unit 7 exam revised

Question 1

Grand strategies can be broadly grouped into three types:

Answer 1

Growth strategies
Decline strategies
Corporate combinations

Question 2

Break down the internal growth strategies.

Answer 2

Concentrated growth -penetrating the market to increase the market share of an organisation.

Market development - expanding the portfolio of the markets the organisation serves.

Product development - improving and modifying the
organisation’s products and services
to increase sales.

Innovation - creates new product life cycles that will make
similar existing products or services.

Diversification - Adding new but related products and services to the product line.

Question 3

List the benefits of diversification.

Answer 3

Access to key resources like capital.
Sharing of value chain activities.

Question 4

Break down the external growth strategies.

Answer 4

Integration - gaining control of suppliers, distributors or competitors in a particular industry to enhance the effectiveness and efficiency of the organisation.

3 Types:
Vertical
-Forward vertical - attractive when distributors are ineffective & have high profit margins
-Backwards vertical - attractive when low cost & integrating company has capital
Horizontal - attractive in a growing industry

Question 5

Break down decline strategies.

Answer 5

Retrenchment (Turnaround) - a rescue plan to make the company focus on their abilities to become profitable again

Diversiture - selling part of an organisation to raise funds for new investments

Liquidation - Selling all the assets to avoid bankruptcy
Bankruptcy - Assets are sold for their tangible worth

Question 6

Break down the corporate combination strategies.

Answer 6

Joint ventures - a temporary partnership of two companies to capitalise on opportunities

Strategic alliances - Organisations sharing skills in a
business venture for a defined period

Consortia - Multi-partner alliances between groups of organisations

Question 7

List the risks of combination strategies.

Answer 7

They are very costly
Partners become incompatible over time
Partners become too dependent on each other

Question 8

Break down functional strategies.

Answer 8

Must be formulated to ensure that all organisational units do what is required to implement the strategy successfully.