Business Orgs | Course Paper

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Study guide for the mid-term test

This study guide contains questions about the topics that will be covered in the test. The better you can answer these

questions, the better you will perform on the test. It is advised to study section-by-section: study the chapter(s) and

slide deck(s) related to each section, then see if you can answer the questions from this study guide.

Class 1/Chapter 1 – Introduction to Strategic Management

– What is ‘strategy’ and how do organizations determine this?

• A set of related actions that managers take to increase their company’s performance

• A coherent set of actions developed by management taking the external and internal context into account

to reach a long-term objective

• Organizations determine this in different ways:

• Publicly listed (for profit firms):

• Goal is to maximize shareholder value

• Private (for profit) firms:

• Maximize firm value

• Nonprofit organizations:

• Ideological objectives

• Government organizations:

• Objective(s) set by the people/ congress

– What are the main components of strategic planning process?

• Textbook components of strategic planning:

• Select the corporate mission and major corporate goals

• Analyze the organization’s external competitive environment to identify opportunities and

threats

• Analyze the organization’s internal operating environment to identify the organizations

strengths and weaknesses

• Select strategies that build on the organization’s strength and correct its weaknesses in order to

take advantage of external opportunities and counter external threats. These strategies should

be consistent with the mission and major goals of the organization. They should be congruent

and constitute a viable business model

• Implement the strategies.

• Lecture components of strategic planning process:

• Identification

• Mission

• Vision

• Values

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• Goals

• Analysis

• External analysis

• Industry evolution

• Competitive dynamics

• Internal analysis

• Resources

• Capabilities

• SWOT analysis

• Formulation

• Functional level

• Business level

• Positioning

• Competitive advantage

• Corporate level

• Horizontal integration

• Vertical integration

• Diversification

• Global

• Implementation

• Governance

• Structures and processes

• Organizational culture

• Control systems

• Evaluation

– At which levels are strategies developed?

• Corporate level

• Which industries, markets, and countries

• Includes the corporate headquarters (CEO and directors)

• Business level

• Industry positioning and customer segments

• Includes division managers

• Functional level

• Efficiency, quality, differentiation

• Includes functional managers for manufacturing and marketing for each division

– What is a mission, vision and strategic objectives?

• Mission

• Describes what a company does

• The purpose of the company or statement of what the company strives to do

• Purpose of the company:

• Who is being satisfied (customer groups)

• What is being satisfied (customer needs)

• How are customer needs satisfied (distinctive elements)

• Vision:

• Desired future state

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• What would the world look like If the mission were achieved.

• What the company would like to achieve

• The articulation of a company’s desired achievements or future state

– What is the role of strategic managers in this process?

• Managers select and implement a set of strategies that aim to achieve a competitive advantage

• Have to formulate strategies to attain a competitive advantage and putting strategies in effect through

implementation

• Lead the strategy making process

– What are the common cognitive biases in strategic decision-making process? How to avoid them?

• Prior hypothesis bias: ignoring opposing information

• Escalating commitment: sunk cost fallacy

• Reasoning by analogy: wrong analogies

• Illusion of control: thinking one is in control

• Availability error: overestimating probabilities

• Techniques for improving strategic decision making:

• Playing devil’s advocate

• Dialect inquiry: openly debating pros and cons of a plan

• Outside view: compare to prior cases that are similar

– Is strategy an emergent process? Why or why not?

• Yes.

• Autonomous action: low level managers have more information and can make decisions quicker.

Class 2/Chapter 2 – External Analysis

– What is an industry? How is it different from a sector or a market segment?

• Industry:

• A group of companies offering products/ services that are close substitutes for one another:

businesses that satisfy the same customer needs

• They pay attention to relevant geographic scope

• May (and often should) change as the analysis unfolds

• Sector:

• A group of closely related industries

• Market segment:

• Distinct groups of customers within a market that can be differentiated on the basis of their

individual attributes and specific demands

– Which external factors determine the growth or decline of an industry?

• Economic forces:

• Economic growth

• Interest rates

• Exchange rates

• Inflation rates

• Global forces:

• Import tariff

• Barriers to international trade and investments

• Technological forces:

• Infrastructure

• Developments

• Commercialization

• Demographic forces:

• Population growth

• Distribution of age, gender, ethnic, race

• Social classes

• Social forces:

• Education levels

• Social values

• Cultural values

• Political and legal forces:

• (de)regulation

• Taxes and subsidies

• Health and safety rules

• Intellectual property rights

– What is Porter’s Competitive Forces analysis used for? What are the factors leading to a threat to