Strategy Analysis & Choice

Question 1

“When a crisis forces choosing among alternatives, most people choose the worst possible one.”

Answer 1

Rudin’s Law

Question 2

a shift from a words-oriented to a numbers-oriented planning process can give rise to a false sense of certainty; can reduce dialogue, discussion, argument

Answer 2

Lenz

Question 3

Limitations to a SWOT matrix

Answer 3

• may favor/overemphasize one external or internal factor
• no weights
• snapshot in time only
• doesn’t show how to achieve competitive advantage; cannot be the end-all

Question 4

4 components of a SPACE Matrix

Answer 4

Financial Position, Industry Position, Stability Position, Competitive Position

Question 5

Steps to Creating a SPACE Matrix

Answer 5

1. Select variables
2. Assign numerical value to each of the variables
3. Compute average score for the 4 by summing values given to the variables and dividing by no. of vars
4. Plot on SPACE Matrix
5. Add x axis scores and add y axis scores; plot resultant points
6. Draw a directional vector from origin to the new point

Question 6

Limitations of SPACE

Answer 6

• snapshot in time
• coordinate could lie back at origin or end up on x axis
• implications if angles are unclear
• relative attrractiveness of alternative strats is unclear
• key underlying int and ext factors are not explicitly considered
• more than 4 dimensions that firms could/should be rated on

Question 7

Differences between BCG and IE Matrices

Answer 7

• x and y axes are different
• IE matrix requires more info on divisions
• strat implications of each matrix are different
• 9 quadrants vs 4

Question 8

Principles of Good Governance (Boards of Directors)

Answer 8

• Never have more than 2 company’s executives (past or present) in the board
• Never have interlocking directorships
• Never have CEO as chair of the board
• Have directors attend at least 75% of meetings
• Reqire all directors to own a large amount of the firm’s equity
• Never allow executives to serve on the board’s auditing, compensation, nominating committees
• require the board to meet annually to evaluate own performance, w/o top mgt in attendance

Question 9

“Boards of directors are now rolling up their sleeves and becoming much more closely involved with management decision making”

Answer 9

Jeff Sonnerfeld