Chapter 8 - Strategic Option Generation

Question 1

Porters Generic Strategies

Answer 1

Cost Leadership

• Not necessarily cheapest
• need high market share, cheap resources, efficienct processes
• same price as rivals but higher margin
• defend self in price war
• pursue penetration pricing

Differentiation

• Be different, or appear different (marketing)
• need R+D, marketing, creativity, skilled staff

Focus/Niche

* Need to avoid being ‘stuck in the middle’

* Can only be 1 cost leader

Question 2

Ansoff Matrix

Answer 2

* Strategic direction

• Market Penetration (protect/build)
• Market Development
• Product Development
• Diversification

Question 3

Unrelated Diversification

Answer 3

• Reduce risk
• Growth in saturated market
• Reduce variability in profits/cash flow

BUT

• Reduced management time for core activities
• Lack of management experience - increase risk

Question 4

BCG Matrix

Answer 4

• Sustainability of company due to its product portfolio
• Cash from cash cow used to fund new products (question marks) with hope become star. Once market maximises drops to cash cow.
• Dog might be most profitable!
• Want good mix across all 4 quadrants

* Market growth vs Relative market share

* Star, question mark, cash cow, dog

Question 5

Methods of Strategy Development

(Johnson + Scholes)

Answer 5

• Internal/Organic development
• Acquisition (or disposal)
• Joint development, or alliances

Question 6

Franchising

Answer 6

Provides proven methods of doing business to a franchisee for a fee and % of sales/profit

Advantages

• Speed
• Expansion
• Training

Disadvantages

• Control
• Price/Costs
• Conflict

Question 7

Divestment

Answer 7

Disposal of part of its activities by an entity

Question 8

Evaluating Strategy

Answer 8

• Suitable -
  
  • to mission/objectives
  • exploit competences
  • fit culture
• Acceptable -
  
  • to stakeholders (Mendelow)
  • e.g. EPS for shareholders
• Feasible -
  
  • available resources
  • competitor response

Question 9

4 CSR Philosphies

(Carroll)

Answer 9

• Reaction - denies responsibility for social issues
• Defense - does least possible
• Accomodation - what stakeholders want
• Proaction - more than expected

Question 10

Choices when formulated/implementing strategy

Answer 10

• Product market - what?/where? (Ansoff)
• Competitive strategy - how? (Porters generics)
• Method of Growth - bigger/smaller, organic/external