90.
Distinguish between a policy, a rule, and a standard operating procedure of an
organization and give one example of each of these types of standing plans that would be
used in a business.
Standing plans are used in situations in which programmed decision making is
appropriate. When the same situations occur repeatedly, managers develop policies, rules,
and standard operating procedures (SOPs) to control the way employees perform their
tasks. A policy is a general guide to action, a rule is a formal written guide to action, and
an SOP is a written instruction describing an exact series of actions that should be
followed in particular circumstances.
An organization may have a standing plan about ethical behavior by employees. This plan
includes a policy that all employees are expected to behave ethically in their dealings with
suppliers and customers; a rule that requires any employee who receives from a supplier
or customer a gift worth more than $50 to report the gift; and an SOP that obliges the
recipient of the gift to make the disclosure in writing within 30 days.
AACSB: Analytical Thinking
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
91.
Explain a SWOT analysis. Describe briefly the steps involved in a SWOT analysis.
SWOT analysis is a planning exercise in which managers identify internal organizational
strengths (S) and weaknesses (W) and external environmental opportunities (O) and
threats (T). Based on a SWOT analysis, managers at the different levels of the
organization select the corporate, business, and functional strategies to best position the
organization to achieve its mission and goals.
• The first step in SWOT analysis is to identify an organization’s strengths and
weaknesses. The task facing managers is to identify the strengths and weaknesses that
characterize the present state of their organization.
• The second step in SWOT analysis begins when managers embark on a full-scale SWOT
planning exercise to identify potential opportunities and threats in the environment that
affect the organization now or may affect it in the future. Scenario planning is often used
to strengthen this analysis.
With the SWOT analysis completed, and strengths, weaknesses, opportunities, and threats
identified, managers can continue the planning process and determine specific strategies
92.
Michael Porter presented four ways in which the top management of an organization could
select a business-level strategy for their organization. Discuss any two of these four ways
of increasing the value of the organization’s products and explain the advantages and
disadvantages of the strategies that you choose.
Managers can pursue one of four business-level strategies: a low-cost strategy, a
differentiation strategy, a focused low-cost strategy, or a focused differentiation strategy.
Students can discuss any two of the four strategies.
• With a low-cost strategy, managers try to gain a competitive advantage by focusing the
energy of all the organization’s departments or functions on driving the company’s costs
down below the costs of its industry rivals. When existing companies have low costs and
Difficulty: 2 Medium
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a
competitive advantage that may lead to superior performance.
Topic: Strategic Planning
93.
According to Porter, organizations cannot simultaneously pursue both a low-cost strategy
and a differentiation strategy. Illustrate why. Show how exceptions to this “rule” can be
found, and give an example to demonstrate the point.
According to Porter’s theory, managers cannot simultaneously pursue both a low-cost
strategy and a differentiation strategy.
With a low-cost strategy, managers try to gain a competitive advantage by focusing the
energy of all the organization’s functions on driving the company’s costs down below the
costs of its industry rivals.
With a differentiation strategy, managers try to gain a competitive advantage by focusing
all the energies of the organization’s functions on distinguishing the organization’s
products from those of competitors on one or more important dimensions. Often the
process of making products unique and different is expensive.
Porter identified a simple correlation: Differentiation raises costs and thus necessitates
6-79
Topic: Strategic Planning
94.
Managers can use four principal corporate-level strategies in order to help their
organization to increase its sales and profits. Discuss any two of these strategies and
explain the decisions that a manager would have to make in a business in order to design
a program that used these two strategies.
Managers can concentrate the organization on a single business, can use a diversification
strategy, can expand internationally, or can use either a backward or forward vertical
integration strategy. Students can discuss any two of the four strategies.
• Concentration on a single industry becomes an appropriate corporate-level strategy
services. There are two main kinds of diversification: related and unrelated.
• If managers decide that their organization should sell the same standardized product in
each national market in which it competes, and use the same basic marketing approach,
they adopt a global strategy. If managers decide to customize products and marketing
strategies to specific national conditions, they adopt a multidomestic strategy.
AACSB: Reflective Thinking
Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
95.
Write a brief note on global strategies and multidomestic strategies. Also mention one
advantage and one disadvantage of each.
A global strategy is adopted by managers when they decide that their organization should
sell the same standardized product in each national market in which it competes, and use
the same basic marketing approach.
A multidomestic strategy is adopted by managers when they decide to customize products
and marketing strategies to specific national conditions.
Both global and multidomestic strategies have advantages and disadvantages. The major
advantage of a global strategy is the significant cost savings associated with not having to
customize products and marketing approaches to different national conditions. The major
disadvantage of pursuing a global strategy is that by ignoring national differences,
managers may leave themselves vulnerable to local competitors that differentiate their
products to suit local tastes.
The advantages and disadvantages of a multidomestic strategy are the opposite of those
of a global strategy. The major advantage of a multidomestic strategy is that by
customizing product offerings and marketing approaches to local conditions, managers
may be able to gain market share or charge higher prices for their products. The major
96.
Write a brief note on the different modes of international expansion.
There are four basic ways to operate in the global environment: importing and exporting,
licensing and franchising, strategic alliances, and wholly owned foreign subsidiaries.
• The least complex global operations are exporting and importing. A company engaged in
exporting makes products at home and sells them abroad. A company engaged in
importing sells products at home that are made abroad.
• In licensing, a company (the licenser) allows a foreign organization (the licensee) to take
charge of both manufacturing and distributing one or more of its products in the licensee’s
country or world region in return for a negotiated fee. In franchising, a company (the
franchiser) sells to a foreign organization (the franchisee) the rights to use its brand name
and operating know-how in return for a lump-sum payment and share of the franchiser’s
profits.
97.
List the process of strategy implementation.
Strategy implementation is a five-step process:
• Allocating responsibility for implementation to the appropriate individuals or groups
• Drafting detailed action plans that specify how a strategy is to be implemented
• Establishing a timetable for implementation that includes precise, measurable goals
linked to the attainment of the action plan
• Allocating appropriate resources to the responsible individuals or groups
• Holding specific individuals or groups responsible for the attainment of corporate,
divisional, and functional goals
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-04 Describe the vital role managers play in implementing strategies to achieve an organization’s
mission and goals.
Topic: Strategic Planning
98.
Discuss Michael Porter’s five forces model.
A well-known model that helps managers focus on the five most important competitive
forces, or potential threats, in the external environment is Michael Porter’s five forces
model. Porter identified these five factors as major threats because they affect how much
profit organizations competing within the same industry can expect to make:
• The level of rivalry among organizations in an industry: The more that companies
compete against one another for customers—for example, by lowering the prices of their
products or by increasing advertising—the lower is the level of industry profits (low prices
mean less profit).
• The potential for entry into an industry: The easier it is for companies to enter an
99.
Distinguish related diversification from unrelated diversification. Provide suitable
examples.
Related diversification is the strategy of entering a new business or industry to create a
competitive advantage in one or more of an organization’s existing divisions or businesses.
Related diversification can add value to an organization’s products if managers can find
ways for its various divisions or business units to share their valuable skills or resources
so that synergy is created. Synergy is obtained when the value created by two divisions
8% and 12%.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
100.
List and describe the four ways to expand internationally.
In general, four basic ways to operate in the global environment are importing and
exporting, licensing and franchising, strategic alliances, and wholly owned foreign
subsidiaries.
IMPORTING AND EXPORTING: The least complex global operations are exporting and
organization, and it reduces the level of risk because the organization’s managers have full
control over all aspects of their foreign subsidiary’s operations. Moreover, this type of
investment allows managers to protect their technology and know-how from foreign
organizations.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy