Questions and Answers of Exploring Strategy

How the company is being impacted by the state of the macro-environment.
Draw circles around each strategic group, making the circles proportional to the size of the group’s share of total industry sales revenues 1. On what basis do buyers of the industry’s product
Assign firms occupying about the same map location to the same strategic group.
Plot the firms on a two-variable map using pairs of these variables.
Identify the competitive characteristics that delineate strategic approaches used in the industry. Typical variables used in creating strategic group maps are price/quality range (high, medium, low),
2. Initiating actions calculated to shift the competitive forces in the company’s favor by altering the underlying factors driving the five forces.
1. Pursuing avenues that shield the firm from as many of the different competitive pressures as possible.
Buyers have discretion to delay their purchases or perhaps even not make a purchase at all. Consumers often have the option to delay purchases of durable goods, such as major appliances, or
Buyers are well informed about sellers’ products, prices, and costs. The more information buyers have, the better bargaining position they are in. The mushrooming availability of product
Buyers pose a credible threat of integrating backward into the business of sellers.Companies like Anheuser-Busch, Coors, and Heinz have partially integrated backward into metal-can manufacturing to
Buyers are large and few in number relative to the number of sellers. The larger the buyers, the more important their business is to the seller and the more sellers will be willing to grant
Buyers’ costs of switching to competing brands or substitutes are relatively low.Switching costs put a cap on how much industry producers can raise prices or reduce quality before they will lose
Industry goods are standardized or differentiation is weak. In such circumstances, buyers make their selections on the basis of price, which increases price competition among vendors.
Buyer demand is weak in relation to industry supply. Weak or declining demand and the resulting excess supply create a “buyers’ market,” in which bargainhunting buyers are able to press for
Industry members are incapable of integrating backward to self-manufacture items they have been buying from suppliers. As a rule, suppliers are safe from the threat of self-manufacture by their
The supplier industry is dominated by a few large companies and it is more concentrated than the industry it sells to. Suppliers with sizable market shares and strong demand for the items they supply
It is difficult or costly for industry members to switch their purchases from one supplier to another. Low switching costs limit supplier bargaining power by enabling industry members to change
Suppliers provide differentiated inputs that enhance the performance of the industry’s product. The more valuable a particular input is in terms of enhancing the performance or quality of the
Demand for suppliers’ products is high and the products are in short supply. A surge in the demand for particular items shifts the bargaining power to the suppliers of those products; suppliers of
There are restrictive trade policies. In international markets, host governments commonly limit foreign entry and must approve all foreign
There are restrictive regulatory policies. Regulated industries like cable TV, telecommunications, electric and gas utilities, radio and television broadcasting, liquor retailing, and railroads
When existing sellers have strong, well-functioning distributor–dealer networks, a newcomer has an uphill struggle in squeezing its way into existing distribution channels. Potential entrants
There are difficulties in building a network of distributors/dealers or in securing adequate space on retailers’ shelves. A potential entrant can face numerous distribution-channel challenges.
Capital requirements are high. The larger the total dollar investment needed to enter the market successfully, the more limited the pool of potential entrants.The most obvious capital requirements
There are strong “network effects” in customer demand. In industries where buyers are more attracted to a product when there are many other users of the product, there are said to be “network
Patents and other forms of intellectual property protection are in place. In a number of industries, entry is prevented due to the existence of intellectual property protection laws that remain in
LO 4 How to use multiple frameworks to determine whether an industry’s outlook presents a company with sufficiently attractive opportunities for growth and profitability.
LO 3 How to map the market positions of key groups of industry rivals.
LO 2 How to use analytic tools to diagnose the competitive conditions in a company’s industry.
LO 1 How to recognize the factors in a company’s broad macro-environment that may have strategic significance.
3. What are the three to four key elements of your company’s strategy?
When you are finished, check to see if your vision statement meets the conditions for an effectively worded strategic vision set forth in Table 2.1. If not, then revise it accordingly. What would be
Meet with your co-managers and prepare a strategic vision statement for your company. It should be at least one sentence long and no longer than a brief paragraph.
The sum of a company’s strategic vision, mission, objectives, and strategy constitutes a strategic plan for coping with industry conditions, outcompeting rivals, meeting objectives, and making
5. Monitoring developments, evaluating performance, and initiating corrective adjustments in light of actual experience, changing conditions, new ideas, and new opportunities. This stage of the
4. Executing the chosen strategy and converting the strategic plan into action. Management’s agenda for executing the chosen strategy emerges from assessing what the company will have to do to
Thus, strategy making is an inclusive collaborative activity involving not only senior company executives but also the heads of major business divisions, functional-area managers, and operating
3. Crafting a strategy to achieve the objectives and move the company along the strategic course that management has charted. Masterful strategies come from doing things differently from competitors
2. Setting objectives to convert the vision and mission into performance targets that can be used as yardsticks for measuring the company’s performance. Objectives need to spell out how much of
1. Developing a strategic vision of the company’s future, a mission statement that defines the company’s current purpose, and a set of core values to guide the pursuit of the vision and mission.
Exerting the internal leadership needed to propel implementation forward.
Creating a company culture conducive to successful strategy execution.
Motivating people and tying rewards directly to the achievement of performance objectives.
Installing information and operating systems that enable company personnel to perform essential activities.
Organizing the work effort along the lines of best practice.
Ensuring that policies and procedures facilitate effective strategy execution.
Allocating ample resources to the activities critical to strategic success.
Developing and strengthening strategy-supporting resources and capabilities.
Staffing the organization to obtain needed skills and expertise.
Creating a strategy-supporting structure.
4. Executing the chosen strategy efficiently and effectively.
3. Crafting a strategy for advancing the company along the path management has charted and achieving its performance objectives.
2. Setting objectives for measuring the company’s performance and tracking its progress in moving in the intended long-term direction.
1. Developing a strategic vision that charts the company’s long-term direction, a mission statement that describes the company’s purpose, and a set of core values to guide the pursuit of the
LO 5 The role and responsibility of a company’s board of directors in overseeing the strategic management process.
LO 4 What a company must do to achieve operating excellence and to execute its strategy proficiently.
LO 3 Why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.
LO 2 The importance of setting both strategic and financial objectives.
LO 1 Why it is critical for company managers to have a clear strategic vision of where a company needs to head and why.
Does it appear to have a competitive advantage, and is it likely to be sustainable?
Does your company appear to be in a sound financial condition?
Is your company in a good, average, or weak competitive position vis-à-vis rival companies?
1. What is our company’s current situation? A substantive answer to this question should cover the following issues:
How are we going to get there?
Where do we want to go from here?
What is our present situation?
3. Go to www.nytco.com/investors and check whether The New York Times’ recent financial reports indicate that its business model is working. Does the company’s business model remain sound as more
2. Elements of eBay’s strategy have evolved in meaningful ways since the company’s founding in 1995. After reviewing all of the links at the company’s investor relations site, which can be
1. Based on your experiences as a coffee consumer, does Starbucks’s strategy (as described in Illustration Capsule 1.1) seem to set it apart from rivals? Does the strategy seem to be keyed to a
7. Crafting and executing strategy are core management functions. How well a company performs and the degree of market success it enjoys are directly attributable to the caliber of its strategy and
6. A winning strategy will pass three tests: (1) Fit (external, internal, and dynamic consistency), (2) Competitive Advantage (durable competitive advantage), and (3)Performance (outstanding
5. A company’s business model sets forth the logic for how its strategy will create value for customers and at the same time generate revenues sufficient to cover costs and realize a profit. Thus,
4. A company’s strategy typically evolves over time, emerging from a blend of (1)proactive deliberate actions on the part of company managers to improve the strategy and (2)• reactive emergent
3. A company achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm. The advantage is sustainable
2. The central thrust of a company’s strategy is undertaking moves to build and strengthen the company’s long-term competitive position and financial performance by competing differently from
1. A company’s strategy is its game plan to attract and please customers, outperform
5. A best-cost provider strategy —giving customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their
4. A focused differentiation strategy —concentrating on a narrow buyer segment and outcompeting rivals by offering buyers customized attributes that meet their specialized needs and tastes better
3. A focused low-cost strategy —concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs and thus being able to serve niche members at a lower price.
2. A broad differentiation strategy —seeking to differentiate the company’s product or service from that of rivals in ways that will appeal to a broad spectrum of buyers. Successful adopters of
1. A low-cost provider strategy —achieving a cost-based advantage over rivals.Walmart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have
How to achieve the company’s performance targets.
How to manage each functional piece of the business (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources).
How to respond to changing economic and market conditions.
How to position the company in the marketplace and capitalize on attractive opportunities to grow the business.
How to compete against rivals.
How to attract and please customers.
LO 6 The three tests of a winning strategy.
LO 5 Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula.
LO 4 That a company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy.
LO 3 The five most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage.
LO 2 The concept of a sustainable competitive advantage.
LO 1 What we mean by a company’s strategy.
For technology-based companies, building linkages across different businesses is critical to sustaining competitive advantage. Select a technology-based company that you are familiar with
Identify a poorly performing multibusiness company (examples might include Sony, Time Warner, Bombardier, Pearson, Matsushita, Dubai World, or Tyco). Using the McKinsey pentagon framework, in which
If you were VP of strategic planning for a large multibusiness company, would you use portfolio planning techniques in your work? If so, for what purposes? If not, why not?Would your preference be to
Williamson’s “M-form” concept argues that the efficiency of the multidivisional firm is the result of (a) the separation of responsibilities between divisional and corporate management and (b)
General Electric, Berkshire Hathaway and Richard Branson’s Virgin Group each comprise a wide range of different businesses that appear to have few close technical or customer linkages. Are these
Giorgio Armani SpA is an Italian private company owned mainly by the Armani family.Most of its clothing and accessories are produced and marketed by the company (some are manufactured by outside
Tata Group is one of India’s largest companies, employing 203000 people in many different industries, including steel, motor vehicles, watches and jewelry, telecommunications, financial services,

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