Chapter 5 - Identify and Evaluate Strategic Options

Question 1

SWOT

Answer 1

Strength
Weakness
Opportunities
Threats

Question 2

TOWS matrix

Answer 2

SO Strengthen Opportunities
ST Strategy to counter threats
WO address weakness, exploit opportunities
WT avoid threats to weakness or change rapidly

Question 3

Three overall types

Answer 3

Competitive strategies
Product-market strategies
Method of growth

Question 4

Strategy boundaries

Answer 4

horizontal
economical scale
vertical boundaries
outsourcing, across value chain

Question 5

Product dependent strategies

Products

Answer 5

Search products: differentiated product features
Experience products: usage differentiation
Credence products: not evaluate because time sensitive (waitress service) or hard to evaluate

Question 6

Product dependent strategies

Categories

Answer 6

Breakthrough products
Improved products
Competitive products

Question 7

Market segmentation

Answer 7

Introducing variation in standard products allows market segmentation resulting in:

• Increased sales and profit
• extended life cycle
• increased market share
• survive competition

Question 8

Competitive strategies - Definition: 3

Answer 8

favorable position in the industry to achieve superior return.

The main ones:
A. cost leadership
B. differentiation
C. niche aka focus (cost- or differentiation-focus)

Question 9

Advantages and Issues with Porter’s strategy selection approach:

Answer 9

for cost leadership

• internal focus
• only one firm
• higher margin can be used for differentiation

for differentiation:

• no price premium
• choice of competitor to differentiate from
• choosing source of differentiation

Question 10

Strategy clock (Bowman)

Answer 10

no frills
low price
hybrid
differentiation
focused differentiation

unsuccessful ones:
increased price, std value
increased price, low value
low value, standard price

Question 11

Issues with Strategy Clock

Answer 11

problem defining industry

defining the strategic unit

Question 12

Value Chain (Porter)

Answer 12

inbound, operations, outbound, marketing+sales, service

Infra, HR, Tech Dev, Procurement

Question 13

Pricing strategies

Answer 13

Competitive
Cost plus
Market based
Penetration 
Predatory pricing
Skimming
Range (fits to connected products)
Selective: category (by brand segment), customer group, peak pricing (demand dependent), service level (dependent), time material (like cost plus)

Question 14

Pricing objectives: 2

Answer 14

• market share

- maximise profit

Question 15

loss leader (definition)

Answer 15

A loss leader (also leader) is a pricing strategy where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services.

Question 16

Strategies in answering to price cuts: 4

Answer 16

• maintain price
• maintain price, but answer with non-price counter-attack
• reduce price
• raise price (and praise quality advantages)

Question 17

Ansoff matrix extended by Lynch

Answer 17

Penetration (or withdraw, de-merge, privatize)
Product development
Market development
Diversification (related or unrelated->fin, risk, other)

Question 18

Types of synergies: 4

Answer 18

marketing
operations
investment
management

Question 19

Withdrawal
Exit barriers: 6
Reasons for exit: 6

Answer 19

Barriers:
sale of assets, redundancy costs
misses opportunity costing
political barriers
marketing may delay exit
admitting failure
assumption carrying on is low risk

Reasons:
investment purpose only
limited resources
insolvency
changed strategy
declined market attractiveness
better opportunities

Question 20

Product-Market Guidelines

Answer 20

growth potential
cash generation
timing entering and exiting
long term rational for market or product
diversification by acquisition

Question 21

Types of risk

Answer 21

market risk (or success, reaching customers)
product risk
managerial risk
financial risk

Question 22

Methods of growth

Answer 22

From the bottom
Acquire or merge
Co-operate

Question 23

Factors influencing growth method choice

Answer 23

resources
complementary skills
speed
retaining control
cultural fit
risk

Question 24

Methods of collaboration by Co’s

Answer 24

integrate
JV
contractual (franchising)

Question 25

Expansion methods

Answer 25

Inside:
organic or export, foreign office, foreign mfg, multi national ops, global ops

Outside: merger, acquisition, JV, Alliance, franchise, licence, international contract mfg

Question 26

Organic growth reasons:

Answer 26

new products create market understanding
pure innovation
no acquisition targets around
sufficient internal resources
mgmt and culture remains as is
same operating systems
less cash flow drain than acquisition
fewer misses than hits

Question 27

Arguments against organic growth

Answer 27

• time
• overcoming lack of access
• no risk sharing

Question 28

Reasons for international expansion

Answer 28

cost or competence lead

market lead

Question 29

Porter’s diamond

Attractiveness of a particular location

Answer 29

Firm strategy, structure, rivalry
Factor condition
Demand conditions
Related and support industry

Question 30

Why expand overseas

Answer 30

Chance or unplanned introduction
Life cycle
Competition
Reduce dependence
Economies of scale
Cheaper source of raw materials
financial opportunities

Question 31

Kotler’s market entry matrix

Answer 31

market attractiveness
risk
competitive advantage

Question 32

International business risks

Answer 32

political
business (likelihood of successful business case)
currency risk
profit repatriation risk

Question 33

BPP to be continue

Answer 33

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