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Questions and Answers
According to Henry Mintzberg, which mode of strategic decision-making is characterized by reactive solutions to existing problems rather than a proactive search for new opportunities?
Adaptive mode
What is the dominant goal of the Entrepreneurial mode of strategic decision-making?
Logical incrementalism is a synthesis of the planning, adaptive, and entrepreneurial modes of strategic decision-making.
True
Corporate governance pertains to the system of rules, practices, and processes by which a firm is directed and controlled, balancing the interests of various ____ such as shareholders, management, customers, suppliers, government, and the community.
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Match the following sustainable business practices with the respective companies:
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What factor determines the impact of government and government policy on an organization?
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Give an example of how McDonald's may benefit from international trade agreements.
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Buyer power in Porter's Five Forces can easily influence price increases.
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Supplier power in Porter's Five Forces can be influenced by the uniqueness of their product or service, relative size and strength of the supplier, and cost of switching from one supplier to another.
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Match the following business ecosystem players with their descriptions:
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What is a strategy according to the Management Study Guide?
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According to Sun Tzu, what is the most critical factor to a winning strategy?
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Strategic management includes short term and long-term strategy formulation, implementation, evaluation, and control.
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Functional strategy focuses on maximizing resource productivity in a specific ______________ area of an organization.
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According to Carroll, in what order should a business firm prioritize its responsibilities?
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Peter Drucker believes that the corporate mission should always come first.
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What characteristic makes strategic decisions unique?
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What is the primary purpose of environmental scanning in business?
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A stakeholder is a person with an interest or concern on a particular ____________ undertaking.
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Match the following aspects of the environment with their descriptions:
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Study Notes
Strategy
- A strategy involves courses of action to attain organizational goals, integrating and aligning activities and allocating resources to meet objectives.
- Features of strategy include:
- A well-defined roadmap of an organization
- Defines overall mission, vision, and direction
- Maximizes organizational strengths and minimizes competitors' strengths
- Objective of strategy: to capture a greater market share than competitors
The Study of Strategic Management
- Strategic management: a set of managerial decisions and actions that determine long-term performance
- Includes internal and external environment, short-term and long-term strategy formulation, implementation, evaluation, and control
- Evolution of strategic management:
- Phase 1: Basic financial planning (complex proposals, shallow analysis, simplistic operational planning)
- Phase 2: Forecast-based planning (five-year budget plans, projects taking more than a year, highly political and time-consuming process)
- Phase 3: Externally oriented planning (formal strategic planning system, top-down planning, use of consultants and competitive intelligence units)
- Phase 4: Strategic management (input and commitment of lower-level managers, integrated plans, strategic thinking at all levels)
Types of Strategies
- Business strategy: strengthens company's competitive position, composed of competitive and cooperative strategies
- Corporate strategy: long-term vision, creates corporate value, motivates workforce
- Functional strategy: emphasizes a particular functional area, achieves objectives of a business unit, maximizes resource productivity
Competitive Advantage
- Superior performance relative to competitors or industry average
- Determinants of competitive advantage:
- Benefit (value offered to the market)
- Target market (selected group of customers)
- Competition (rivalry between companies)
- Cost advantage (lower cost than competitors)
- Differentiation strategy (unique qualities setting the product apart)
Initiation of Strategy: Triggering Events
- Triggering events: stimuli for change in strategy
- Internal environment:
- New CEO
- Performance measures (gaps in performance meeting expectations)
- Threat of change in ownership
- External environment:
- External intervention (alterations in supply chain, demand, supply, and environmental risks)
- Strategic inflection point (major alterations due to new technologies, regulatory environment, customer values, or preferences)
Strategic Decision-Making
- Characteristics of strategic decisions:
- Rare
- Consequential
- Directive
- Approaches to strategic decision-making:
- Entrepreneurial mode (one powerful individual, focused on opportunities)
- Adaptive mode (reactive solutions to existing problems)
- Planning mode (systematic gathering of information for situation analysis)
- Logical incrementalism (synthesis of planning, adaptive, and entrepreneurial modes)
Strategic Decision-Making Process
- Steps in strategic decision-making process:
- Evaluate current performance results
- Review corporate governance
- Scan and assess external environment
- Scan and assess internal corporate environment
- Analyze strategic factors
- Generate, evaluate, and select alternative strategies
- Implement selected strategies
- Evaluate implemented strategies
Definition and the Triple Bottom Line (TBL) of Sustainability
- Sustainability: business practices satisfying present needs without compromising future generations' ability to meet their own needs
- Triple Bottom Line (TBL):
- Economic Pillar (economic efficiency, income, profitability)
- Social Pillar (quality of life, safety, services for citizens)
- Environmental Pillar (availability and quality of natural resources)
Sustainable Business Practices
- Examples of sustainable business practices:
- Stakeholder engagement (PepsiCo)
- Employee engagement (General Electric)
- Water stewardship (Coca-Cola)
- Supply chain management (Ford Motor Company)
- Innovation (Nike)
- Management accountability (Xylem)
- Executive compensation (Exelon)
- Biodiversity (Pacific Gas & Electric Company)
- Investor dialogue (Starbucks)### Corporate Governance
- Corporate governance refers to the system of rules, practices, and processes by which a firm is directed and controlled.
- It involves balancing the interests of a company's stakeholders, including shareholders, management, customers, suppliers, government, and the community.
- Functions of corporate governance:
- Goals and risk management: setting policies and procedures to meet company goals and manage business risk.
- Corporate accountability: ensuring accountability within the board of directors and management structure.
- Shareholder meetings: keeping shareholders informed of the company's financial health and business initiatives.
Social Responsibility and Ethics
- Social responsibility refers to the obligations of a business to society, including economic, legal, ethical, and discretionary responsibilities.
- Milton Friedman's traditional view: a business's primary responsibility is to increase profits, while social responsibility is a "fundamentally subversive doctrine".
- Archie Carroll's four responsibilities of business:
- Economic: producing goods and services of value to society.
- Legal: complying with laws and regulations.
- Ethical: following generally accepted ethical values.
- Discretionary: voluntarily contributing to the well-being of society.
- Peter Drucker's view: companies should ensure that social responsibilities become business opportunities.
- Stakeholder analysis: identifying and evaluating corporate stakeholders, including primary (direct connection) and secondary (indirect connection) stakeholders.
Environmental Scanning and Industry Analysis
- Environmental scanning: an in-depth examination of key factors that influence business operations, including natural, societal, and task environments.
- Natural environment: physical resources, wildlife, and climate that affect business operations.
- Societal environment: general forces that influence long-term decisions, including economic, technological, political-legal, and sociocultural forces.
- Task environment: elements that directly affect a corporation, including governments, local communities, suppliers, competitors, customers, creditors, employees, and special-interest groups.
Industry Analysis
- Industry analysis: examining the important stakeholder groups in a corporation's task environment.
- SWOT analysis: evaluating a company's competitive position by identifying strengths, weaknesses, opportunities, and threats.
- PESTEL analysis: identifying external factors that may affect an organization, including political, economic, social, technological, environmental, and legal factors.
- Porter's Five Forces: assessing the competitive strength and position of a business organization, including supplier power, buyer power, threat of new entrants, threat of substitutes, and competitive rivalry.### Porter's Five Forces Analysis
- Customer bargaining power is strong when there are low switching costs, a large number of providers, and high availability of substitutes.
- McDonald's has strong customer bargaining power due to low switching costs, a large number of providers, and high availability of substitutes.
Competitive Rivalry
- Competitive rivalry is high when there are few businesses equally selling a product or service, the industry is growing, and consumers can easily switch to a competitor's product for a cheaper cost.
- McDonald's faces tough competition due to the saturated fast food restaurant market, high number of firms, high aggressiveness of firms, and low switching costs.
Threat of Substitution
- The threat of substitution is strong when buyers can easily find substitute products with attractive prices or better quality, and when buyers can switch from one product or service to another with little cost.
- McDonald's has a high threat of substitution due to high substitute availability and low switching costs.
Threat of New Entrants
- The threat of new entrants is strong when an industry is profitable and there are few barriers to enter, and weak when there are high barriers to enter.
- McDonald's has a moderate threat of new entrants due to low switching costs, highly variable capital cost, and high cost of brand development.
Business Ecosystem Assessment
- The business ecosystem consists of four types of players: customers, suppliers, competitors, and complementors.
- Customers are people or parties that buy products and services of an organization.
- Suppliers are external factors that provide the resources needed to produce or sell finished products or services.
- Competitors are parties that fight over the market share of an organization by offering similar products or services and targeting similar customers.
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Description
This quiz covers the concept of strategy in business management, including its features, importance, and implementation.
