Strategy and Governance - Strategy Formulation

Question 1

Explain strategy formulation to the strategic management process

Answer 1

It is a complex process that demands a systematic approach, monitoring and assessing internal resources and capabilities

Question 2

What is the first step of strategic formulation

Answer 2

Is to develop a strategy based on the mission, vision, and value statement
- It is based on various analyses, is established on an overall objective

Question 3

How is corporate-level strategy formulated

Answer 3

• It is made by the executive of the corporation to determine the strategies that allow the organization to achieve success
• Look at industry markets, business unit coordinate and develop synergies
• How much does the value chain of the organization want to control

NFP - usually focuses on maintaining competitive advantages, by attracting and retaining customer
- Focus on long-term sustainability

Question 4

What are the strategic vehicles and provide the four types

Answer 4

The strategic vehicles are the method to support the chosen strategy
Four types:
1. Integration strategies
2. Diversification strategies
3. Defensive strategies
4. Intensive strategies

Question 5

Explain how integration strategy is used and the three models

Answer 5

• Integration is considered the aspect of the industry value that should be included in the organization’s business model

1. Forward vertical integration - Involves expanding the organization to include the next steps in the value chain
2. Backward vertical integration - Involves expanding the organization to include preceding steps in the value chain
3. Horizontal integration - This occurs when an organization increases capacity at some point along the value. Increase production of goods and services or add trucks to existing fleet.

Question 6

Explain how diversification is used for a strategic vehicle and provide the different types of models.

Answer 6

• It considers the product and service that a firm should offer as well as the market in which it should operate

Types
1. Concentric diversification - diversifying the business through the addition of new products or services that are related to the current business
2. Horizontal diversification - diversifying the business through the addition of new products or services that are not related to the current product
3. Conglomerate diversification - Diversifying the business through the addition of new products or services that are completely unrelated to the current product offering

Question 7

Explain how defensive and intensive strategic vehicles are used

Answer 7

Defensive - The organization needs to respond to external conditions, usually in the form of competitive pressure
- Retrenchment - refers to reorganization of business activities to reduce assets and expenses

Intensive - grows a business by increasing sales volume through marketing strategies
1. Market penetration strategy - seek to obtain or increase market shares.
2. Market development - Involves sales by entering in new market or region
3. Product development strategy - Involves improving or modifying an existing product

Question 8

How is unbundling/ outsourcing to be decided using the strategy vehicles

Answer 8

Unbundling - Dissecting the organization’s value chain into its components part, allowing management to determine the activities, function
Outsourcing - Purchasing value-creating activity from external providers. Made from inhouse

Question 9

Explain what business-level strategies are and customer value proposition

Answer 9

Business level strategies - apply to business level units such as profit center level and production level
Focuses on resources, capabilities, and competencies

Customer value proposition - why does the ideal customer buy the product or use the service rather than those competitors

Question 10

What are the generic strategies and the different types

Answer 10

The generic strategies are to increase the organization’s ability to create and maintain a competitive advantage

1. Differentiation strategies
   - offers unique and higher quality products and services.
   Ex. Customer intimacy - allows for the personalization of product or service
   Product leadership - is to bring the product to market
2. Low-cost strategies - promises to deliver product/service at a lower cost than that of its competitors
   - Can develop internal processes to help reduce cost
3. Focused or niche - Involves providing a small number of products or service and a focused subset of the customer, a level of quality to gain their loyalty

Question 11

How are functional strategies used for strategy formulation

Answer 11

Functional level strategies - focus on using the resources and competencies of each functional area, such as department within the organization, to create value that supports corporate and business level strategies

Ex. Finance, sales and marketing, R&D, Logistics, Purchasing, Human resources, etc.

Question 12

What are the four stages of the development life cycle and the different growth in the market

Answer 12

1. Introduction
2. Growth
3. Maturity
4. Decline

Organizations can have growth
1. Joint venture - A business agreement between two or more companies to combine resource
2. Strategic Alliance - Cooperation between two or more independent organizations to develop a strategic alliance
3. Merger - Two more or more organizations are combined on a relatively equal basis
4. Acquisition - Effectiveness acquisition of one organization by another can predecessors shares are achieved. Can increase market share and dominance