its own performance.

Question 2

Complete the sentence

A company’s strategy is…

Answer 2

The set of actions that its managers take to outperform the company’s competitors and achieve superior profitability.

Question 3

Discuss strategy as a choice

Answer 3

• Is about deciding to compete differently from rival, doing what competitors do not do or, even better, doing what they cannot do! * Is likely to be successful when its actions, business approaches, and competitive moves appeal to buyers in ways that
• Set a company apart from its rivals * Stake out a market position that is not crowded with strong competitor

Question 4

Discuss strategy and competitors

Answer 4

Strategy is about competing differently from rivals.
- Doing what they do not do or doing it better
- Doing what they cannot do
- Doing things that attract customers and set a firm apart from its rivals
- Doing things calculated to produce a competitive edge over rivals
- Doing what the firm must do and also knowing what it must not do

Question 5

Why bother with strategy?

Answer 5

An organization needs a strategy to specify what actions will be taken.
* To improve its financial performance
* To strengthen its competitive position
* To gain a sustainable competitive advantage over its market rivals

Question 6

Elaborate on competitive advantage and sustainable competitive advantage

Answer 6

Competitive advantage
* Requires meeting customer needs either more effectively (with products or services that customers value more highly) or more efficiently (by providing products or services at a lower cost to customers)

Sustainable competitive advantage
* Requires giving buyers lasting reasons to prefer a organization products or services over those of its competitors

Question 7

State the basic strategic approaches

Answer 7

• broad differentiation
• focused differentiation
• best cost provider
• focused low cost
• broad low cost

Question 8

When does a firm gain competitive advantage and sustainable competitive advantage

Answer 8

An organisation (aka firm) achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers buyers the same value as its rivals but at a lower cost to the firm.

The firm achieves a sustainable competitive advantage if the basis for its advantage persists despite the best efforts of competitors to match or surpass its advantage.

Question 9

How to create a sustainable competitive advantage?

Answer 9

Develop valuable expertise and competitive capabilities over the long term that rivals cannot readily copy, match, or best Put the constant quest for sustainable competitive advantage at center stage in crafting your strategy

Question 10

Managers modify strategy in response to what?

Answer 10

*Changing market conditions
*Advancing technology
*Fresh moves of competitors
*Shifting buyer needs
*Emerging market opportunities
*New ideas for improving the strategy

Question 11

Complete the sentence.
Changing circumstances and ongoing management efforts to improve the strategy cause…

Answer 11

An organisations strategy to evolve over time—a condition that makes the task of crafting strategy a work in progress, not a one-time event.

An organisations strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and of learning by doing

Question 12

What is the evolving nature of an organisations strategy?

Answer 12

Realised (current) strategy is a blend of:

Proactive (deliberate) strategy elements that include planned initiatives to improve the company’s financial performance and secure a competitive edge.

Reactive (emergent) strategy elements developed on the fly in response to unanticipated developments and fresh market conditions.

Abandoned and superseded strategy elements that no longer fit with the firm’s ongoing strategy

Question 13

Deliberate strategy consists of?

Answer 13

A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.

Question 14

Emergent strategy consists of?

Answer 14

Its emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.

Question 15

True or False

A Company’s Strategy Is a Blend of Proactive Initiatives and Reactive Adjustments

Answer 15

True

Question 16

How does a firm make money?

Answer 16

By providing customers with value The firm’s customer value proposition By generating revenues sufficient to cover costs and produce attractive profits

Question 17

Complete the sentence

A firm’s business model sets…

Answer 17

A firm’s business model sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit.

Question 18

Discuss the customer value proposition in relation to business model

Answer 18

The customer value proposition Satisfying buyer wants and needs at a price customers will consider a good value The greater the value provided (V) and the lower the price (P), the more attractive the value proposition is to customers

Question 19

State the profit formula

Answer 19

The profit formula Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition V – the value provided to customers P – the price charged to customers C – the costs (of the organisation)

Question 20

True or false

Thehigher the costs (C) for a given customer value proposition (V–P), the greater the ability of the business model to be a moneymaker

Answer 20

False

The lower the costs (C) for a given customer value proposition (V–P), the greater the ability of the business model to be a moneymaker

Question 21

What does strategy provide?

Answer 21

A prescription for doing business
A road map to competitive advantage
A game plan for pleasing customers
A formula for attaining long-term standout marketplace performance

Question 22

True or False
A company performs is directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed.

Answer 22

True.

Question 23

Disclose process of strategy making and execution

Answer 23

1. Developing a strategic vision, a mission statement, and a set of core values
2. Setting objectives for measuring the firm’s performance and tracking its progress
3. Crafting a strategy to move the firm along its strategic course and achieve its objectives
4. Executing the chosen strategy efficiently and effectively
5. Monitoring developments, evaluating performance, and initiating corrective adjustments

Question 24

Complete the sentence

A company’s strategic plan lays…

Answer 24

“A company’s strategic plan lays out its future direction, performance targets, and strategy.”

Question 25

How can one develop a strategic vision?

Answer 25

• Delineates management’s aspirations for the firm to its stakeholders
• Provides direction: “where we are going”
• Sets out the compelling rationale (strategic soundness) for the firm’s direction
• Uses distinctive and specific language to set the firm apart from its rivals

Question 26

State the do’s of developing a strategic plan

Answer 26

• Be graphic
• Be forward-looking and directional
• keep it focused
• Have some wiggle room
• Be sure the journey is feasible
• Indicate why the directional path makes good business
• Make it memorable

Question 27

State the do not’s of developing a strategic plan vision

Answer 27

• Don’t be vague or incomplete
• Don’t dwell on the present
• Don’t use overly broad language
• Don’t state the vision in bland or uninspiring terms
• Don’t be generic
• Don’t rely on superlatives
• Don’t run on and on

Question 28

How should one communicate their strategic vision?

Answer 28

Fosters employee commitment to the firm’s chosen strategic direction:
- Ensures understanding of its importance
- Motivates, informs, and inspires internal and external stakeholders
- Demonstrates top management support for the firm’s future strategic direction and competitive efforts

Question 29

Why should one communicate their strategic vision?

Answer 29

• Fosters employee commitment to the firm’s chosen strategic direction
• Ensures understanding of its importance
• Motivates, informs, and inspires internal and external stakeholders
• Demonstrates top management support for the firm’s future strategic direction and competitive efforts

Question 30

Why communicate?

Answer 30

• It crystallizes senior executives’ own views about the firm’s long-term direction.
• It reduces the risk of rudderless decision making. * It is a tool for winning the support of organization members to help make the vision a reality.
• It provides a beacon for lower-level managers in setting departmental objectives and crafting departmental strategies that are in sync with the firm’s overall strategy.
• It helps an organization prepare for the future

Question 31

True or False

An effectively communicated vision is a valuable management tool for enlisting the commitment of company personnel to engage in actions that move the company forward in the intended direction

Answer 31

True

Question 32

Explain what is an mission statement

Answer 32

●Uses specific language to give the firm its own unique position. Describes the firm’s current business and purpose

“who we are, what we do, and why we are here”

● Should focus on describing the firm’s business, not on “making a profit”—earning a profit is an objective not a mission

Question 33

What is strategic vision?

Answer 33

● A strategic vision portrays a firm’s aspirations for its future (“where we are going”).

● A firm’s mission describes the scope and purpose of its present business (“who we are, what we do, and why we are here”)

Question 34

What should a mission statement encompass?

Answer 34

• Identifies the firm’s product or services
• Specifies the buyer needs it seeks to satisfy
• Identifies the customer groups or markets it is endeavouring to serve
• Specifies its approach to pleasing customers
• Sets the firm apart from its rivals
• Clarifies the firm’s business to stakeholders

Question 35

Explain core values

Answer 35

• Are the beliefs, traits, and behavioral norms that employees are expected to display in conducting the firm’s business and in pursuing its strategic vision and mission
• Become an integral part of the firm’s culture and what makes it tick when strongly espoused and supported by top management
• Match the firm’s vision, mission, and strategy, contributing to the firm’s business success

Question 36

Explain setting objectives

Answer 36

• To convert the vision and mission into specific, measurable, challenging and timely performance targets
• To focus efforts and align actions throughout the organization
• To serve as yardsticks for tracking a firm’s performance and progress
• To provide motivation and inspire employees to greater levels of effort

Question 37

Define objectives in context of setting objectives

Answer 37

Objectives are an organisation’s performance targets—the specific results management wants to achieve

Question 38

Explain the difference between short-term objectives and long-term objectives

Answer 38

Short-Term Objectives:
* Focus attention on quarterly and annual performance improvements to satisfy near-term shareholder expectations.

Long-Term Objectives:
* Force consideration of what to do now to achieve optimal long-term performance. Stand as a barrier to an undue focus on short-term results.

Question 39

Define stretch objectives in context of setting objectives

Answer 39

Stretch objectives set performance targets high enough to stretch an organization to reach its full potential and deliver the best possible results.
* Push a firm to be more inventive.
* Increase the urgency for improving financial performance and competitive position.
* Cause the firm to be more intentional and focused in its actions.
* Act to prevent internal inertia and contentment with modest to average gains in performance.

Question 40

Define financial objectives

Answer 40

Financial objectives relate to the financial performance targets management has established for the organization to achieve.
* Communicate top management’s goals for financial performance.
* Are focused internally on the firm’s operations and activities.

Question 41

Define strategic objectives

Answer 41

Strategic objectives relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects.
* Are the firm’s goals related to marketing standing and competitive position.
* Are focused externally on competition vis-à- vis the firm’s rivals.

Question 42

When does a company exhibit strategic intent?

Answer 42

A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective.

• Supports making quantum gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds. * Develop a grandiose performance target out of proportion to immediate capabilities and market position, but then devoting the firm’s full resources and energies to achieving the target over time.
• Entails sustained, aggressive actions to take market share away from rivals and achieve a much stronger market position

Question 43

Explain the balanced scorecard

Answer 43

The Balanced Scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.
* A balanced scorecard measures a firm’s optimal performance by:
* Placing a balanced emphasis on achieving both financial and strategic objectives.
* Tracking both measures of financial performance and measures of whether a firm is strengthening its competitiveness and market position.

Question 44

What does effective corporate governance require?

Answer 44

Effective corporate governance requires the board of directors to oversee the company’s strategic direction, evaluate its senior executives, handle executive compensation, and oversee financial reporting practices.

Question 45

What is crafting a strategy?

Answer 45

• Addresses a series of strategic how’s.
• Requires choosing among strategic alternatives.
• Promotes actions to do things differently from competitors rather than running with the herd.
• Is a collaborative team effort that involves managers in various positions at all organizational levels.

Question 46

State the CEO responsibility

Answer 46

● Has ultimate responsibility for leading the strategy making process as strategic visionary and chief architect of strategy

Question 47

What is the board of directors responsibility?

Answer 47

• Oversee the firm’s financial accounting and reporting practices compliance with GAAP principles
• Critically appraise the firm’s direction, strategy, and business approaches
• Evaluate the caliber of senior executives’ strategic leadership skills
• Institute a compensation plan that rewards top executives for actions and results that serve stakeholder interests—especially shareholders

Question 48

Disclose the senior executives responsibilities

Answer 48

● Fashion the major strategy components involving their areas of responsibility. Managers of subsidiaries, divisions, geographic regions, plants, and other operating units (and key employees with specialized expertise)
● Utilize on-the-scene familiarity with their business units to orchestrate their specific pieces of the strategy

Question 49

What is corporate strategy?

Answer 49

Multi-business strategy—how to gain synergies from managing a portfolio of businesses together rather than as separate businesses

Question 50

What is business strategy?

Answer 50

*How to strengthen market position and gain competitive advantage
*Actions to build competitive capabilities of single businesses
*Monitoring and aligning lower-level strategies

Question 51

What is functional area strategy?

Answer 51

*Add relevant detail to the “hows” of business strategy
*Provide a game plan for managing a particular activity in ways that support the business strategy

Question 52

What is Operational strategy?

Answer 52

*Add detail and completeness to business and functional strategies
*Provide a game plan for managing specific operating activities with strategic significance

Question 53

True or false

A company’s vision, mission, objectives, strategy, and approach to strategy execution are never final; reviewing whether and when to make revisions is an ongoing process.

Answer 53

True

Question 54

Complete the sentence
An objective of a company…

Answer 54

Is not to obtain competitive success which is temporary, but to obtain long-term success which will support the growth of a company, and this will secure the company’s future in the industry.

Question 55

What does a creative and distinctive strategy help with?

Answer 55

Help a company produce above-average profits and increase competitive pressures on rivals

Question 56

When does a strategy have a better chance of succeeding?

Answer 56

• It appeals to buyers in ways that set a company apart from its competitors
• It establishes a market position that is not crowded with strong competitors.

Question 57

State the different 3 test a strategy goes through

Answer 57

1. The fit test
2. The competitive advantage test
3. The performance test

Question 58

True or false

To be a winning strategy, a strategy must match industry and competitive conditions.

Answer 58

True

Question 59

How can company strategy pass the fit test?

Answer 59

To pass the fit test a strategy must fulfill the following:
- External fit
- Internal fit
- Dynamic fit

Question 60

Explain external fit

Answer 60

Well-matched to industry and competitive conditions, market opportunities, and other pertinent aspects of the business environment in which the company operates

Question 61

Explain internal fit

Answer 61

Tailored to the company’s resources and competitive capabilities and be supported by a complementary set of functional activities

Question 62

Explain dynamic fit

Answer 62

Evolve over time in a manner that maintains close and effective alignment with the company’s situation even as external and internal conditions change

Question 63

Discuss the competitive advantage test

Answer 63

• Is the strategy helping the company to achieve a sustainable competitive advantage?
• If a strategy does not achieve continuous competitive advantage over rivals, they rarely produce excellent performance for more than a brief time period.
• Winning strategies equip a company to achieve a competitive advantage over key rivals, the bigger and more durable the competitive advantage the more powerful it is.

Question 64

What are the performance indicators of performance test that tell most about the quality of a company’s strategy?

Answer 64

• Competitive strength and market standing
• Profitability and financial strength