Chapter 18 - Strategic Planning

Question 1

Conceptual Framework

Senior Management Viewpoint

Answer 1

Senior management is concerned primarily with managing the whole enterprise-the total business.

From this perspective, senior managers must give particular emphasis to interdependence and interrelationships among the different aspects of the company. Therefore, the initiation and development of the company’s strategic plan are their responsibilities.

Question 2

Key Elements In Strategic Planning

Answer 2

The strategic plan answers the following six key questions:
1. Where are we?
• Step 1: Definition of Business/Activity
• Steps 2 and 3: Analysis of Environment and Capabilities
2. Where do we want to go?
• Step 4: Determination of Assumptions
• Step 5: Determination of Objectives
3. How do we get there?
• Step 6: Examination of Policies/Procedures
• Step 7: Strategies and
• Step 8: Programs/Projects
4. When will it be done?
5. Who will be responsible?
6. How much will it cost?

Question 3

Key Elements In Strategic Planning

” Where do we want to go?” involves two steps: assumptions and objectives.

Determination of Assumptions

Answer 3

Assumptions can be divided into two categories:

1) broad assumptions about the environment (e.g., economic, sociopolitical, technological), and
2) specific assumptions applicable directly to the company (e.g., managerial, future nature of the business, future environment, and future capabilities).

Question 4

Key Elements in Strategic Planning

” Where do we want to go?” involves two steps: assumptions and objectives.

Determination of Objectives

Answer 4

They should include four or five financial objectives, and four or five that are nonfinancial. They should be estimated for a 3- to 5-year period and should be capable of being measured at the end of the period. These key objectives must be clear, concise, achievable, and communicated to all who will have a part in achieving them.

Question 5

Strategy Formulation

Major Strategic Concepts

Answer 5

The changing environment of the insurance industry can easily be categorized in the context of these forces:
• Threat of New Entrants
• Bargaining Power of Buyers and Suppliers
• Threat of Substitute Products

Question 6

Strategy Formulation

Generic Competitive Strategies

Answer 6

there are three generic strategies for coping with forces in the environment and for outperforming other firms in an industry:
1. Overall cost leadership: this strategy seeks to achieve the lowest costs in the industry through economies of scale, high levels of efficiency, cost reductions, and tight controls over cost and overhead.

2. Differentiation: creating a unique product within the industry.
3. Focus:focusing on a particular type of buyer, market segment, or geographic locale

Question 7

Strategic Planning For The Future

Low Cost Strategy

Answer 7

The low cost company must have a strategy consisting of the following:
• Lower premiums.
• Low cost distribution systems that reach key market segments.
• Low corporate overhead.
• Efficient computerized transaction processing capabilities.
• Superior investment returns

the important elements in developing a strategic plan are:
• Know the market (the environmental scan).
• Know the competition (the competitor analysis).
• Know the company’s strengths and weaknesses (the internal scrutiny step).
• Develop distinctive strategic options (strategy formulation).

Question 8

Implementation

Phases of the implementation process?

Answer 8

A. Priorities and Schedules. When will it be done?
B. Organization and Delegation. Who will be responsible?
C. Budgets/Resources. How much will it cost?