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Questions and Answers
What is the primary purpose of strategic management?
Which of the following describes a business model?
What is NOT included in the strategic management process?
What does an external analysis help managers identify?
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Which of the following represents an organization's strengths?
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What is the purpose of a mission statement?
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What does a SWOT analysis evaluate?
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Which is a core competency of an organization?
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What is the primary focus of a cost leadership strategy?
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Which of the following best represents a characteristic of a differentiation strategy?
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What does it mean for a company to be 'stuck in the middle'?
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What is one of the five differentiation strategies that can be used for competitive advantage?
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In Porter’s Five Forces model, what does the threat of substitutes refer to?
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Which of the following factors contributes to the bargaining power of suppliers according to Porter’s model?
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What is a characteristic of functional strategies within an organization?
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How does customer service serve as a differentiation strategy?
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What is the primary purpose of a corporate strategy?
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What best describes a 'cash cow' in the BCG matrix?
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What does a renewal strategy primarily address?
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Which type of strategy involves combining operations with a competitor?
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What characteristic defines a competitive advantage?
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In terms of corporate strategy, what is 'related diversification'?
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What role do top-level managers typically fulfill regarding corporate strategies?
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Which strategy would be most appropriate during a period of industry stagnation?
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What is the primary function of a strategic business unit (SBU)?
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What does the term 'economic moat' imply in competitive strategy?
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What is typically the focus of a backward vertical integration strategy?
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In the context of SWOT analysis, what is meant by 'correct weaknesses'?
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Which statement best describes 'turnaround' strategies?
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Study Notes
Strategic Management
- The process of developing, implementing, and evaluating organizational strategies.
- Involves top management formulating initiatives using resources and environmental opportunities to achieve organizational goals.
Strategies
- Plans that define a company's business, how it will compete, and attract/satisfy customers to achieve goals.
Business Model
- How a company generates revenue and makes money.
Strategic Management Process
- Six-step process encompassing strategy planning, implementation, and evaluation.
Mission
- Organization's purpose.
- Example: Tesla's mission is "to accelerate the world's transition to sustainable energy."
External Analysis
- Identifies opportunities and threats in the external environment.
- Opportunities: Positive trends in the external environment.
- Threats: Negative trends in the external environment.
Internal Analysis
- Examines the organization's internal resources and capabilities.
- Resources: Assets used to develop, manufacture, and deliver products.
- Capabilities: Skills and abilities for performing business activities.
Core Competencies
- Major value-creating capabilities that give an organization a competitive advantage.
- Resources and core competencies determine an organization's competitive weapons.
SWOT Analysis
- Combines external and internal analysis.
- Analyzes an organization's:
- Strengths: Activities done well or unique resources.
- Weaknesses: Activities not done well or missing resources.
- Opportunities: Positive external trends.
- Threats: Negative external trends.
- Goals include:
- Matching organizational strengths to environmental opportunities.
- Correcting weaknesses.
- Guarding against threats.
Types of Strategies
- Three main levels of strategies:
- Corporate Strategy
- Competitive Strategy
- Functional Strategy
Corporate Strategy
- Determines the businesses a company is in or wants to be in, and the role of each business unit.
- Based on the organization's mission, goals, and the role of each business unit.
- Example: PepsiCo's mission is "To be the world's premier consumer products company focused on convenient foods and beverages."
Types of Corporate Strategies
- Growth Strategy
- Stability Strategy
- Renewal Strategy
Growth Strategy
- Expanding the number of markets served or products offered.
- Achieved through current or new businesses.
- Methods:
- Concentration
- Vertical Integration
- Horizontal Integration
- Diversification
Concentration
- Focusing on a primary line of business by increasing products or markets.
Vertical Integration
- Gaining control of inputs (Backward Vertical Integration) or output (Forward Vertical Integration).
Horizontal Integration
- Combining operations with a competitor to enhance competitive strengths and reduce competition.
Related Diversification
- Expanding by merging with companies in related industries.
Unrelated Diversification
- Growing by merging with companies in unrelated industries for higher financial returns.
Stability Strategy
- Maintaining the status quo.
- Appropriate in slow-growth industries or to deal with uncertainty.
Renewal Strategy
- Addresses declining performance.
- Types:
- Retrenchment
- Turnaround
Retrenchment
- Short-term strategy focusing on eliminating weaknesses and restoring strengths.
Turnaround
- Addresses critical long-term performance problems with cost reduction and organizational restructuring.
BCG Matrix
- Strategy tool for resource allocation based on a business unit's (SBU) market share and growth rate.
- Categories:
- Stars
- Cash Cows
- Question Marks
- Dogs
Stars
- High market share and growth rate, require significant investment to maintain their position.
Cash Cows
- High market share but low growth rate, generate cash that can be invested in other SBUs.
Question Marks
- Low market share but high growth rate, require careful consideration and potential investment to become stars.
Dogs
- Low market share and growth rate, may be sold or liquidated.
Competitive Strategy
- Defines how an organization will compete in its chosen businesses.
- Focuses on achieving a competitive advantage.
- Example: Porsche achieves a competitive advantage through engineering, design, and its reputation for high-quality, high-performing vehicles.
Competitive Advantage
- Sets an organization apart and provides a distinctive edge.
- Key Sources:
- Quality
- Low Cost
- Technology
Economic Moat
- Protecting long-term profits and market share by creating barriers for competitors.
- Example: A wide economic moat can help sustain a competitive advantage.
Types of Competitive Strategy
- Cost Leadership Strategy
- Differentiation Strategy
- Focus Strategy
Cost Leadership Strategy
- Achieving the lowest overall costs relative to competitors.
Differentiation Strategy
- Creating a unique and distinctive product or service for which customers are willing to pay a premium.
Focus Strategy
- Using a cost or differentiation advantage to exploit a specific market segment.
Stuck in the Middle
- Occurs when an organization cannot develop a cost or differentiation advantage.
- They do not have the low cost to compete with the cost leader or the differentiation to compete with the differentiator.
Differentiation Strategies
- Examples of how differentiation strategies are used as a competitive advantage:
- Quality
- Innovation strategies (R&D, process improvement, first-mover advantage).
- Customer Service
- Mass Customization
Porter's Five Forces Model
- Analyzes competitive forces within an industry:
- Threat of New Entrants
- Threat of Substitutes
- Bargaining Power of Buyers
- Bargaining Power of Suppliers
- Current Rivalry
Functional Strategies
- Strategies used by functional departments to support the organization's competitive strategy.
- Examples:
- Marketing Strategy
- Finance strategy
- Human Resource Strategy
- Operations Strategy
Implementation of Strategies
- Key to successful strategy execution.
Evaluation of Results
- Key to continuous improvement.
- Assessing the effectiveness of strategies in achieving organizational goals.
- Identifying areas for adjustment as needed.
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Description
Test your knowledge on the fundamental concepts of strategic management, including strategy formulation, business models, and the strategic management process. This quiz covers both internal and external analyses that organizations must perform to succeed. Understand how companies like Tesla define their mission and navigate challenges in their industry.
