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
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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
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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
