Chapter 8: Strategy Formulation and Implementation

Question 1

Strategic Management

Answer 1

It refers to the set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and the environment to achieve organizational goals

Question 2

The purpose of strategy

Answer 2

The essence of formulation strategy is choosing how the company will be different.

Question 3

Strategy

Answer 3

A plan of action that describes

• resource allocation
• activities for dealing with the environment
• activities for dealing with competitors
• activities for achieving a competitive advantage
• activities for attaining the goals of the organization.

Question 4

Competitive advantage

Answer 4

Why the company is different from others and provides it with a distinctive edge for meeting customer needs in the market.

Question 5

Competitive advantage strategies

Answer 5

1. target specific customer
2. build synergy
3. create value
4. exploit core competence

Question 6

Levels of strategy

Answer 6

Strategic managers usually think in three levels of strategy; corporate, business and functional.

Question 7

The strategic management process

Answer 7

1. Identify current mission, goals and strategies
2. Scan internal (core competences, synergy, value proposition) and external (National & global) environment.
3. Identify strategic factors. Strengths, weaknesses, (Internal) opportunities and threats (external).
4. Define new mission, goals and grand strategy
5. Formulate strategy: corporate, business, functional
6. Execute strategy via changes in: leadership/culture, structure, human resources and communication systems.

Question 8

SWOT analysis

Answer 8

The SWOT analysis is an assessment of the strengths, weaknesses, opportunities and threats of an organization.

Strengths & weaknesses: internal environment
Opportunities & threats: external environment

Question 9

Approaches to formulate corporate-level strategy

Answer 9

The three approaches to understand the corporate-level strategy are portfolio strategy, the BCG matrix and diversification.

Question 10

Portfolio strategy

Answer 10

The portfolio strategy directs to the mix of the SBU’s and product lines that fit together in a logical way to provide synergy and competitive advantages.

Question 11

The BCG matrix

Answer 11

The BCG matrix is illustrated by the Boston Consultancy Group and it organized businesses along two dimensions (business growth and market share). The business growth shows how rapidly the entire industry is increasing. The market share defines whether a business unit has a larger or a smaller share in comparison to competitors. These combinations provide four categories for a corporate portfolio. Star, Cash cow, Question mark and Dog.

Question 12

The BCG matrix: Star

Answer 12

The star has a high business growth rate and a high market share; The star is visible and attractive and will generate profit and positive cash flow even if the company gets older and the market share slows.

e. g.
- Tiktok

Question 13

The BCG matrix: The cash cow

Answer 13

The cash cow has a low business growth rate and a high market share. This means that the business is a bit riskier than the star, but still generates profit and cash flow.

e. g.
- Email

Question 14

The BCG matrix: The question mark

Answer 14

The question mark has a low market share and a high business growth rate. This usually exists in a new, fast growing company. It is a risky business because it could become a star but could also fail.

e. g.
- Clubhouse

Question 15

The BCG matrix: The dog

Answer 15

The dog is a poor performer. It has low market share and low business growth. Get rid of it.

e.g.
Vine

Question 16

Diversification strategy

Answer 16

Diversification is the strategy of moving into new lines of business. The purpose is to expand the firm’s business operations to produce new kinds of valuable products and services

• related diversification
• unrelated diversification
• vertical integration

Question 17

Related diversification

Answer 17

When the new business is related to the company’s existing business

Question 18

Unrelated diversification

Answer 18

When an organization expands into a totally new line of business

Question 19

Vertical integration

Answer 19

the company expands into businesses that either produce supplies needed to make products or distribute and sell the company’s products

Question 20

Porter’s competitive strategies

Answer 20

A popular and effective model for formulating business-level strategy

• differentiation strategy
• cost-leadership
• focus strategies

Question 21

Porter’s competitive strategies: differentiation strategy

Answer 21

Attempting to distinguish the firm’s products or services

from others in the industry

Question 22

Porter’s competitive strategies: cost-leadership

Answer 22

The organization seeks for efficient facilities and pursues cost reductions, uses tight controls to produce products more efficiently than competitors

Question 23

Porter’s competitive strategies: focus strategies

Answer 23

The organization concentrates on a specific regional market or buyer group. Either differentiation or cost leadership

Question 24

Functional-level strategy

Answer 24

How the organization will support business-level strategy

Question 25

Globalization strategy

Answer 25

If an organization chooses a globalization strategy, that means that the product design and advertising are based on standards throughout the world. This approach is based on the assumption that a single global market exists for many consumer and industrial products. The theory is that people everywhere want to buy the same things and live the same way. An advantage of this is the fact that one commercial can be used all around the world; this can safe a company and its marketing team millions of dollars.

Question 26

Multidomestic strategy

Answer 26

If an organization chooses a multidomestic strategy, it means that competition in each country is handled independently of industry competition in other countries. A multinational company may be present in many countries, but its marketing and advertising team has to adapt to the needs of each country.

Question 27

Transnational strategy

Answer 27

The transnational strategy seeks to achieve both global standardization and national responsiveness. It is difficult to achieve this because one goal may need global coordination while the other requires local flexibility.

Question 28

Strategy execution

Answer 28

A key to successful strategy execution is alignment; moving towards the same direction. Great goals need to be blueprinted to make sure everything is in line with the manager’s strategic intentions.

The following are the primary tools that managers use to implement strategy effectively:

• visible leadership
• clear roles and accountability
• candid communication
• appropriate human resource practices