MODULE 2--Business Basics: Purpose, Strategy and Position

Question 1

How is the reason Why Organizations are in Business articulated?

Answer 1

􀁑 Mission
* The intention or purpose of the business
* Answers the question, “Why are we in business?”

􀁑 Vision
* What the organization wants for the future
* Describes who we are and where we are heading together

􀁑 Values
* Guiding principles and/or beliefs shared by stakeholders
* How we work and who we are
* What kind of organization we want to create in pursuit of our vision

􀁑 Strategy
* Goals, directions to achieve those goals, and policies to support those efforts
* How we are going to compete and achieve our mission, and what makes us different

􀁑 Profit Model
* Plan for how the organization generates revenue and makes money
* Why customers are willing to pay for our goods and services

Question 2

What is the Definition of Competitive Strategy?

Answer 2

Strategy is the broad framework of principles and approaches that guide day-to-day decisions affecting the business, including how a company positions itself in the market.

Question 3

What are the Key Differntiators that Lead Customers to Choose one organization over a competitor (3 of em)?

Answer 3

􀁑 Operational excellence: price/cost-based strategy that can include a combination of price, quality, dependability and ease of purchase, minimizing waste and rewarding efficiency

􀁑 Product/service leadership: innovation-based strategy that focuses on product development and market exploitation, creating the best products, generating more/better ideas and commercializing them faster than their competitors

􀁑 Customer intimacy: solutions-based strategy that focuses on creating results for carefully selected customers by building bonds to meet or exceed customer needs in order to build loyalty

Question 4

What are the 4 Types of Market Positions?

Answer 4

􀁑 Question Mark: Businesses in markets with low market share and high growth potential. Businesses in this segment use cash because of the need to sustain growth. The ability to generate profits is unknown because of low market share position.

􀁑 Star: Businesses in markets with high market share and high growth potential. Businesses in this segment use cash because of need to sustain growth but can also result in high profits.

􀁑 Dog: Businesses in markets with low market share and low growth potential. This segment typically uses cash from other segments.

􀁑 Cash Cow: Businesses in markets with high market share but low growth potential. Cash from these businesses should be used to develop businesses in other segments, such as question marks.

Question 5

What are the 4 phases of the business lifecycle?

Answer 5

􀁑 Start-up: The organization is new, and therefore has few or no formal policies or procedures.
The organization’s focus is on obtaining capital, marketing products or services, initial sales growth and cash conservation.

􀁑 Growth: In this stage, the organization is highly focused on growing sales, increasing distribution capability and determining how to efficiently produce products or services to meet growing demand. Growth typically generates the need to begin standardizing procedures through policy creation.

􀁑 Mature: The mature stage is characterized by a focus on maintaining/increasing market share, improving productivity and otherwise reducing cost of sales. Improvements to products are more evolutionary than revolutionary. The organization typically has higher levels of bureaucracy and greater amounts of cash on hand than at other stages.

􀁑 Decline: At this point, the organization’s revenues are declining. It must decide whether to reinvest in current products, create new products or maximize profits with current products as long as possible.

Question 6

Cereal

Question 7

Convenient Meals

Question 8

Snacks

Question 9

Yogurt

Question 10

Super Premium Ice Cream

Question 11

What Elements of the Compensation Plan are Directly influenced by the organization’s business strategy?

Answer 11

􀁑 Investment in resources
* An organization’s bottom line is directly related to how much it is willing to invest in HR resources, including compensation resources
* As the bottom line increases, there is more opportunity to invest in HR and compensation resources
* The organization might be willing to invest more if they predict a high return on that investment

􀁑 Fixed and variable compensation
* The mix between fixed and variable compensation programs may be impacted by the bottom line of the company, because as there may be more scope to implement variable pay programs that are contingent on organization success, including profit
– For example, if employees have a significant impact on the bottom line, an organization is more likely to incentivize those employees whose achievable goals will push the overall profit
* The mix will also depend on the overarching compensation philosophy and strategy
– The discussion of fixed vs. variable will depend on the types of people the organization needs to recruit, retain and motivate, as well on the outcomes and behaviors needed to drive organizational success

􀁑 Market competitive posture
* The bottom line of an organization impacts how aggressive a stance (high vs. low) an
organization takes in terms of where it positions itself against the market, such as market
median or market upper quartile
* Lead, lag, lead-lag

Question 12

1. What is captured in a mission statement?
   A. Goals, directions and policies
   B. Plan to generate revenue
   C. Intention or purpose of the business
   D. How an organization works and who they are

Answer 12

C. Intention or purpose of the business

Question 13

2. What question can be answered by looking at an organization’s profit model?
   A. Why will customers pay us for our services?
   B. Why are we in business?
   C. Who are we?
   D. What kind of organization do we want to create?

Answer 13

A. Why will customers pay us for our services?

Question 14

3. Which of the following is an example of a customer intimacy strategy?
   A. Computer manufacturer creates high volume, low-priced laptops for schools to send home with students
   B. Grocery chain’s loyalty program generates coupons based on individual shopper’s purchases
   C. Fast food restaurant has consistent menus and food that is prepared according to uniform standards

D. An automobile company develops low-cost, fuel efficient vehicles incorporating the latest technology for comfort and convenience

Answer 14

B. Grocery chain’s loyalty program generates coupons based on individual shopper’s purchases

Question 15

4. What is the definition for a cash cow market position?
   A. High market share and low growth potential
   B. Low market share and high growth potential
   C. High market share and high market potential
   D. Low market share and low market potential

Answer 15

A. High market share and low growth potential

Question 16

5. A company that manufactures household cleaners has recently patented a plant-based antibacterial bathroom cleaner. Although they have been in business for 20 years, they are looking to break into this up-and-coming market. They are ramping up their marketing campaign to include free sample distributions and coupons. Which phase of the business lifecycle best describes this company?

A. Start-up
B. Growth
C. Mature
D. Decline

Answer 16

B. Growth

Question 17

6. Why is it beneficial for an organization’s compensation policy to be in alignment with its overall business strategy?

A. Organizations that pay above market are at a higher risk for excessive compensation practices.
B. Compensation is built on fixed and variable expenses that determine the competitive strategy.
C. Most compensation professionals have additional responsibilities and need to be able to address business concerns from multiple angles.
D. Compensation usually represents a significant expense in the budget.

Answer 17

D. Compensation usually represents a significant expense in the budget.

Question 18

How do those with a market position of “Question Mark” use cash?

Answer 18

Question Mark: Businesses in markets with low market share and high growth potential. Businesses in this segment use cash because of the need to sustain growth. The ability to generate profits is unknown because of low market share position.

Question 19

How do those with a market position of “Star” use cash?

Answer 19

Star: Businesses in markets with high market share and high growth potential. Businesses in this segment use cash because of need to sustain growth but can also result in high profits.

Question 20

How do those with a market position of “Dog” use cash?

Answer 20

Dog: Businesses in markets with low market share and low growth potential. This segment typically uses cash from other segments.

Question 21

How do those with a market position of Cash Cow” use cash?

Answer 21

Cash Cow: Businesses in markets with high market share but low growth potential. Cash from these businesses should be used to develop businesses in other segments, such as question marks.