Block 1

Question 1

Define a company’s strategy:

Answer 1

The set of actions that its
managers take to outperform the
company’s competitors and
achieve superior profitability.

Question 1

What is meant by a company’s strategy? (6)

Answer 1

1. What is our present situation?
   ● Business environment and industry conditions.
   ● Firm’s financial and competitive capabilities.
2. Where do we want to go from here?
   ● Creating a vision for the firm’s future direction.
3. How are we going to get there?
   ● By crafting an action plan that heads the firm in the direction of its intended market position.

Question 2

What is strategy about? (6)

Answer 2

● How to position the firm in the marketplace.
● How to attract customers.
● How to compete against rivals.
● How to achieve the firm’s performance targets.
● How to capitalize on opportunities to grow the business.
● How to respond to changing economic and market conditions.

Question 3

Explain Strategy as a choice: (4)

Answer 3

● It’s about deciding to compete
differently from rivals

● Is likely to be successful when its
actions, business approaches, and
competitive moves appeal to
buyers in ways that:
- Set a company apart from its
rivals.
- Stake out a market position that
is not crowded with strong
competitors.

Question 4

How can a company compete differently from rivals? (5)

Answer 4

● Doing what they don’t do or
doing it better.
● Doing what they cannot do.
● Doing things that attract
customers and set a firm
apart from its rivals.
● Doing things calculated to
produce a competitive edge
over rivals.
● Doing what the firm must
do and also knowing what it
must not do.

Question 5

Why does a company need a strategy? (3)

Answer 5

● To improve its financial
performance.
● To strengthen its competitive
position.
● To gain a sustainable competitive
advantage over its market rivals.

Question 6

What does a good strategy do for a company? (2)

Answer 6

● Helps produce above-average
profits.
● Increases competitive pressures on
rivals.

Question 7

What should you look for when identifying a company’s strategy?

Answer 7

Actions to:
- Gain sales and market share with lower prices based on lower costs.
- Enter new markets or exit current ones.
- Capture emerging market opportunities and defend against external threats.
- Strengthen market standing by merging with other companies.
- Strengthen competitiveness through strategic alliances.
-Upgrade, acquire or build important resources.

Question 8

Define a competitive advantage:

Answer 8

Meeting customer needs
either more effectively (with
products or services that customers
value more highly) or more
efficiently (by providing products or
services at a lower cost to customers)

Question 9

Define a Sustainable competitive
advantage:

Answer 9

Giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors.

Question 10

What are the five basic strategic approaches?

Answer 10

1. Low-cost provider
2. Focused low-cost
3. Best-cost provider
4. Focused differentiation
5. Broad differentiation

Question 11

How do you create a sustainable
competitive advantage? (4)

Answer 11

● Develop valuable expertise and competitive capabilities over the long-term that rivals cannot readily copy, match, or best.
● Put the constant quest
for sustainable competitive advantage at
center stage in crafting your strategy.

Question 12

Why does a company’s strategy evolve over time? (6)

Answer 12

Managers modify strategy in response to:
● Changing market conditions
● Advancing technology
● Fresh moves of competitors
● Shifting buyer needs
● Emerging market opportunities
● New ideas for improving the strategy.

Question 13

Explain a Realised (current) strategy:

Answer 13

A Realised (current) strategy is a blend of:

● Proactive (deliberate) strategy elements that include planned initiatives to improve the company’s financial performance and
secure a competitive edge.
● Reactive (emergent) strategy elements developed on the fly in response to unanticipated developments and fresh market conditions.
● Abandoned and superseded strategy elements that no longer fit with the firm’s ongoing strategy.

Question 14

Define a deliberate strategy:

Answer 14

A firm’s deliberate strategy consists of proactive strategy elements that are both planned and realized as planned.

Question 15

Define an emergent strategy:

Answer 15

An emergent strategy consists of reactive strategy elements that emerge as changing conditions warrant.

Question 16

What does a firm’s business model focus on and consist of?

Answer 16

It focuses on how the firm will make money:
● By providing customers with value
- The firm’s customer value proposition
● By generating revenues sufficient to cover
costs and produce attractive profits
- The firm’s profit formula

Question 17

Define a business model:

Answer 17

A firm’s business model sets forth the logic for how its strategy will create value for customers, while at the same time generate revenues sufficient to cover costs and realize a profit.

Question 18

For a business model, explain the customer value proposition:

Answer 18

● Satisfying buyer wants and needs at a price customers will consider a good value.

• The greater the value provided (V) and the
  lower the price (P), the more attractive the value proposition is to customers.

Question 19

For a business model, explain the profit formula:

Answer 19

● Creating a cost structure that allows for acceptable profits, given that pricing is tied to the customer value proposition.

V – the value provided to customers
P – the price charged to customers
C – the firm’s costs

● The lower the costs (C) for a given customer value proposition (V–P), the greater the ability of the business
model to be a moneymaker.

Question 20

What are the three tests of a winning strategy? (6)

Answer 20

1. The fit test
   Does it fit with the external and internal aspects of the firm’s dynamic situation? (analyzing how well the company’s
   strategies fit with its resources, capabilities, and the broader market conditions)
2. The performance test
   Will it produce superior performance as indicated by the firm’s profitability, financial and competitive strengths, and market share?
3. The competitive advantage test
   Does it help the firm achieve a sustainable competitive advantage?

Question 21

Explain why crafting and executing strategy are important tasks: (4)

Answer 21

Strategy provides:
● A prescription for doing business.
● A road map to competitive advantage.
● A game plan for pleasing customers.
● A formula for attaining long-term standout marketplace performance.

Question 22

Give the 5 stages of The Strategy-Making, Strategy-Executing Process:

Answer 22

Stage 1: Developing a strategic vision, mission and core values.
Stage 2: Setting objectives
Stage 3: Crafting a strategy to achieve the objectives and the company vision.
Stage 4: Executing the strategy
Stage 5: Monitoring developments, evaluating performance and initiating corrective adjustments.

(The first three stages are part of Strategy making, the last 2 stages are part of Strategy execution.)

Question 23

Explain stage 1 of the Strategy-Making, Strategy-Executing Process:

Answer 23

STAGE 1: Developing a strategic vision, mission and core values.

Used to:
● Fosters employee commitment to the firm’s chosen strategic direction.
● Ensures understanding of its importance.
● Motivates, informs, and inspires internal and external stakeholders.
● Demonstrates top management support for the firm’s future strategic direction and competitive efforts.

Question 24

Why does a well-communicated strategic vision matter? (5)

Answer 24

- It crystallizes senior executives’ own views about the firm’s long-term direction. - It reduces the risk of rudderless decision making. - It is a tool for winning the support of organization members to help make the vision a reality. - It provides a beacon for lower-level managers in setting departmental objectives and crafting departmental strategies that are in sync with the firm’s overall strategy. - It helps an organization prepare for the future.

Question 25

What does a strategic vision do?

Answer 25

A strategic vision portrays a firm’s aspirations for its future.

Question 26

What does a firm's mission do?

Answer 26

A firm’s mission describes the scope and purpose of its present business.

Question 27

Explain stage 2 of the Strategy-Making, Strategy-Executing Process:

Answer 27

Stage 2: Setting objectives - Converting the vision and mission into specific performance targets. Characteristics of Well-Stated Objectives: - Specific - Challenging - Deadline for achievement - Quantifiable (measurable)

Question 28

What are the characteristics of strategic intent? (8)

Answer 28

- A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective. - It indicates a firm’s intent to making quantum gains in competing against key rivals and to establishing itself as a winner in the marketplace, often against long odds. - Involves establishing a grandiose performance target. - Entails sustained, aggressive actions to take market share away from rivals and achieve a much stronger market position.

Question 29

Why is it necessary for companies to set stretch targets? (8)

Answer 29

Setting stretch objectives promotes better overall performance because stretch targets: * Push a firm to be more inventive. * Increase the urgency for improving financial performance and competitive position. * Cause the firm to be more intentional and focused on its actions. * Act to prevent internal inertia (inactivity) and contentment with modest to average gains in performance.

Question 30

Name and explain the two types of objectives a company should set: (6)

Answer 30

1. Financial Objectives * Communicate top management’s goals for financial performance. * Are focused internally on the firm’s operations and activities. 2. Strategic Objectives * Are the firm's goals related to market standing and competitive position. * Are focused externally on competition vis-à-vis the firm’s rivals.

Question 31

Define the balanced scorecard:

Answer 31

The Balanced Scorecard is a widely used method for combining the use of both strategic and financial objectives, tracking their achievement, and giving management a more complete and balanced view of how well an organization is performing.

Question 32

Explain stage 3 of the Strategy-Making, Strategy-Executing Process: (6)

Answer 32

Stage 3: Crafting a strategy to achieve the objectives and the company vision. There are three levels of management in a firm: 1. CEO 2. Senior executives 3. Senior management 1. Chief executive officer (CEO): - Has ultimate responsibility for leading the strategy-making process as strategic visionary and chief architect of strategy. 2. Senior executives: - Fashion the major strategy components involving their areas of responsibility. 3. Senior management: - Managers of subsidiaries, divisions, geographic regions, plants, and other operating units (and key employees with specialized expertise) - Utilize on-the-scene familiarity with their business units to orchestrate their specific pieces of the strategy.

Question 33

Name and explain the four levels of a firm's strategy-making hierarchy: (10)

Answer 33

1. Corporate strategy: Multi-business strategy – how to gain synergies from managing a portfolio of businesses together rather than as separate businesses. 2. Business strategy: - How to strengthen market position and gain competitive advantage. - Actions to build competitive capabilities of single businesses. 3. Functional area strategies: Add relevant detail to the “how's” of business strategy. 4. Operational strategies: - Add detail and completeness to business and functional strategies. - Provide a game plan for managing specific operating activities with strategic significance.

Question 34

Explain stage 4 of the Strategy-Making, Strategy-Executing Process:

Answer 34

Stage 4: Executing the strategy Converting strategic plans into actions requires: ● Directing organisational action ● Motivating people ● Building and strengthening the firm’s competencies and competitive capabilities. ● Creating and nurturing a strategy-supportive work climate. ● Meeting or beating performance targets.

Question 35

Explain what needs to be done when managing the strategy executing process: (16)

Answer 35

● Creating a strategy-supporting structure ● Staffing the firm with the needed skills and expertise. ● Developing and strengthening strategy supporting resources and capabilities. ● Allocating ample resources to the activities critical to strategic success. ● Ensuring that policies and procedures facilitate effective strategy execution. ● Organising work effort to achieve best practices. ● Creating a company culture conducive to successful strategy execution. ● Exerting the internal leadership needed to propel implementation forward.

Question 36

Explain stage 5 of the Strategy-Making, Strategy-Executing Process:

Answer 36

Stage 5: Monitoring developments, evaluating performance and initiating corrective adjustments. 1. Evaluating performance ● Deciding whether the enterprise is passing the three tests of a winning strategy 2.Initiating corrective adjustment ● Deciding whether to continue or change the firm’s vision and mission, objectives, strategy, and strategy execution methods. ● Applying lessons based on organizational learning.