Strategic Analysis and Management Quiz

Strategic Analysis and Management

• Strategy analysis involves setting organizational goals, evaluating internal and external environments, and formulating strategies to achieve objectives.

• Hierarchy of goals consists of:

  • Organizational Vision: A long-term, aspirational goal that defines the organization's values, goals, and aspirations and inspires employees.
  • Mission Statement: Specifies the company's purpose, competitive advantage, and stakeholder management, focusing on how the organization competes.
  • Strategic Objectives: Operationalize the mission statement, providing measurable and specific guidance for achieving goals, often with timeframes and targets.

• Key attributes of strategic management:

  • Aligns the organization towards overall goals and objectives.
  • Integrates multiple stakeholders in decision making.
  • Requires a balance of short-term and long-term perspectives.
  • Acknowledges trade-offs between efficiency and effectiveness.

• Intended vs. Realized Strategies:

  • Intended strategy: Based on analysis and organizational decisions.
  • Realized strategy: Incorporates both deliberate analysis and unforeseen environmental changes, resource constraints, or managerial preferences.

• Analyzing organizational goals & objectives:

  • Establish a hierarchy of goals, ensuring alignment with vision and mission.

External and Internal Analysis

• External analysis involves:

  • Monitoring and scanning general and industry environments to identify opportunities and threats.

• Internal analysis involves:

  • Analyzing strengths, relationships among activities within the value chain, and intellectual assets to uncover potential sources of competitive advantage.

Strategy Formulation

• Business-level strategy:

  • Focuses on achieving sustainable competitive advantage through cost leadership, differentiation, or focusing on a specific market segment.

• Corporate-level strategy:

  • Addresses the portfolio of businesses, determining which to compete in and how to manage them for synergy.

• International strategy:

  • Determines the appropriate entry strategy for international markets and how to achieve competitive advantage.

• Entrepreneurial strategy and competitive dynamics:

  • Analyzes the identification of viable opportunities and the formulation of effective strategies.

Strategy Implementation

• Strategy implementation:

  • Translates formulated strategies into action, establishing strategic control systems, organizational design, coordination with partners, and leadership commitment.

• Strategic control & corporate governance:

  • Informational control: Involves monitoring and scanning the environment to respond to threats and opportunities.
  • Behavioral control: Balances rewards and incentives, fostering appropriate corporate cultures and boundaries.

• Corporate governance: Ensures alignment of shareholder, management, and Board of Directors interests, establishing external control mechanisms and promoting responsible management practices.

Empowered Strategic Management

• Strategic management requires an integrative view of the organization, with all functional areas working coherently towards goals and objectives.

• Leadership is essential at various levels:

  • Local line leaders: Responsible for profit and loss.
  • Executive leaders: Champion and guide ideas.
  • Internal networkers: Contribute with conviction and clarity of ideas, despite limited positional power.

Social Responsibility & Environmental Sustainability

• Organizations have multiple stakeholders and must go beyond a purely financial focus.
• Social responsibility is the expectation that businesses strive to improve society's overall welfare.
• Triple bottom line: Measures financial, social, and environmental performance.
• Businesses can implement sustainability projects, even those difficult to quantify, to achieve substantial benefits.

Strategic Groups Within Industries

• Strategic groups are clusters of firms within an industry that share similar strategies.
• Strategic groups can be defined by factors such as:
  • Breadth of product and geographic scope
  • Price/quality
  • Degree of vertical integration
  • Type of distribution
• Companies within a strategic group are usually more similar to each other than they are to companies in other strategic groups.

How to Use Strategic Groups

• Strategic groups can be a useful tool for analyzing the competitive landscape of an industry.
• By identifying strategic groups, you can:
  • Identify barriers to mobility that protect a group from attacks by other groups.
  • Identify groups whose competitive position may be marginal or tenuous.
  • Chart the future direction of firms' strategies.
  • Think through the implications of each industry trend for the strategic group as a whole.

Example: The World Automobile Industry

• The World Automobile Industry is a good example of how strategic groups can be used to analyze an industry.
• Strategic groups in this industry include but are not limited to:
  • Luxury car manufacturers (e.g. Mercedes-Benz, BMW, Audi)
  • Mass market car manufacturers (e.g. Toyota, Ford, General Motors)
  • Budget car manufacturers (e.g. Hyundai , Kia)

Porter's Five Forces Model

• Porter's Five Forces Model is a framework for analyzing the competitive environment of an industry.
• The model identifies five forces that shape the competitive landscape of an industry:
  • Threat of new entrants
  • Bargaining power of buyers
  • Bargaining power of suppliers
  • Threat of substitute products
  • Intensity of rivalry among competitors
• The strength of each force determines the attractiveness of an industry.

Internet and Digital Technologies

• The internet and digital technologies are changing the competitive landscape of many industries.
• The internet and digital technologies can impact the five forces of competition in a number of ways.

Threat of New Entrants

• Digital technologies can lower the barriers to entry in many industries.
• This is because the internet and digital technologies make it easier for new firms to:
  • Access customers
  • Acquire capital
  • Develop and distribute products and services

Bargaining Power of Buyers

• The internet and digital technologies can increase the bargaining power of buyers in many industries.
• This is because the internet and digital technologies give buyers more information about products and services, which allows them to:
  • Compare prices
  • Choose the best options
  • Demand better value for their money

Bargaining Power of Suppliers

• The internet and digital technologies can increase the bargaining power of suppliers in some industries.
• This is because the internet and digital technologies allow suppliers to:
  • Reach more customers directly
  • Sell their products and services online
  • Reduce their reliance on intermediaries

Threat of Substitute Products

• The internet and digital technologies can increase the threat of substitute products in many industries.
• This is because the internet and digital technologies make it easier for consumers to find substitutes.
• It also allows companies to develop and launch new substitute products more easily.

Intensity of Rivalry

• The internet and digital technologies can increase the intensity of rivalry in some industries.
• This is because the internet and digital technologies make it easier for companies to:
  • Enter new markets
  • Differentiate their products and services
  • Compete on price
• It also allows companies to reach new customers more easily.

Value-Chain Analysis

• Value chain analysis helps managers to create value by investigating the relationships:

  • Between firm activities
  • Between the firm and its customers
  • Between the firm and its suppliers

• Primary activities:

  • Inbound logistics
  • Operations
  • Outbound logistics
  • Marketing and sales
  • Service

• Support activities:

  • Procurement
  • Technology development
  • Human resource management
  • Firm infrastructure

Resource-Based View

• Resource-based view of the firm:

  • Focuses on how resources can be used to gain a competitive advantage
  • Includes tangible and intangible resources, and organizational capabilities

• Tangible resources:

  • Physical assets such as buildings, machinery, and equipment

• Intangible resources:

  • Non-physical assets such as brand reputation, patents, trademarks, and organizational culture
  • Often more difficult to imitate and therefore more valuable

• Organizational capabilities are the result of combining tangible and intangible resources

  • Examples:
    • Marketing and sales
    • R&D
    • Production

Sustaining a Competitive Advantage

• Four criteria for resources to be sustainable:
  • Valuable
  • Rare
  • Inimitable
  • Non-substitutable
  • These criteria are necessary for long-term success

Appropriation of Value Created

• Employees and managers can appropriate value created through:
  • Salaries
  • Bonuses
  • Stock options
  • Company growth

Financial Ratio Analysis

• Financial ratio analysis helps to:

  • Assess firm performance over time
  • Make comparisons with industry norms
  • Make comparisons with key competitors in the strategic group
  • Determine if the firm's strategy is working -Identify problems and opportunities

• Types of financial ratios:

  • Liquidity ratios: Ability to pay short-term obligations
  • Leverage/solvency ratios: Ability to meet long-term obligations
  • Asset management/turnover ratios: Efficiency in using assets
  • Profitability ratios: Measure of how well a firm is making a profit
  • Market value ratios: How the market values a company

• Financial analysis helps to:

  • Analyze the balance sheet
  • Analyze the income statement
  • Analyze the cash flow statement
  • Identify financial trends
  • Prepare financial forecasts
  • Update strategic goals

The Balanced Scorecard

• The Balanced Scorecard is a comprehensive performance evaluation tool

• Focuses on four key perspectives:

  • Customer perspective: How do customers see us?
  • Internal perspective: What must we excel at?
  • Innovation & learning perspective: Can we continue to improve and create value?
  • Financial perspective: How do we look to shareholders?

• Internal Business Perspective: Focuses on key internal operations that enable satisfying customer needs

  • Examples: business processes, decisions, coordinated actions, key resources & capabilities

• Innovation & Learning Perspective: Focuses on improving existing products/services and introducing new products/services with extended capabilities

  • Focuses on: human capital, information capital, and organization capital

• Financial Perspective: Focuses on how the firm's strategy, implementation, & execution are contributing to bottom-line improvement

  • Measures: profitability, growth, shareholder value
  • Objectives lead to: improved sales, increased market share, reduced operating expenses, and higher asset turnover

Limitations of the Balanced Scorecard

• Not a "quick-fix" - needs proper execution
  • Requires commitment to learning & continuous improvement
  • Requires employee involvement
• Needs cultural change
• Needs a focus on non-financial measures vs financial measures
• Needs data on actual performance

Test your understanding of strategic analysis and management concepts, including goal hierarchy, mission statements, and strategic objectives. This quiz evaluates your knowledge of how organizations align their strategies to achieve success and integrate stakeholder perspectives.