Unit 2: Dunkin Donuts NOTES

Question 1

Industry Attractiveness

Answer 1

5 competitive forces are what constitute the “industry structure” and it establishes the industry’s attractiveness or potential to generate long-term returns. Less attractive an industry structure is, the harder it will be to make good strategic choices and realize competitive advantage relative to rivals.

Question 2

Unattractive industry:

Answer 2

In which rivalry among competitors is intense, substantial threats exist in the form of possible new entrants and substitute products, and suppliers, and buyers are very powerful in bargaining over such things as prices and quality.

Question 3

Attractive industry:

Answer 3

Less existing competition, few threats from new entrants, or substitutes, and low bargaining power among suppliers or buyers.

Question 4

The choice of corporate-level strategies generally begins with what are called “grand” or “master” strategies.

Answer 4

These are the growth, stability, renewal, and combination strategies.

Question 4

The CEO and other senior management team in a business focus on corporate-level strategy formulation.

Answer 4

The goal at this level of strategic analysis is to plot the overall direction of the organization in the competitive setting of its industry.

Question 5

Growth strategy:

Answer 5

Involves expansion of the organization’s current operations.

Question 6

Growth strategies seek to expand the size and scope of operations in respect to such things as total sales, market shares, and operating locations.

Answer 6

When you hear terms like “acquisition”, “merger” and “global expansion”, for example, the underlying master strategy is one of growth.

Question 7

Growth doesn’t equate to effectiveness

Answer 7

Growth doesn’t equate to effectiveness.

Question 7

Stability strategy:

Answer 7

Maintains current operations without substantial changes

Question 8

Stability strategies try to maintain an existing course of action with major changes.

Answer 8

At a retail firm, for example, stability may mean working with current customers in the same markets and in mostly the same ways as in the past, while avoiding any major investments in new initiatives. Stability is sometimes pursued when an organization is performing well, already operating at capacity, or when the environment appears stable or exceptionally risky. In the latter case, strategic managers may make the decision to wait, rather than “leap” until current conditions change for the better.

Question 9

Renewal strategy:

Answer 9

Tries to solve problems and overcome weaknesses that are hurting performance.

Question 10

Renewal strategies, also called

Answer 10

retrenchment strategies or defensive strategies, try to solve problems/overcome weaknesses.

Question 11

They often cut size and rearrange operations to improve performance.

Answer 11

Retrenchment is a viable strategic option under appropriate circumstances. “Restructuring”, “divestiture”, and “bankruptcy”, underlying master strategy is renewal and retrenchment.

Answer 12

• U.S law allows firms to file for bankruptcy protection while they regroup and make changes to restore profitability.
• In Canada, bankruptcy is set out by a federal law, called the Bankruptcy and Insolvency Act, and is applicable to both business and individuals.

Question 13

The most extreme form of retrenchment is liquidation

Answer 13

Where business ceases operations and assets are sold to pay creditors.

Question 13

Liquidation:

Answer 13

Business operations cease and are sold to pay creditors.

Question 14

Combination strategy:

Answer 14

Pursues growth, stability, and/or retrenchment in some combination

Question 15

Growth through concentration:

Answer 15

Growth within the same business area.

Question 16

Combination Strategy

Answer 16

Combination strategies pursue one or more of the other strategies at the same time. This is common in complex and diversified firms, which may be retrenching in one major business line while seeking growth in another, and operation with stability in still another.

Question 17

Growth through diversification:

Answer 17

Is growth by acquisition of or investment in new and different business areas.

Question 17

One approach is through concentration

Answer 17

where expansion is within the same business area.

Question 18

Growth is one of the most common and popular of the grand strategies.

Answer 18

It’s popular in part because growth is viewed as necessary for long-run survival in some industries, and also because organizations have a variety of strategic options in how to pursue growth.

Question 19

Growth through vertical integration:

Answer 19

Is growth by acquiring suppliers or distributors

Question 19

Growth can be pursued through diversification

Answer 19

where expansion takes place in new and different business areas.

Question 20

A strategy of related diversification:

Answer 20

pursues growth by acquiring new business or entering business areas that are related to what the company already does.

Question 21

A strategy of unrelated diversification:

Answer 21

pursues growth by acquiring businesses or entering business areas that are different from what the company already does.

Question 22

Diversification can also take the form of vertical integration.

Answer 22

Where a business acquires suppliers (backward vertical integration) or distributors (forward vertical integration). Backward vertical integration was once common in the automobile industry, as firms purchased suppliers to ensure quality and control over availability of key parts.

Question 23

Restructuring:

Answer 23

Changes the mix or reduces the scale of operations

Question 24

Turnaround strategy:

Answer 24

Tries to fix specific performance problems

Question 25

Downsizing strategy:

Answer 25

Decreases size of operations

Question 26

Divestiture:

Answer 26

Sell off parts of the organization to refocus attention on core business areas

Question 27

When organizations are in trouble, experiencing problems brought about by a bad economy or too much growth/diversification, the goal shifts toward renewal.

Answer 27

A restructuring strategy tries to correct weaknesses by changing the mix or reducing the scale of operations. The idea is to reverse or change an approach that isn’t working, and reorganize to compete better in the future.

Question 28

Restructuring by turnaround focuses on

Answer 28

fixing specific performance problems.

Question 29

Restructuring by downsizing decreases

Answer 29

the size of operations, often by reducing the workforce. Rightsizing is used to describe downsizing by a clear strategic focus.

Question 30

Restructuring by divestiture also reduced size, this time by selling off parts of the organization

Answer 30

to refocus on core competencies, cut costs, and improve operating efficiency. This strategy is followed when organizations become over-diversified and have problems managing so much complexity. It’s also a strategy followed by organizations that want to profit from the value of internal assets by selling off as independent businesses.

Question 31

There are very few businesses today without some exposure to and direct involvement in international operations.

Answer 31

A key aspect of corporate strategy, therefore, is how the firm approaches the global economy and its mix of business risks and opportunities.

Question 32

Globalization strategy:

Answer 32

Adopts standardized products and advertising for use worldwide

Question 33

A grand or master strategy of growth is pursued with the support of an accompanying global strategy.

Answer 33

An easy way to spot differences in global strategies is to notice how products are developed and advertised around the world.

Question 33

A multi-domestic strategy customizes

Answer 33

products/advertising to best fit local needs.

Question 34

A firm pursuing a GLOBALIZATION strategy tends to view the world as one large market,

Answer 34

making most decisions from the corporate home base and trying as much as possible to standardize products and their advertising for use everywhere.

Question 35

Firms using a MULTI-DOMESTIC strategy try to customize products and their advertising as much as possible to fit the local needs of different countries or regions.

Answer 35

Local and regional managers are given authority to provide this differentiation. Many consumer goods companies such Bristol Myers, P&G, and Unilever, take this polycentric view and vary their products to fit consumer preferences in different countries and cultures.Local and regional managers are given authority to provide this differentiation. Many consumer goods companies such Bristol Myers, P&G, and Unilever, take this polycentric view and vary their products to fit consumer preferences in different countries and cultures.

Question 36

Third approach is the TRANSNATIONAL strategy, that tries to balance efficiencies in global operations and responsiveness to local markets.

Answer 36

The transnational firm tries to operate without a strong national identity and blend seamlessly with the global economy to fully tap its business potential. Resources are acquired worldwide; manufacturing and other business functions are performed wherever in the world they can be done best at the lowest cost.

Question 37

In a strategic alliance:

Answer 37

Organizations join together in partnership to pursue an area of mutual interest.

Question 38

Co-opetition is the strategy of

Answer 38

working with rivals on projects of mutual benefit

Question 39

Trends day are more toward cooperation among organizations, such as the joint ventures that are common in international business.

Answer 39

They are a form of strategic alliance in which 2 or more organizations join together in partnership to pursue an area of mutual interest. One way to co-operate strategically is through outsourcing alliances – contracting to purchase important services from another organization.

Question 40

Co-operation in the supply chain takes the form of supplier alliances, in which preferred supplier relationships guarantee a smooth and timely flow of quality supplies among alliance partners.

Answer 40

Another common approach is co-operation in distribution alliances, in which firms join together to accomplish sales/distribution of products or services.

Question 41

An e-business strategy strategically uses the

Answer 41

internet to gain competitive advantage

Question 42

A B2B business strategy uses

Answer 42

IT and web portals to link organizations vertically in supply chains

Question 43

A B2C strategy uses

Answer 43

IT and web portals to link businesses with customers.

Question 44

B2C business strategies use IT and web portals to link organizations with their customers.

Answer 44

But, there’s more success with B2C than simply advertising and selling online. B2C strategy must be fully integrated with supporting functional strategies and operations. Among e-tailers, for example, Dell has set benchmarking standards. Its website is easy-to-use and allows customization of an individuals’s computer order, in effect offering a design-your-own-product capability. Then a highly efficient and streamlined manufacturing and distribution system takes over to build and quickly ship the computer.

Question 45

A portfolio planning approach seeks the

Answer 45

best mix of investments among alternative business opportunities.

Question 46

The BCG matrix analyzes

Answer 46

business opportunities according to industry or market growth rate and market share.

Question 47

When firms are highly diversified they operate in multiple industries and deal with many products/services.

Answer 47

They’re internally complex and large in size. This makes resource allocation a challenging strategic management task. The problem is similar to that faced by an individual with limited money who must allocate it among stocks, bonds, and real estate in a personal investment portfolio.

Question 47

In multi-business situations, corporate-level strategy formulation can make use of

Answer 47

portfolio planning to help allocate scarce resources among competing uses.