Business Strategy and Market Analysis

Question 1

economic system

Answer 1

The economic system in which an entity operates establishes the broadest economic context of concern to the entity.

Question 2

Strategic Planning Process

Answer 2

Mission statement
An expression of the purpose and range of activities of the entity.
Entity values
The underlying beliefs that govern the operations of an entity and the conduct of its relationship with other parties.
Objectives
The desired, measurable results the entity seeks to achieve related to such factors as profitability, growth, market share, innovation, etc.

Question 3

Assessing the entity and the environment in which it operates

Answer 3

Analyzing the external macro-environment in which the entity operates (or may operate).
A variation of the PEST analysis provides a framework for this environmental analysis.

Analyzing the industry in which the entity operates (or may operate).
The five forces framework (developed by Michael Porter) for determining the nature, operating attractiveness and likely long-run profitability of a competitive industry may be used for this analysis.

Analyzing the internal strengths and weaknesses of the entity, the external opportunities, threats present in its operating environment (or environment in which it may operate), and the relationship between the characters of the entity and its environment.
SWOT analysis may be used to develop a profile of the entity’s strengths, weaknesses, opportunities and threats.

Question 4

Strategic Planning Process Summary

Answer 4

Establish the entity’s mission, values and objectives.
Assess the entity and the environment in which it operates; also called environmental scanning.
Establish goals.
Formulate strategies.
Implement strategies.
Evaluate and control strategic activities.

Question 5

SWOT

Answer 5

SWOT is a means of analyzing the internal strengths and weaknesses of an entity, the external opportunities and threats in its operating environment, and the relationship between the internal factors and the external factors.

Question 6

The five forces framework

Answer 6

The five forces framework developed by Michael Porter is used for determining the nature, operating attractiveness, and probable long‐run profitability of a competitive industry.
Focus.
Cost leadership.
Differentiation.

Question 7

PEST Analysis

Answer 7

PEST analysis is an assessment of the Political, Economic, Social and Technological elements of a macro-environment. Its purpose is to provide an understanding of those elements of an environment, typically a country or region, in which a firm operates or is considering operating.

• primarily with where an entity should locate.
• concerned only with assessment of the external environment of an entity.

Question 8

PESTEL analysis

Answer 8

In PESTEL analysis, climate conditions would be part of the environmental (the second “E”) factors considered.

Question 9

Macro‐environmental analysis

Answer 9

Macro‐environmental analysis considers the broad political, economic, social, and technological characteristics of a country or a region.

Question 10

Five Forces Analysis

Answer 10

Five forces analysis focuses on the industry in which an entity operates or may operate.

1. Threat of entry into the market by new competition
2. Threat of substitute goods or services
3. Bargaining power of buyers (customers) of the industry good or service
4. Bargaining power of suppliers of the inputs used in the industry
5. Intensity of rivalry-The highest intensity of rivalry should be in an industry with a high fixed cost structure, in which producers seek to operate at full capacity, and a low degree of product differentiation, which results in products having many substitutes.

Question 11

competitor analysis

Answer 11

Competitor analysis is designed to predict the behavior of major competitors.
Gathering information about the competitor and using it to predict the competitor’ behavior

Question 12

SWOT Analysis

Answer 12

A SWOT analysis develops a profile of the internal S trengths and W eaknesses of the entity, and the O pportunities and T hreats faced by the entity in the external environment.

Question 13

SWOT matrix

Answer 13

1. S/O strategies would utilize the entity’s strengths to take advantage of opportunities in the environment.
2. W/O strategies would pursue opportunities to overcome weaknesses.
3. S/T strategies would utilize the entity’s strengths to reduce the entity’s susceptibility to external threats.
4. W/T strategies would pursue ways to prevent the entity’s weaknesses from being overcome by external threats.

Question 14

Under SWOT analysis, the possibility of this new regulation would be considered

Answer 14

The possibility of changes in customer preferences.
The prospect of new regulations on an entity’s industry.
The possibility of restricted access to needed natural resources.

Question 15

entity’s strength in a competitive environment

Answer 15

The entity has patent rights.
The entity has a favorable reputation in the market.
The entity has a favorable location for its market.

Question 16

Cost Leadership Strategy

Answer 16

Under this strategy, an entity will seek to be the low cost provider in an industry for a given level of output.

• An entity may achieve a cost advantage over competitors by pursuing vertical integration.
• likely to invest significant assets in production assets.

Question 17

Differentiation Strategy

Answer 17

Under this strategy, an entity will seek to develop a product or service that offers unique features that are valued by customers, and that those customers perceive to be better than or different from the products of competitors in the industry.

• Research and development are critical
• The strength and dedication of an entity’s marketing function are critical

Question 18

Focus Strategy

Answer 18

Under this strategy, an entity will focus on a narrow segment of an industry (a “niche”), and within that segment, seek to achieve either a cost advantage or differentiation.
-likely to have lower volume than an entity that adopts a different strategy.