Business Strategy Fundamentals

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Questions and Answers

What is a primary consideration for GOOGLE in managing its entry into the mobile phone market?

Adopting outdated technologies

Increasing sales in existing products

Attaining a competitive advantage (correct)

Maintaining low prices across all products

Which of the following best defines strategy according to Alfred D. Chandler?

Focusing solely on profit maximization

Short-term tactical adjustments

Determining long-run goals and allocating resources (correct)

Managing day-to-day operations effectively

Which component does NOT directly relate to strategic decision-making?

Long-term management of the firm

Organizational resources and capabilities

Developing a customer loyalty program (correct)

Facing environmental changes

What does competitive strategy fundamentally focus on?

Being distinct from others in the marketplace (B) Signup and view all the answers

Which aspect is essential for strategic capability in a firm?

Aligning with the values of organizational stakeholders (B) Signup and view all the answers

What is the primary goal of identifying a company's resources and capabilities?

To establish competitive advantages (D) Signup and view all the answers

Firms can be defined by which of the following characteristics?

Unique resources and heterogeneous capabilities (D) Signup and view all the answers

What premise explains why firms differ from one another?

Heterogeneity in their resources and capabilities (D) Signup and view all the answers

Why is imperfect mobility of resources relevant in understanding firm differences?

It restricts firms from sharing their resources with competitors (A) Signup and view all the answers

What aspect of resources and capabilities is emphasized in the analysis of firms?

Their evolution and expansion over time (A) Signup and view all the answers

What characterizes a strategic group within an industry?

Companies that exhibit similar competitive behaviors (D) Signup and view all the answers

What is intragroup competition?

Competitive behavior of companies within the same strategic group (C) Signup and view all the answers

What are mobility barriers?

Obstacles to movement from one strategic group to another (A) Signup and view all the answers

Which company best fits within the discount strategic group?

Lidl (A) Signup and view all the answers

What is the main implication of analyzing strategic groups?

It helps in identifying direct competitors within the group (A) Signup and view all the answers

What can the analysis of strategic opportunities help identify?

Attractive strategic spaces within an industry (A) Signup and view all the answers

Which of the following best describes intergroup competition?

Competitive behaviors of firms from different strategic groups (A) Signup and view all the answers

Which companies are identified in Strategic Group 1?

Mercadona and Carrefour (A) Signup and view all the answers

What is notable about the recommendations of the Unified Code of Good Governance?

They rely on a 'comply or explain' approach. (A) Signup and view all the answers

Which report was published in February 2015 and revised in June 2020?

Rodríguez Report (B) Signup and view all the answers

How many general principles are included in the Unified Code of Good Governance?

25 general principles (D) Signup and view all the answers

What approach does the Unified Code of Good Governance take regarding compliance?

'Comply or explain' methodology. (C) Signup and view all the answers

Which of the following reports is NOT mentioned in relation to codes of best practice?

Fukuyama Report (C) Signup and view all the answers

How many recommendations are contained within the Unified Code of Good Governance?

64 recommendations (D) Signup and view all the answers

Which of the following recommendations specifically refers to the Board of Directors in the Unified Code?

17 recommendations (C) Signup and view all the answers

What legislative framework has integrated some recommendations of the Unified Code?

Ley de Sociedades de Capital (B) Signup and view all the answers

What does 'dynamism' in a turbulent environment refer to?

The speed and depth of changes occurring. (A) Signup and view all the answers

Which of the following best describes 'complexity' in a turbulent environment?

The difficulty in controlling changes due to diversity. (C) Signup and view all the answers

What is an important characteristic of a strategic attitude for a CEO?

Being anticipatory and open to change. (D) Signup and view all the answers

To what does 'uncertainty' refer in the context of a turbulent environment?

The difficulty in predicting future developments. (B) Signup and view all the answers

Which term describes a firm's ability to maintain its operations amidst a changing environment?

Survival adaptation. (C) Signup and view all the answers

What does an 'extroverted' strategic attitude imply for a manager?

Concern with both physical and social environments. (C) Signup and view all the answers

What is the key focus of strategy in an organization?

Dealing with key issues for the future organization. (A) Signup and view all the answers

Which characteristic is NOT associated with a strategic attitude?

Being self-critical and subjective. (B) Signup and view all the answers

What creates a differentiation competitive advantage for a company?

Providing unique features that customers perceive as valuable (A) Signup and view all the answers

Which of the following best describes a product perceived as unique?

A product that has features that are meaningful to customers and commanding a higher price (D) Signup and view all the answers

What is typically NOT an attribute that could lead to differentiation?

Widespread availability (A) Signup and view all the answers

Which example illustrates a differentiation competitive advantage?

A luxury watch brand like Rolex known for its innovative features (C) Signup and view all the answers

How can companies gain an advantageous position relative to competitors?

By developing unique capabilities that resonate with customer values (B) Signup and view all the answers

What is a key characteristic of differentiation in marketing strategy?

Positioning products in a way that highlights uniqueness to the customer (A) Signup and view all the answers

Which of the following is a tangible feature that might contribute to differentiation?

Packaging design (D) Signup and view all the answers

Which statement about differentiation is false?

All differentiation strategies require significant market research. (A) Signup and view all the answers

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Study Notes

Introduction to the Strategic Process

Strategic management is about creating the future and thinking strategically.
Dynamic and static analyses are used to predict the future.
Financial planning is crucial for achieving the current budget.
Environments can be stable, complex, dynamic or uncertain; turbulent implies complexity, dynamism and uncertainty.
A strategic attitude is extroverted, proactive, anticipatory and self-critical.

Types of Environment

Complexity: the diversity and difficulty in controlling changes.
Dynamism: speed and depth of change.
Uncertainty: difficulty in predicting future developments.

Strategy: Concept and Components

Strategy is about key long-term business issues.
It involves a long-term management approach.
Gaining a competitive advantage is crucial.
Stakeholder expectations must be considered.
Strategy involves resource allocation to achieve goals.
Strategy is the long-term direction of an organization.
It achieves competitive advantage through the configuration of resources and capabilities, achieving stakeholder expectations and needs.

Scope of Activity

Scope of activity: the set of businesses or activities in which a firm operates now and wants to operate in the future.
Businesses are defined as technology, functions and market.

Resources & Capabilities

Resources and capabilities are essential for competitive advantage.
Tangible resources include physical and financial resources.
Intangible resources include human capital, reputation and organizational systems.
Capabilities are the ability to put resources together to do something.

Competitive Advantages

Competitive advantage is about being better than competitors.
Differentiation is about offering unique products or services.
Cost advantage is about offering lower costs.

Synergy

Synergy is when the value of a whole system is different from the combined values of its parts.
Improved management results from coordinating activity scope, distinctive capability development and competitive advantage.

Classic Process of Strategy Formulation

Includes mission, vision, values, environmental and internal analysis, strategy selection, implementation and control.
A cyclical process that is constantly assessed and updated.
Strategic fit & organizational fit are important considerations.
Internal and external analysis are needed for successful strategies.
Rational and emerging processes are both considered.

Levels of Strategy and Strategic Business Units (SBU)

Corporate strategy defines the relationship of the company with the environment.
Business strategy defines how to compete in each business.
Functional strategy defines how to optimize resources within functional areas of the company.
The interconnectedness of these levels is crucial .

Corporate Governance

Mechanisms of control guide company management and ensure stakeholder interests align.
External controls involve markets for goods and services, capital, and labor.
Internal controls involve incentive systems and direct supervision mechanisms.

Mission, Vision, Values, and Objectives

Mission: the identity and personality of the company (present and future).
Vision: how the organization should be in the future.
Values: beliefs and attitudes that guide the organizational culture.
Objectives: measurable goals to achieve the mission and vision.

Stakeholder Mapping - Power/Interest Matrix

Stakeholders are groups affected by and affecting the organization.
Identifying stakeholder power and interest can help management and stakeholders.
Understanding their influence can help develop successful strategies.

CSR is the set of obligations beyond legal requirements that businesses feel a need to fulfill
Includes economic, social and environmental factors.
CSR considers the impact on stakeholders and the company's role in society.

External Analysis (Advanced Environmental Analysis)

PESTEL analysis (Political, Economic, Social, Technological, Environmental, Legal) identifies macro-environmental factors.
The purpose of external analysis is to understand current and potential influence of the environment on a company.
Identifying threats and opportunities from the environment is crucial for strategizing.
The five forces framework by Porter helps understand industrial structure, like the threat of new entrants and supplier/buyer power.

Intra-Industry Analysis (Strategic Groups)

Strategic groups are aggregations of similar companies within an industry by following similar strategies, characteristics and actions.
Strategic groups can be mapped on a 2-dimensional map using key variables (size, technology, customer focus, etc.).
Analysing similarities within groups and contrasts between groups can show useful points about the industry structure.

Advanced techniques for environmental analysis

Projection of past situations into the future according to certain assumptions (extrapolation).
Foresight techniques aim at projecting future possibilities by considering and modelling uncertainties.
The creation of scenarios can be done by different methods, one of them is the Delphi method; scenario method.

Internal Analysis (Resources, Capabilities and Competitive Advantage)

Internal analysis studies a company's resources and capabilities and how they can create competitive advantage.
Tangible resources are the physical and financial resources available to a company (property, equipment, cash).
Intangible resources are less tangible or observable assets like knowledge, reputation or organizational attributes.
Capabilities are the abilities to efficiently combine resources for different activities; it's a more dynamic concept than resources and it's how resources are combined in order to perform activities.
Competitiveness depends on the proper identification of internal strengths and weakness that will determine if a company has a competitive advantage or not and comparing them against the competition.

Competitive Strategies

A competitive advantage is a characteristic that sets a company apart from its competitors and enables it to achieve superior profitability.
Companies can gain this advantage by focusing on differentiation, low-cost or focus (combination of these).
The choice of competitive strategy will affect many other crucial aspects like the target market and the resources needed.

SWOT Analysis

SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) consolidates internal and external analysis findings.
Strengths and weaknesses assess internal attributes, whereas opportunities and threats come from external ones.
SWOT helps identify the proper strategies and their alignment.

Corporate Strategies

Diversification strategies allow companies to enter new product markets, either related or unrelated.
Internal and external growth strategies are both methods to facilitate diversification strategies.
A portfolio analysis helps manage the balance between various organizational units.

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Description

Test your knowledge on fundamental concepts of business strategy, including competitive strategy, strategic decision-making, and the analysis of strategic groups. This quiz covers essential theories and definitions by prominent strategists, emphasizing the resources and capabilities of firms. Prepare to delve into the mechanics of strategic management.