Strategic Management and Planning Quiz

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Questions and Answers

What does strategic planning primarily focus on?

  • Daily operational tasks
  • Long-term organizational objectives (correct)
  • Short-term financial goals
  • Individual performance metrics

Strategic management ensures that an organization uses the best strategy available.

False (B)

What is the primary purpose of environmental analysis in strategic planning?

To identify environmental factors that impact organizational operations.

The acronym SWOT stands for strengths, weaknesses, _____, and threats.

<p>opportunities</p> Signup and view all the answers

Match the following components of environmental analysis to their associated focus area:

<p>S = Social values E = Economic factors T = Technological changes N = Natural Environment</p> Signup and view all the answers

Which management level typically develops strategic plans?

<p>Upper-level management (B)</p> Signup and view all the answers

Tactical planning is focused on the long run while strategic planning is focused on the short run.

<p>False (B)</p> Signup and view all the answers

Name one factor that influences a firm's competitive dynamics.

<p>Awareness, Motivation, or Capability</p> Signup and view all the answers

Good strategy implementers create a network of people to help solve __________ problems.

<p>implementation</p> Signup and view all the answers

Match the following elements associated with planning and competitive dynamics:

<p>Strategic Plans = Long-term focus Tactical Plans = Short-term operations Competitor Awareness = Mindfulness of competitor actions Competitor Capability = Ability to take action</p> Signup and view all the answers

What is the primary purpose of a mission statement?

<p>To describe and explain the mission of the organization (D)</p> Signup and view all the answers

SWOT Analysis focuses on matching internal strengths and weaknesses with external opportunities and threats.

<p>True (A)</p> Signup and view all the answers

What does the Boston Consulting Group Matrix categorize businesses as?

<p>Star, Cash Cow, Question Mark, Dog</p> Signup and view all the answers

A properly developed mission statement provides guidelines for _______ allocation.

<p>resource</p> Signup and view all the answers

Match the following terms with their descriptions:

<p>Star = High growth, high share business needing heavy investment Cash Cow = Low growth, high share business requiring less investment Question Mark = Higher growth, lower share business needing analysis Dog = Low growth, low share business often divested</p> Signup and view all the answers

What is the primary characteristic of a 'Star' in the BCG matrix?

<p>High market share, high growth (A)</p> Signup and view all the answers

Which of the following is NOT one of the critical questions in strategy formulation?

<p>What are the organization's current financials? (A)</p> Signup and view all the answers

A mission statement does not need to be shared with all organization members.

<p>False (B)</p> Signup and view all the answers

Cash cows are expected to provide large amounts of cash for organizational expansion.

<p>True (A)</p> Signup and view all the answers

What is strategy formulation?

<p>The process of determining appropriate courses of action for achieving organizational objectives.</p> Signup and view all the answers

What is the recommended strategy for 'Dogs' in the BCG matrix?

<p>Divest</p> Signup and view all the answers

The BCG matrix uses relative market share and _____ to assess the performance of SBUs.

<p>market growth</p> Signup and view all the answers

Match the following BCG categories with their descriptions:

<p>Stars = High growth, high share, generate cash Question Marks = High growth, low share, require cash to grow Dogs = Low growth, low share, may drain cash Cash Cows = Low growth, high share, generate steady cash</p> Signup and view all the answers

What action should an organization take for 'Question Marks'?

<p>Invest more resources to build market share (C)</p> Signup and view all the answers

An organizational mission is significant for achieving success.

<p>True (A)</p> Signup and view all the answers

Name two factors that influence decisions in the BCG matrix.

<p>Organizational objectives and environmental conditions</p> Signup and view all the answers

What is the primary purpose of an organizational mission?

<p>To direct human effort towards common targets (D)</p> Signup and view all the answers

Cost leadership means making an organization more competitive by producing products more expensively than competitors.

<p>False (B)</p> Signup and view all the answers

What are the three approaches to strategy formulation according to Porter?

<p>Differentiation, Cost Leadership, Focus</p> Signup and view all the answers

Retrenchment can be defined as downsizing to overcome current __________ problems.

<p>performance</p> Signup and view all the answers

Match the following organizational strategies with their descriptions:

<p>Growth = Increase the amount of business Divestiture = Eliminate a business unit that is underperforming Stability = Seeking to maintain current performance Retrenchment = Fortifying or defending against underperformance</p> Signup and view all the answers

Which skill is crucial for a manager during strategy implementation?

<p>Monitoring skill (D)</p> Signup and view all the answers

An organizational mission has no effect on resource allocation.

<p>False (B)</p> Signup and view all the answers

What is the role of the interacting skill in strategy implementation?

<p>To manage people and understand their fears and frustrations during implementation.</p> Signup and view all the answers

What does the 'threat of new entrants' refer to in Porter's Five Forces Model?

<p>The ability of new firms to enter an industry (B)</p> Signup and view all the answers

The internal environment of an organization includes external market forces.

<p>False (B)</p> Signup and view all the answers

Name one act related to consumer protection mentioned in the content.

<p>Consumer Protection Act</p> Signup and view all the answers

The __________ environment includes customers, competition, labour, suppliers, and international issues.

<p>industry operating</p> Signup and view all the answers

Match the following components to their categories:

<p>Marketing = Internal Environment Competition = Industry Operating Environment Government = External Environment Supplier Power = Porter's Five Forces</p> Signup and view all the answers

Which of the following is NOT a component of the internal environment?

<p>Suppliers (B)</p> Signup and view all the answers

Buyer power refers to the control that suppliers have over firms.

<p>False (B)</p> Signup and view all the answers

What model outlines the primary forces that determine competitiveness within an industry?

<p>Porter's Five Forces Model</p> Signup and view all the answers

Flashcards

Strategy

A broad and general plan that aims to achieve long-term organizational goals.

Strategic Planning

A long-term planning process that focuses on the overall organization.

Strategic Management

The process of ensuring that an organization uses the most suitable strategy for its success.

Environmental Analysis

The process of studying the factors that can significantly impact an organization's operations.

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External Environment Factors

The factors that affect the external environment of a business.

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Mission Statement

A document describing an organization's goals and purpose, written by management with input from various employees.

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Strategy Formulation

The process of determining how to achieve an organization's objectives and accomplish its overall purpose.

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SWOT Analysis

A tool used in strategic analysis to match an organization's internal strengths and weaknesses with external opportunities and threats.

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BCG Matrix

A tool used to analyze a company's product lines based on market share and growth rate, categorizing each business into four categories: Star, Cash Cow, Dog, and Question Mark.

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Star (BCG Matrix)

A business unit with high market share operating in a high-growth market. They require significant investments to support rapid growth.

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Cash Cow (BCG Matrix)

A business unit with a low growth rate but a high market share, generating more cash than they need to grow. They require minimal investment to maintain their position.

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Dog (BCG Matrix)

A business unit with low market share operating in a low-growth market. These businesses are often considered to be weak and require significant investment to turn them around.

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Question Mark (BCG Matrix)

A business unit with low market share operating in a high-growth market. They require considerable investment to become stars.

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Organizing Skill for Strategy Implementation

The ability to create a network of people within an organization to solve implementation problems as they arise. This network should be tailored to address specific challenges anticipated during strategy implementation.

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Competitive Dynamics

The process by which companies take strategic and tactical actions and how their competitors react to these actions.

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Competitor Awareness

The degree to which a firm is aware of its competitors' activities. It encompasses recognizing rivals' moves and understanding their strengths and weaknesses.

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Competitor Motivation

The incentives that motivate a company to take action in response to a competitor's move. This can be driven by factors like market share, profitability, or competitive pressure.

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Competitor Capability

The ability of a company to take action in response to a competitor's move. This involves having the resources, capabilities, and expertise to execute a strategic response effectively.

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Organizational Mission

A written declaration of an organization's core purpose and long-term goals. It defines the organization's reason for existence, its desired future state, and its guiding principles.

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Differentiation Strategy

A strategic approach that aims to differentiate an organization's products or services from its competitors by offering unique features, higher quality, or innovative solutions.

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Cost Leadership Strategy

A cost-focused strategy that aims to achieve a competitive advantage by minimizing production costs and offering the most affordable products or services.

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Focus Strategy

A strategic approach that focuses on serving a specific, well-defined target market or niche. It caters to the specific needs and preferences of a particular customer segment.

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Growth Strategy

A strategic approach that seeks to enlarge the organization's overall business activity, such as expanding into new markets, launching new products, or acquiring other companies.

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Stability Strategy

A strategic approach that focuses on maintaining the organization's current size and position in the market. It aims to preserve existing market share and profitability.

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Retrenchment Strategy

A strategic approach for addressing performance problems by reducing business operations, cutting costs, streamlining processes, or downsizing the organization.

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Divestiture Strategy

A strategic approach that involves eliminating a business unit or product line that is underperforming or not contributing to the overall organizational goals.

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GE-McKinsey Matrix

A strategic management model based on an organization's industry attractiveness and business strength.

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Industry Attractiveness (GE-McKinsey)

A key element of the GE-McKinsey Matrix, representing the overall appeal of a market based on factors like market size, growth rate, and competition.

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Business Strength (GE-McKinsey)

A key element of the GE-McKinsey Matrix, representing the competitive strength of a business unit based on factors like market share, brand recognition, and cost structure.

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External Environment

The factors outside of a company's control that can significantly impact its operations, including political, economic, social, technological, legal, and environmental elements.

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Industry/Operating Environment

The portion of the external environment directly relevant to a company's operations, including customers, competition, suppliers, labor, and international issues.

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Internal Environment

The factors and elements within a company that directly influence its operations and management, including marketing, finance, and accounting.

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Porter's Five Forces Model

A framework developed by Michael Porter to analyze the competitive forces within an industry, consisting of five key elements: Threat of New Entrants, Buyer Power, Supplier Power, Threat of Substitute Products, and Intensity of Rivalry.

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Threat of New Entrants

The likelihood of new competitors entering an industry, influencing the existing companies' profitability and market share.

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Buyer Power

The power that buyers/customers have over the companies in an industry, influencing prices and demand.

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Supplier Power

The power that suppliers have over the companies in an industry, impacting pricing and resource availability.

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Threat of Substitute Products

The likelihood that customers might choose products or services from other industries instead of the focal industry, affecting the market's overall appeal.

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Study Notes

Introduction to Strategic Planning

  • Strategic planning is a broad, general plan for long-term organizational objectives.
  • Strategic planning is long-term planning focusing on the entire organization.
  • Strategic management is the process of ensuring an organization has, and benefits from, an appropriate strategy. A strategy best suited to the organization, not necessarily the 'best' strategy.
  • Objectives for this topic include: defining strategic planning and strategy; understanding the strategic management process; the impact environmental analysis has on strategy formulation; the ability to use critical question analysis and SWOT analysis to formulate strategy; understanding how to use business portfolio analysis and industry analysis to formulate strategy; and insight into tactical planning and the coordination between strategic and tactical planning.

Objectives

  • Understanding both strategic planning and strategy definitions
  • Understanding the strategic management process
  • Knowing the impact of environmental analysis on strategy formulation
  • How to use critical question analysis and SWOT analysis for strategy formulation
  • Understanding business portfolio and industry analysis for strategy formulation
  • Understanding tactical planning and strategic/tactical coordination

What is Strategic Planning

  • Strategy is a comprehensive plan created to achieve long-term organizational goals.
  • Strategic Planning is long-term planning, focused on the entire organization.
  • Strategic management ensures an organization possesses and benefits from a relevant strategy.

Strategic Planning Process

  • Step 1: Environmental analysis (general, operating, internal)
  • Step 2: Establishing organizational direction (mission, objectives)
  • Step 3: Strategy formulation
  • Step 4: Strategy implementation
  • Step 5: Strategic control
  • Feedback loop is an integral part of the process.

Environmental Analysis

  • Environmental analysis examines the organizational environment to identify factors influencing operations.
  • Environmental analysis includes social, international, political, labor, economic, supplier, competition, customer, legal, technological components (and others) of the general and operating environment. Internal environment is also important (organizational aspects, influencing aspects, control aspects).

External Environment - Step 1

  • S: Social values, attitudes, language, and demographics.
  • T: Dynamic technological changes
  • E: Economic development, GNP, interest rates, taxes, inflation rates, per capita income, trade agreements, etc.
  • Natural Environment: Natural resources, ecosystem, climate change, environmental regulations
  • P: Government attitude, stability, forms of government, social unrest, etc.
  • L: Laws and regulations governing business. (e.g., Consumer Protection Act, Utilities Regulations Act, Fair Competition Act, National Environmental Protection Act).

Step 1 - Environmental Analysis

  • Industry/Operating Environment: customers, competition, labor, suppliers, and international issues.
  • Internal Environment: marketing, finance, accounting; planning, organizing, influencing, and controlling internal operations.

Porter's Five Forces

  • Threat of new entrants: ability of new firms to enter an industry.
  • Buyer power: power customers have over firms in an industry.
  • Supplier power: power suppliers have over firms in an industry.
  • Threat of substitute products/services: extent customers can use products from other industries.
  • Intensity of rivalry: intensity of competition among organizations in an industry.

Boston Consulting Group (BCG) Matrix

  • Star: High growth, High market share (invest heavily)

  • Cash Cow: Low growth, High market share (require little investment, generate cash)

  • Question Mark: High growth, Low market share (high investment, uncertain if it should be developed)

  • Dog: Low growth, Low market share (may generate little cash, consider divestment)

  • Relative market share - shows SBU's strength in the market.

  • Market Growth – measure of market attractiveness.

  • A matrix used in business portfolio analysis to analyze the strength of business units (products/services).

Step 2: Mission/Direction

  • Mission statement documents the organization's purpose, developed with input from management and non-managers, to ensure understanding.

Importance of a Mission

  • Importance to increase the probability of organizational success.
  • Allows to direct human effort in a common direction.
  • Helps managers achieve targets, make decisions, and allocate resources effectively.

Step 3 - Strategy Formulation

  • Strategy formulation is determining the best courses of action to achieve organizational objectives.
  • Key questions in critical analysis include:
    • Organizational purposes/objectives
    • Current organizational direction
    • Current organizational environment
    • Future organizational objectives

SWOT Analysis

  • SWOT Analysis: matching internal organizational strengths and weaknesses with external opportunities and threats.

Step 4 - Strategy Implementation

  • Interacting skill: managing people during implementation.
  • Allocating skill: providing organizational resources for implementation.

Strategy Implementation (cont'd)

  • Monitoring skill: using information to determine if problems block implementation.
  • Organizing skill: creating a network of people to solve implementation problems.

Comparing Strategic and Tactical Planning

  • Tactical planning emphasizes current operations of various parts of an organization.
  • Differences between strategic and tactical plans:
    • Strategic plans are developed by upper-level management; tactical by lower-level.
    • Strategic plans are often more difficult to base on facts than tactical plans.
    • Strategic are less detailed than tactical plans.
    • Strategic focus on the long-term; tactical on the short-term.

Competitive Dynamics

  • Competitive Dynamics: the process where firms undertake strategic and tactical actions, and how competitors respond.
  • Key factors influencing firm action/reaction:
    • Competitor awareness
    • Competitor motivation
    • Competitor capability

GE - McKinsey and Company Matrix

  • A matrix used in business portfolio analysis to visualize the attractiveness of markets and the strength of SBUs (product/service lines).

Porter's 3 Approaches to Strategy Formulation

  • Differentiation: making a product unique.
  • Cost Leadership: producing products more cheaply than competitors.
  • Focus: targeting a specific, niche market.

General Organizational Strategies

  • Growth: increase the business volume.
  • Stability: maintain current business levels.
  • Retrenchment: restructuring to deal with performance problems.
  • Divestiture: selling off a business unit.

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