Strategy Formulation

Question 1

What are the levels of Strategy

Answer 1

Corporate - Goals and objectives of the firm
Business - how a firm competes in industry and market
Functional - Implementation of strategy at lower level

Question 2

What are the types of strategies

Answer 2

1. Diversification - reducing risk by spreading the business across products
2. Defensive Maneuvers - Moves to protect the company from attack
3. Integration
4. Outsourcing

Question 3

What are some strategies to obtain a competitive advantage

Answer 3

Cost leadership - Providing a product at the lowest cost
Differentiation - Unique product with features the buyer is looking for
Best value - low cost + Differentiation
Niche/Focus - Focus on serving the needs of a narrow segment of the market

Question 4

What are some ways to achieve growth

Answer 4

Joint Venture
Alliance
Merger - acquire a target company
Acquisition - purchasing part of another company
Organic growth

Question 5

What are 3 types of defensive Maneuvers

Answer 5

1. Divestiture - Disposal of business units and focus on core business
2. Retrenchment - A reduction or curtailment of operations
3. Sale and lease-back - Sells capital assets to raise cash and reduce fixed asset investment

Question 6

What are the 2 Types of Diversification

Answer 6

1. Related - 2 Types
   a. Concentric - New products developed or acquired that is similar to the company’s core business
   b. Horizontal - Unrelated product development or acquisition that appeals to the existing customer base
2. Unrelated - NEw product development and acquisition where it’s not related to the existing customer base or business

Question 7

When is cost leadership attractive to pursue?

Answer 7

Price competition is fierce
Standardized product and readily available with many suppliers
Low switching cost to buyers
Buyers have bargaining power

Question 8

When is differentiation attractive to pursue?

Answer 8

Buyers and uses ae diverse
Few rivals following a similar strategy
Fast-paced tech change and innovation
Lots of ways to differentiate

Question 9

When is niche attractive to pursue?

Answer 9

Big enough market to profitable
Not crucial for the success of industry leaders
Difficult for competitors in multi-segment to meet the needs of the niche
Few rivals

Question 10

What is internationalism?

Answer 10

Entering international markets

Risky since new competition, cultures, and regulations

Question 11

What is the customer value proposition

Answer 11

stmt that describes why a client should buy a product

Question 12

What are the 3 types of value propositions

Answer 12

1. All benefits - Benefits received from purchasing product
2. Favorable points of difference - Why select product X over Y
3. Reasoning focus - how the product differs from the market and why the improvements provide the most value to customers