Business Strategy febraury

Question 1

Please define 3 Key Issues (Questions) of strategic planning.

Answer 1

1. What do we do (Mission of the company). What are we doing now? What is our current position?
2. For whom do we do it? (Who are the Stakeholders, Sponsors, Customers?)
3. How do we beat or avoid competition? (Africa’s Problem: Tomato Merchandise Story, they copy everything which seems to run good.) Fazit: In order to determine where the company is going, the organisation needs to know exactly where it stands, then determine where it wants to go and how it will get there.

Question 2

Please give a defintion for Business Strategy!

Answer 2

1. “Business Strategy is the long term direction of an organisation, levering competencies and resources with a view to satisfy stakeholders’ expectations.” (Johnson G and Scholes K, 1999).
2. “It is the ability to deliver long time added value to the organisation.”

Question 3

Please enumerate 3 levels of strategies and explain them!

Answer 3

1. Corperate Strategy (decisions at the top, CEO are making decicions, business decisions, financial decisions who bring them ROI) a. It explores the ways firm can develop a favourable portfolio strategy for its many activities. b. It includes such factors as decisions about the type of business a form should be in (SBU.) The flow and other resources to and from its divisions and the way a corporation can increase its ROI.

2. Business Strategy (How do we compete with strategy (SBU) a. In constrast, usually occurs at the divisional level with emphasis on improving the competitive position of the corporation’s product or services in a specific industry or market segment the divisions (Unternehmensbereich) serves.

3. Operational Strategy (functional, Departments of the Companies. These guys are in the field.) a. Is on maximising resource productivity. b. Given the constraints (Vorgaben/Auflagen) of corporate and business strategies around them, operational departments develop strategies to pull together their various activities and competences to improve performance.

Question 4

There are four needs for strategic planning. Please explain!

Answer 4

1. It Provides a “theme (Mission,title, subject)” for the organisation.
2. It ensures organisational “fit” (do not conflict with environment) with the environment.
3. Optimal use of discretionary resources.
4. Better control (It is a plan you have, you are able to see the current situation.)

Question 5

What are the limitations of strategic planning? Please give four examples.

Answer 5

1. It is costly in terms of time and money
2. It tends to encourage bureaucracy
3. It stifles (erstickt) innovation and oppurtunities. Maybe these will be missed because they are not in the plan.
4. It is not relevant in a crisis

Question 6

Please give a definition to Analysis of Strategy and also discuss the aim of AS.

Answer 6

1. Analysis is concerned with understanding the strategic position of the organisation in terms of its external environment, internal resources and competences and the expectations and influences of stakeholders.
2. The aim of AS is to form a view of the key influences on the present and future well-being of the organisation and what opportunities are afforded by the environment and the competences of the organisation. (Key Influences, Present and Future, Well Being and Opportunities of the environment and competences.

Question 7

Which 5 components does the AS (Analysis of strategy) include? Please enumerate them and discuss

Answer 7

1. The Environment Describing environmental changes and trends in commercial, economic, political, technological, cultural and social world. 2. Avaiable Resources/ Competencies /Strengths and Weaknesses SWOT - Internal components based on Resources = Competencies , Strength and Weaknesses.
2. The organisation culture / Beliefs and Assumption Belief and Assumptions make up the culture of an organisation and influences the strategy.
3. Stakeholder expectations E.G. Shareholders and Employees needs. These are important as they will affect what is seen as acceptable in terms of the strategies propelled (vorangetrieben) by management.
4. Profit oriented organisation Have a choice of adopting high risk/high return strategy or low risk/low return strategy

Question 8

Please explain the two main approaches to business strategy!

Answer 8

1. Prescriptive: Business Strategy - one whose objectives are defined in advance. Main Elements are developed before strategy commences. It is a structured approach strategy with the final objective being clear.
2. An Emergent: Business Strategy - is one where the final objectives are unclear. Elements developed during the course of its life as strategy proceeds or unfolds (entfaltet).

Question 9

Define choice of strategy (CS) and enumerate and discuss its three components

Answer 9

Def: CS involves understanding the underlying bases guiding future strategy, generating strategic options for evaluation and selecting from among them.

1. Generating of strategic options: There are several possible courses of actions.
2. Strategic options: Can be seen in the context of strategic analysis in order to assess the relative merit (Begünstigte) of the available options.
3. The Selection of the Strategy: That the organisation finally peruses (durchgeht

Question 10

Which compenents does the strategic management process includes. Please enumerate 3 components.

Answer 10

1. Analysis of the strategy

2. Choice of strategy

3. Strategic evaluation and implementation

Question 11

Please define Strategy Implementation and enumerate all its three components and define them as well.

Answer 11

Def: SI is the translation of strategy into action. Implementing a strategy takes into account the following:

1. Organisational Structure: E.G. should the organisation be split into Africa, Asia and Europe?
2. Does the Organisation have suffient resources to implement the strategy?
3. Managing change : Crucial particularly amongst employees

Question 12

Please define strategic lenses and discuss all three ways:

Answer 12

Def: Strategic lenses are different ways of viewing the strategy:

1. Strategy as design: Assumes that strategy is formulated in a rational / logical process based on information which is systematically conderised and predictions made.
2. Strategy as experience: View that future strategies based on experience drawn from past strategies. This is essentially an emergent approach to strategy.
3. Strategy as ideas: New and innovative ideas. They are not preserved on senior manamgent at corporate level, but new ideas are often created across the spectrum of the organisation as people interact in their daily jobs.

Question 13

Fundamental principles for businesses are (**Profit Making and finding customers. **Please discuss all the different ways of strategic management in organisational context: Please give 5 explanation.

Answer 13

Definition: While businesses have similiar underlying fundamental principles (Making profit, finding customers), they differ in a variety of ways:

1. Small organisations: Single or limited range of market with limited products or services hence (deshalb) scope of their operations is likely to be less strategic.
2. Multinational companies: Divers in terms of product range and geographical spread. The challenge here is that multinationals face issues of structure, control at corporate level, coordination and allocation of resources.
3. Public sector institutions: Exist to provide a service-differences in planning.
4. Voluntary and NGO’s: Dependent on donors and there may be great influence on strategy formulation from such donors. (Donator’s Influence)
5. Professional Service organisations: Are being more important than revenue-earning capability in terms of strategies that profit making organisations make. (Professional Service Organisations are more important than profit making strategies, long termed)

Question 14

Please come up with 2 models for environmental research. Just enumerate them first.

Answer 14

1. PESTEL Analysis:
2. Porter’s Five Forces:

Question 15

Please explain the PESTEL framework in detail. Start with a short definition.

Answer 15

1. The PESTEL Framework provides a comprehensive list of influences and trends on the possible success or failure of particular strategies. It is an analysis for the macro-environment of an organization.
2. The Macro environment is hardly to change by the organization
3. It stands for Politocal, economic, social, Technological, environment, legal.
4. Since the Macro environment is hardly to change by the organization, firms have to adopt to these trends and influences.

Question 16

Please see the picture below and give examples for every categories for the airline industry:

Answer 16

Political:

Security controls, restrictions on migration

Economic: Fuel price, National growth indicators

Social: Rise in travel by elderly, Student international study exchanges Technological: Fuel-efficient engines and aircrafts, security check technologies, WIFI during flights

Environmental: Noise pollution controls, Energy consumption controls, Land for growing airports

Legal: Restrictions on mergers, preferential airport rights for some carriers.

Question 17

The five forces framework by porter helps analysing industries and sectors. Please define this model. Firstly enumerate all the five force.

Answer 17

The five forces framework by michael porter helps identify the attractiveness of an industry or sector in terms of competitive forces.

**1. Threat of Entry **

**2. Supplier Power **

**3. Power of Buyer **

**4. Substitution Products **

**5. Competitive Rivalry **

Question 18

Please explain the five forces by porter with more details. Refer to Threat of entrys

Answer 18

**1. Threat of entry: Barriers of entry to an industry. **

Factors new entrants has to overcome:

1. Economy of scale
2. **Capital requirements **
3. **Access to supply or distribution channel **
4. **customer or supplier loyalty **
5. **experience & expected retailation. **

The higher the barriers the more unattractive it gets for new entrants to enter the market.

Question 19

Please explain the five forces by porter with more details. Refer to Buyer Power!

Answer 19

Power of Buyer: The power of buyers is high when some of the conditions prevail.

1. **(Switching cost) **Cost of switching supplier is low or involves less risk.
2. (**Backward Integration) **The threat of the supplier being acquired by the buyer. The buyer might setting up competition with the supplier. Backward integration.
3. **(Concentration of buyers): **There is concentration of buyers particularly if the volumes purchased by the buyer are high. Otherwise the supplying industry comprises (beinhaltet) a number of small operators.

Question 20

Please explain the five forces by porter with more details. Refer to Supply Power!

Answer 20

SUPPLY POWER-is likely to be high when:

• There is concentration of suppliers
• The switching costs from one supplier to another is high

Question 21

From the 5 forces of porter please explain **Threat of Substitutions. **

Answer 21

THREAT OF SUBSTITUTES-

• Substitution reduces demand for a particular class of products as customers switch to the alternatives.
• Even to the extent that this class of products or services becomes obsolete (veraltet aus der Mode), eg fanta to apple max drink.

Question 22

What does the compenent **Competetive Rivalry mean? **

Answer 22

The component **Competitive rivalry **is a part of Porter’s Five Forces in order to analyze the organisation’s micro environment also called industry or sector. This models gives information about the attractiveness of an industry or sector.

** COMPETITIVE RIVALRY-**

These are organisations with similar products and services aimed at the same customer group. (MTN,AIRTEL, ZAMTEL)

There are a number of factors that affect the degree of competitive rivalry in an industry or sector:

1. (**Equal sized Competitors = High Competition) **The extent to which competitors are in balance (where competitors are of roughly equal size there is the danger of intense competition as one competitor attempts to gain dominance over another.
2. Industry growth rates may affect rivalry
3. High fixed costs in an industry-perhaps through capital intensity, may result in price wars and low margins if industry capacity exceeds demand as capacity fill becomes a prerogative( Vorrecht).
4. Where there are high exit barriers to an industry.
5. Differentiation-where products or services are undifferentiated, there is little to stop customers switching between competitors increasing rivalry.

Question 23

The Porters Diamond is a model to analyze why some industries have become more competitive than others in different locations. Please enumerate all its 4 components.

Answer 23

1. Factor Conditions
2. Demand Conditions
3. Firm strategy, structure and rivalry
4. Related and supporting industries.

This diamond represents the national playing field that countries establish for their industries.

Question 24

Please explain Factor CLoconditions out of the Diamond model by Porter.

Answer 24

Factors Conditions: A country creates its own factors by **skilled resources **and **technologies base. **

1. Factors that extent to be upgraded or deployed are more important than factors at a given time.
2. Local disadvantages in production forces Innovation.
3. Firms are forced to develop new methods, when there are bad conditions like labour shortages and rare raw materials.
4. These **New Methods & Innovation **leads to national comparative advantage.

Question 25

Please explain demand conditions within the Porters Diamond.

Give 3 statement what could have said about this.

Answer 25

1. A more **demanding **local market **leads to national advantage.
   (Demanding Local market = national advantage)
2. A **strong, trend setting local market ** helps firms anticipate **global trends. (strong, trend setting local market = anticipation of global trends) **
3. Local firms devote more attention to a product, which demand is locally higher than in foreign markets. This leads to a competitive advantage when local firms start exporting the product.

Question 26

Another factor is “related and supporting industries”.

Please state two statements.

Answer 26

1. III. Related and Supporting Industries
2. •When local supporting industries are competitive, firms enjoy more cost effective and innovative inputs.
3. •This effect is strengthened when the suppliers themselves are strong global competitors.

Question 27

Lastly the “Firm strategy, structure and Rivalry- Factor” is an important element of the Diamond model. Please explain it in giving 3 statesment.

Answer 27

1. Local conditions affect firm strategy. Such strategy and structure helps to determine in which types of industries a nation’s firm will excel. (German firms = Hierachical, Italien = Small & family based)
2. Local Rivalry forces firms to move beyond basic advantages. Such as low factor costs, in their **home country. **
3. High local rivalry results in less global rivalry. It is better in the long run for firms with local rivalry, because it puts pressure on innovate and **improving. **

Question 28

The Diamond model is described as a system. What does this mean ?

Answer 28

1. One effect of one point depends on the others.
   E.G. Factor disadvantages will not lead firms to innovate unless there is sufficient rivalry.
2. The diamond also is a self-reinforcing system. A high level of rivalry often leads to the formation of unique specialized factors.

Question 29

What is the government role particularly described in the diamond model by Porter.

Answer 29

The Role of government in the model is to:

1. Stimulate early demand for advanced products
2. Focous on specialized creation.
3. Stimulate local rivalry by limiting direct cooperation and enforcing antitrust regulations.
4. Encourage firms to raise their performance, e.g. by enforcning strict product standards.

Question 30

Please define **Strategic Group **in your own words.

Answer 30

1. A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategies. (MTN, AIRTEL, ZAMTEL) (All Restaurants can be strategic groups)
2. They follow similar strategies or compete on similar bases. This helps in understanding the competitive structure of an industry.

Question 31

What does the term **strategic group **mean according to Porter?

Answer 31

1. Strategic groups refer to meaningful collections of firms or substructures within an industry.
2. They are often defined as sets of firms with similar strategies, or as groups of firms isolated by common mobility barriers (Porter, 1979)

Question 32

What is the meaning of “mobility barriers” according to Porters definition?

Answer 32

He explained strategic groups in terms of what he called “mobility barriers”. These are similar to the entry barriers that exist in industries, except they apply to groups within an industry

Question 33

What are the characteristics for identifying strategic groups ?

Answer 33

SCOPE OF ACTIVITIES

1. •Extent of product (or service) diversity.
2. •Extent of geographic coverage.
3. •Number of market segments served.
4. •Distribution channels used.

RESOURCE COMMITMENT

1. •Extent of branding.
2. •Marketing effort.
3. •Degree of vertical integration.
4. •Product (or service) quality.
5. •Pricing policy.
6. •Technological leadership (leader or follower)

Question 34

Explain why it is useful to use strategic group analyisis?

Answer 34

1. Helps identify who the most direct competitors are and on what basis they compete.
2. Raises the question of how likely or possible it is for another organization to move from one strategic group to another.
3. Strategic Group mapping might also be used to identify opportunities.
4. Can also help identify strategic problems

Question 35

What are the recent critism against strategic groups? Give two statements.

Answer 35

1. Recently, strategic groups research has come under significant criticism.
2. •A lack of theory regarding how groups are formed, how they evolve, or how they influence outcomes has produced profound disagreements about how groups should be studied.

Question 36

Please define market segmentation and illustrate its process. How can businesses approach?

Answer 36

Market segmentation is a marketing strategy that involves:

1. Dividing a broad target market into subsets of consumers, businesses, or countries, who have common needs and priorities.
2. Designing and Implementing strategies to target them.

• *Businesses can develop: **
  1. product differentation strategies

2. Undifferentiated approach, involving specific products or product lines, depending on the specific demand and attributes of the target segment.

Question 37

Please enumerate the possible segmentations factors. What are they?

Answer 37

1. Geographical Segmentation
2. 1. Demographic Segmentation
3. 2. Behavioral Segmentation
4. 3. Time Segmentation
5. 4. Media Segmentation
6. 5. Price Segmentation
7. 6. Distribution Segmentation

Question 38

Explain **Geographical Segmentation **in your own words.

Answer 38

Marketers can segment according geographic criteria:

1. Nations
2. States
3. Regions
4. Countries
5. Cities
6. Neighbourhoods
7. Postal codes

• Most common form of segmentation. Where companies segment the market by attacking a restricted area.
• A brand could be sold only in one market, one state, or one region of the US. Many restaurants chains focus on a limited geographic area to achieve concentration of force.
• Regional differences in consumer preferences exist, it often provides a basis for geographic specialization: Hungry Lion only within Towns.

Question 39

Explain Demographic Segmentation.

Answer 39

1. Gender
2. Age
3. Income
4. housing type
5. education level

• Are common demographic variables. Some brands are only targeted to women or men only.

•Demographic segmentation divides markets into different life stage groups and allows for messages to be tailored accordingly.

Question 40

Explain Behavioral segmentation and give the key factors.

Answer 40

Behavioral Segmentation divides consumers into groups according to:

1. Knowledge of
2. attitude towards
3. usage rate
4. response
5. loyalty status
6. readiness stage

to a product.

Question 41

**Time Segmentation. Discuss. **

Answer 41

1. Time segmentation is less common, but highly effective.
2. Some stores stay open later than others, or stay open on weekends.
3. Some products are sold only at certain times of the year (Christmas, cards, fireworks)

Question 42

Media Segmentation is not common. Explain!

Answer 42

1. Media segmentation is based on the fact that different media tend to reach different audiences.
2. If a brand pours all of its budget into one media, it can possibly dominate the segment of the market that listens to that radio station or reads that magazine.
3. It is most often practied by companies that have some control over the media and can somehow discourage competitors from using that media.

Question 43

Explain Price Segmentation.

Answer 43

1. It is common and widely practiced. Varation in household incomes creates an opportunity for segmenting some markets along a price dimension.
2. If personal incomces range from low to high, then a company should offer some cheap, medium-priced and expensive products.

Question 44

Explain Distribution Segmentation.

Answer 44

• Different markets can be reached through different channels of distribution.
• For example, a company might segment the “tick and flea collar” market by selling the product to supermarkets under one brand name, to mass merchandisers under another brand, to pet stores under another brand name, and to veterinarians under yet another brand name

Question 45

Read the follow final thoughts about Market Segmentation.

Answer 45

If the segmentation results don’t make sense, then you have to go back, change some of your assumptions or methods, rerun the analysis, and repeat the crosstab exercise to apply the “common sense” validity check

Final Thoughts on Market Segmentation

Question 46

Session 5 Analysis of Competencies, Resources, Skills

Please define the term strategic capability.

Also mention the three key concepts that underpin the discussion.

Answer 46

Set of capacities, resources and skills that create a long-term competitive advantage for an organization.

There are three key concepts that underpin the discussion.

The First (Heterogeneous) is that organisations are not identical but have different Capacitiy/capabilities, they are “Heterogeneous” (Airtel/Zamtel doing their jobs different) in this respect.

**The second (Difficulty of copying) **is that it can be difficult for one organisation to obtain or copy the capabilities of another. For example, Pick & Pay’s cannot readily obtain the whole of shoprite’s retail site, its management or its experience.

**The third (base of capability competetive advandtages) **arises from these: if an organisation is to achieved competitive advantage, it will do so on the basis of capabilities that its rivals do not have or have difficulty in obtaining.

Question 47

How can organisation have stronger capabilities than other firms? What do they have to do?

Answer 47

They have capabilities that permit them to produce at lower cost ,or generate a superior product or service at standard cost in relation to other organisations with inferior capabilities.

Question 48

Strategic capabilities fall into two categories. Mention them and explain.

Answer 48

1. **Threshold capabilities: **
   Are minimum capabilities required for an organisation to be able to compete in a given market. These resources and competencies required to meet customer’s minimum requirements.
2. Competetive edge capabilities:
   Allows an organisation to outwit its competition. Capabilities need to meet the needs and expectations of the customers.

Question 49

Please expain resource audit. Please also explain what resources could be?

Answer 49

1. A resource audit is the start point for considering the importance of an **organisations internal resources. **
2. This helps to identify the resources available to an organisation in order to be able to effectively support its strategies.
3. Typically, resources would include **physical resources, human resources, financial resources and intangibles. **

Question 50

Please explain the terms:

Tangible resources:

Intangible resources:

Competences:

Unique resources:

Answer 50

1. Tangible resources:
   Are the physical assets of an organisation such as plant, people and finance.
2. Intangible resources:
   are non-physical assets such as information, reputation and knowledge.
3. Competences:
   Activities and processes through which an organisation deploys its resources effectively.
4. Unique resources:
   Resources that critically underpin competitive advantage and that **others cannot easily imitate or obtain. **

Question 51

The typical organisation resources are considered under the following four broad categories:

Answer 51

Physical resources

Such as the machines, buildings or the production capacity of the organisation. The nature of these resources, such as the age, condition, capacity and location of each resource, will determine the **usefulness of such resources. **

**Financial resources **

Such as capital, cash, debtors and creditors and suppliers of money (shareholders, bankers, etc.)

**Human Resources **
Including the mix (for example, demographic profile), skills and knowledge of employees and **other people in an organisation’s networks. **

**Intellectual capital **

As an intangible resource – includes patents, brands, business systems and customer databases. An indication of the value of these is that when businesses are sold, part of the value is “goodwill”. In a knowledge-based economy intellectual capital is likely to be a major asset of many organisations.

Question 52

Please define cost efficiency and why it is an important strategic capability.

Answer 52

1. An important strategic capability in any organisation is to ensure attention is paid to achieving and continually improving cost efficiency.
2. This will involve having both appropriate resources and the competences to manage costs. Customers can benefit from cost efficiency.

Question 53

Cost effective is determined by a number of cost driver please enumerate them and explain them short.

Answer 53

1. Economy of Scale: High capital costs of plant need to be recovered over a high volume of output. (Industries, motor vehicle, chemicals, metals) , Other industries drinks, tobacco and food = scale of economies are important in distribution or marketing.
2. Supply Costs: Particulary important to organisations that act as intermediaries (reseller), when the value added through their own activities is low and the need to identify and manage input costs is critically important to success. Cost advantages trough unique ownership
3. Experience: Experience curve, key source of cost effiency. Competitive advantage through cumulative experience gained by an organisation and its unit costs.
4. First Mover Advantage: When you are the first mover, you have a advantage over all competitor. You are more experienced and you are able to reduce cost.
5. Product/Process design:

Efficiency gains in production processes have been achieved by many organisations through improvements in capacity-fill, labour productivity, yield (from materials) or working capital utilisation

6. **Growth is not optional: **

If an organisation chooses to grow more slowly than the competition, it should expect the competitors to gain cost advantages in the longer term – through experience.

Question 54

The Value chain analysis. Please give two definition.

Answer 54

1. If organisation are to achieve competitive advantage by delivering value to customers, managers need to understand which activities they undertake are especially important in creating that value and which are not.
2. The value chain describes the categories of activities within and around an organisation, which together create a product or service. The concept was developed in relation to competitive strategy by Michael porter.

Question 55

Please group the primary activities of an organisation into five main areas. Please enumerate them first.

Answer 55

1. Inbound logistics

Receiving, storing and distribution inputs to the product or service including (Materials Handling, Stock control, transport)

**2. Operations transform **
(Machining, packaging, assembly, testing etc.)

**3. Outbound logistic **
Store, distribute the product to customers, warehousing, materials handling distribution, etc.

**4. Marketing & Sales **

Create consumer awareness of product and service and are able to purchase. Includes Sales admin, advertising and selling.

**5. Service **

Activities of enhance or maintain the value of a product or service such as installation,repair, training and spares.

Question 56

What are the other supportive activity for the value chain analysis?

Answer 56

1. Other support activities that help to improve the effectiveness or effiency of primary activities of an organisation include:
2. Procurement
3. Technology development
4. Human resource management
5. Infrastructure
6. It is important to emphasise that if an organisation seeks to build competitive advantage it must meet the needs and **expectations of its customers. **