SBI Exam
What are the 8 steps to the SBI Process
1. Analyze the external environment of the firm 2. Analyze the the capabilities of the firm 3. Analyze the strategy of the firm 4. Identify strategic gaps 5. Develop new strategy 6. Identify required capabilities changes 7. Prepare complementary functional plans and develop an implementation plan 8. Asses financial viability
What are the two components of Part 3 in the SBI process (part 7)?
1. Develop plans for the top 3 functional areas that will spearhead the capability change process 2. Implement the change plans for the top 3 functional areas
What are the three elements of component two in part 7 of SBI?
1. Develop the change agenda 2. Analyze starting conditions 3. Create an action plan
Four questions/criteria to ask when choosing one of the two proposed strategies.
1. Does the chosen strategy increase in the value creating abilities, and competitive advantage of the firm? 2. Does the increase in value creation justify the investment that needs to be made? 3. What is the level of risk associated with the strategic proposal? 4. How "doable" is the strategic proposal (in terms of time-frame, magnitude, and expertise)?
What two questions must you ask yourself after identifying the top 3 forces in the firms environment?
1. How will these forces drive future changes in the industry? 2. How will these forces alter existing key survival factors in the industry?
Three requirements of the 5 year pro forma financial statement
1. Income statement 2. Balance sheet 3. Cash flow statement
What are the two components of the final step in the SBI process (confirm financial viability)?
1. Prepare 5 year pro forma financial statement 2. Confirm financial viability
What is documented attractive strategic adjustments?
Changes in strategy components (goals, product/market, focus and value proposition) that the firm could consider
The Criterion of Consistency framework forms the basis for a comprehensive process of strategic analysis. It is appropriate to use the SBI process.....
1. when current or anticipated performance is poor 2. on a periodic basis, such as once a year or, as determined by senior management 3. when the business confronts a sudden perceived opportunity or threat
In Part-2B of the SBI process we should develop __ strategic proposals for the client
2
If the firm I am analyzing has strong organizational health but poor operating performance it is
A complacent organization
If an industry analysis determines that the environment if favorable:
A firm desiring profitability must understand what factors are at works in the industry and create a strategy that addresses these.
Which of the following is the best description of a vision statement?
A statement of what the firm will be in the future
What are the two things that have to be changed/reshaped to close the top 3 strategic gaps?
Change strategy and change complementary business capabilities
Which of the following is a necessary condition for the new strategy to provide a risk-adjusted ROI that is better than their current ROI?
Adjusted for cost, the new strategy must result in an improved competitive advantage for the firm
Management processes that can/should be altered to construct new organizational capabilities include:
All of the above (decision making processes/operating processes/performance assessment processes)
When choosing between the two strategic proposals developed in Part-2b of the SBI process, an important selection criterion is:
All of the above (increase in the value creating abilities of the firm that is attributable to the new strategic proposal/What is the level of risk associated with the strategic proposal?)
In the video, What is Strategy?, which of the following is not one of the four components of Strategy?
All of these are part of strategy (where do we compete/what unique value do we bring/what resources and capabilities do we utilize/How do we sustain our value)
When assessing overall industry attractiveness, we should consider what factors?
All of these: Industry profitability, market growth potential, and level of investment
When analyzing operating performance, I need to look at
All of these: financial position, profitability, and market share
Key Survival Factors represent...
Areas where any firm in that industry sector must demonstrate competencies in order to survive
Part-2A of the SBI process is focused on:
Both a and b above (Evaluating potential inconsistencies or gaps between a firm's current strategy and the drivers of change and key survival factors in the firm's environment/ Evaluating potential inconsistencies or gaps between a firm's current strategy and its capabilities)
Financial ratio analysis can be used to
Both a and b above (compare the firm to other firms in the industry/compare current performance to past performance of the firm)
The output of an industry analysis must include Which of the following:
Both a and b above (identification of key survival factors in the industry/Identification of drivers of change in the industry)
A company's ability to create new products and services would best support which strategic orientation?
Broad Product Focus, Broad Market Focus, Unique Products
If a firm is able to customize orders to all individual preferences, the firm would be one that displays a ____________.
Broad market focus
A _____________ is a detailed plan that relates to how a business proposes to compete and win in the marketplace
Business Strategy
When conducting a five forces analysis of the restaurant industry, you identify that consumers 1) have very low switching costs, 2) are price-sensitive and 3) have alternatives to fulfill their need to eat other than getting food from a restaurant. This leads you to conclude that
Buyer power is high
What are some negative attributes of management preferences?
Can result in opportunistic behavior of managers and potential inflexibility (frozen preferences)
What do we mean by the term "capabilities" in the context of the firm?
Capabilities represent firm-specific abilities that enable the firm to achieve its desired strategic orientation and goals.
A firm's ability to use its resources to create goods and services for the customer is called a __.
Capability
What is documented supporting capability changes?
Changes in capabilities that the firm could consider to address the strategic adjustments proposed by you.
After sorting through the data and proposing two proposals, what do you do next?
Choose ONE of the two strategies proposed.
How does one create organizational capabilities?
Combo of: management preferences, firm resources, and organizing processes
In doing your competitive analysis on an industry you note that the industry is fragmented (there are 20 firms of a similar size to your focal firm), the industry has experienced zero to negative growth in the past three years and the industry's products are mostly in the mature phase of the product life cycle. You conclude that
Competitive rivalry is high
Auto Dealer Inc. differentiates the firm by offering "no-haggle" pricing. This is an example of
Customer value created through execution
High barriers to entry and a high threat of retaliation by firms in the industry __________ the threat of new entrants (as viewed by firms in the industry) and make the industry ______ profitable.
Decrease, more
What are the components of the conclusion and recommendations in a 2x2 matrix?
Desired state, complacent organization, troubled organization, crisis Determined by positive or negative organizational heath and operating performance
Assuming that substitutes exist for the types of goods served by the fast food industry, how would one assess the competitive force exerted by these substitutes on the industry?
Determine whether attractively prices substitutes are available
How would you assess the impact of the top 3 gaps on the future performance of the firm (assuming no change in the strategy of the firm in the future?)
Develop pro forma financial statements using the common size technique and then adjusting for the top 3 strategic gaps
The five forces analytic tool suggests that the attractiveness of the competitive environment is a function of all the following factors except...
Economic environment
If one of the drivers of change in the fast food industry is the perceived (but not demonstrated) customer preference for healthy foods, then a good value proposition for a firm's industry would be one that,
Emphasized intangible value-adds like design (form and function) and brand that highlight the healthy components of the menu.
A firm in the fast food industry that seeks to provide quality customer services and a unique service experience is most likely seeking a value proposition that providers fundamental customers through its _________________
Execution
The video on Unique Value Proposition argues that it is best to imitate competitors. TRUE OR FALSE
FALSE
Which of the following is a category of viable value propositions that provides customer benefits for a firm in the fast food industry?
Features
In the SBI process, the best tool to use to analyze the competitive environment is
Five Forces
What are the three ways to build a value proposition?
Generate value through price, features, and execution
"Where do we want to be in a year?" is the kind of question we ask when we are examining which of the following strategy components?
Goals
What are the components of the strategy of the firm?
Goals and strategic orientation (product and market focus, value proposition)
Which is true of the Criterion of Consistency?
High consistency among the elements of the framework will lead to successful firm performance
If one has data on an industry for the year 2005, what else would I need to conduct an industry analysis in 2010?
I would need info from 2005 and an estimate as to how it may change in subsequent years.
The output of an industry analysis must include which of the following?
Identification of KSFs and Drivers of change in the industry
Low barriers to entry and a low threat of retaliation by firms in the industry _____________ the threat of new entrants and make the industry _____________ profitable
Increase, less
What are the industry's economic features?.... What are the change... Who is likely to make what competitive move next?... What key factors will create competitive success or failure?... These are all questions you should ask when undertaking, _________
Industry analysis
Name the five comparisons we have to make to identify the top 3 environment-strategy (E-S) gaps.
Industry attractiveness <--> goals Key survival factors <--> product/market focus Key drivers of change <--> value proposition
Name the 5 forces that are scrutinized in the 5 forces analysis process.
Industry competitors (competitive rivalry), potential new entrants (threats of new entrants), suppliers (power of suppliers), buyers (power of buyers), and substitutes (threat of subs).
An employee:
Is an organizational resource
What MUST BE included in your 5 year financial statement?
It must be based on the key factual and quantitative information culled from the proposal for SBI
The elements of the Criterion of Consistency include
Organizational capabilities, strategy and external environment
In your PEST analysis of the fast-casual dining industry you note a Social trend toward urbanization of the population. You realize that this is a strong force for the fast-casual dining industry because these restaurants need to locate stores in close proximity to customers. Ultimately, you classify this force as a
KSF
The output of the Environmental Analysis should include what three things?
KSFs, Drivers of Change, Assessment of Industry Attractiveness
What are you trying to achieve when analyzing the environment/output of environmental analysis?
Key drivers of change, key survival factors, and access overall attractiveness of the environment for future investment
Organizational Capabilities arise from
Management preferences, firm resources, and organizing processes
Which of the following represent a lever that that can be used to create and/or enable changes in organizational capabilities.
Management processes
In a public statement the CEO of Shoemaker Inc. declares that the company will not be making any of those "new-fangled" wedge sandals even though wedge sandals sales make up a large percentage of competitor firm's total sandal sales. Shoemaker Inc. is losing market share and profits are suffering. This is an example of
Management's Frozen Preferences
Describe the management process that is used to create, employ or change business capabilities.
Management's decision making processes, operating processes, performance assessment, and reward system process
What two questions should you ask when leading up to the strategy?
Mission - Why are we in business? Vision - What do we want the business to look like in the future?
In assessing Shoemakers, Inc's strategy, Joe notes that the firm produces 10 products. There are over 1,000 total products offered by all firms in the industry. Shoemaker, Inc. has a
Narrow-Product Focus
In a speech at the January 2007 shareholder's meeting, John Valentine, the Chairman and CEO of Valentine's Gifts chain of specialty stores, said, "Our company's primary goal to continue to grow sales at a rate of 5%." Does John's statement represent an approach specified goal for the company?
No
Is the 5-forces analysis the best tool for an assessment of Fresh-Air's capabilities?
No
In the most recent reporting period, a firm was found to have a ROA of 12%, given this we can conclude:
Nothing else without additional info
A firm's Debt/Equity ratio is a measure of its
Operating Performance
What are the components of organizational performance?
Operating performance - financial (financial position and profitability) and market performance Organizational Health
Performance of a firm should be measured using the followign
Operating performance and organizational health
Chipotle's ability to produce above average throughput in its restaurants is a(n)
Operational Capability
What are the three types of capabilities of a firm?
Operational, customer, and innovation capabilities
Name three types of organizing processes that can be used to create, employ or change business capabilities.
Organization structure, management processes, and leadership behavior
Which of the following items does not reflect a firm's strategy?
Organizational Structure
A firm earned a 12% ROA this past year, after averaging a 4% ROA over the past 3 years. The industry average stayed steady at 7%. Given this,
Owners are likely to be happy with the profit
In the SBI process, the best tool to use to conduct a broad environment analysis is
PEST
When analyzing the environment, what two tools are necessary?
PEST and Porter's 5 Forces
What three aspects of the firm that need to be characterized?
Performance, strategy, and organizational capabilities
What are the types of firm resources?
Physical, human, relationship and reputational, and financial resources
What does P.E.S.T. stand for? And what environment does it help you analyze?
Political, economic, social, and technological Helps the broad environment
"We manufacture high-end ladies shoes that are sold in boutique retail stores in the northeastern region of the United States," is an example of which component of the strategy of the firm?
Product Proposition
Name the six comparisons we have to make to identify the top 3 capability strategy (C-S) gaps.
Product/Market focus to operational, customer, and innovation capabilities Value proposition to operational, customer, and innovation capabilities
Having a clear stated mission is of value only if it:
Provides a framework to ensure that everyday actions stay on track and are focused on important issues
Which of the following capabilities would be most difficult for competitors to copy?
R & D processes that allow for ongoing innovation
A general manager must:
Recognize that performance, direction, strategy and change are interconnected and must be managed simultaneously
_______________ are transformed into __________________ when a firm is able to organize its operations to take advantage of them to compete and win in the marketplace
Resources, Capabilities
The rule that I would use to select the top business capabilities of an organization is
Select the ones that maximize long-term performance (i.e., shareholder wealth) of the firm
What are some positive attributes of management preferences?
Serve to focus and motivate the development of business capabilities
Which of the following is an appropriately stated goal?
Shoemaker inc. will introduce 5 new products in its women's open toed sandal line by December 21, 2016
We have 6 gaps identified now. What do we do next?
Short-list the top 3 gaps faced by the firm ( take all six and choose top 3)
What do you do next after the document attractive strategic adjustments and capability changes?
Sort through the data and extract two viable strategic proposals and corresponding capabilities
The organizational chart displays how the people are grouped, and how responsibilities are assigned within the organization. This is known as the organizational __
Structure
The "5 Ways" method is a tool that allows you to start with the _________________ you are able to see with an industry or company and systematically identify underlying ___________________.
Symptoms, Problems
"Product / market focus" is (1) a component of the strategy of the firm and (2) it addresses the products/services offered and the market segment targeted by the firm. TRUE OR FALSE
TRUE
A strategy is a carefully articulated description of how an organization intends to compete and win in the marketplace. TRUE OR FALSE
TRUE
Goals should be set or specified in the same areas in which performance will be measured in the future. TRUE OR FALSE
TRUE
Having well-articulated mission and vision statements is a necessary but not sufficient condition to complete the strategic business integration process. TRUE OR FALSE
TRUE
Managerial preferences impact the configuration of organizational capabilities. TRUE OR FALSE.
TRUE
PEST is an analysis of political, economic, social-culture, and technological forces that impact the firm. TRUE OR FALSE
TRUE
Potential gaps in the Criterion of Consistency framework must be constantly examined, sine firms operate in dynamic environments. TRUE OR FALSE
TRUE
Supporting your conclusions with logical arguments, facts, and analysis is important. TRUE OR FALSE
TRUE
When analyzing the fast food industry, we should be more concerned about identifying the supplies (e.g. financial capital markets, human capital markets and the markets for goods and services) and we should be less concerned about the power of these suppliers. TRUE OR FALSE?
TRUE
When analyzing the fast food industry, we should be more concerned about the buyers (e.g. the consumer) and should be less concerned about the supplier. TRUE OR FALSE?
TRUE
Managers can optimize firm performance and shareholder wealth by optimizing
The Criterion of Consistency
Strategic orientation refers to
The firms product/market focus and goals
What is the Criterion of Consistency?
The first three steps of the SBI process; analyzing the environment, capabilities, and the strategy of the firm
In working through Part-21 and 2B of the SBI process it is best to first focus on:
The inconsistencies between the firm's current strategy and changes in the environment, before focusing on potential gaps between the firm's strategy and its capabilities.
Assume that there are many strategic options available to a firm that is flush with funds. What would be an appropriate benchmark that this firm should use when it invests some of its "mountain of cash" in a new strategy?
The new strategy must provide a long-term risk-adjusted ROI that is better than their current risk-adjusted ROI
The term "management preferences" refers to:
The preference of managers that impact decision making in a firm
The following is an example of a frozen preference:
The unwillingness or inability of a manager to alter his/her perspective on an issue
The ability of firms to generate premium pricing decreases when:
There are few, if any, real differences between the offerings of different competitors
The ability of firms to charge premium pricing is more severely limited when:
There are few, if any, real differences between the offerings of rival companies
The Criterion of Consistency framework suggests that:
There must be a fit or alignment between a firm's environment, strategy, and capabilities
One uses the PEST and 5 forces analyses to do what?
To rank/order the six most important forces in the firm and then select the 3 most significant forces from among these 6 forces.
Identification of KSFs in an industry allows the firm to...
Understand the fundamental issues that all firms in the industry must address and what strategic approaches are possible
How does one assess the performance of the firm?
Use the components of organizational performance
Fora business capability to create a competitive advantage it should be
Valuable, rare, inimitable, and organizable
"Why is someone going to buy our product?" is the kind of question we ask when we are examining which of the following strategy components?
Value Proposition
What four characteristics must a capability demonstrate to provide a competitive advantage for the firm?
Value, rare, inimitable, and organizable
Chipotle strives to change the way people think about and eat fast food. This is the firm's
Vision
Ideally, a firm would like to compete in an industry that has:
Weak suppliers and low rivalry
Ideally, a firm would like to compete in an industry that has,
Weak suppliers and strong customers
What is the question you must ask when confirming the financial viability of the SBI proposed?
Why should the company invest their money in your proposal rather than investing it somewhere else?
The outputs of an environmental analysis should provide detailed descriptions of the ____ and the ______ present in the environment
drivers of change ksf
