Strategic Management/Planning

Question 1

What is strategic planning?

Answer 1

Defining an organization’s long term goals and developing plans to achieve the goals of the organizational environment.

These plans must be adaptable in order to fit with the constant changes

Question 2

E.S.C.D.F

Outline the strategic management process

Answer 2

• Evaluate current Plan (where are we now)- what are the current strategies?
• Scan External (national and global) & Internal Environment (synergy, value creation etc)
• Conduct a SWOT analysis (strengths, weaknesses, opportunities & threats)-
• Define/ refine new strategies & goals (use big matrix etc)
• Formulate and Execute new strategies via changes in leadership, structure and more

SWOT is ongoing because of constant changing environment

Question 3

What is SWOT analysis?

Answer 3

Internal Strengths (maximise) & Weaknesses (address & overcome)
External Opportunities (capitalize on) & Threats (address & overcome head on)

acquired from surveys, reports, discussions & meetings

Not theoretical, we must use SWOT constantly to guide strategic planning.

Question 4

acronym

Goals must be what?

Answer 4

S- specific
M- measureable
A- attainable
R- relevant
T- time based

Question 5

What are the different types of goals set in organizations? Who are responsible for which?

Answer 5

First your mission statement must be set. Then, Strategic goals are long term longer than 5 years (senior management), tactical are medium 3-5 years (middle management) and operational are less than 5 years (lower management).

Question 6

What is a corporate-level strategy & how do we formulate it?

Answer 6

This is strategizing at the highest level of the organization. We can use:
* Portfolio Strategy (BCG Matrix)
* Diversification Strategy

Question 7

What is the portfolio strategy?

Answer 7

This is used to formulate strategies for strategic business units (SBUs).

Question 8

What is the BCG Matrix?

Stands for…

Answer 8

It studies the rate at which companies with various product lines are producing.

Boston Consulting Groups

Question 9

S.Q.C.D

What are the 4 components of the BCG Matrix?

Answer 9

• Stars- Rapid growth & expansion (High market share & High business growth rate)
• Question Marks- New ventures (Low market share & High business growth rate)
• Dogs- No investment (Low market share & Low business growth rate)
• Cash cows- High market share & Low business growth rate. Eg. Coke has commanded the global market and has become saturated so then its revenue can be ‘milked’ to invest into other product lines. It is a cash cow because it has maximized growth and cannot expand any further.

Product lines can move on the matrix. If a product is consistently a ‘dog’ it will be discontinued/ divested.

Question 10

What is the diversification strategy?

Answer 10

This is moving into new lines of business.

Question 11

How do we formulate business level strategies?

Answer 11

This is a strategy used within the business units. It uses Porter’s Five Forces Model.

Question 12

What is Porter’s 5 force model?

Answer 12

Porter’s Five Forces is a framework for analyzing a company’s competitive environment.

Question 13

T.C.P.P.P

What are porter’s 5 forces?

Answer 13

1. Competition in the industry- more competitiors lead to lower profits
2. Potential of new entrants into the industry- strong barriers to entry is ideal for existing companies
3. Power of suppliers- more suppliers means a company can keep its input costs lower and enhance its profits
4. Power of customers- A company that has many, smaller, independent customers will have an easier time charging higher prices to increase profitability.
5. Threat of substitute products- Companies that produce goods or services for which there are no close substitutes will have more power to increase prices and lock in favorable terms.

Question 14

What are Porter’s 3 competitive strategies?

Answer 14

• Differentiation- Our core particular factors will put us ahead of our competition (BMW standing out from other car manufacturers with luxury)
• Cost leadership- To thrive in a competitive market we should Minimize unnecessary costs, offer cheaper products & services (eg. Walmart, Shein, Rattans, Nissan etc)
• Focus- The business focuses on the particular market segment maybe a particular socio-economic group. It uses cost leadership or differentiation to capture that market segment (BMW would pick a high end/ level socio-economic and then use differentiation to stand out). Eg. Entrepreneurship program.

Question 15

What are functional level strategies?

Answer 15

These are action plans made by major departments such as finance.