Chapter 2-4

Question 1

Define allocentricism in strategic thinking.

Answer 1

Thinking about other actors, such as customers, suppliers, rivals, and governments

It challenges over-confident fast thinking by considering the strengths and weaknesses of others.

Question 2

What does an issue tree represent?

Answer 2

A systematic breakdown of a big issue into subsidiary issues

A goal is to ensure the issues are MECE: mutually exclusive and collectively exhaustive.

Question 3

List the four elements of a SWOT analysis.

Answer 3

• Strengths
• Weaknesses
• Opportunities
• Threats

It involves internal and external analysis to assess an organization’s position.

Question 4

What are strengths in a SWOT analysis?

Answer 4

Internal factors that make an organization superior and competitive

Examples include a skilled workforce, unique technology, or a valuable brand.

Question 5

What are weaknesses in a SWOT analysis?

Answer 5

Limitations or faults within the organization that hinder achieving objectives

Examples include poor IT systems or a negative organizational culture.

Question 6

What constitutes an opportunity in a SWOT analysis?

Answer 6

Favorable current or prospective situations in the environment

Examples include market growth or new technology that the organization can exploit.

Question 7

What defines a threat in a SWOT analysis?

Answer 7

Unfavorable situations or trends that may damage the organization’s objectives

Examples include a downturn in demand or new competitors.

Question 8

What are common mistakes made with SWOT analysis?

Answer 8

• Confusing internal and external factors
• Creating long lists without prioritization
• Over-generalization
• Stopping at SWOT without further analysis

Effective SWOT analysis should lead to informed conclusions.

Question 9

What is the purpose of macro-environment analysis?

Answer 9

Identify key drivers for change and their implications for specific organizations

It helps organizations understand their environment for survival.

Question 10

What does PESTEL stand for?

Answer 10

• Political
• Economic
• Social
• Technological
• Ecological
• Legal

It examines macro-environmental factors affecting organizations.

Question 11

What are the two environments in market analysis?

Answer 11

• Market environment: suppliers, customers, competitors
• Nonmarket environment: social, political, legal, ecological factors

Both environments influence organizational strategies.

Question 12

What are economic factors in macro-environment analysis?

Answer 12

• Currency exchange rates
• Interest rates
• Economic growth rates
• Unemployment rates

These factors influence how markets are affected by the economy.

Question 13

What social aspects can influence demand and supply?

Answer 13

• Demographics
• Distribution
• Geography
• Culture

These aspects shape the nature of markets and organizational effectiveness.

Question 14

What are the five primary indicators of innovative activity?

Answer 14

• R&D budgets
• Patenting activity
• Citation analysis
• New product announcements
• Media coverage

These indicators help identify areas of rapid technological change.

Question 15

What is divergent thinking?

Answer 15

Creative and receptive to a wide range of ideas and information

Useful for designing imaginative strategies.

Question 16

What is convergent thinking?

Answer 16

Analytical and focused, breaking problems down into parts

It is often used in strategic plans to achieve specific outcomes.

Question 17

What are key drivers for change in industries?

Answer 17

• Environmental factors
• Success or failure of strategies

Understanding these drivers is crucial for effective strategic decisions.

Question 18

What does the PESTEL framework help identify?

Answer 18

• Specific factors impacting the industry
• Opportunities and threats

It is important to apply PESTEL selectively and consider future importance.

Question 19

What are the three fundamental approaches to forecasting?

Answer 19

• Single-point forecasting
• Range forecasting
• Multiple-futures forecasting

Each approach varies in certainty and detail.

Question 20

What are megatrends?

Answer 20

• Large-scale movements/changes
• Slow to form
• Influence many areas over decades

Megatrends set the direction for other factors.

Question 21

What are inflexion points?

Answer 21

• Movements when trends shift direction
• Example: working from home during COVID-19

These points indicate significant changes in trends.

Question 22

What are weak signals?

Answer 22

• Advanced signs of future trends
• Unstructured and fragmented information

They help identify inflexion points and are often perceived as unusual.

Question 23

What is the purpose of scenario analysis?

Answer 23

• Offer plausible alternative views of the future
• Learn rather than predict

Scenarios help deepen understanding of potential changes.

Question 24

What is the first step in the scenario process?

Answer 24

Define scenario scope

This includes determining the subject and time span of the analysis.

Question 25

What does **Porter's Five Forces framework** assist with?

Answer 25

Identifying industry attractiveness ## Footnote It evaluates five competitive forces affecting the industry.

Question 26

What are the **five competitive forces** in Porter's framework?

Answer 26

* Extent of rivalry * Threat of entry * Threat of substitutes * Power of buyers * Power of suppliers ## Footnote Each force impacts industry dynamics and profitability.

Question 27

What is the **definition of an industry**?

Answer 27

A group of firms producing similar products/services ## Footnote This definition helps in analyzing competitive dynamics.

Question 28

What is the **definition of a market**?

Answer 28

A group of customers for specific products/services ## Footnote Markets can be defined geographically or by product type.

Question 29

What are **business ecosystems**?

Answer 29

A business ecosystem is a living network of companies that grow and adapt together — competing and collaborating to create greater value than any could alone. * **Apple’s ecosystem:** iPhone + App Store + iCloud + accessory and app partners. * **Tesla’s ecosystem:** electric cars, Supercharger network, software updates, suppliers, and energy services. ## Footnote Complementors are key factors in these ecosystems.

Question 30

What does a **monopoly** entail?

Answer 30

* One firm dominates * Very high entry barriers * Unique products/services ## Footnote Monopolies have significant power over buyers and suppliers.

Question 31

What characterizes an **oligopoly**?

Answer 31

* Few large firms dominate * Limited rivalry * High entry barriers ## Footnote The actions of one firm can significantly influence the market.

Question 32

What defines **perfect competition**?

Answer 32

* Low barriers to entry * Many equal rivals * Identical products/services ## Footnote Competition focuses heavily on price in this market structure.

Question 33

What is a **hypercompetitive industry**?

Answer 33

* Frequent and aggressive competitor interactions * Constant change and disequilibrium ## Footnote This environment leads to rapid shifts in market dynamics.

Question 34

What is the **development/introduction stage** in the industry life cycle?

Answer 34

* Experimental phase * Few players * Weak competitive forces ## Footnote Profits may be scarce due to high investment requirements.

Question 35

What occurs during the **shake out stage** of the industry life cycle?

Answer 35

* Market saturation * Increased rivalry * Variable profits ## Footnote Weaker competitors are forced out during this stage.

Question 36

What happens in the **maturity stage** of the industry life cycle?

Answer 36

* Increased barriers to entry * Established control over distribution * Standardized products/services ## Footnote Profitability relies heavily on market dynamics.

Question 37

What is the **first stage** of industry growth?

Answer 37

Introduction stage ## Footnote Characterized by low sales, high costs, and limited customer loyalty.

Question 38

What occurs during the **shake out stage** of industry growth?

Answer 38

Market saturation and increased rivalry ## Footnote Profits become variable, forcing weaker competitors out.

Question 39

In the **maturity stage**, what becomes key to profitability?

Answer 39

Market share ## Footnote Control over distribution and economies of scale play significant roles.

Question 40

What defines the **decline stage** of industry growth?

Answer 40

Extreme rivalry and falling sales ## Footnote Survivors may still be profitable, potentially leading to monopolistic situations.

Question 41

What are **complementors**?

Answer 41

Enhancers of another organization's business attractiveness ## Footnote Customers value a product more when they also have the complementor's products.

Question 42

List the **three characteristics** of complementors and core business ecosystems.

Answer 42

* Non-generic, unique complementarities * Ecosystem leaders * Network effects ## Footnote These characteristics help in understanding the dynamics of ecosystems.