Strategy Formulation Lecture 5

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Questions and Answers

What is the main purpose of backward vertical integration?

To enter a new market

To combine with competitors

To become a distributor

To control inputs (correct)

What is an example of a diversification strategy?

Reducing costs

Entering a new but related industry (correct)

Merging with a competitor

Becoming a supplier

What is the main difference between retrenchment and turnaround strategies?

The type of organization

The extent of restructuring (correct)

The level of cost-cutting

The industry in which they are used

What is a major driver of the importance of corporate sustainability practices?

Government regulations Signup and view all the answers

What is the goal of a retrenchment strategy?

To stabilize operations Signup and view all the answers

What is forward vertical integration?

Becoming a distributor Signup and view all the answers

What is the main goal of grand strategies?

To achieve organizational growth Signup and view all the answers

What is horizontal integration?

Combining with a competitor Signup and view all the answers

What is a key requirement for a successful sustainability strategy?

Elevating sustainability to the level of organizational governance Signup and view all the answers

What is a challenge that companies face when pursuing globalization?

Coordinating and managing far-flung operations Signup and view all the answers

Why is it important to formulate goals for products and services?

To measure achievements and strive for improvements Signup and view all the answers

What can be a consequence of not considering variabilities in different countries or regions?

Strategic decisions that do not work Signup and view all the answers

What is a benefit of setting business direction?

Formulating goals for products and services Signup and view all the answers

Why is it important to consider political or social upheaval in global markets?

To consider the threat of upheaval Signup and view all the answers

What is the primary goal of a growth strategy?

To increase revenues and expand into new markets Signup and view all the answers

What is the main purpose of a grand strategy?

To decide what businesses a company is in or wants to be in Signup and view all the answers

What type of strategy is used when an organization is in trouble and needs to improve its performance?

Renewal strategy Signup and view all the answers

What is a characteristic of a stability strategy?

Maintaining current business operations Signup and view all the answers

What is the primary focus of a grand strategy?

The organization's mission and goals Signup and view all the answers

What is a result of a successful growth strategy?

Increased revenues and number of employees Signup and view all the answers

What is the difference between a growth strategy and a stability strategy?

A growth strategy focuses on increasing revenues, while a stability strategy focuses on maintaining current operations Signup and view all the answers

Why is a renewal strategy necessary?

To address declining performance Signup and view all the answers

Study Notes

Strategic Management Process

Strategic Management Process involves Strategy Formulation and Setting Business Direction.

Grand Strategies

A grand strategy determines what businesses a company is in or wants to be in, and what it wants to do with those businesses.
Three main types of grand strategies are:
- Growth strategy
- Stability strategy
- Renewal strategy

Growth Strategy

Expands the number of markets served or products offered, either through its current business(es) or through new business(es).
Increases revenues, number of employees, or market share.

Types of Growth Strategies

Integration
- Backward vertical integration: becomes its own supplier to control inputs.
- Forward vertical integration: becomes its own distributor to control outputs.
- Horizontal integration: combines with competitors.
Diversification
- Related diversification: combines with other companies in different, but related, industries.
- Unrelated diversification: combines with companies in unrelated industries.

Stability Strategy

Continues to do what it is currently doing.
Examples: continuing to serve the same clients, offering the same product or service, maintaining market share, and sustaining current business operations.

Renewal Strategy

Addresses declining performance.
Two types of renewal strategies:
- Retrenchment
- Turnaround

Retrenchment Strategy

Short-run renewal strategy for minor performance problems.
Helps stabilize operations, revitalize organizational resources and capabilities, and prepare to compete once again.

Turnaround Strategy

More drastic action needed for serious performance problems.
Managers cut costs and restructure organizational operations more extensively than in retrenchment strategy.

Sub-Grand Strategies

Sustainability Strategy
- Elevates sustainability to the level of organizational governance.
- Formulates goals for products and services, processes, and entire supply chain.
- Measures achievements and strives for improvements.
- Links executive compensation to sustainability goals.
Global Strategy
- Faces issues of globalization, such as variability in different countries and regions.
- Threat of political or social upheaval.
- Difficulty of coordinating and managing far-flung operations.

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Description

This quiz covers the strategic management process, specifically strategy formulation and setting business direction, including grand strategies and their applications.