Strategic Management Quiz

Introduction to Strategic Planning

• Strategic planning is long-term planning focusing on the entire organization.
• Strategic management ensures an organization has and benefits from an appropriate strategy.

Objectives

• Understand strategic planning, strategy, and the strategic management process.
• Learn the impact of environmental analysis on strategy formulation.
• Learn to use critical question analysis and SWOT analysis to formulate strategy.
• Understand business portfolio analysis and industry analysis for strategy formulation.
• Grasp the coordination between strategic and tactical planning.

What is Strategic Planning

• Strategy: a broad, general plan to achieve long-term objectives.
• Strategic planning: long-term planning focused on the organization as a whole.
• Strategic management: the process of ensuring an organization possesses and benefits from a suitable strategy that best fits the organization.

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

Environmental Analysis

• Studies the organizational environment to identify factors influencing organizational operations.
• Components of the general environment include social, international, and economic factors.
• Components of the operating environment include suppliers, competitors, labor, customers, and international issues.
• The internal environment includes factors within the organization, such as marketing, finance, and accounting.

External Environment - Step 1

• Social values, attitudes, demographics
• Dynamic technological changes
• Economic development, interest rates, taxes, inflation
• Government attitudes towards business, political stability, social unrest
• Laws and legislation impacting business

Step 1 - Environmental Analysis (cont.)

• Industry/Operating Environment: portion of the external environment, including customers, competitors, labor, suppliers, and international issues.
• Internal Environment: factors within the organization impacting how business operates. Includes marketing, finance, accounting.

Porter's Five Forces

• Threat of new entrants: ability of new firms entering 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: the extent customers can use substitutes from another industry.
• Intensity of rivalry: level of competition within an industry among existing organizations.

Porter's Five Forces (cont.)

• Potential entrants: Economies of scale, Absolute cost advantage, Brand identity, Access to distribution, Switching costs, Government policy.
• Industry Rivalry: Number of competitors, Market growth, Asset intensity, Product differentiation, Exit barriers.
• Substitutes: Functional similarity, Price performance trend, Product identity.
• Buyers: Buyer concentration, Number of suppliers, Switching costs, Substitute products, Threat of backward integration.
• Suppliers: Supplier concentration, Number of buyers, Switching costs, Substitute raw materials, Threat of forward integration.

Step 2: Mission/Direction

• A mission statement is a written document, often developed by management with input from all levels, outlining the organization's mission.
• This written statement ensures all organization members understand the organization's goals.

Importance of a Mission

• Increased probability of organizational success.
• Direct human effort toward a common goal.
• Explicitly outline major targets and guide decision-making.
• Provide a rationale for allocating resources.
• Define critical work areas and jobs within the organization.

Step 3 - Strategy Formulation

• Strategy formulation is the process of defining appropriate actions to achieve organizational objectives and purposes. Key questions include:
• What are the organization's objectives?
• Where is the organization currently heading?
• What is the existing environment?
• How can organizational objectives be better achieved in the future?
• Important elements in the process include analyzing opportunities and threats to assist in the formulation and development of a strategic plan.

SWOT Analysis

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

Boston Consulting Group (BCG) Matrix

• Business Portfolio Analysis tool used to assess business units and their product lines.
• Categorizes business units as stars, cash cows, question marks, or dogs based on market share and market growth rate.
• Stars: High growth, high market share. Often need significant investment.
• Cash Cows: Low growth, high market share. Generate considerable cash to support other business units.
• Question Marks: Low market share, high growth. Uncertainty about whether they'll become successful.
• Dogs: Low growth, low market share. May not generate substantial revenue.

GE - McKinsey and Company Matrix

• A matrix that evaluates business units based on industry attractiveness and business strength. Industry and Business Strength are evaluated via factors like market growth rate, market size and demand and market share, competitive landscape and market positions.

Porter's 3 Approaches to Strategy Formulation

• Differentiation: Focuses on making unique products that customers perceive as different from competitors.
• Cost Leadership: Makes an organization more competitive by producing products more cheaply than competitors.
• Focus: Targets a specific customer group (niche) to make an organization more competitive.

General Organizational Strategies

• Growth: Increase the organization's business.
• Stability: Maintain current levels of business.
• Retrenchment: Reduce or downsize to address current performance issues (a form of defensive approach).
• Divestiture: Eliminate a business unit that isn't performing well.

Step 4 - Strategy Implementation

• Interacting skill: Managing people during implementation, understanding their fears/frustrations and working to find solutions to any roadblocks for the implementation.
• Allocating skill: Providing organizational resources (time, money, personnel) for the successful strategy implementation.

Strategy Implementation (cont.)

• Monitoring skill: Using information to identify and resolve problems that arise during strategy implementation.
• Organizing skill: Creating a network within the organization to help solve implementation problems.

Comparing Strategic and Tactical Planning

• Tactical planning focuses on current operations of various organization parts.
• Strategic plans are developed by upper-level management & tactical by lower-level management.
• Strategic plans are often more difficult to evaluate than factual data in tactical plans.
• Strategic plans are usually less detailed than tactical plans.
• Strategic planning focuses on long-term goals & tactical on short-term.

Competitive Dynamics

• Competitive Dynamics: The process by how firms undertake strategic and tactical actions and how rivals respond.
• Three primary factors impacting firms' actions/reactions: Awareness, Motivation, and Capability.
• Competitor Awareness: How mindful a firm is of its rivals' actions.
• Competitor motivation: The incentives for an organization to take action.
• Competitor Capability: A firm's ability for action.

Test your knowledge on the fundamentals of strategic planning and management. This quiz covers various components such as environmental analysis, industry forces, and the BCG matrix. Challenge yourself to see how well you understand the strategic management process.