Business Strategy Assessment Planning Flashcards
Why is planning important? does it eliminate uncertainty?
establishes organizational goals and standards
can improve employee engagement throughout the org
-provides direction that can align all of the activities of the org
-planning does NOT eliminate uncertainty
What are the functions of planning?
Define the organizations objectives or goals
establish an overall strategy for achieving the organizational goals and objectives
develop a hierarchy of plans to integrate and coordinate activities
-NOT hire senior executive responsible for strategic planning
Can planning eliminate uncertainty?
No, it can only reduce it
A Functional strategy is one that determines how capital will be allocated across various businesses (or strategic business units). (T/F)
False
Capital allocation across SBUs occurs at the Corporate level of strategy formulation.
Operational plans address the “what ifs” of a business – incorrect strategic planning assumptions and the realization of known risks.
False
they specify the details of how the operational goals will be achieved. specific activities of the corporation. schedules, project work plans, etc
Developing a marketing strategy based on product, price, place, and promotional considerations is an example of a ____________ plan.
functional
can a Snowboard manufacturing firm Lower the price on the firm’s popular snowboard product line $50 below the prices of all of the firm’s competitors to obtain a strategic, sustainable competitive advantage?
no
Competitive advantage is always judged relative to other competitors or to the industry average. (T/F)
True
A firm that under performs relative to other competitors in the same industry is said to have a temporary but not sustainable competitive advantage. (T/F)
False
what level of strategy does Capital allocation across SBUs occur at?
the Corporate level of strategy formulation.
functional plans
basically goals that are highly interrelated and help accomplish the strategic plans
sales, marketing, manufacturing goals etc
Competitive advantage is always judged relative to other competitors or to the industry average.
true
From an economic value creation perspective, the firm that does this achieves competitive advantage?
Creates and captures more economic value than its rivals
A ________ is the end results of decisions and tradeoffs made by management in formulating strategy.
business model
what are the three parts of a Business Model?
Value creation, Value delivery, Value capture
3 critical factors used to evaluate economic value creation and competitive advantage?
value
price
costs
describe cost leadership
Cost leadership is about becoming the lowest COST producer in an industry. Firms focused on cost leadership are best positioned to charge the lowest price but this does not ALWAYS need to be the case.
Lowest Cost does not always equal Lowest Price.
Additionally, firms focused on the other strategies may not be the best positioned to charge the lowest price but may do so anyway to increase market penetration. Refer to Lesson 9.7 for more on cost leadership.
Using the terminology of Porter’s positioning strategies, Apple Inc. would be said to be pursuing a ________________ positioning strategy in its markets.
differentiation
horizontal integration
occurs when a company acquires or merges with another company in the same industry that is operating at the same level in the value chain
Firms that have 1) access to leading scientific research, 2) a highly skilled and creative product development team, 3) a strong sales team and creative marketing, and 4) a reputation for quality and innovation are likely to be pursuing a _________ strategy. Note that more than one answer may be correct. Consider only Porter generic strategies.
differentiation strategy broadly across the market
differentiation strategy in a niche market
is a strategic planning methodology that is used to develop plans in an uncertain environment. Typically managers begin by identifying variables that can interact to significantly impact firm performance, then management develops alternative strategies for the most plausible future environments.
scenario planning
The ______ provides a statement of how the organization intends to achieve its vision and the organizations’ responsibilities towards its key stakeholders.
mission
Traditional top-down strategic planning can best be described as:
a rational data driven process in which top management attempts to program future success
The traditional approach to strategic management (top-down) works best in dynamic environments where the future is highly uncertain.
false
The IKEA “flat boxes” example used in this topic was an example of the __________ approach to strategic management.
Strategy as Planned Emergence This example is explained while reviewing Strategy as Planned Emergence. Refer to Lesson 7.16.
what is a strategic group?
A strategic group is a set of firm’s that pursue a similar strategy within a specific industry.
are tangible or intangible assets more likely to drive sustained competitive advantage
Intangible assets are more likely to drive sustainable competitive advantage than physical assets
what is a sbu strategy focused on?
SBU strategy is directed towards creating and sustaining competitive advantage
It is important to consider a firm’s external environment when performing an internal analysis. (TF)
true
what would result in competitive rivalry?
Very high fixed costs required for business infrastructure
The industry’s products are highly perishable
Very high barriers to exit
Brand loyalty is low
The external environment of a firm comprises
industyr
market
general environment
primary objective of porters 5 forces
to assess the attractiveness and competitive intensity of an industry by analyzing the power dynamics between different players within that industry
what is the threat of a substitute product?
it can result in limits placed on the competitors abilities to raise prices.
The idea that the source of competitive advantage is the resources and the capabilities of the firm is referred to as __________.
Resource Based View of Competitive Advantage
what is vrio looking for?
VRIO is an acronym for Valuable, Rare, Costly to Imitate, and Organized to Capture Value. In the resource-based model, certain types of resources are seen as key to superior firm performance.
The resource based view is a model that sees types of resources as key to superior firm performance.
true
VRIO ( Valuable, Rare, Costly to Imitate, and Organized to Capture Value) can be outsourced?
no
two assumptions that are critical in the resource based model
resource heterogeneity and resource immobility.
Why can resources be costly to immitate?
historical condition
causal ambiguity
social complexity
capabilities definition
the organizational and management skills necessary to orchestrate a diverse set of resources to deploy them strategically.
strength vs opportunity in swot
internal positive vs external positive
pestel acronym
political
economic
sociocultural and demographic
technological
ecological
legal and ethical
what does vrio stand for
Valuable,
Rare,
Costly to Imitate,
and Organized to Capture Value
what does scp stand for?
Structure-Conduct-Performance
what is scp?
structure of industry influences conduct which influences performance
What is the productivity frontier?
The best possible strategic positions that a firm can take relating to value and low cost. The frontier is drawn as a concave curve
4 common approaches to grow a firm and their meanings?
Concentration - focus on single market/product
Vertical Integration - acquire forward or backwards on production vertical
Horizontal Integration - merger or acquisition of companies at same stage of production
Diversification - increase products, markets or industries
These strategies address which businesses the firm will be in and how capital will be allocated among those businesses.
Corporate
A business sets a 10% per annum growth objective over a 5 year planning horizon. The CEO intends to accomplish this growth through taking additional market share from competitors by improving product packaging and aggressively advertising. This is an example of an inorganic growth strategy.
false: Inorganic growth occurs through acquisition, while organic growth occurs through building new capabilities.
In order for a firm to formulate an effective business level strategy, it is important to remember that competitive advantage is determined by who?:
The characteristics of both the industry and the firm
To formulate an appropriate business level strategy, managers need to keep in mind that the firm’s performance, or competitive advantage, is determined jointly by industry factors and firm effects.
3 stage of diversification
Single business: >95% of total firm revenues from a single line of business
Dominant business: 70-95% of total firm revenues from a single line of business
Diversification (related or un-related): <70% of total firm revenues from a single line of business
Which of the following makes up the three main types of “grand” strategies?
Growth, stability, renewal
Consider both statements regarding combination strategies. Statement 1. Combination strategies are often difficult because they are inherently contradictory. Statement 2. The goals of a combination strategy is to provide unique value in an efficient manner.
Both statements are true
Combination strategies ignore Porter’s advice even though the inherent goals of cost leadership and differentiation are in conflict. And the goal of a combination strategy is to provide unique value in an efficient manner.
What is the productivity frontier?
The productivity frontier is the theoretical limit of the cost value relationship (differentiation vs cost leadership) and captures the sum of all existing best practices
_________ drivers are as important to a differentiation strategy as _____ drivers are to a cost leadership strategy.
value, cost
The goal of differentiation is to add unique features that will increase the perceived value of goods or services. The goal of cost leadership is to become the lowest cost producer in the industry.
Firms that have 1) access to leading scientific research, 2) a highly skilled and creative product development team, 3) a strong sales team and creative marketing, and 4) a reputation for quality and innovation are likely to be pursuing a _________ positioning strategy. If there are more than one correct answer, check all the answers you believe are right.
differentiation strategy broadly across the market
differentiation strategy focused in a niche market
Differentiation tends to be driven by innovation and creativity. There is also mention of a strong reputation for quality which implies the firm is focused on value, which is the key driver for differentiation. Refer to Lesson 9.8.
Regarding the market size, there isn’t anything in the prompt to specifically imply niche or broad market. So, both should be selected.
The firm that consistently charges the lowest price for a product/quality category relative to the competition will always be following a cost leadership strategy.
false
Cost leadership is about becoming the lowest COST producer in an industry. Firms focused on cost leadership are best positioned to charge the lowest price but this does not ALWAYS need to be the case.
Lowest Cost does not always equal Lowest Price.
Additionally, firms focused on the other strategies may not be the best positioned to charge the lowest price but may do so anyway to increase market penetration. Refer to Lesson 9.7 for more on cost leadership.
what is a turnaround strategy?
When an organization’s problems are more serious they need to use a turnaround strategy. A turnaround strategy may also involve a formal Chapter 11 bankruptcy process, which involves reorganization of strategy.
chapter 11
reorganization
chapter 7
liquidation
Being “stuck in the middle”
a firm has tried to implement both a differentiation and low cost producer strategy concurrently but has not succeeded in either.
Blue Ocean Strategy
is a business level strategy that successfully combines differentiation and cost leadership activities using Value Innovation to reconcile the inherent tradeoffs in those two distinct business strategies and supporting business models.
Risks of cost leadership
include anything that will erode margins. New production or technology will allow other firms to take advantage of decreasing production costs and offer similar prices.
Concentration strategies
growth in existing markets
what are influence costs? related to related and/or unrelated diversification?
Influence costs and political maneuvering by managers to influence capital and resource allocation decisions can result in less-than-optimal allocation of scarce resources. Both related and unrelated diversification can lead to this type of cost.
Which strategy is a potential result of a make vs. buy analysis?
Backward vertical integration
In a make vs. buy analysis, a firm is evaluating whether to make an input material or service itself OR to purchase this from a supplier. Backward vertical integration refers to a firm acquiring a supplier(s) that is part of its value chain. A firm that chooses this strategy will acquire the supplier so it is now able to make the input material or service itself.
how many competitive strategies is A diversified corporation is likely to have?
Multiple competitive strategies
Because diversification involves a firm producing multiple goods and services, depending on whether these products are related or not, the firm will need multiple competitive strategies to be profitable.
Cost leadership is when
a firm becomes the lowest cost producer in an industry. Although cost leadership strategy does not necessarily suggest lowest prices and lowest prices not necessarily a cost leadership strategy, successfully maintaining lowest prices over an extended period (five-years) strongly suggests they are employing a successful cost leadership strategy.
Horizontal integration
the process of acquiring or merging with competitors. Hacienda Joes is a local competitor that Taco Rocket acquired/merged with.
Unrelated diversification
occurs when a firm adds new or unrelated product or service lines and penetrates new markets. In this instance, solar panels are completely unrelated from Mexican fast-food.
is The decision to lower prices on a product that facing intense competition an output of corporate strategy
no, pricing decisisons happen at the business unit level
These strategies address which markets a firm will compete in and which markets that the firm is in but plans to exit.
corporate
blue ocean strategy main tenet
ignore competition and Porter forces
how is horizontal integration accomplished
Horizontal integration is accomplished through mergers or acquisitions of competitors.
Holding everything else constant, horizontal integration results in less competition than vertical integration.
yes
