SM worksheet answer

##1
Define the concept of strategy and discuss the model of strategic management.

Answer
The Concept of Strategy and Strategic Management.
Strategy refers to:-
 The plans organization formulates to meet its end objectives, which devised to ensure
market success and achieve competitive advantage...
 A method or plan chosen to bring about a desired future, such as achievement of a goal
or solution to a problem.
Johnson and Scholes define strategy as
 "The direction and scope of an organization over the long-term which achieves advantage for
the organization through its configuration of resources within a challenging environment, to
meet the needs of markets and to fulfill stakeholder expectations"
The model of strategic management.
Developing the strategic management model
Is important because it provides the basic framework for understanding how strategic
management can be operationalised at the company level.
Provides managers and strategists a greater comprehension of the iterative approach in
conducting real strategic management in the organizational setting.
Begins with the development of the organizational mission and vision.

#2
What is the role of environment analysis in strategy formation? Characterize 5 forces model,
strategic group analysis and stakeholder analysis.

Answer
The role of environment analysis in strategy formation
The process of environmental analysis includes collection of relevant information from
the environment, interpreting its impact on the future organizational working, and
determining what opportunities and threats-positive and negative aspects-are offered by
the environment
Its usefulness for evaluating the present strategy, setting strategic objectives and
formulating strategies.
It also helps them to develop an early warning system to present threats or develop
strategies, which can turn a threat to the organizations advantage.

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Characterize 5 forces model, strategic group analysis and stakeholder analysis.

Porter's five forces models are:

1. Competitive Rivalry. This looks at the number and strength of your competitors. How
many rivals do you have? Who are they, and how does the quality of their products and
services compare with yours?
2. Supplier Power. This is determined by how easy it is for your suppliers to increase their
prices. How many potential suppliers do you have?
3. Buyer Power. Here, you ask yourself how easy it is for buyers to drive your prices down.
How many buyers are there, and how big are their orders?
4. Threat of Substitution. This refers to the likelihood of your customers finding a
different way of doing what you do.
5. Threat of New Entry. Your position can be affected by people's ability to enter your
market.
Strategic Group Analysis looks at players' positions in the competitive environment and
the underlying factors that determine a company's profitability, as well as the competitive
dynamics of an industry. It attempts to characterize the strategies of all significant
competitors along broad strategic dimensions.
Stakeholder analysis is a process of systematically gathering and analyzing qualitative
information to determine whose interests should be taken into account when developing
and/or implementing a policy or program

#3
Discuss in detail the components of mission statement. In your opinion, what are the three most
important components that should be included when writing a mission statement? Why?

Answer
According to Chris Bart, professor of strategy and governance at McMaster University, a
commercial mission statement consists of three essential components: mission statement is a
short statement of why an organization exists.
 Key market: the target audience
 Contribution: the product or service
 Distinction: what makes the product unique or why the audience should buy it
over another?

#4
Discuss relationships among objectives, strategies, and policies with a clear example

Answer
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Strategies are the best plan opted from a number of plans in order to achieve the
organizational goal and objectives. It is usually long term plans which will contain short
or long term objectives.
Policies are the set of common rule and regulation which forms as a base to take day to
day decision. It usually formed to ensure that the strategy is implemented effectively
and efficient.
Objectives are the goals set out by an entity based on the policies that are already in
existence. The strategies are the methods employed to carry out the objectives.

#5
Why do you think some chief executive officers fail to use a strategic-management approach to
decision making?

Answer
Reasons why chief chief executive officers fail to use a strategic management approach to
decision making are:-
not having formal training,
not understanding,
no monetary rewards,
no punishment for not planning,
too busy,
laziness,
content with current success, and
Overconfident.

#6
Who are the major competitors of Grand College? What are their strengths and weaknesses?
What are their strategies? How successful are these institutions compared to Grand college?

Answer
Any person or entity which is a rival against another. In business, a company in the same
industry or a similar industry which offers a similar product or service. The presence of one or
more competitors can reduce the prices of goods and services as the companies attempt to gain
a larger market share.
Here are 5 steps you can follow to conduct your own competitor analysis.
1. Identify your competitors. ...
2. Gather information about your main competitors. ...
3. Analyze the competition's strengths and weaknesses. ...

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4. Talk to your competitors directly. ...

5. Identify your competitive advantage.
#7
List four financial and four nonfinancial benefits of a firm engaging in strategic planning

Answer
Four financial benefits of a firm engaging in strategic planning
Show significant improvement in sale, profitability, and productivity.
Exhibit superior long term financial performance
Make more informed decision
Prepare fluctuation in their external and internal environment

Four nonfinancial benefits of a firm engaging in strategic planning

 Increased employee productivity
 Improved understanding of competitors' strategies
 Greater awareness of external threats
 Understanding of performance reward relationships

#8
Explain how to conduct an external strategic-management audit.

Answer
In order to conduct external Strategic Management audit, the organization needs to collect
competitive intelligence & information about economic, social, demographic, cultural, legal,
environmental, technological & governmental trends. Certain sources of information are
concerned by appointed individuals like newspapers, trade journals, magazines etc. These
appointed individuals provide periodic report to the authorized committee of members whose are
responsible for conducting external audit. By using this method continuous information is
obtained & a number of people are involved in the audit process. Moreover there are certain
other potential sources that also provide strategic information like internet, university, corporate
& public libraries etc. Customers, suppliers, competitors, distributors etc are also another set of
sources for provision of the required information. When all the useful information is collected,
then the next step is to assimilation & evaluation of that information. One or more meeting is
held by the managers in order to find out the potential opportunities & threats that are faced by
the organization.
#9
Use Porter’s Five-Forces Model to evaluate competitiveness within the Ethiopian banking
industry.

Answer
Whether the business is service oriented or physical goods, there are always competitive forces
in any perfect competitive business environment, like that of the banking sector in Ethiopia. The

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model attempts to address key strategic issues in a wider scope. The banking sector of Ethiopia
can also consider the application of this model for some strategic decision processes.
The porter’s five forces frameworks reveals that the banking industry is of two starts. This
implies that bargaining power of suppliers and Threat of substitutes forces are favorable to those
who are already full-fledged banks. This implies that for the bank to survive profitably in the
industry, it needs to choose a strategy, which can lead to a possibility of charging premium price
for some products. Since customers have a high bargaining power, it is imperative for the banks
to make sure that they have a customer retention strategy in place. In this industry therefore, it is
about survival of the fittest. There is no room for losers but winners only. It should be borne in
mind that these competitive forces are not and will never be static.
There is a clear observation that there is a strong positive relationship between porter’s five
forces model and the performance of banks in Ethiopia. Owing to the strong relationship
between substitutes of substitutes and the performance of banks in Ethiopia, the strength and
effects of substitutes should not be ignored.
#10
List three firms you are familiar with and give a distinctive competence for each firm

Answer
Distinctive competence is a list of characteristics that sets a business apart from others. It may
include a number of areas including marketing, technology, manufacturing and so on.
Distinctive Competence with Apple firm
 they create the most well-designed,
 They create user-friendly products that are like no other in the market.

Dell computer industry firm

 Dell is officially the No. 1 computer systems company in the world. Dell is able to
sustain a competitive advantage over competitors in the computer industry because of an
extremely efficient supply chain/distribution system. Dell is able to achieve superior
profits in the industry because they are a knowledgeable user of information,
communication, e-commerce, e-business, internet, and web technologies
Nike Company
 The company's innovative and creative product design is what truly set Nike apart from
their competitors.
 Focusing one of its corporate values on technology and innovation, Nike has pioneered
four shoe-cushioning systems that reduce shock, distribute pressure, protect from
impact and offer comfort.
#11
Could a firm simultaneously pursue focus, differentiation, and cost leadership? Should firms do
that? Discuss

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Answer: - Yes; if a firm can achieve cost leadership and differentiation simultaneously, the
benefits are great because differentiation leads to premium prices, and at the same time that cost
leadership implies lower costs. An example of a firm that has achieved success in both a cost
advantage and differentiation is McDonald

#12
List four major benefits of forming a joint venture and six benefits of acquiring another firm to
achieve desired objectives.

Answer
Benefits of joint ventures include:
 access to new markets and distribution networks
 increased capacity and flexibility
 sharing of risks and costs (i.e. liability) with a partner
 Access to greater resources, including specialized staff, technology and finance.
Benefits of acquisition are:
 Speed: It provides ability to speedily acquire resources and competencies not held
in house. It allows entry into new products and new markets. Risks and costs of
new product development decrease.
 Market power: It builds market presence. Market share increases. Competition
decrease. Excessive competition can be avoided by shut down of capacity.
Diversification is aggrieved. Synergistic benefits are gained.
 Overcome entry barrier: It overcomes market entry barrier by acquiring an
existing organization. The risk of competitive reaction decrease.
 Financial gain: Organization with low share value or low price earnings ratio can
be acquired to take short term gains through assets stripping.
 Resources and competencies: Acquisition of resources and competencies not
available in house can be a motive for merger and acquisition. Stakeholder
expectations: Stakeholder may expect growth through acquisitions.

#13
Discuss market penetration, market development, product development, forward integration,
backward integration, and horizontal integration. Give recent examples for each

Answer
What Is Market Penetration?
 Market penetration is a measure of how much a product or service is being used by
customers compared to the total estimated market for that product or service. Market
penetration can also be used in developing strategies employed to increase the market
share of a particular product or service.

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 For example, if there are 300 million people in a country and 65 million of them own
cell phones, the market penetration of cell phones would be approximately 22%. In
theory, there are still 235 million more potential customers for cell phones, or 78% of the
population remains untapped.
Product development
Product Development is a creation, innovation, utility enhancement or continuous improvement
of earlier features (design, service, etc.) of an existing product or developing (manufacturing) an
entirely new kind of product to satisfy the requirements of its end-users (consumers).”
Example:-
 Modify desktop computers into light-weight laptops to ease portability.
 Transform a traditional library into an e-library to facilitate faster searching and
accessibility of electronic books and other digital documents.
 Convert a simple airplane into a fighter jet to achieve a greater speed.

Forward integration is when a company at the beginning of the supply chain controls stages
farther along. Examples include iron mining companies that own "downstream" activities such as
steel factories.

Backward integration is when a business at the end of the supply chain takes on activities
"upstream." An example is when a movie distributor, such as Netflix, also manufactures content.

Horizontal integration is the process of a company increasing production of goods or services

at the same part of the supply chain. A company may do this via internal expansion, acquisition
or merger.

#14
Would a BCG Matrix and analysis be worth performing if you do not know the profits of
each segment?

Answer: - yes The BCG matrix allows multidivisional organization to manage its portfolio of
business by examining the relevant market share and industry growth rate of each division relate
to all other divisions in the organization. The location of segments with the matrix is very useful
strategic information even without the piece slice (profit information).

Why? Would the Question Mark quadrant or the Cash Cow quadrant be more desirable?
Explain

Answer: - an argument for the question mark quadrant being more desirable is that this division
competes in a very attractive, growing industry, even though they have a low relative market
share. Al so cash cow are usually nearing the end their productive life cycle. Cash cow, however,
being more desirable is the cash cows division are proven winner and have large relativity
market share, but are in slow growing industry.

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#15
In an IE Matrix, do you believe it is more advantageous for a division to be located in quadrant
II or IV? Why?
Answer. In an IE matrix quadrant II and IV are both placed in the grow and build category
quadrant II divisions are stronger externally, where as quadrant IV division are internally
stronger.

#16
Given the following information, develop a SPACE Matrix for the XYZ Corporation: FP =
+2; SP = -6; CP = -2; IP = +4. And suggest possible strategies to pursue.

Answer:-
The directional vector of the space matrix lies in the lower quadrant, indicating that capacity type
strategy is most appropriate.

Final position =2

Competitive position =-2

Stability position=-6

Industry position= 4

Direct vector coordinate x-axis: -2+4=2; y-axis: 2+ (-6) = -4

DVC= (+2,-4)

#17
How are the SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, and Grand Strategy Matrix
similar? How are they different?

Answer.
The SWOT, BCG, IE, and GRAND are similar I that all are matching tools in stage of the
strategy formulation analytical framework. The intent is to match internal with external factors.
For example, to use strength to take advantage of opportunities . The five tools each had
different axis so it is best to utilize all five strategic planning. The SWOT most widely used

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because it is conceptually simple yet comprehensive. The BCG and IE is portfolio matrix that
applies best to multidivisional firm. The GRAND is used list with the space next list , but again ,
all five are useful as all five aims to effectively match internal with external factor s in
formulating strategies .

#18
Develop a SPACE Matrix for a company that is weak financially and is a weak competitor. The
industry for this company is pretty stable, but the industry’s projected growth in revenues and
profits is not good. Label all axes and quadrants.

Answer:-
Financial position =2

Competitive position =-5

Stability position = -3

Industry position = 2

Direct vector coordinate: - x-axis:-5+2 = -3; y=axis: 2+ (-3) = -1

DVC = (-3,-1)

This organization should pursue defensive strategies (lower left quadrant)

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