1. Strategic Management of Commercial and Service Companies

Question 1

What is a mission statement?

Answer 1

A mission statement defines a company’s fundamental purpose, what it does, whom it serves, and its values. It describes the company’s business, objectives, and approach.

Question 2

What is a vision statement?

Answer 2

A vision statement describes where the company aspires to be in the future, providing a long-term goal and inspiration. It outlines the desired future state of the company.

Question 3

Why are mission and vision statements important in strategic management?

Answer 3

They are important because they:

1. Guide strategic decision-making.
2. Motivate employees.
3. Communicate organizational values.
4. Help align all activities towards common goals.

Question 4

What is environmental analysis in strategic management?

Answer 4

Environmental analysis in strategic management is the process of understanding the external factors (e.g., economic, social, technological, political) that can impact a company’s operations and strategic decisions, helping to identify opportunities and threats.

Question 5

What is STEEP/PESTEL analysis?

Answer 5

PESTEL (or STEEP) analysis is a framework used to analyze the macro-environmental factors that can impact an organization.

Question 6

What does each letter in PESTEL stand for?

Answer 6

Political: Government policies, political stability, trade regulations.

Economic: Economic growth, inflation, interest rates, exchange rates.

Social: Demographic trends, cultural shifts, lifestyle changes.

Technological: Innovations, automation, R&D activities.

Environmental: Ecological and environmental aspects like climate change, sustainability.

Legal: Laws, regulations, and legal frameworks.

Question 7

What is the purpose of PESTEL analysis?

Answer 7

The purpose is to identify opportunities and and threats arising from the external environment that can affect a company’s operations and strategic decisions.

Question 8

What is Porter’s Five Forces model?

Answer 8

Porter’s Five Forces model analyzes the competitive intensity and attractiveness of an industry by examining five specific forces.

Question 9

List and briefly describe each of Porter’s Five Forces.

Answer 9

Threat of New Entrants: How easy or difficult it is for new competitors to enter the market.

Bargaining Power of Buyers: The ability of customers to drive down prices.

Bargaining Power of Suppliers: The ability of suppliers to drive up prices.

Threat of Substitute Products or Services: The likelihood of customers finding different products or services to satisfy the same need.

Rivalry Among Existing Competitors: The intensity of competition between existing firms in the industry.

Question 10

What is the purpose of Porter’s Five Forces analysis?

Answer 10

Its purpose is to understand the industry structure and profitability.

Question 11

What is Porter’s Diamond Model?

Answer 11

Porter’s Diamond Model explains why particular industries in certain nations are more competitive globally, focusing on four interconnected determinants.

Question 12

List and briefly describe the four determinants of Porter’s Diamond Model.

Answer 12

Factor Conditions: A nation’s endowments of factors of production (e.g., skilled labor, infrastructure).

Demand Conditions: The nature of domestic demand for the industry’s product or service.

Related and Supporting Industries: The presence or absence of internationally competitive supplier and related industries.

Firm Strategy, Structure, and Rivalry: The conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry.

Question 13

What is the purpose of Porter’s Diamond Model?

Answer 13

Its purpose is to identify competitive advantages at a national level.

Question 14

What does each letter in SWOT stand for?

Answer 14

Strengths: Internal capabilities that give the company an advantage.

Weaknesses: Internal limitations that hinder performance.

Opportunities: Favorable external factors that a company can exploit.

Threats: Unfavorable external factors that could harm the company.

Question 15

What is the purpose of SWOT analysis?

Answer 15

Its purpose is to develop strategies that leverage strengths, overcome weaknesses, capitalize on opportunities, and mitigate threats.

Question 16

What is the Competitive Profile Matrix (CPM)?

Answer 16

The Competitive Profile Matrix (CPM) is a tool used to identify a firm’s major competitors and its particular strengths and weaknesses in relation to them, by assigning weights to critical success factors and ratings to companies.

Question 17

What is the purpose of CPM?

Answer 17

Its purpose is to provide a clear competitive snapshot and help identify areas for strategic improvement.

Question 18

What is the BCG Matrix?

Answer 18

The BCG Matrix (Boston Consulting Group Matrix) is a portfolio management framework that categorizes a company’s products or business units based on their market share and market growth rate.

Question 19

List and describe the four categories in the BCG Matrix.

Answer 19

Stars: High market share, high growth rate (require significant investment).

Cash Cows: High market share, low growth rate (generate more cash than they consume).

Question Marks: Low market share, high growth rate (uncertain future, require careful analysis).

Dogs: Low market share, low growth rate (generate low profits or losses, often divested).

Question 20

What are the typical strategic actions for each of the four categories in the BCG Matrix?

Answer 20

Stars: Invest further to maintain growth and market share, aiming to turn them into Cash Cows as market growth slows.

Cash Cows: Milk for cash to invest in Stars and Question Marks; maintain their dominant market share with minimal investment.

Question Marks: Invest heavily to increase market share and turn them into Stars, or divest if they don’t show potential.

Dogs: Divest or harvest (minimize investment and maximize short-term cash flow) to free up resources.

Question 21

What is the purpose of the BCG Matrix?

Answer 21

Its purpose is to help companies decide which products to invest in, discontinue, or divest.

Question 22

What are long-term goals and possible growth paths in strategic management?

Answer 22

Long-term goals are the overarching objectives a company aims to achieve over an extended period.

Possible growth paths are the strategic approaches and frameworks (like Ansoff Matrix or Porter’s Generic Strategies) a company uses to reach these long-term goals and expand its business.

Question 23

What is the Ansoff Matrix?

Answer 23

The Ansoff Matrix (Product-Market Growth Matrix) is a strategic planning tool that helps businesses decide their product and market growth strategy.

Question 24

List and briefly describe the four strategies in the Ansoff Matrix.

Answer 24

Market Penetration: Increase sales of existing products in existing markets.

Market Development: Sell existing products into new markets.

Product Development: Introduce new products into existing markets.

Diversification: Introduce new products into new markets.

Question 25

What is the purpose of the Ansoff Matrix?

Answer 25

Its purpose is to identify growth opportunities and associated risks.

Question 26

What are Porter's Generic Competitive Strategies?

Answer 26

Porter's Generic Competitive Strategies are approaches businesses can take to achieve a competitive advantage in their market.

Question 27

List and briefly describe Porter's four generic competitive strategies.

Answer 27

Cost Leadership: Becoming the lowest-cost producer in the industry, targeting a broad market. This involves optimizing operations to reduce costs and offer products or services at a lower price than competitors. Differentiation: Offering unique products or services that are perceived as superior by customers across a broad market. This allows the company to charge a premium price for its distinct offerings. Cost Focus: Concentrating on a narrow, specific market segment and achieving the lowest cost within that segment. Differentiation Focus: Concentrating on a narrow, specific market segment and offering unique products or services tailored to that segment's needs.

Question 28

What is the purpose of Porter's Generic Competitive Strategies?

Answer 28

Their purpose is to gain a sustainable competitive advantage.

Question 29

What is strategy implementation?

Answer 29

Strategy implementation is the process that turns strategies and plans into actions to achieve strategic objectives.

Question 30

List common tools and methods for strategy implementation.

Answer 30

Common tools and methods include: Action Plans: Detailed plans outlining specific tasks, responsibilities, timelines, and resources required to execute a strategy. They convert strategic goals into actionable steps. Budgeting: The process of allocating financial resources to various strategic initiatives and activities. It ensures that strategies are adequately funded and that financial performance is managed. Organizational Structure Redesign: Adjusting the company's organizational chart, reporting lines, and departmental arrangements to better align with the new strategic direction and facilitate effective execution. Communication: Disseminating strategic goals, plans, and progress throughout the organization to ensure all employees understand the strategy, their role in its implementation, and stay informed. Change Management: A structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. It addresses the human side of change to minimize resistance and ensure successful adoption of new strategies. Leadership: The role of leaders in guiding, motivating, and inspiring employees to embrace and execute the strategy. Effective leadership involves setting direction, building commitment, and role-modeling desired behaviors.

Question 31

What is the role of project management in strategy implementation?

Answer 31

Project management plays a critical role in strategy implementation by breaking down strategic initiatives into manageable projects.

Question 32

How does project management contribute to strategy implementation?

Answer 32

Project management contributes by providing: Structured Approach: For planning, executing, and controlling work to achieve strategic goals. Resource Allocation: Efficient allocation and utilization of resources (people, budget, time). Risk Management: Identification and mitigation of risks. Monitoring and Control: Mechanisms to track progress and make adjustments. Accountability: Clear responsibilities for tasks and deliverables.

Question 33

What is monitoring the realization of strategic objectives?

Answer 33

Monitoring the realization of strategic objectives is a continuous process of tracking the progress of strategic objectives and evaluating their effectiveness.

Question 34

List common methods for monitoring strategic objectives.

Answer 34

Common methods include: Key Performance Indicators (KPIs) Balanced Scorecard Regular Reviews Feedback Systems

Question 35

What is the significance of monitoring strategic objectives?

Answer 35

The significance of monitoring includes: Accountability: Ensures individuals and teams are accountable. Early Detection of Issues: Allows for timely corrective actions. Learning and Adaptation: Provides insights for organizational learning and adaptation. Resource Optimization: Helps in reallocating resources based on performance data.