Management 595 – Fall 2019

Exam 1 Study Guide

A. Essay questions

1. What are the five tasks of strategic management and what does each involve (Be as detailed as
possible)? (Chapters 1 & 2 and notes)
 Determine mission and vision statement
 Set objectives
 Create a strategy
 Implement strategy
 Evaluate and change
2. Why does an organization need both financial and strategic objectives? Give a SMART example of each
type of objective. (Chapters 1 & 2 and notes)
Financial- Increase Revenue by 5% through new aggressive marketing campaign by the end of
2015.
 Strategic-Increase market share by 5% thought development of new product by the end of next
year.
3. What are the steps of the macro-environmental analysis? Describe each step and explain which
analytical technique(s) is/are used. (Chapter 3 + notes)
 Industry’s dominant economic traits
 Industry’s competitive forces  Porter’s 5 F model
 Drivers of change in industry  IDF (industry driving forces)
 Competitive position of rivals  SGM (strategic group map)
 Strategic moves of rivals
 Key Success Factors  KSF
 Conclusions: Overall Attractiveness of Industry

 Economic traits
 Competitive forces (Porter’s 5F)
 Change drivers (IDF)
 Positions (SGM)
 KSF (KSF)
 Conclusions
 eccpksfc
4. Describe Porter’s five forces model of competition, how it is used, and give an example. (Chapter 3 and
notes)
 Rivalry among competitors
  Potential entry
 Substitute products
 Bargaining power of supplier
 Bargaining power of buyers
5. What are the steps of the micro-environmental analysis? Describe each step and explain which analytical
technique(s) is/are used. (Chapter 4 + notes)
 How well is the company’s present strategy working?
 What are the company’s strengths and weaknesses and its external opportunities and threats? 
SWOT analysis
 Are the company’s prices and costs competitive?  Value Chain analysis
 Is the company competitively stronger or weaker than key rivals?  CSA
 What strategic issues merit front-burner managerial attention?

 Strategy working
 SWOT
 Prices competitive (value chain analysis)
 Competitively stronger (CSA)
 Front-burner attention
 sspcf

B. Multiple Choice Questions

Chapters:
 Strategic Management Process (Chapters 1 & 2)
 Industry Analysis (Chapter 3)
 Situation Analysis (Chapter 4)

Cases:
 Robin Hood
 Nestlé’s Ethical Dilemma
 Course Outline
Module 1: The Strategic Management Process
What is a strategy?
The five tasks of the strategic management process
1. Developing a business mission and a strategic vision
2. Setting financial and strategic objectives
3. Crafting the strategy
4. Implementing the strategy
5. Evaluating and making corrections

The benefits of thinking strategically

The different levels of strategies
The different factors shaping strategies
The different criteria to test a strategy

The Case Study Methodology

 The main idea
 How to
 Guidelines
 Case discussions

Module 2: External Analysis (Industry and Competitive Analysis)

1. Industry’s dominant economic traits
2. Industry’s competitive forces  Porter’s 5 F model
3. Drivers of change in industry  IDF
4. Competitive position of rivals  SGM
5. Strategic moves of rivals
6. Key Success Factors  KSF
7. Conclusions: Overall Attractiveness of Industry
8. Conclusions: Overall Attractiveness of Industry

Module 3: Internal Analysis (Situation Analysis)

1. How well is the company’s present strategy working?
2. What are the company’s strengths and weaknesses and its external opportunities and threats?  SWOT
analysis
3. Are the company’s prices and costs competitive?  Value Chain analysis
4. Is the company competitively stronger or weaker than key rivals?  CSA
5. What strategic issues merit front-burner managerial attention?
Chapter 1 and 2 – the strategic management process
 What is a strategy
o The company’s game plan
o The roadmap, direction setting
o All the competitive moves and business approaches used by managers to run the company and
strengthen its competitive position
 5 tasks of strategic management
o 1 develop a strategic vision and mission
o 2 set objectives
o 3 craft a strategy to achieve objectives
o 4 implement and execute strategy
o 5 evaluate and make corrections
o Not a 1 time event
 Big loop of continual changes and revisions
 Never ending process because it should be a state of mind instead of a 1 time exercise
o 2 phases
 First phase
 Tasks 1-3 “thinking”
 Tasks 4-5 “doing”
 Task 1
o Where we are, where we are headed
o the questions to ask when thinking strategically
 where we are
 where are we going
 what to accomplish
 how to proceed
o vision vs mission
 visions are future
 missions are current
 the biggest difference between the 2 is time
 missions vs. strategic visions
o a mission statement focuses on current business activities “who we are and what we do”
 current definition of your business
o a strategic vision concerns a firm’s future business path “where we are going”
 future oriented view of your business
 what you see on the horizon
 your manager’s aspirations for the business
 always have to revise your vision statement to be great
 task 2
o set objectives
o what to accomplish
o how much of what by when
o 2 types
 Financial: anything that will help your company’s financial performance
 Strategic: anything that will help your company’s market position (ex. competitive
advantage)
o Want your goals to be a challenge and to be tough – don’t want to make it too easy, so go and
stretch your goals as much as you can without becoming unrealistic
 Task 3
o Craft a strategy
 o How to proceed
o Answers the “how” question
o How to proceed and how to make it happen
o Want your strategy to be action oriented
o Has to be market and customer driven
 Actively searching for opportunities to do new things or to do things better
o Strategic plan = task 1+ task 2 + task 3
o Patterns of actions that define strategy
o A company’s strategy is partly planned and partly reactive
o A company’s strategic plan consists of
 Task 1: its strategic vision and business mission
 Task 2: its strategic and financial objectives
 Task 3: its strategy
 Task 4
o Implement and execute strategy
o Make it happen
o Most difficult and time consuming task in the process
o Where most companies fail
o Involves
 People management
 Developing competencies and capabilities
 Budgeting
 Policy-making
 Motivating
 Culture-building
 Leadership
 Task 5
o Evaluate and change
o The end and beginning of the strategic management process
 Conclusions: benefits of strategic thinking
o Guides entire firm regarding what it is we are trying to do and achieve
o Makes managers more alert
o Unifies organizational efforts
o Creates a proactive atmosphere
o *Helps a company prepare for the future
 Levels of strategy-making in a diversified company
o Operating strategies
 Operating managers
o Functional strategies
 Functional managers
o Business strategies
 Business-level managers
o Corporate strategy
 Corporate-level managers
 Tests of a winning strategy
o Goodness of fit test
 How well is strategy matched to firm’s situation
o Competitive advantage test
 Does strategy lead to sustainable competitive advantage
 o Performance test
 Does strategy boost firm performance
Chapter 3
 Industry and competitive analysis
 Good analysis leads to good strategic choices
 Macro environment
o Outside the organization
o Assess industry and competitive conditions
 Micro environment
o Inside the organization
o Assess company’s own situation
 Use both to identify strategic options for the company
o Then select the best strategy for the company
 Key questions regarding the external/macro environment
o Industry’s dominant economic traits
o Industry’s competitive forces
o Drivers of change in industry
o Competitive position of rivals
o Strategic moves of rivals
o Key success factors
o Conclusions: overall attractiveness of industry
 What are the industry’s dominant and economic traits?
o Market size and growth rate
o Size and growth rate are very important – usually in terms of revenue
o Scope of competitive rivalry
o Number of competitors and their relative sizes
o Prevalence of backward/forward integration
o Entry/exit barriers
o Nature and pace of technological change
 Porter’s five forces model of competition
o The stronger the forces, the harder it will be for the industry to be profitable and less attractive to
newcomers
o To use:
 Identify 5 forces by name
 Rivalry among competing sellers
 Buyers
 Potential of new entrants
 Substitute product (other industries)
 Suppliers of key inputs
 Determine if they are a powerful force (small, moderate, weak) and why
 look at results
o rivalry among competitors
 usually the most powerful force
 competitive weapons: how frequently and how vigorously they are being used in the
industry
 anything you are going to use to fight or battle in your industry (ex. advertising, patents,
innovation, price differentiation, etc.)
 other factors: growth of demand
 when industry is shrinking, rivalry increases
  when the cost to switch to another brand is high, rivalry is low
o potential entry
 easily overlooked
 the seriousness of threat depends of
 barriers to entry
 expected reaction of incumbents (retaliation)
 what is the threat posed by newcomers
 ex. cost, government regulation, licensing, patents, technology, knowhow, culture,
market share
 more entry barriers = weak force
 harder for anyone to get in so don’t have to worry about them as much as
competitors
 what forces are at work to change industry conditions?
o Definition of Industry Driving Force (IDF)
 What market positions to rivals occupy
o Strategic group
o Strategic group map
 Steps to creating:
 Identify competitive characteristics that differentiate firms in an industry from one
another
 Plot firms on a two-variable map using pairs of these differentiating
characteristics
 Assign firms that fall in about the same strategy space to same strategic group
 Draw circles around each group, making circles proportional to size of group’s
respective share of total industry sales
 What are the key factors for competitive success?
o Key Success Factors (KSFs)
Chapter 4
 Situational analysis
 Company analysis key questions
o How well is the company’s present strategy working
o What are the company’s strengths and weaknesses and its external opportunities and threats
o Are the company’s prices and costs competitive
o Is the company competitively stronger or weaker than key rivals
o What strategic issues merit front-burner managerial attention
 Key analytical tools for company situation analysis
o SWOT analysis
o Value chain analysis
o Competitive strength assessment
 Question 1: some indicators of how well the strategy is working
o Trend in sales and market share
o Acquiring and/or retaining customers
o Trend in profit margins
o Trend in net profits, ROI, and EVA
o Overall financial strength and credit ranking
o Efforts at continuous improvement activities
o Trend in stock price and stockholder value
o Image and reputation with customers
o Leadership role(s) (technology, quality, innovation, etc.)
 o Marketing performance
o Financial performance
o Stock performance
o How do they do it? What is the company doing right now?
 Improve it or figure out better strategy
o Do you see any red flags in marketing, financial, or stock performance?
o Look for anything that concerns you or impresses you
o Financial analysis
 Question 2: SWOT analysis
o Strengths, weaknesses, opportunities, threats
o Strengths and weaknesses: internal
o Opportunities and threats: external
 Question 3: are the company’s prices and costs competitive?
o Value chain analysis
 Question 4: is the company stronger or weaker than key rivals?
o Competitive strength assessment
 List industry key success factors and other relevant measures of competitive strength
 Rate firm and key rivals on each factor using rating scale from 1 to 10
 Decide whether to use a weighted or unweighted system
 Sum individual ratings to get an overall measure of competitive strength for each rival
 Based on overall strength ratings, determine overall competitive position of the firm
 This method is very subjective
o Use a third party to complete the assessment so it isn’t so biased