Strategic Planning and Budgeting Concepts

Question 1

What are the five stages of strategic management?

Answer 1

1. The board of directors drafts the organization’s mission statement.
2. The organization performs a situational analysis (SWOT)
3. Based on the results, upper management develops a group of strategies describing how the mission will be achieved.
4. Strategic plans are implemented through the execution of component plans at each level.
5. Strategic controls and feedback are used to monitor progress, isolate problems, and take corrective action.

Question 2

Porter’s Five Competitive Forces

Answer 2

1. Threat of new entry.
2. Bargaining power of suppliers.
3. Threat of substitutes.
4. Bargaining power of customers.
5. Intensity of rivalry among established firms.

Question 3

Factors that increase the threat of entry:

Answer 3

1. Economies of scale are not significant.
2. Brand identity of existing products is weak.
3. Costs of switching suppliers are low.
4. Existing firms have no vertical integration.
5. Product differences are few.
6. Access to existing suppliers is not blocked, and distribution channels are willing to accept new products.
7. Capital requirements are low.
8. Exit barriers are low.
9. Government policy encourages new entrants.

Question 4

Cost Leadership Strategy

Answer 4

The generic strategy of entities that seek competitive advantage through lower costs and that have a broad competitive scope.

Question 5

Differentiation Strategy

Answer 5

The generic strategy of entities that seek competitive advantage through providing a unique product and that have a broad competitive scope.

Question 6

Cost Focus Strategy

Answer 6

The generic strategy of entities that seek competitive advantage through lower costs and that have a narrow competitive scope.

Question 7

Focused Differentiation Strategy

Answer 7

The generic strategy of entities that seek competitive advantage through providing a unique product and that have a narrow competitive scope.