strategic planning chpts 1-4

Marketing is becoming much more technical, as are the duties and responsibilities of chief marketing officers (CMOs). Give four examples of increasing technical aspects of marketing.

(1.) Using web analytics to understand the customers and market. (2.) Increasing search engine optimization (SEO) to increase the companies online visibility. (3.) Utilizing email marketing by delivering promotional value to your customer database. (4.) Creating and attracting users to a mobile app.

If Netflix increases its advertising expenses by 30 percent while keeping its price and variable costs the same, does that mean the company's breakeven point will increase 30 percent? Show this calculation for a hypothetical firm.

A breakeven point will change if 1) there is an increase in a fixed cost or 2) reduction of profit margin. The breakeven point would not increase by 30%.

Explain cost/benefit analysis

A cost/benefit analysis assesses the costs, benefits, and risks associated with marketing decisions. It involves three steps: (1) Compute the costs associated with a decision. (2) Estimate the total benefits from the decision. (3) Compare the total costs with the total benefits. Some variables can't be calculated, but reasonable estimates can be used in the analysis (i.e. risk). If the total benefits exceed the total costs, the decision is more attractive. Key cost/benefit indicators are: • NPV • Present value of benefits (PVB) • Present value of costs (PVC) • Benefit cost ratio (BCR) • Net benefit • NPV/k (k being level of funds available)

the strategic management process consists of three stages:

strategy formulation, strategy implementation, and strategy evaluation.

strategic management is-

the art and science of formulating, implementing, and evaluating cross functional decisions that enable an organization to achieve it's objectives.

List eight benefits of having a clear mission statement

1) achieve clarity of purpose among all managers and employees; 2) provide a basis for all other strategic planning activities; 3) provide direction; 4) provide a focal point for all stakeholders of the firm; 5) resolve divergent views among managers; 6) promote a sense of shared expectations among all managers and employees; 7) project a sense of worth and intent to all stakeholders; 8) project an organized, motivated organization worthy of support; 9) achieve higher organizational performance; and 10) achieve synergy among all managers and employees.

Is a capacity utilization rate of 50 percent good? Why?

Capacity utilization is the extent of using the productive capacity of a business. It is an okay rate as long as the manufacturing can meet the demand and sell more than the breakeven point.

Explain the difference between data and information in terms of each being useful to strategists.

Data becomes information when it is used by specific purpose to obtain answers

How can strategists best ensure that strategies will be effectively implemented?

Strategists can best assure that strategies formulated will be effectively implemented by involving as many managers as possible in the strategy formulation process. It is important to communicate effectively why changes are needed, and how managers and employees will benefit from the expected results. Good communication yields good understanding yields good commitment, which is essential for good implementation

Explain how to motivate managers and employees to implement a major new strategy

Leadership is important to create a business strategy and set a clear vision by empowering subordinates to achieve their goals. Communication throughout the process is crucial

What are the three basic objectives of a CI program?

The three basic objectives of a competitive intelligence (CI) program are: 1) To provide a general understanding of an industry and its competitors; 2) To identify areas in which competitors are vulnerable and to assess the impact strategic actions would have on competitors; and 3) To identify potential moves that a competitor might make that would endanger a firm's position in the market.

Distinguish between the concepts of vision and mission.

Mission statements are "enduring statements of purpose that distinguish one business from other similar firms." Vision statements answer the question "What do we want to become?" A vision statement should be one sentence, whereas a mission statement is several sentences, but less than 200 words.

strategy formulation includes:

developing a vision and mission statement, identifying and organizations external opportunities and threats, determining internal strengths and weaknesses, establishing long term objectives, generating alternative strategies, and choosing particular strategies to pursue.

. In your opinion, what is the single major benefit of using a strategic-management approach to decision making? Justify your answer.

The single major benefit is the potential for improved understanding of the business and industry on the part of all managers and employees. Understanding generally leads to increased commitment, which, in turn, leads to creativity, innovativeness, and overall cooperativeness. The process is more important than the plan. Also, the strategic-management process allows an organization to initiate and influence, rather than just respond and react to its environment. That is, it allows an organization to be proactive, rather than reactive, in controlling its own destiny. Strategic-management concepts provide an objective basis for allocating resources and for reducing internal conflicts that can arise when subjectivity alone is the basis for major decisions.

List the 10 external areas that give rise to opportunities and threats.

The ten external areas are economic, social, cultural, demographic, natural environment, political, government, legal, technological, and competitive

long-range Planning is -

in contrast to strategic planning, long range planning tries to optimize for tomorrow the trends of today

Construct an EFE Matrix for an organization of your choice. -> read chapter 3, also:

1. List key external factors as identified in the external-audit process. Include a total of 20 factors from both the opportunities and threats. 2. Assign to each factor a weight from .0 (not important) to 1.0 (very important). These weights show the relative importance. The total of all the weights should equal 1.0. 3. Assign a 1-4 rating to each factor to indicate how effective the firm's current response strategy is: 1= the response is poor, 2 = the response is average, 3 = the response is above average, and 4 = the response is superior. 4. Multiply each factor's weight by its rating to get a weighted score. 5. Sum the weighted scores for each variable to determine the total weighted score for the Organization

Explain why a mission statement should not include monetary amounts, numbers, percentages, ratios, goals, or objectives.

: A mission statement is broad in scope for three reasons. First, it allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly stifling management creativity. Excess specificity would limit the potential of creative growth for the organization. Second, a mission statement needs to be broad to reconcile differences among, and appeal to, an organization's diverse stakeholders. Thus, a mission statement should be reconciliatory. Third, it is simply premature in the mission statement to reveal goals and objectives, which should be determined after the internal and external assessment, as illustrated in the comprehensive strategic planning model.

Why do many firms move too hastily from vision and mission development to devising alternative strategies?

: Firms that move too hastily from vision and mission development to devising alternative strategies are overlooking two important steps in the strategic management process: 1) identify and evaluate internal strengths/weaknesses and 2) identify and evaluate external opportunities/threats. Reasons why many firms are negligent in this regard include 1) laziness, 2) lack of time, 3) lack of knowledge, 4) unwillingness to do research to find specific facts and figures, and 5) unaware that matching key external with internal factors is a key to strategy formulation.

Why do you think organizations that have a comprehensive mission tend to be high performers? Does having a comprehensive mission cause high performance?

: Having a comprehensive mission statement does not guarantee or cause high performance. However, a comprehensive mission statement can contribute significantly to high performance, because ideally it conveys the intent and aspirations of all employees and managers who by working together achieve synergy. Having an excellent mission statement also provides a firm foundation for effective strategic planning, rather than ad hoc guessing about what actions would be best to take in the future.

What aspect of strategy formulation do you think requires the most time? Why?

: Important aspects of strategy formulation include developing a business mission, performing an external audit, conducting an internal audit, generating alternative strategies, and choosing among alternative strategies. Performing an external audit generally takes the most time. For example, identifying competitors' strengths and weaknesses is an essential aspect of the external audit. Effective use of the Internet can reduce the time required for performing an external audit.

Discuss relationships among objectives, strategies, and policies.

: Long-term objectives and strategies are products of strategy formulation. Short-term (annual) objectives and policies are products of strategy implementation. Firms should translate long-term objectives into annual objectives. Strategies should be supported with clear policies.

List reasons why objectives are essential for organizational success.

: Objectives are essential for organizational success because they state direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for effective planning, organizing, motivating, and controlling activities.

Why are policies especially important in strategy implementation?

: Policies, like annual objectives, are especially important in strategy implementation because they outline an organization's expectations of its employees and managers. Policies allow consistency and coordination within and between organizational departments. Policies can be broad and include rules, regulations, and procedures..

Explain the importance of a vision and a mission statement.

: Reaching agreement on a formal vision and mission statement can greatly facilitate the process of reaching agreement on an organization's strategies, objectives, and policies. Organizational success depends on reasonable agreement on key issues, so a clear, jointly developed and supported, vision and mission statement is essential in strategic management.

. Most students will never become a chief executive officer or even a top manager in a large company. So why is it important for all business majors to study strategic management?

: Strategic management takes place at multiple levels within an organization. Although most students may never become the CEO of a corporation, they may become the "branch manager" or department head or manager. In these roles, they may be asked to participate in development of a strategic plan. Employees at all levels are frequently asked to contribute to development of their firm's strategic plan. Thus, an understanding of the strategic-management process is important, perhaps for the career development of any business major.

When someone or some company is "on a mission" to achieve something, many times the person or company cannot be stopped. List three things in prioritized order that you are on a mission to achieve in life.

Answer: 1) To daily eat healthy. 2) To daily be a good steward of the natural environment. 3) To daily build up rather than break down people.

Governments sometimes use "protectionism" to cope with economic problems, imposing tariffs and subsidies on foreign goods as well as placing restrictions and incentives on their own firms to keep jobs at home. What are the strategic implications of protectionism for international commerce?

An increasing number of countries utilize protective tariffs to allow companies within these countries to prosper. However, many economists say that protectionist trade constraints make it harder for a country's economy to grow, restricts imports, and also invites retaliation from other countries that may do the same to "protect" their firms. Protectionism hurts international commerce

Why are strategic-planning retreats often conducted away from the worksite? How often should firms have a retreat, and who should participate in them?

Answer: The rationale for periodically conducting strategic-management meetings away from the work site is to encourage more creativity and candor from participants. Good communication and feedback are needed throughout the strategic-management process in order to 1) formulate effective strategies and 2) achieve understanding and commitment that are vital to strategy implementation.

Discuss the importance of feedback in the strategic-management model.

As indicated in the strategic-management model, feedback is critically important. Changes can occur at any stage in the process and impact all other strategic-management activities. Feedback allows these changes to be identified and adjustments to be made. Feedback promotes the creation of a climate for two-way communication and, thus, allows esprit de corps to be achieved in an organization.

How important do you think "being adept at adapting" is for business firms? Explain.

Being adept at adapting is vital for survival of business firms (and organisms). The strategic-management process is based on the belief that an organization's survival can depend on how well the firm continually monitors internal and external events and trends and makes timely changes as needed.

What are the limitations of breakeven analysis?

Breakeven analysis does not take into account external factors in the market, such as other companies within the industry that pose a barrier to entry, the number of companies within the industry, as well as the pricing that the other companies use. It is a very focused measure that is good for measuring one thing, but not the overall stability and health of a company.

List four financial and four non financial benefits of a firm engaging in strategic planning.

Businesses engaging in strategic planning experience many financial benefits, including: 1) significant improvement in sales, profitability, and productivity compared to firms without strategic planning activities, 2) superior long-term financial performance relative to their industry, 3) seem to make more informed decisions with good anticipation of both short and long-term consequences, and 4) better prepared for fluctuations in their external and internal environments. In addition to the financial benefits, firms using strategic planning also

How can delegation of authority contribute to effective strategic management?

Delegation of authority is an effective way to involve lower-level and middle-level managers in the strategy-formulation process. Delegation can also be important in strategy implementation to help motivate managers, because those persons being delegated to may actually be closer to customers/suppliers/distributors and thus can make more effective decisions.

What are some limitations of financial ratio analysis?

Financial ratio analysis can help us determine the financial health of a company, but it does not measure other important factors in determining the stability of the company such as customer/employee satisfaction, rival companies in the industry, what the long-term plan of the company is (in terms of capturing market share), etc.

In analyzing big data, there is a shift from focusing largely on aggregates or averages to focusing, in addition, on outliers, because outliers oftentimes reveal (predict) critical innovations, trends, disruptions, and revolutions on the horizon. Explain and discuss this statement.

In analyzing big data, there is a shift from focusing largely on aggregates or averages to focusing, in addition, on outliers, because outliers oftentimes reveal (predict) critical innovations, trends, disruptions, and revolutions on the horizon. In essence, knowing more about "who is not your customer and why" may be as (or more) important than knowing about your customer. Perceptual mapping and multidimensional scaling are being more widely used to explore outlier patterns. Also, the typical statistical approach of relying on p values to establish the significance of a finding is becoming less trusted, since with extremely high sample sizes "almost everything" becomes significant. In contrast, the focus of analysis is shifting more to the size and variance explained, i.e., examining for example R-squared. Stepwise regression and cluster analysis are becoming more widely used to supplement traditional p-value analyses.

Explain why it is best not to have more than 30 percent of the factors in an IFE Matrix be financial ratios.

In developing an IFE Matrix, it is important to not have more than 30 percent of the key factors be financial ratios, because financial ratios are the result of many factors, so it is difficult to know what particular strategies should be considered based on a financial ratio. For example, a firm would have no insight on whether to sell in India or China to take advantage of a high ROI ratio. A much better factor is that the firm's sales in India increased 14% vs. 4% in China.

Explain how developing a mission statement can help resolve divergent views among managers in a firm.

Negotiation, compromise, and eventual agreement on important issues is needed in forming or revising a mission statement. Then, managers can "be on the same page" and focus on more specific strategy formulation activities.

Why is inclusion of about 20 factors recommended in the EFE Matrix rather than about 10 factors or about 40 factors?

No firm can do everything that will benefit them. Prioritization is a key aspect of strategic planning, including in selection of key external factors. About 40 total would dilute the significance of the most important factors. About 10 would leave too much information on the table. The set of external factors will ultimately be matched with internal factors to yield alternative strategies, so 40 would be overwhelming and 10 would likely exclude some vital information. Because threats and opportunities are weighted, going above 20 factors would dilute the importance of key factors.

The drop in gas prices benefited thousands of firms. Does this fact confirm that "external factors are more important than internal factors" in strategic planning? Discuss.

No. But the authors feel that external factors are more important than internal factors generally speaking; however, that does not take anything away from the importance of internal actors. An analogy, however,is that "if the tide is rising, it is hard to counter the tide." But again, it is vitally important for a firm to be exceptional internally in order to capitalize on external opportunities and mitigate the impact of external threats.

Explain why it is appropriate for ratings in an EFE Matrix to be 1, 2, 3, or 4 for any opportunity or threat.

Ratings in an EFE Matrix are based on effectiveness of a firm's strategies in regards to the particular factor. A rating of 4 means the firm's response is superior, a 3 above average, a 2 average, and a rating of 1 means the firm's strategic response to the external factor is poor.Even though a factor may be a huge threat as indicated by a high weight, the firm may be doing a great job handling that threat, thus receiving a rating of 4. In contrast, even though some factor may represent a huge opportunity for the firm, if the firm is doing a poor job capitalizing on that opportunity, then the rating would be 1. So, in contrast to an IFEM to be presented in the next chapter, you should have 1, 2, 3, 4 anywhere up and down the rating column in an EFEM.

Define "reconciliatory" and give an example of how this "characteristic" can be met in a mission statement.

Reconciliatory refers to the need for a mission statement to be supported by all stakeholders, even though the claims of various stakeholders on the firm conflict. For example, shareholders want large profits, which conflicts with employees wanting high wages, yet support is needed from both constituencies. Thus, ideally a statement reconciles differences among key stakeholders, and does so best by including the nine components written from a customer perspective. To leave out any component, especially employees or customers or even profitability (or growth), would undermine the desired reconciliatory characteristic.

Why it is not adequate simply to obtain competitive advantage?

Rival firms will constantly attempt to undermine firms with competitive advantages and try to imitate/duplicate those advantages/products/services - and perhaps offer similar products at much lower prices. Organizations must constantly strive to achieve sustained competitive advantage by continually evaluating their own strategies/products/services as well as rival firms' efforts to undermine and overcome.

Explain how Facebook, Twitter, and Instagram can represent a major threat or opportunity for a company.

Technological forces represent major opportunities and threats that must be considered in formulating strategies. Social networking sites such as Facebook, Twitter, and Instagram provide opportunities for many companies in terms of broadening exposure to a wider market, but overlooking these technological trends or waiting too long to act on them may represent a threat to a company's survival. Bad news can spread very fast on social network sites, representing a major threat to firms. Good news can also spread very fast, representing a major opportunity to firms.

In developing an EFE Matrix, would it be best to have 10 opportunities and 10 threats, or would 17 opportunities (or threats) be fine with 3 of the other to achieve a total of 20 factors as desired?

The EFE Matrix can include any combination of opportunities and threats for analysis.The key is to include the 20 most important factors rather than necessarily to limit the number of opportunities or threats. The number 20 is not magic, but it is most commonly used as appropriate given scarce resources and the need for prioritization in strategic planning.

Which mission statement component most closely reveals the firm's distinctive competence? Give an example.

The answer is "self concept." Offering the lowest prices among all rival firms could be a company's self concept, or providing the widest selection of products, or providing the best customer service, or providing the best warranty.

Drucker says the most important time to seriously reexamine the firm's vision or mission is when the firm is successful. Why is this?

The most important time to ask seriously "What do we want to become?" and "What is our business?" is when a company has been successful. Success obsoletes the very behavior that achieved it, and creates new realities and different problems. A very successful firm is the target of rival firms who try to imitate, duplicate, reverse engineer their products, and take market share from the leading firms.

Explain why communication may be the most important word in management. What do you think is the most important word in marketing? In finance? In accounting?

The most important word in marketing is maneuver. Determining where you have room to maneuver in your marketplace will align all the pieces of your marketing and expansion strategy. (F.) Diversification, to protect your assets. (A.) In regards to business, revenue is likely the most important word in accounting.

Does McDonald's Corp. benefit from a low or high value of the dollar? Explain why.

The value of the dollar changes some every day, but generally in 2014-2015, the value of the dollar was very strong, and thus profits of USA companies with a lot of revenue from abroad, such as McDonald's were lowered on average six to seven percent. Why the lowered profits? Because, for example, 100 euros earned in Europe, when translated back to U.S.dollars for reporting purposes, the 100 euros is worth maybe $75. To combat this "loss," some companies try to raise prices in their European or Mexican stores, but that carries a risk of alienating shoppers, angering retailers, and giving local competitors a price edge. Some advantages of a strong dollar, however, are that companies with substantial outside USA operations, see their overseas expenses, such as salaries paid in euros, become cheaper.Another advantage of a strong dollar is that it gives American companies greater firepower for international acquisitions. Another advantage of a strong dollar is that companies that import benefit from greater buying power, since their dollars now go further overseas.

Define, compare, and contrast the weights versus ratings in an EFE Matrix.

The weight in an EFE Matrix indicates the relative importance of that factor to being successful in the firm's industry. The rating indicates how effectively the firm's current strategies respond to each key external factor. Thus, the weight allows more important factors to receive more consideration, while the rating evaluates how well the firm handles each factor. Weights are industry- based; ratings are company-based.

Discuss how the nature of advertisements has changed in the last few years.

There has been lots of changes in the nature of advertisement in reaching customers and tracking the market penetration. The most important medium has changed to television and Internet. Many corporations are spending billions of dollars to reach customers around the world. Internet is better at reaching target customers explicitly while television targets customers amass. Virtual personal selling has become common. Websites like Google and Facebook make much more money through advertising. Facebook is the best at targeting advertising because they leverage customer loyalty. Lots of advertising doesn't cost anything unless the customer clicks on the site and has a sale. Strategic marketing has become easier, worthy, and economical at a certain place and time.

How do you think an organization can best align company mission with employee mission?

Through involvement, people become committed to an organization. An organization can align company mission with employee mission by including as many individuals as possible in the process of developing mission statements. The process of developing a mission statement should create an "emotional bond" and "sense of shared mission" between the organization and its employees. This is especially true in the USA, but employee involvement and participation are not utilized in countries such as Mexico because there that management practice would be viewed as showing weakness.

As the value of the dollar rises, U.S. firms doing business abroad see their profits fall, so some firms raise prices of their products to offset the decrease in profits. What are some risks of raising prices?

Trends in the dollar's value have significant and unequal effects on companies indifferent industries and in different locations. A low value of the dollar means lower imports and higher exports, which helps U.S. companies' competitiveness in world markets.Manufacturers in many domestic industries actually benefit because of a weak dollar, which forces foreign rivals to raise prices and extinguish discounts. The value of the dollar changes some every day, but generally in 2014-2015 the value of the dollar was very strong and thus profits of USA companies with a lot of revenue from abroad were lowered on average six to seven percent. Why the lowered profits? Because, for example, 100 euros earned in Europe,when translated back to U.S. dollars for reporting purposes, the 100 euros is worth maybe $75.To combat this "loss," some companies try to raise prices in their European or Mexican stores, but that carries a risk of alienating shoppers, angering retailers, and giving local competitors a price edge. Some advantages of a strong dollar, however, are that companies with substantial outside USA operations, see their overseas expenses, such as salaries paid in euros, become cheaper. Another advantage of a strong dollar is that it gives American companies greater firepower for international acquisitions. Another advantage of a strong dollar is that companies that import benefit from greater buying power, since their dollars now go further over seas.

If a firm has zero debt in its capital structure, is that always an organizational strength? Why or why not?

Whenever an organization's return on investment or profit margin exceeds the cost of debt, it may be advisable to use debt to finance growth and expansion. Thus, it is not always an organizational strength to have zero debt in a firm's capital structure. As an individual, if you were sure you could make 15 percent on monies invested, then you would probably obtain a substantial amount of debt at 4 percent to invest at that higher level.

Explain the principal value of a vision and a mission statement.

Whereas the mission statement answers the question, "What is our business?" the vision statement answers the question, "What do we want to become?" Both the vision statement and the mission statement ensure unanimity of purpose within the organization and make important statements about "who the firm is" and "what it wants to become" to outside stakeholders. The two statements provide a firm foundation for effective strategic planning. The statements provide direction and help motivate employees/managers. Table 2-2 lists ten benefits of having a clear mission statement: 1) achieve clarity of purpose among all managers and employees; 2) provide a basis for all other strategic planning activities; 3) provide direction; 4) provide a focal point for all stakeholders of the firm; 5) resolve divergent views among managers; 6) promote a sense of shared expectations among all managers and employees; 7) project a sense of worth and intent to all stakeholders; 8) project an organized, motivated organization worthy of support; 9) achieve higher organizational performance; and 10) achieve synergy among all managers and employees.

In developing an EFE Matrix, would it be advantageous to arrange your opportunities according to the highest weight, and do likewise for your threats? Explain.

Yes. Arranging factors according to importance would help the firm organize,evaluate, and utilize external factors in the strategic planning process. It is not essential that the EFEM be structured in this manner, but it definitely would be helpful for an analyst