21. Specific Strategy Tools

Question 1

Describe the four classifications of the BCG Growth-Share Matrix.

Answer 1

• Cash cows: a large share of an established (slow growth) market. Require little investment and generate a lot of cash.
• Stars: a high share of a fast-growing market. Must spend significant resources to maintain.
• Question marks: a small share in a fast-growing market. A lot of potential to do well.
• Dogs: a small share of market that isn’t growing. An undesirable business.

Question 2

Describe scenario analysis

Answer 2

Scenario analysis helps companies consider the complexities of an uncertain business environment with many factors that interact with each other. By carefully modeling how different scenarios might interact to impact the organization’s market and business, managers can do better strategy planning.

Question 3

Describe contingency planning.

Answer 3

Contingency planning involves developing alternative strategies in order to be prepared for unexpected conditions or outcomes. Good contingency planning can minimize the negative effect of surprising events, as well as optimize opportunities that may present themselves.

Question 4

Give examples of the components of PESTLE analysis.

Answer 4

• Politics: regulation issues, political stability, legal environment, tax policies
• Economy: inflation, unemployment, quality of labor force, stability of currency, economic growth rate
• Social: demographics, culture, education levels, leisure interests, attitudes toward environment, social responsibility
• Technology: manufacturing, computers, communication, transportation, medical
• Legal: regulations governing consumer and employee safety, intellectual property, competition fairness, product warranties
• Environmental: scarcity of raw materials, pollution impacts, weather patterns, geography

Question 5

What are the five dimensions of competitive forces in an industry according to Porter’s Five Forces?

Answer 5

1. Supplier Power
2. Customer Power
3. Threat of New Entrants
4. Threat of Substitute Products
5. Intensity of Competition