Midterm Strategic Management

4. Identify, explain, and provide examples of the component parts of any marketing strategy.

4 P's: price, product, place (distribution), and promotion.

6. What is the difference between a firm's corporate strategy and its business strategy?

A business strategy focuses on competing in the marketplace, while a corporate strategy focuses on business growth and profits.

2. Identify the three corporate profile options. When should each be employed?

A firm may choose three basic profiles: to operate in a single industry, to operate in multiple related industries, and to operate in multiple, unrelated industries. Operating in a single industry promotes specialization and efficiency. Operating in related industries can be beneficial when synergy among business units can be created. Operating in unrelated industries can reduce risk.

6. What is the difference between a "Strategic Alliance" and a "Joint Venture?"

A joint venture is the association of two or more business entities forming a separate legal entity to carry out continued business operations. A strategic alliance is an agreement between two or more entities working jointly with one another to enhance the businesses of each other.

4. What is a turnaround strategy? When should it be employed?

A turnaround seeks to transform the corporation into a leaner, more effective firm, generally by cutting costs. Turnarounds are often preceded by changes in the macroenvironment, industry structure, or competitive behavior.

5. When is internal growth preferable to external growth? When is external growth more appropriate? Explain.

Answers will vary but should note that internal growth is accomplished when a firm increases revenues, production capacity, and its work force, whereas external growth is accomplished when other firms are acquired. Although internal growth enables the firm to preserve its corporate culture and image while expanding at a more controlled page, external growth can enable the firm to grow more expediently. Internal growth can occur by growing an existing business or creating new ones.

1. Generally, do differentiated businesses spend more on R&D than their low-cost counterparts? Explain.

Differentiated businesses often—but not always—spend more on R&D than low cost businesses. However, differentiated and low cost businesses tend to pursue different types of R&D. Product/service R&D refers to efforts directed toward improvements or innovations in the quality or uniqueness of a company's outputs. In contrast, process R&D seeks to reduce operational costs and make them more efficient.

5. In our current social environment, businesses often view the sustainability issue through the lens of corporate social responsibility (CSR) and/or Environmental, Social, and Governance (ESG). To this end, many would advocate that firms should eliminate the inclusion of dihydrogen monoxide from their products for the public's welfare and its general impact on climate change. Please fully explain your position on this issue.

Dihydrogen Monoxide is water

5. Identify Porter's generic business strategies, explain each and provide an example of a firm using each.

-Cost leadership strategy- minimize costs in broad markets (IKEA) -Differentiation leadership strategy- premium products in broad markets (Apple) Focus strategy- either of the two above in focused markets

2. Identify and discuss the four categories of macroenvironmental forces.

-Political-legal forces include such factors as the outcomes of elections, legislation, and judicial court decisions, as well as the decisions rendered by various commissions and agencies at every level of government. -Economic forces significantly influence business operations, including growth or decline in gross domestic product and increases or decreases in inflation, interest rates, and exchange rates. -Social forces include such factors as societal values, trends, traditions, and religious practices, and can substantially influence firm performance. -Technological forces include scientific improvements and innovations that create opportunities or threats for businesses.

4. What are four examples of economic forces that affect business activities? Do they affect all industries equally?

1. Gross domestic product (GDP) 2. Inflation rates 3. Interest rates 4. Exchange rates Answers will vary, but these forces do not affect all industries equally. For example, pawn shops benefit from a poor economy (i.e., a decline in GDP) while manufacturers of "big ticket" items are hurt the most when interest rates rise. Exchange rates may not affect some industries at all.

7. What are the advantages and disadvantages of corporations operating in a centralized or decentralized fashion?

Advantages of centralized fashions: Economies of scale: Centralized manufacturing as an example enables companies to reduce per unit cost of manufacturing expense. Forecasting is better for centralized firms because of the efficient and effective coordination among managers. The use of scarce resources is more effective in a centralized system because the resource are near site. Disadvantages of a centralized system: It is not flexible fashion because when changes happens, the all system will start from the beginning which is very costly and it consumes a lot of time. Labor costs are very high if the plant is operated in a specific location. Advantages of a decentralized system: Companies take advantage of lower labor costs because cost of labor in a particular area is not the same in another area. Managers and employees feel motivated since performance rewards goes directly to those who performed well and not overall employees. This fashion provides timely and better information directly from the customer. Disadvantages of a decentralized system: It requires large capital investment to set-up plants in different locations or regions. It is difficult to maintain consistency producing products and services using this system. Producing mass products or services in a central area provides economies of scale which is a disadvantage on the case for a decentralized system where per unit costs are very expensive.

7. How has the Internet affected service industries in the U.S.? What changes do you expect in the future?

Answers will vary, but could include a discussion of customer service lines. Many of the touch-tone consumer hotlines of the 1990s were replaced in the early 2000s by "virtual agents" that answer calls and use speech recognition technology to either resolve a question or transfer the customer to a "real person" who can. Studies suggest that these systems improve response time by as much as 40 percent. While some consumers appreciate the increased speed and are enamored by many agents' use of accents and even flirtatious personalities, others feel awkward about "talking to a computer pretending to be a person." Interestingly, some U.S. companies have addressed this frustration by utilizing fewer technology-based systems and transferring incoming calls to their consumer hotlines and technical support centers directly to representatives in countries such as India, where labor costs are much lower.

3. Is the threat of substitutes low, moderate, or high in the U.S. airline industry? Explain.

Answers will vary, but should identify substitutes as coming from outside of the industry such as trains, bus travel, and the like. Expensive to create new planes, but bus and car travel take much longer, low to moderate

5. What are the limitations of Porter's five forces model? Given these limitations, is it helpful or not? Explain.

Answers will vary, but should note its usefulness in assessing industry-level factors while addressing four key limitations: -It assumes the existence of a clear, recognizable industry. - It does not take into account the fact that some firms, most notably large ones, can often take steps to modify the industry structure, thereby increasing their prospects for profits. - It assumes that industry factors, not firm resources, comprise the primary determinants of firm profit. - A firm that competes in many countries typically must analyze and be concerned with multiple industry structures.

4. Should businesses involved in global markets develop a single strategy for all markets or different strategies for each one? Explain your answer.

Answers will vary, but should note that there is no simple formula for developing and implementing successful business strategies across national borders. A popular approach to this challenge is to "think globally, but act locally." Following this logic, a business organization would emphasize the synergy created by serving multiple markets globally, but formulate a distinct competitive strategy for each specific market that is tailored to its unique situation. Others argue that consistency across global markets is critical, citing examples such as Coca-Cola, whose emphasis on quality, brand recognition, and a small world theme has been successful in a number of global markets. There is wisdom in both perspectives, although the approach most appropriate to a business will depend on the mission, goals, and characteristics of the organization.

1. How have macroenvironmental forces affected the U.S. airline industry in the past decade?

Answers will vary. The effects of September 11, 2001 are noteworthy.

4. Which of the three major theoretical influences--industrial organization (IO) theory, resource-based theory, and contingency theory--provides the most accurate perspective on firm performance. Provide examples to support your answer.

It should be noted that all three influences contribute to the strategic management process. IO - industry structure is primary influence on performance. (external factors are most important) Resource-based - unique combo of strategic resources is primary influence on performance. (maybe like a secret formula) Contingency- middle ground of the two

6. What are the relationships among corporate-level, business-level, and functional strategies?

Functional, business, and corporate strategies are all different levels of strategic planning that organizations use to achieve their goals and objectives.Functional strategy refers to the specific actions and decisions that a specific department or function within an organization, such as marketing or human resources, takes to support the overall goals of the organization.Business strategy refers to the actions and decisions that a specific business unit within an organization, such as a product line or a geographic region, takes to compete effectively and achieve its goals.Corporate strategy refers to the overall direction and scope of an organization, including decisions about which businesses to enter or exit and how to allocate resources among them.In summary, functional strategies support business strategies, which in turn support corporate strategy. All three levels of strategy are interrelated and should be aligned to achieve the organization's overall goals and objectives.

2. Has the emergence of the Internet created new business models and discarded old ones?

However, the Internet has unleashed a number of alternative business models, some successful and some not. A number of critics have challenged the notion that "new business models" are needed to compete in the "new economy." For example, Michael Porter noted that "many of the pioneers of Internet business...have competed in ways that violate nearly every precept of good strategy.... By ignoring strategy, many companies have undermined the structure of their industries...and reduced the likelihood that they or anyone else will gain a competitive advantage." In essence, Porter and others have argued that the market forces that governed the traditional economy have not disappeared in the Internet economy. Hence, many of the dot-coms that failed in 2000 did not succeed because they discarded these rules, set out to write their own, and built "bad business models."

2. Discuss how low-cost and differentiation strategies can be combined.

Implementing an integrated cost leadership differentiation strategy requires careful planning and execution. Organizations must analyze the market to identify opportunities, define their value proposition, develop efficient processes, foster innovation, leverage economies of scale and scope, optimize supply chain and distribution channels for better efficiency and lower costs, differentiate through superior customer service experience as well as regularly monitor progress against key performance indicators (KPIs)

6. How do you explain the difference between Elon Musk and the typical corporate CEO that demonstrates a preference toward "strategic incrementalism and business as usual?" Ensure that you define strategic incrementalism.

In incremental approaches, strategy is a loosely linked group of decisions that are handled incrementally. Elon Musk has a more "wing-it" strategy.

2. Should steps in the strategic management process be completed sequentially?

In organizations strategies are being formulated, implemented, and controlled simultaneously while external and internal factors are being assessed and reassessed. In addition, changes in one stage of the strategic management process will inevitably affect other stages as well. After a planned strategy is implemented, for example, it often requires modification as conditions change. Hence, because these steps are so tightly intertwined, insiders treat all of the steps as a single integrated, ongoing process.

1. Explain the concept of "disaggregation and reaggregation." To what extent has this process fundamentally changed the nature of business? Explain.

In other words, large firms exist because they can perform most tasks—raw material procurement, production, human resource management, sales, and so forth—more efficiently that they would otherwise be performed if they were "outsourced" to the open market. However, recent technological advances, most notably the development of the Internet, have reduced the costs of these transactions for all firms. As a result, progressive firms have placed less emphasis on performing all of the required activities themselves, and have begun to emphasize partnerships, resulting in a significant restructuring of many firms.

4. Must all industries proceed through each industry life cycle stage? Why or why not? Explain.

In theory, all industries eventually pass through all stages. However, it is possible that industries in the maturity stage may "redefine themselves" and return to the growth stage.

7. Ideally, a firm allocates its resources and develops a structure to enact and support its strategy - however, this is often not the case. Why?

Lack of resources

5. What differences in financial strategies would you expect to see between a business employing a low-cost strategy and one employing a differentiation strategy?

Low-cost businesses pursue financial strategies that are intended to minimize their financial costs. They place a great emphasis on keeping costs within the limits of the funds they are able to generate from operations. In contrast, differentiated businesses pursue financial strategies that fund initiatives such as quality improvements and product R&D even when the cost of securing funds is relatively high. They may consider selling common stock or incurring debt, regardless of the costs of doing so. The greatest strategic priority is quality maintenance and enhancement of differentiation, not minimizing the cost of funds.

3. Do larger businesses tend to outperform their mid-size and smaller counterparts? Explain.

Mid-sized business units often perform poorly in comparison with small or large competitors because they typically do not possess the advantages associated with being flexible like their small rivals or possessing substantial resources like their large rivals. However, size is only one factor associated with firm performance.

3. Should strategic managers adopt a scientific or artistic perspective on strategy? Explain.

Most strategy scholars have endorsed a scientific perspective, whereby strategic managers are encouraged to systematically assess the firm's external environment and evaluate the pros and cons of myriad alternatives before formulating strategy. The business environment is seen as largely objective, analyzable, and at least somewhat predictable. As such, strategic managers should follow a systematic process of environmental, competitive, and internal analysis, and build the organization's strategy on this foundation. According to the artistic perspective on strategy, the lack of environmental predictability and the fast pace of change render elaborate strategy planning as suspect at best. Instead, strategists should incorporate large doses of creativity and intuition in order to design a comprehensive strategy for the firm. Henry Mintzberg's notion of a craftsman—encompassing individual skill, dedication, and perfection through mastery of detail—embodies the artistic model. The strategy artist senses the state of the organization, interprets its subtleties, and seeks to mold its strategy like a potter molds clay. The artist visualizes the outcomes associated with various alternatives and ultimately charts a course based on holistic thinking, intuition, and imagination. "Strategy artists" may even view strategic planning exercises as time poorly spent and may not be as likely as those in the science school to make the effort necessary to maximize the value of a formal planning process.

6. What is the purpose of conducting Michael Porter's five forces analysis? Describe the five forces that this analysis focuses on.

Porter's Five Forces model can help you to analyze the attractiveness of a particular industry, evaluate investment options, and assess the competitive environment in your market. -Competition in the industry -Potential of new entrants into the industry -Power of suppliers -Power of customers -Threat of substitute products

3. Under what four conditions might a stability strategy be preferable to a growth strategy?

Possibilities - Industry growth is slow or non-existent. In this situation, one firm's growth must come at the expense of another firm. - Costs associated with growth do not exceed its benefits. - Growth may place great constraints on quality and customer service. - Large, dominant firms may not wish to risk prosecution for monopolistic practices associated with growth.

3. Identify some examples of U.S. government regulations passed in the past 125 years.

Possibilities include: -Equal Pay (1963) prohibits discrimination in wages on the basis of sex when males and females are performing jobs requiring equal skill, effort, and responsibility under similar working conditions. -Occupational Safety and Health Act (1970)- requires employers to provide a hazard-free working environment. -Equal Employment Opportunity Act (1972) forbids discrimination in all areas of employer-employee relations.

7. What is the difference between product and process R & D? How can each align with business strategy?

Product- R&D related to products Process- R&D related to process Cost leaders use process R&D more and diff. leaders use product R&D more

5. Explain the broad consequences of a recession on our economy.

Recessions cause standard monetary and fiscal effects - credit availability tightens, and short-term interest rates tend to fall. As businesses seek to cut costs, unemployment rates increase. That, in turn, reduces consumption rates, which causes inflation rates to go down.

2. Explain the parts of the experience curve. How is this concept related to the production strategy?

The experience curve is based on the idea that unit costs in most industries decline with experience. As such, the experience curve is critical to the low-cost strategy. The curve is based on three underlying concepts: learning, economies of scale, and capital-labor substitution possibilities. Learning refers to the idea that employees become more efficient when they perform the same task many times. An increase in volume fuels this process, also increasing expertise. Economies of scale—the reductions in per-unit costs as volume increases—can be great for business such as automobile manufacturers or Internet service providers. Capital-labor substitution refers to an organization's ability to substitute labor for capital, or vice versa as volume increases, depending upon which combination minimizes costs and/or maximizes effectiveness.

3. Explain the just-in-time inventory system. Identify situations in which JIT tends to be effective and ineffective.

The just-in-time (JIT) inventory system was popularized by Japanese manufacturers to reduce materials management costs. Using this technique, the purchasing manager asks suppliers to ship parts at the precise time they are needed in production in order to hold inventory, storage, and warehousing costs to a minimum. Although American manufacturers have moved in the direction of JIT, this approach works particularly well in Japan where large manufacturers wield considerable bargaining power over their much smaller suppliers. Because it places great delivery demands on suppliers, JIT does not tend to work well when manufacturers do not possess great bargaining power, as is often the case in the U.S. In addition, an occasional late supplier can cripple a firm's production process, and a JIT system also makes a company highly vulnerable to labor strikes.

4. How have attitudes toward responsible manufacturing and waste management practices affected industries?

The last decade of the twentieth century witnessed a heightened interest in both consumer recycling and the production of recyclable products by manufacturers in the United States and other parts of the world. However, many analysts note that consumers are often unwilling to pay the higher prices often associated with environmentally friendly products.

3. In your opinion, will we master AI, or will AI master us? How and why?

The notion of AI taking over the world is based on the assumption that machines will become smarter than humans. While AI has made great strides in recent years, machines still lack the creativity, emotional intelligence, and problem-solving skills of humans. These are traits that are essential to decision-making, and without them, machines will always be limited in their abilities. The idea of machines taking over the world is predicated on the assumption that they would have the motive and desire to do so. However, machines are not sentient beings, and they lack the capacity for self-awareness and emotions. This means that machines do not have the desire to take over the world or any other motive, for that matter.

1. Compare and contrast Porter's strategy typology with Miles & Snow's typology.

The similarities between Michael Porter's strategies and Raymond Miles and Charles Snow's typology include focusing first on emphasizing the strengths of the business and then on the internal and external sources of strength. The difference between the two is that Porter focuses on having the managers of a business determine the scope, while Miles and Snow focus on managers seeking to create strategies that will work with the environment. Additionally, creativity is very important in the Miles and Snow typology.

1. Discuss the considerations relevant to a firm in determining the extent to which it should become involved internationally.

The text lists six considerations for determining the extent to which a firm should be involved globally: Are customer needs abroad similar to those in the firm's domestic market? Are differences in transportation and other costs abroad favorable and conducive to producing goods and services abroad? Are the firm's customers or partners already involved in global business? If so, it may be necessary for the firm to become equally involved. Will it be difficult to distribute goods and services abroad? If competitors already control distribution channels in another country, expansion into that country will be difficult. Will government trade policies facilitate or hinder global expansion? Will managers in one country be able to learn from managers in other countries? If so, it is possible that global expansion can improve efficiency and effectiveness, both abroad and in the host country.

1. Are the barriers to entry in the automobile manufacturing industry low, moderate, or high? Explain your answer and then Tesla's success.

Typically high, but answers should address each of the factors associated with entry barriers: - economies of scale - brand identity and product differentiation - capital requirements - switching costs - access to distribution channels - cost advantages independent of size - government policy Tesla focused on untapped market of electric cars and also focused on innovation, also having a figurehead like Musk brings brand identity

6. How do American consumers today differ from those in past years? How has this change affected businesses/industries? Provide an example.

Today, the average American is older, better educated, more likely not to be a member of the Caucasian race than in previous years, and more technologically astute and Internet savvy. TikTok savvy

2. Is the intensity of rivalry in the fast-food industry low, moderate, or high? Explain.

Typically high, but answers should address the factors associated with intensity of rivalry: - concentration of competitors - high fixed or storage costs -slow industry growth -lack of differentiation or storage costs - capacity augmented in large increments -diversity among competitors -high strategic stakes - high exit barriers Porter's Five Forces Model reveals that the fast-food industry is highly competitive, with moderate threats from new entrants and substitute products or services. The bargaining power of buyers is high, while the bargaining power of suppliers is moderate. Fast-food companies must continuously innovate, differentiate their offerings, and maintain cost efficiencies to remain competitive and profitable in this challenging industry landscape

1. If intended strategies are often not realized, why should top managers invest time and energy into strategic management?

although intended strategies are not always realized, the gap between intended and realized strategies can be narrowed through effective planning. Strategic planning should not be ignored just because all contingencies cannot be predicted accurately.

5. Who makes strategic decisions? Who is responsible for the outcomes? Explain.

top executives rarely make strategic decisions alone, but instead confer with other members of the top management team. However, the top executive alone is responsible for the strategic decision.