low cost strategy  

Definition A pricing strategy in which a company offers a relatively low price to

stimulate demand and gain market share. It is one of three generic marketing

strategies (see differentiation strategy and focus strategy for the other two) that can

be adopted by any company, and is usually employed where the product has few or

no competitive advantage or where economies of scale are achievable with

higher production volumes. Also called low price strategy.

What is LOW COST STRATEGY?A company offers a relatively low price as a pricing strategy, seeking to stimulate

demand and gain market share. One of three generic marketing strategies. Refer

to differentiation strategy and focus strategy. These can be adopted by any

company. Product with few or no competitive advantages, or product volume

achieving an economies of scale is the best use of these strategies. Also known as

low price strategy.

2.Distinctive competence of a firm refers to a set of activities or capabilities that a company is

able to perform better than its competitors and which gives it an advantage over them. Distinctive

competence can lie in different area such as technology, marketing activities, or management

capability.

distinctive competency  

DefinitionAlternative term for core competencies.

Distinctive Competencies?AnswerCompany distinctive competencies help distinguish businesses from competitors. Products typically make a company distinctly competitive. The distinctive competency allows a company to be successful over the long run.

Definition of Distinctive Competencies 

Distinctive competencies are an element of Strategic Management and are also known by the term core competencies. The term core competencies was coined in 1990 with a series of articles by C. K. Prahalad and Gary Hamel, and most notably in their 1994.

SWOT analysis (alternatively SWOT Matrix) is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture

Definition of 'Value Chain'A high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.

Competitive Business StrategiesA competitive advantage allows a company to produce or sell goods more effectively than another business. Business owners commonly develop business strategies in order to maintain a competitive advantage. Several types of strategies are available in the business environment. Business owners can use standard strategies or develop their own strategy. Flexibility is an important feature of competitive business strategies.

Definition of 'Core Competencies'The main strengths or strategic advantages of a business. Core competencies are the combination of pooled knowledge and technical capacities that allow a business to be competitive in the marketplace. Theoretically, a core competency should allow a company to expand into new end markets as well as provide a significant benefit to customers. It should also be hard for competitors to replicate

differentiation strategy  

Definition Save to Favorites See Examples

Approach under which a firm aims to develop and market unique products for

different customer segments. Usually employed where a firm has clear competitive

advantages, and can sustain an expensive advertising campaign. It is one of

three generic marketing strategies (see focus strategy and low cost strategy for the

other two) that can be adopted by any firm. See also segmentation strategies.

Read more: http://www.businessdictionary.com/definition/differentiation-strategy.html#ixzz2Vjllqj1A

Difference Between Joint Venture and Strategic Alliance0

inSharJoint Venture vs Strategic Alliance

Joint venture and Strategic Alliance differ from each other financially and legally too. There is difference between them in their definitions too. A joint venture is indeed a contractual agreement between two or more companies that come together in business in terms of the performance of a business task.A strategic alliance on the other hand is a formal relationship between two or more companies in pursuit of common goal in their business even while remaining as independent organizations. This is the main difference between the two terms joint venture and strategic alliance.In other words it can be said the two or more companies that join together in a joint venture do not remain as independent companies in a joint venture. On the other hand the two or more companies that join together in a strategic alliance will remain as independent organizations in a strategic alliance.There has been a lot of debate on the issue whether joint venture is better than strategic alliance. It is generally felt that joint venture is better than strategic alliance for some interesting reasons. A joint venture is legally binding in a better way than a strategic alliance.When it comes to tax purposes strategic alliance is a bit disadvantageous when compared to joint venture. On the other hand you will find strategic alliance more flexible when compared to joint venture. Alliance can also be broken by the help of less number of lawyers. A joint venture on the other hand is not easily broken for that matter. This is because of the fact that it is more legally binding in nature.Things would work better in strategic alliance due to the fact that it is characterized by a wonderful combination of resources or information. On the other hand lot of hard work has to be put into joint venture in order to taste success.

Differences Between a Joint Venture and a Strategic AllianceWritten by Linda Hurley

There are three types of strategic alliance; direct cooperation, joint ventures and minority investments. Every joint venture is always a strategic alliance but not all strategic alliances are joint ventures.

What is a strategic alliance?

Strategic alliances are agreements to operate collaboratively between otherwise arm’s length organizations to accomplish a strategic purpose. Alliances can be either equity or non-equity alliances but all are formed to achieve benefits for the organizations that would not be achieved by operating individually.

Strategic alliances usually have a unique value proposition that uses the specific competencies of each of the organizations to achieve competitive advantage. By sharing complementary resources and capabilities alliance partners achieve quicker and more efficient growth than they would if they

developed the resources or capabilities within their own organization.

Joint ventures

Joint ventures are the most complex of strategic alliances as they involve the creation of a separate legal entity from those of the alliance partners. The alliance partners own and control the new entity together. They can be distinguished from other forms of equity alliance by the fact that they are created to achieve a specific, defined purpose.

As an example, joint venture companies are commonly seen in the manufacturing industry where economies of scale require a single manufacturing plant to be cost effective but the market can sustain a number of distributors of the product.

In such cases competitors may form an alliance to create a separate company jointly owned and controlled to manufacture goods. The goods are supplied to the alliance partners who then compete in the same market to distribute the goods through either wholesale or retail channels.

Direct cooperation

Direct cooperation alliances are usually entered into for the purpose of operational efficiency or geographic expansion. They are non-equity alliances and are managed less formally than joint ventures. Rather than creating a separate entity or alliance partners obtaining a shareholding, direct cooperation usually involves a contractual arrangement.

Although they may appear similar to transactional dealings direct cooperation alliances involve a greater commitment by the strategic partners and performance objectives are defined and measured by the partners in cooperation.

Minority investment

This type of strategic alliance is an equity alliance and is used most frequently by young rapidly growing organizations. The young firm obtains capital from corporate investors by providing the corporate investor with a minority shareholding in their company.

The purpose of minority investment is less specific than in a joint venture and unlike a joint venture one partner retains control through their majority shareholding. Investors usually have a strategic interest in the growth and success of the company that extends beyond a simple return on investment.

Before seeking a strategic alliance organizations need to identify the type of alliance that will fit their needs. Whatever vehicle is used it is essential that the expected outcomes are defined, the elements to be provided by each partner are documented and the whole arrangement is conducted through an appropriate legal agreement.

What is Vertical and Horizontal integration?

Many a times, while gazing through the business daily, you

come across the words “Vertical integration” or “Horizontal integration”. While some take it as a business

gimmick; others do have but only a slight idea of what it is. In any case, as a regular business reader or as an

entrepreneur, one needs to be aware about all the aspects of vertical and horizontal integration.

Both of these relate to strategies that are made to grow your business but they differ in approach. And most of

the times which one to choose is not a very straight forward decision.

In this post we will try to completely understand Vertical and Horizontal integration and list certain key things

that a business should take care of while looking forward to any of these optionsWhat is Vertical Integration?

Out of all the definitions I read online the best one is from Investorwords which says.

Vertical integration is the process in which several steps in the production and/or

distribution of a product or service are controlled by a single company or entity, in order to

increase that company’s or entity’s power in the marketplace.

Simply said, every single product that you can think of has a big life cycle. While you might

recognize the product with the Brand name printed on it, many companies are involved in

developing that product. These companies are necessarily not part of the brand you see.

Example of vertical integration: while you are relaxing on the beach sipping chilled cold

drink, the brand that you see on the bottle is the producer of the drink but not necessarily the

maker of the bottles that carry these drinks. This task of creating bottles is outsourced to

someone who can do it better and at a cheaper cost. But once the company achieves

significant scale it might plan to produce the bottles itself as it might have its own advantages

(discussed below). This is what we call vertical integration. The company tries to get more

things under their reign to gain more control over the profits the product / service delivers.Types of Vertical Integrations:

There are basically 3 classifications of Vertical Integration namely:

1. Backward integration – The example discussed above where in the company tries to

own an input product company. Like a car company owning a company which makes

tires.

2. Forward integration – Where the business tries to control the post production areas,

namely the distribution network. Like a mobile company opening its own Mobile retail

chain.

3. Balanced integration – You guessed it right, a mix of the above two. A balanced strategy

to take advantages of both the worlds.What is Horizontal Integration?

Much more common and simpler than vertical integration, Horizontal integration (also

known as lateral integration) simply means a strategy to increase your market share by taking

over a similar company. This take over / merger / buyout can be done in the same geography

or probably in other countries to increase your reach.

Examples of Horizontal Integration are many and available in plenty. Especially in case of

the technology industry, where mergers and acquisitions happen in order to increase the reach

of an entity.

As per me an apt example of Horizontal Integration will be You Tube, which was taken

over my Google primarily because it had a strong and loyal user base. (There was no rocket

science in technology used at Youtube which Google couldn’t have done without taking over,

but yes to increase the viewers was definitely as complex without the takeover.)Executing these strategies and key points to remembers

Vertical and Horizontal integration strategy generally can be done by businesses which have

established themselves and probably have a stable life as compared to ones which have to

address risks on a regular basis. The immediate advantage of implementing them is to

1. Have economies of scale

2. Expand your knowledge and capabilities

3. Increase market (and profits)

4. Own the whole life cycle so that you can change it the way required

5. Reduce competition (by merging with them rather than competing)

6. Provide better services

7. Many more (refer links below)

I believe this much will suffice for you to understand what is vertical integration and

horizontal integration? Attached are a few more links that will help you understand the

concepts further

Before signing off would recommend reading vertical integration case study from wikipedia

which highlights how Reliance Industries worked on backward integration and from textiles

they got into polyster and later into petrochemicals. This was a brilliant strategy executed by

the them owner Dhirubhai. Must read.

Growth-share matrixFrom Wikipedia, the free encyclopedia

Early depiction of the growth-share matrix

The growth-share matrix (aka the product portfolio[1], BCG-matrix, Boston matrix, Boston Consulting

Group analysis, portfolio diagram) is a chart that had been created by Bruce D. Henderson for the Boston

Consulting Group in 1970 to help corporations with analyzing their business units or product lines. This

helps the company allocate resources and is used as an analytical tool in brand marketing, product

management, strategic management, and portfolio analysis.[2] Analysis of market performance by firms

using its principles has called its usefulness into question, and it has been removed from some major

marketing textbooks.[3]

Contents

  [hide]

1     Overview   

2     Practical use of the growth-share matrix   

o 2.1      Relative market share   

o 2.2      Market growth rate   

o 2.3      Critical evaluation   

o 2.4      Misuse of the growth-share matrix   

o 2.5      Alternatives   

3     Other uses   

4     References   

Overview [edit]

To use the chart, analysts plot a scatter graph to rank the business units (or products) on the basis of their

relative market shares and growth rates.

Cash cows  are units with high market share in a slow-growing industry. These units typically generate

cash in excess of the amount of cash needed to maintain the business. They are regarded as staid

and boring, in a "mature" market, and every corporation would be thrilled to own as many as possible.

They are to be "milked" continuously with as little investment as possible, since such investment would

be wasted in an industry with low growth.

Dogs, more charitably called pets, are units with low market share in a mature, slow-growing industry.

These units typically "break even", generating barely enough cash to maintain the business's market

share. Though owning a break-even unit provides the social benefit of providing jobs and possible

synergies that assist other business units, from an accounting point of view such a unit is worthless,

not generating cash for the company. They depress a profitable company's return on assets ratio,

used by many investors to judge how well a company is being managed. Dogs, it is thought, should be

sold off.

Question marks (also known as problem children) are growing rapidly and thus consume large

amounts of cash, but because they have low market shares they do not generate much cash. The

result is a large net cash consumption. A question mark has the potential to gain market share and

become a star, and eventually a cash cow when the market growth slows. If the question mark does

not succeed in becoming the market leader, then after perhaps years of cash consumption it will

degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in

order to determine whether they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. The hope is that stars become the

next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is

worthwhile if that's what it takes for the unit to remain a leader. When growth slows, if they have been

able to maintain their category leadership stars become cash cows, else they become dogs due to low

relative market share.

The 3 Strategies of a CorporationHere are the three strategies of an organisation that represent the master plan in achieving goals and the maximisation of their profits.

    

Posted by Maria Zain on Mar 10, 2008

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In order to work toward maximising profits, organisations need a framework to

work by and to move forward in achieving goals that will lead to the maximum

profit margin. There are three main strategies that businesses have to adopt to

achieve this goal. Of course, strategies will differ from industry to industry

and from firm to fim. However, the concepts remain the same and companies

customise their strategies to fit their corporate culture, business products as

well as functions in the market.

Corporate Strategy

A corporate strategy depicts the corporate culture's perception of progress and

growth. The corporate strategy comprises a directional strategy through a

corporate vision and a mission statement. The corporate strategy is an

important strategy to observe to depict the best image of the company toward

its clientele. If the corporation wants to be perceived as a leading clothes

manufacturer, its corporate strategies have to incorporate growth in the retail

line that will allow them to keep up with the latest trends in fashion and

clothes.

Business Strategy

A business strategy accentuates the lines of the different business units. These

strategies are developed based on the micro interests of the company. The

corporate strategy takes an overview picture of a parenting strategy to ensure

that a corporation is on the right track. Collectively, the business strategies

ensure that individual business units are able to increase their effectiveness

while remaining jived with the corporate strategy. The business strategy

concentrates on improving a firm's competitive position by developing their

products and services and by continunously exceeding clientele expectations.

These business strategies will be based on a SWOT analysis and will

recommend strategies to top management, to look into growth opportunities.

Functional Strategy

A functional strategy is one that is implemented and activated by functional

areas that support product and service development. These could be human

resources, marketing and/or research and development. Their functional

strategies have to be customised to ensure that the business strategy adopted

by the business team will be able to succeed. The functional strategy therefore

supports the business strategy. Effective functional strategies will help the

corporation develop competitive advantages for the company.

Lastly, it is important to know that strategies have to be outlined in a flexible

manner in order to keep in pace with the different changes that take place in

the external environment. From a hierarchial point of view, the corporate

strategy is the one that remains the most stable while the functional strategies

are those that change to keep in pace with customer needs and aggressive

competition in the market.

The Boston MatrixFocusing Effort to Give the Greatest ReturnsRelated variants: The BCG Matrix, the Growth-Share Matrix and Portfolio Analysis

Milk your "cash cows."© iStockphoto/beckariuz

Imagine that you're reviewing your organization's products. You need to decide which ones you should focus investment on.One of the products is doing well financially. However, demand has fallen, and this trend looks set to continue.Another product is also doing well, but it's in a new market, and needs a lot of cash to support it. Should you continue investing in it?And another product is barely profitable, although its market is growing. Should you kill it or keep it?To make these decisions, you need to look beyond the income that the products are currently bringing in. You need to assess how they're likely to perform in future.

The Boston Matrix, also called the Boston Consulting Group (BCG) Matrix, is a simple, visual way to examine the likely financial performance of your product or business portfolio.In this article, we'll look at the Boston Matrix and how to use it. We'll also outline some of its limitations.

Understanding the Boston MatrixManagement consultants at the Boston Consulting Group developed their matrix in the early 1970s. They designed it to help managers at large corporations decide which business units they should invest in.However, managers in all kinds of organizations now also use it to decide which of their product lines or products to invest in, and which to dispose of or to shut down.The matrix, shown in figure 1, places products into four categories based on their market share and market growth.Figure 1 – The Boston Matrix

The categories are: Dogs: Low Market Share and Low Market Growth Dogs are business units or products

that have low market share in a low-growth market. They often don't make much profit, but they don't need much investment either. Much of the time, you'll need to offer a price discount to sell Dog products.

Cash Cows: High Market Share and Low Market Growth These businesses or products are well established. They're likely to be popular with customers, which makes it easier for you to exploit new opportunities. However, you should avoid spending too much effort on these, because the market is only growing slowly, and opportunities are likely to be limited.

Stars: High Market Share and High Market Growth Businesses and products in this quadrant are seeing rapid growth. There should be some good opportunities here, and you should work hard to realize them.

Question Marks (Problem Children): Low Market Share and High Market Growth These are the opportunities that no one knows how to handle. They aren't generating much revenue right now, because you don't have a large market share. But they're in high-growth markets, so they could become Stars or even Cash Cows if you can build market share. However, if you cannot increase market share, Question Marks could absorb a lot of effort with little 

 What is strategy and why is it important?

the five generic competitive strategies: which one to employ? »

Evaluating a company’s resources, capabilities, and competitiveness2012 年 12 月 19 日

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1. Which of the following is not one of the six questions that comprise the task of

evaluating a company’s resources and competitive position?

A. What are the company’s most profitable geographic market segments?

B. How well is the company’s present strategy working?

C. Are the company’s prices and costs competitive?

D. Is the company competitively stronger or weaker than key rivals?

E. What strategic issues and problems merit front-burner managerial attention?

2. Which of the following is not a component of evaluating a company’s resources

and competitive position?

A. Evaluating how well the present strategy is working

B. Scanning the environment to determine a company’s best and most profitable

customers

C. Assessing whether the company’s costs and prices are competitive

D. Evaluating whether the company is competitively stronger or weaker than key

rivals

E. Pinpointing what strategic issues and problems merit front-burner managerial

attention

3. The spotlight in analyzing a company’s resources, internal circumstances, and

competitiveness includes such questions/concerns as

A. whether the company’s present strategy is better than the strategies of its closest

rivals based on such performance measures as earnings per share, ROE, dividend

payout ratio, and average annual increase in the common stock price.

B. whether the company’s key success factors are more dominant than the key

success factors of close rivals.

C. whether the company has the industry’s most efficient and effective value chain.

D. what are the company’s resource strengths and weaknesses and its external

opportunities and threats.

E. what new acquisitions the company would be well advised to make in order to

strengthen its financial performance and overall balance sheet position.

4. Which of the following is not pertinent in identifying a company’s present

strategy?

A. The key functional strategies (R&D, supply chain management, production, sales

and marketing, HR, and finance) a company is employing

B. Management’s planned, proactive moves to outcompete rivals (via better product

design, improved quality or service, wider product lines, and so on)

C. The company’s mission, strategic objectives, and financial objectives

D. Moves to respond and react to changing conditions in the macro-environment and

in industry and competitive conditions

E. The strategic role of its collaborative partnerships and strategic alliances with

others

5. One important indicator of how well a company’s present strategy is working is

whether

A. it has more core competencies than close rivals.

B. its strategy is built around at least two of the industry’s key success factors.

C. the company is achieving its financial and strategic objectives and whether it is an

above-average industry performer.

D. it is customarily a first-mover in introducing new or improved products (a good

sign) or a late-mover (a bad sign).

E. it is subject to weaker competitive forces and pressures than close rivals (a good

sign) or stronger competitive forces and pressures (a bad sign).

6. The best quantitative evidence of whether a company’s present strategy is

working well is

A. whether the company has more competitive assets than it does competitive

liabilities.

B. whether the company is in the industry’s best strategic group.

C. the caliber of results the strategy is producing, specifically whether the company

is achieving its financial and strategic objectives and whether it is an above-average

industry performer.

D. whether the company has a shorter value chain than close rivals.

E. whether the company is in the Fortune 500.

7. Which one of the following is not a reliable measure of how well a company’s

current strategy is working?

A. Whether the company’s sales are growing faster, slower, or about the same pace

as the industry as a whole, thus resulting in a rising, falling, or stable market share

B. Whether it has a larger number of competitive assets than competitive liabilities

and whether it has a superior quality product

C. The firm’s image and reputation with its customers

D. Whether its profit margins are rising or falling and how large its margins are

relative to those of its rivals

E. How well the firm stacks up against rivals on technology, product innovation,

customer service, product quality, price, speed in getting newly developed products

to market, and other relevant factors on which buyers base their choice of which

brand to purchase

8. A company’s resource and capability analysis

A. represent its core competencies.

B. are the most important parts of the company’s value chain.

C. signal whether it has the wherewithal to be a strong competitor in the

marketplace.

D. give it excellent ability to insulate itself against the impact of the industry’s

driving forces.

E. combine to give it a distinctive competence.

9. Which of the following does not represents a company resource?

A. a company’s brand.

B. a productive input that is owned by the firm.

C. marketing and brand management.

D. R&D teams.

E. a productive input that is controlled by the firm.

10. Which of the following is a clear representation of a company’s capability?

A. a company’s brand.

B. a productive input that is owned or controlled by the firm.

C. capacity of a firm to perform some activity.

D. an alliance or collaboration with another firm.

E. All of these.

11. Which of the following most accurately reflect a company’s resource strengths?

A. Its human, physical and/or organization assets; its skills and competitive

capabilities; and achievements or attributes that enhance the company’s ability to

compete effectively

B. The sizes of its unit sales, revenues, and market share vis-à-vis those of key rivals

C. The sizes of its profit margins and return on investment vis-à-vis those of key

rivals

D. Whether it has more primary activities in its value chain than close rivals and a

better overall value chain than these rivals

E. Whether it has more core competencies than close rivals

12. A company’s strength can concern

A. a skill, specialized expertise, or competitively important capability.

B. valuable human assets and intellectual capital.

C. an achievement or attribute that puts the company in a position of market

advantage.

D. competitively valuable alliances or cooperative ventures.

E. All of these.

13. The best example of a company resource is

A. having higher earnings per share and a higher return on shareholders’ equity

investment than key rivals.

B. being totally self-sufficient such that the company does not have to rely in any

way on key suppliers, partnerships with outsiders, or strategic alliances.

C. having proven technological expertise and ability to churn out new and improved

products on a regular basis.

D. having a larger number of competitive assets than competitive liabilities.

E. having more built-in key success factors than rivals.

14. Which of the following is not a good example of a company’s strength?

A. More intellectual capital and better e-commerce capabilities than rivals

B. Fruitful partnerships or alliances with suppliers that reduce costs and/or enhance

product quality and performance

C. Having higher earnings per share and a higher stock price than key rivals

D. A well-known brand name and enjoying the confidence of customers

E. A lower-cost value chain than rivals

15. If a company doesn’t possess stand alone resource strengths capable of

contributing to competitive advantage,

A. all potential for competitive advantage is lost.

B. it is unlikely to survive in the marketplace and should exit the industry.

C. it may have a bundle of resources that can be leveraged to develop a distinctive

competence.

D. it is virtually blocked from using offensive strategies and must rely on defensive

strategies.

E. its best strategic option is to revamp its value chain in hopes of creating stronger

competitive capabilities.

16. Resource and capability analysis is designed to

A. ascertain the internal market place of non-distinct divisions of the company.

B. ascertain which of a company’s resources and capabilities are competitively

valuable.

C. stimulate demand for a product.

D. ascertain to what extent a competitor can sustain a competitive advantage.

E. stimulate economic growth for companies within the industry.

17. Resource and capability analysis is achieved by

A. probing the caliber of a firm’s competitive assets relative to those of rival firms.

B. achieving price stability.

C. analyzing only internal strengths and weaknesses through a matrix comparison

model.

D. cost-benefit analysis of the company’s core product sales.

E. Performing resource specific activities within the organization to allocate available

capital.

18. A company that has competitive assets which are central to company strategy

and superior to rival firms

creates a

A. long-term derivative strategy.

B. cash flow feasibility analysis.

C. competitive advantage over other companies.

D. resource deployment strategic plan.

E. cost underestimation and benefit overestimation.

19. Whether a resource or capability can support a competitive advantage is

determined by which two tests?

A. Whether the resource or capability is competitively valuable and/or is something

that rivals lack.

B. Whether the resource or capability is rare and/or is hard to copy.

C. Whether the resource or capability can be trumped and/or is hard to copy.

D. Whether the resource or capability is competitively valuable and/or are there

good substitutes available for the resource.

E. Whether the resource or capability is hard to copy and/or can be trumped by

different types of resources and capabilities.

20. Which two tests of a resource’s competitive power determine whether a

company’s competitive advantage can be sustained in the face of active

competition?

A. Whether the resource or capability is competitively valuable and/or is something

that rivals lack.

B. Whether the resource or capability is rare and/or is hard to copy.

C. Whether the resource or capability is easy to copy.

D. Whether the resource or capability is competitively valuable and/or are there

good substitutes available for the resource.

E. Whether the resource or capability is hard to copy and/or can be trumped by

different types of resources and capabilities.

21. What two factors inhibit the ability of rivals to imitate a firm’s most valuable

resources and capabilities?

A. Social ambiguity and causal uncertainty.

B. Social simplicity and causal complexity.

C. Collective complexity and causal ambiguity.

D. Social complexity and causal ambiguity.

E. Social simplicity and causal uncertainty.

22. A competitively superior resource or capability is a company’s

A. True strategic asset providing a competitive advantage.

B. Equally valuable substitute resource providing a competitive advantage.

C. Assessment of the availability of superior substitutes.

D. Unsurpassed worker productivity and product quality.

E. Unique piecework incentive system providing a competitive advantage.

23. A company requires a dynamically evolving portfolio of resources and

capabilities to

A. assist the strategic planning team in overall direction.

B. sustain complex manufacturing systems as a strategic recoil.

C. sustain its competitiveness and help drive improvements in its performance.

D. sustain benefits of high market share as an interest in growth strategies.

E. transform knowledge into a management style supporting competition in a

globally diverse world.

24. For a company to have competitively potent resources and capabilities, they

must

A. be in sync with changes in the company’s own strategy.

B. be in sync with its efforts to achieve a resource-based competitive advantage.

C. fully support company efforts to attract customers.

D. combat competitors’ newly launched offensives to win bigger sales and market

shares.

E. All of these.

25. Which of the following is not an example of a company’s dynamic capability?

A. capacity to improve existing resources and capabilities.

B. upgrades to R&D resources to drive product innovation.

C. capacity to add new resources and capabilities to the competitive asset portfolio.

D. ability to replace degraded resources with acquired capabilities.

E. All of these.

26. The competitive power of a company resource strength or competitive capability

hinges on

A. how hard it is for competitors to copy.

B. whether it is rare and something rivals lack.

C. whether it is really competitively valuable and having the potential to contribute

to a competitive advantage.

D. how easily it can be trumped by the substitute resources/capabilities of rivals.

E. All of these.

27. For a particular company resource/capability to have real competitive power and

perhaps qualify as a basis for competitive advantage, it should

A. be hard for competitors to copy, be rare and something rivals lack, be

competitively valuable, and not be easily trumped by substitute resource strengths

possessed by rivals.

B. be something that a company does internally rather than in collaborative

arrangements with outsiders.

C. be patentable.

D. be an industry key success factor and occupy a prime position in the company’s

value chain.

E. have the potential for lowering the firm’s unit costs.

28. The competitive power of a company resource strength is not measured by

which one of the following tests?

A. Is the resource rare and something rivals lack?

B. Is the resource strength something that a company does internally rather than in

collaborative arrangements with outsiders?

C. Is the resource strength easily trumped by the substitute resources/capabilities of

rivals?

D. Is the resource strength hard to copy?

E. Is the resource strength competitively valuable, having the potential to contribute

to a competitive advantage?

29. Identifying and assessing a company’s resource strengths and weaknesses and

its external opportunities and threats is called

A. SWOT analysis.

B. competitive asset/liability analysis.

C. competitive positioning analysis.

D. strategic resource assessment.

E. company resource mapping.

30. SWOT analysis is a powerful tool for

A. gauging whether a company has a cost competitive value chain.

B. sizing up a company’s resource capabilities and deficiencies, its market

opportunities, and the external threats to its future well-being.

C. evaluating whether a company is in the most appropriate strategic group.

D. determining a company’s competitive strength vis-à-vis close rivals.

E. identifying the market segments in which a company is strongly positioned and

weakly positioned.

31. A company’s resource strengths are important because

A. they pave the way for establishing a low-cost advantage over rivals.

B. they represent its competitive assets and are big determinants of its

competitiveness and ability to succeed in the marketplace.

C. they provide extra muscle in helping lengthen the company’s value chain.

D. they give it competitive protection against the industry’s driving forces.

E. they provide extra organizational muscle in turning a core competence into a key

success factor.

32. When a company has real proficiency in performing a competitively important

value chain activity, it is said to have

A. a distinctive competence.

B. a core competence.

C. a key value chain proficiency.

D. a competitive advantage over rivals.

E. a company competence.

33. When a company is good at performing a particular internal activity, it is said to

have

A. a competitive advantage over rivals.

B. a competitive capability.

C. a distinctive competence.

D. a core competence.

E. a company competence.

34. The difference between a company competence and a core competence is that

A. a company competence refers to a company’s best-executed functional strategy

and a core competence refers to a company’s best-executed business strategy.

B. a company competence refers to a company’s strongest resource whereas a core

competence refers to a company’s lowest-cost and most efficiently performed value

chain activity.

C. a company competence is a competitively relevant activity which a firm performs

especially well relative to other internal activities, whereas a core competence is an

activity that a company has learned to perform proficiently.

D. a company competence represents real proficiency in performing an internal

activity whereas a core competence is a competitively relevant activity which a firm

performs better than other internal activities.

E. a core competence usually resides in a company’s technology and physical assets

whereas a company competence usually resides in a company’s human assets and

intellectual capital.

35. The difference between a core competence and a distinctive competence is that

A. a distinctive competence refers to a company’s strongest resource or competitive

capability and a core competence refers to a company’s lowest-cost and most

efficiently executed value-chain activity.

B. a core competence usually resides in a company’s base of intellectual capital

whereas a distinctive competence stems from the superiority of a company’s

physical and tangible assets.

C. a core competence is a competitively relevant activity which a firm performs

especially well in comparison to the other activities it performs, whereas a distinctive

competence is a competitively relevant activity which a firm performs especially well

in comparison to other firms with which it competes.

D. a core competence represents a resource strength whereas a distinctive

competence is achieved by having more resource strengths than rival companies.

E. a core competence usually resides in a company’s technology and physical assets

whereas a distinctive competence usually resides in a company’s know-how,

expertise, and intellectual capital.

36. A core competence

A. retracts from a company’s arsenal of competitive capabilities and competitive

assets and is not a genuine resource strength.

B. is typically results-based, residing in a company’s tangible physical assets on the

balance sheet.

C. is often grounded in a single departments set of knowledge and expertise.

D. is a competitively relevant activity which a firm performs especially well in

comparison to the other activities it performs.

E. All of these.

37. A core competence

A. gives a company competitive capability and is a genuine company strength and

resource.

B. typically has competitive value, the amount of which is reflected in the physical

and tangible assets on a company’s balance sheet.

C. usually is grounded in the technological expertise of a particular department or

work group.

D. is more difficult for rivals to copy than a distinctive competence.

E. refers to a company’s lowest-cost and most efficiently executed value-chain

activity.

38. When a company performs a particular competitively important activity truly well

in comparison to its competitors, it is said to have

A. a company competence.

B. a strategic resource.

C. a distinctive competence.

D. a core competence.

E. a key success factor.

39. Which of the following does not represent a potential core competence?

A. Skills in manufacturing a high-quality product at a low cost

B. Know-how in creating and operating systems for cost-efficient supply chain

management

C. The capability to fill customer orders accurately and swiftly

D. Having a wider product line than rivals

E. The capability to speed new or next-generation products to the marketplace

40. A distinctive competence

A. is a competitively important activity that a company performs better than its

competitors.

B. gives a company competitively valuable capability that is unmatched by rivals.

C. is a basis for sustainable competitive advantage.

D. can underpin and add real punch to a company’s strategy.

E. All of these.

41. Which one of the following is inaccurate as concerns a distinctive competence?

A. A distinctive competence is a competitively important activity that a company

performs better than its competitors.

B. A distinctive competence is typically less difficult for rivals to copy than a core

competence.

C. A distinctive competence can be a basis for sustainable competitive advantage.

D. A distinctive competence can underpin and add real punch to a company’s

strategy.

E. A distinctive competence gives a company competitively valuable capability that

is unmatched by rivals.

42. The competitive power of a company’s core competence or distinctive

competence depends on

A. whether it helps differentiate a company’s product offering from the product

offerings of rival firms.

B. how hard it is to copy and how easily it can be trumped by substitute resource

strengths and competitive capabilities of rivals.

C. whether customers are aware of the competence and view the competence

positively enough to boost the company’s brand name reputation.

D. whether the competence is one of the industry’s key success factors.

E. whether the competence is technology-based or based on superior marketing

know-how.

43. A company resource weakness or competitive deficiency

A. represents a problem that needs to be turned into a strength because weaknesses

prevent a firm from being a winner in the marketplace.

B. causes the company to fall into a lower strategic group than it otherwise could

compete in.

C. prevents a company from having a distinctive competence.

D. usually stems from having a missing link or links in the industry value chain.

E. is something a company lacks or does poorly (in comparison to rivals) or a

condition that puts it at a disadvantage in the marketplace.

44. A company’s resource weaknesses can relate to

A. inferior or unproven skills, expertise, or intellectual capital in competitively

important parts of the business.

B. something that it lacks or does poorly (in comparison to rivals).

C. deficiencies in competitively important physical, organizational, or intangible

assets.

D. missing or competitively inferior capabilities in key areas.

E. All of these.

45. Sizing up a company’s overall resource strengths and weaknesses

A. essentially involves constructing a “strategic balance sheet” where the company’s

resource strengths represent competitive assets and its resource weaknesses

represent competitive liabilities.

B. is called benchmarking.

C. is called competitive strength assessment.

D. is focused squarely on ascertaining whether the company has more/less resource

strengths than weaknesses.

E. is called company resource mapping.

46. The external market opportunities which are most relevant to a company are the

ones that

A. increase market share.

B. reinforce its overall business strategy.

C. match up well with the firm’s financial resources and competitive capabilities,

offer the best growth and profitability, and present the most potential for

competitive advantage.

D. correct its internal weaknesses and resource deficiencies.

E. help defend against the external threats to its well-being.

47. The market opportunities most relevant to a particular company are those that

A. offer the best growth and profitability.

B. provide a strong defense against threats to the company’s profitability.

C. hold the most potential for product innovation.

D. provide avenues for taking market share away from close rivals.

E. hold the most potential to reduce costs.

48. Which of the following best describes the market opportunities that tend to be

most relevant to a particular company?

A. Those market opportunities that provide avenues for taking market share away

from close rivals and enhance a company’s image as a leader in product innovation

and product quality.

B. Those market opportunities that offer the company a chance to raise entry

barriers.

C. Those market opportunities that help promote greater diversification of revenues

and profits.

D. Those market opportunities that match up well with the firm’s financial resources

and competitive capabilities, offer the best growth and profitability, and present the

most potential for competitive advantage.

E. Those market opportunities that help correct a company’s biggest weaknesses

and competitive deficiencies.

49. Which of the following is not an example of an external threat to a company’s

future profitability?

A. The lack of a distinctive competence

B. New legislation that entails burdensome and costly government regulations

C. Slowdowns in market growth

D. More intense competitive pressures

E. The introduction of restrictive trade policies in countries where the company does

business

50. Which of the following is not an example of a threat to a company’s future

profitability?

A. Likely entry of potent new competitors

B. The lack of a well-known brand name with which to attract new customers and

help retain existing customers

C. Shifts in buyer needs and tastes away from the industry’s product

D. Costly new regulatory requirements

E. Growing bargaining power on the part of the company’s major customers and

major suppliers

51. SWOT analysis

A. is a way to measure whether a company’s value chain is longer or shorter than

the chains of key rivals.

B. is a tool for benchmarking whether a firm’s strategy is closely matched to industry

key success factors.

C. reveals whether a company is competitively stronger than its closest rivals.

D. provides a good overview of whether a company’s situation is fundamentally

healthy or unhealthy.

E. identifies the reasons why a company’s strategy is or is not working very well.

52. The payoff of doing a thorough SWOT analysis is

A. identifying whether the company’s value chain is cost effective vis-à-vis the value

chains of rivals.

B. helping strategy-makers benchmark the company’s resource strengths against

industry key success factors.

C. enabling a company to assess its overall competitive position relative to its key

rivals.

D. revealing whether a company’s market share, measures of profitability, and sales

compare favorably or unfavorably vis-à-vis key competitors.

E. assisting strategy-makers in crafting a strategy that is well-matched to the

company’s resources and capabilities, its market opportunities, and the external

threats to its future well-being.

53. In doing SWOT analysis, which one of the following is not an example of a

potential resource weakness or competitive deficiency that a company may have?

A. Less productive R & D efforts than rivals

B. Having a single, unified functional strategy instead of several distinct functional

strategies

C. Lack of a strong brand image and reputation (as compared to rivals)

D. Higher overall unit costs relative to rivals

E. Too narrow a product line relative to rivals

54. In doing SWOT analysis and trying to identify a company’s market opportunities,

which of the following is not an example of a potential market opportunity that a

company may have?

A. Serving additional customer groups or market segments

B. Growing buyer preferences for substitutes for the industry’s product

C. Acquiring rival firms or companies with attractive technological expertise or

capabilities

D. Expanding into new geographic markets

E. Openings to win market share away from rivals

55. One of the lessons of SWOT analysis is that a company’s strategy should

A. be grounded in its resource strengths and capabilities.

B. be aimed at those market opportunities that offer the best potential for both

profitable growth and competitive advantage.

C. seek to defend against threats to the company’s future profitability.

D. generally not place heavy demands on areas where company resources are weak

or unproven.

E. All of these.

56. Which one of the following is not part of conducting a SWOT analysis?

A. Identifying a company’s resource strengths and competitive capabilities

B. Benchmarking the company’s resource strengths and competitive capabilities

against industry key success factors

C. Identifying a company’s market opportunities

D. Drawing conclusions about the company’s overall business situation—what is

attractive and what is unattractive about the company’s circumstances?

E. Translating the results of the analysis into actions for improving the company’s

strategy and market position

57. The two most important parts of SWOT analysis are

A. pinpointing the company’s competitive assets and pinpointing its competitive

liabilities.

B. identifying the company’s resource strengths and identifying the company’s best

market opportunities.

C. identifying the external threats to a company’s future profitability and pinpointing

how many market opportunities it has.

D. drawing conclusions from the SWOT listings about the company’s overall situation

and translating these into strategic actions to better match the company’s strategy

to its resource strengths and market opportunities, to correct the important

weaknesses, and to defend against external threats.

E. making accurate lists of the company’s strengths, weaknesses, opportunities, and

threats and then using these lists as a basis for ascertaining how well the company’s

strategy is working.

58. The three steps of SWOT analysis are

A. identifying the company’s resource strengths and weaknesses and its

opportunities and threats, drawing conclusions about the company’s overall

situation, and translating the conclusions into strategic actions to improve the

company’s strategy.

B. pinpointing the company’s competitive assets, pinpointing its competitive

deficiencies, and determining whether it enjoys a competitive advantage.

C. determining whether the company has more competitive assets than competitive

liabilities, determining whether the company has good market opportunities, and

evaluating the seriousness of the threats to the company’s future profitability.

D. matching the company’s strategy to its resource strengths, correcting the

company’s important resource weaknesses, and identifying the company’s best

market opportunities.

E. benchmarking the company’s strengths and weaknesses against those of key

rivals, identifying its market opportunities and the external threats it faces, and

determining the company’s potential for establishing a competitive advantage over

rivals.

59. Which one of the following is not something that can be gleaned from identifying

a company’s resource strengths, resource weaknesses, market opportunities, and

external threats?

A. How to improve a company’s strategy by using company strengths and

capabilities as cornerstones for its strategy

B. Which market opportunities are best suited to a company’s strengths and

capabilities

C. Which resource weaknesses and deficiencies need to be corrected so as to better

enable the pursuit of important market opportunities and to better defend against

certain external threats

D. How to turn a core competence into a distinctive competence

E. Whether any of the company’s resource strengths can be used to help lessen the

impact of external threats

60. One of the most telling signs of whether a company’s market position is strong or

precarious is

A. whether its product is strongly or weakly differentiated from rivals.

B. whether its prices and costs are competitive with those of key rivals.

C. whether it has a lower stock price than key rivals.

D. the opinions of buyers regarding which seller has the best product quality and

customer service.

E. whether it is in a bigger or smaller strategic group than its closest rivals.

61. Two analytical tools useful in determining whether a company’s prices and costs

are competitive are

A. SWOT analysis and key success factor analysis.

B. SWOT analysis and benchmarking.

C. value chain analysis and benchmarking.

D. competitive position assessment and competitive strength assessment.

E. driving forces analysis and SWOT analysis.

62. A company’s value chain identifies

A. the steps it goes through to convert its net income into value for shareholders.

B. the primary activities it performs in creating value for its customers and the

related support activities.

C. the series of steps it takes to get a product from the raw materials stage into the

hands of end-users.

D. the activities it performs in transforming its competencies into distinctive

competencies.

E. the competencies and competitive capabilities that underpin its efforts to create

value for customers and shareholders.

63. A company’s value chain

A. consists of the primary activities that it performs in seeking to deliver value to

shareholders in the form of higher dividends and a higher stock price.

B. depicts the internally performed activities associated with creating and enhancing

the company’s competitive assets.

C. consists of two broad categories of activities: the primary activities that create

customer value and the requisite support activities that facilitate and enhance the

performance of the primary activities.

D. concerns the basic process the company goes through in performing R&D and

developing new products.

E. consists of the series of steps a company goes through to develop a new product,

get it produced and distributed into the marketplace, and then start collecting

revenues and earning a profit.

64. Identifying the primary and secondary activities that comprise a company’s value

chain

A. indicates whether a company’s resource strengths will ultimately translate into

greater value for shareholders.

B. reveals whether a company’s resource strengths are well-matched to the

industry’s key success factors.

C. is the first step in understanding a company’s cost structure (since each activity in

the value chain gives rise to costs).

D. is called benchmarking.

E. is called resource value analysis.

65. The value chains of rival companies

A. tend to be essentially the same—any differences are typically minor.

B. can differ substantially, reflecting differences in the evolution of each company’s

own particular business, differences in strategy, and differences in the approaches

being used to execute strategy.

C. are fairly similar or fairly different, depending on how many activities are

performed internally and how many are outsourced.

D. can be either fairly similar or fairly different, depending on the extent to which

each company’s primary and support activities are comprised of fixed cost activities

and variable cost activities.

E. are fairly similar except when rival companies have quite different product

designs.

66. The three main areas in the value chain where significant differences in the costs

of competing firms can occur include

A. age of plants and equipment, number of employees, and advertising costs.

B. operating-level activities, functional area activities, and line of business activities.

C. the nature and make-up of their own internal operations, the activities performed

by suppliers, and the activities performed by wholesale distribution and retailing

allies.

D. human resource activities (particularly labor costs), vertical integration activities,

and strategic partnership activities.

E. variable cost activities, fixed cost activities, and administrative activities.

67. Activity-based costing is used to

A. determine whether the value chains of rival companies are similar or different.

B. benchmark the costs of primary value chain activities against the costs of the

support value chain activities.

C. determine the costs of each primary and support activity comprising a company’s

value chain and thereby reveal the nature and make-up of a company’s internal cost

structure.

D. determine the costs of each strategic action a company initiates.

E. None of these accurately describes what activity-based costing is about.

68. Activity-based cost accounting aims at

A. making cross-company comparisons of the costs of each value chain activity.

B. dividing all company expenses into two categories: activities whose costs are

variable and activities whose costs are fixed.

C. determining the costs of each activity comprising a company’s value chain by

establishing expense categories for specific value chain activities and assigning

costs to the activity responsible for creating the cost.

D. determining the costs of each strategic action a company initiates.

E. None of these accurately describes what activity-based costing is about.

69. Activity-based costing

A. is an accounting system that assigns a company’s expenses to whichever activity

in a company’s value chain is responsible for creating the cost.

B. involves using benchmarking techniques to develop cost estimates for the value

chain activities of each major rival.

C. is a powerful tool for identifying the different pieces of a company’s value chain

and classifying them as primary activities and support activities.

D. involves determining which value chain activities represent variable costs and

which represent fixed costs.

E. is a tool for identifying the activities that cause a company’s product to be

strongly differentiated from the products of rivals.

70. Which one of the following provides the most accurate picture of whether a

company is cost competitive with its rivals?

A. How the costs of the company’s internally performed activities (its own value

chain) compare against the costs of the internally-performed activities of rival

companies

B. Costs in the value chains of the company’s suppliers

C. Costs in the value chains of a company’s distributors and retail dealers and

forward channel allies

D. The costs of a company’s internally performed activities, costs in the value chains

of both the company’s suppliers and forward channel allies, and how all these costs

compare against the costs that make up the value chain systems employed by rival

firms

E. Whether the company has a longer or shorter value chain than its close rivals

71. Determining whether a company’s prices and costs are competitive

A. requires looking at the costs of a company’s competitively relevant suppliers and

forward channel allies (distributors/dealers).

B. requires considering the costs of a company’s internally performed activities.

C. involves the use of benchmarking the costs in a company’s value chain system

(the costs of its suppliers, its internally performed activities, the costs of its

distributors/dealers) against the costs of the value chain systems employed by rival

firms.

D. typically involves the use of activity-based cost accounting.

E. All of these.

72. Benchmarking involves

A. comparing how different companies perform various value chain activities and

then making crosscompany comparisons of the costs of these activities.

B. checking whether a company has achieved more of its financial and strategic

objectives over the past five years relative to the other firms it is in direct

competition with.

C. studying whether a company’s resource strengths are more/less powerful than the

resource strengths of rival companies.

D. studying how a company’s competitive capabilities stack up against the

competitive capabilities of selected companies known to have world class

competitive capabilities.

E. comparing the best practices in one industry against the best practices in another

industry.

73. A much-used and potent managerial tool for determining whether a company

performs particular functions or activities in a manner that represents “the best

practice” when both cost and effectiveness are taken into account is

A. competitive strength analysis.

B. activity-based costing.

C. resource cost mapping.

D. SWOT analysis.

E. benchmarking.

74. Which of the following is not one of the objectives of benchmarking?

A. To identify the best practices in performing various value chain activities

B. To learn how best practice companies achieve lower costs or better results in

performing benchmarked activities

C. To help construct a company value chain and identify which activities are primary

and which are support activities

D. To develop cross-company comparisons of the costs of performing specific value

chain activities

E. To take actions to improve a company’s cost competitiveness when benchmarking

reveals that its costs and results of performing an activity are not as good as what

other companies have achieved

75. Benchmarking provides a company with which of the following?

A. Hard evidence of cost competitiveness.

B. Proof of resource availability.

C. A company strategy.

D. Verification of total cost ownership.

E. Improvements to internal processes.

76. The most difficult part of benchmarking is

A. the decision of whether to do it at all.

B. how to gain access to information regarding rivals practices and costs.

C. when to initiate the process.

D. what information to utilize in the analysis process.

E. when to stop the process and move forward with strategy.

77. Which of the following areas within a company’s total value chain system, can

managers improve efficiency and effectiveness?

A. A company’s own activity segments.

B. Suppliers’ part of the overall value chain.

C. The distribution channel portion of the value chain.

D. None of these.

E. All of these.

78. The options for remedying an internal cost disadvantage include

A. investing in productivity-enhancing, cost-saving technological improvements.

B. redesigning the product or some of its components to facilitate speedier and more

economical manufacture or assembly.

C. implementing the use of best practices, particularly for high-cost activities.

D. eliminating some cost-producing activities from the value chain, especially low

value-added activities.

E. All of these.

79. Which of the following is not a good option for trying to remedy high internal

costs vis-à-vis rivals firms?

A. Investing in productivity-enhancing, cost-saving technological improvements

B. Redesigning the product or some of its components to permit more economical

manufacture or assembly

C. Implementing aggressive strategic resource mapping to permit across-the-board

cost reduction

D. Outsourcing high-cost activities to vendors or contractors who can perform them

more economically

E. Relocating high-cost activities (like manufacturing) to geographic areas (like China

or Latin America or Eastern Europe) where they can be performed more cheaply

80. A company’s strategic options for remedying cost disadvantages in internally

performed value chain activities do not include

A. revamping its value chain to eliminate or bypass some cost-producing activities

(particularly low value-added activities).

B. implementing the use of best practices, particularly for high-cost activities.

C. investing in productivity-enhancing, cost-saving technological improvements.

D. switching to activity-based costing.

E. outsourcing the performance of high-cost activities to vendors that can perform

them more cheaply.

81. The options for remedying a supplier-related cost disadvantage include

A. trying to negotiate more favorable prices with suppliers and switching to lower

priced substitute inputs.

B. forward vertical integration.

C. shifting into the production of substitute products.

D. shifting from a low-cost leadership strategy to a differentiation or focus strategy.

E. cutting selling prices and trying to win a bigger market share.

82. Which of the following is not an option for remedying a supplier-related cost

disadvantage?

A. Integrate backward into the business of high-cost suppliers in an effort to reduce

the costs of the items being purchased.

B. Negotiate more favorable prices with suppliers.

C. Collaborate closely with suppliers to identify mutual cost-saving opportunities.

D. Switch to lower priced substitute inputs.

E. Persuade forward channel allies to implement best practices.

83. Which of the following is not an option for remedying a cost disadvantage

associated with activities performed by forward channel allies (wholesale distributors

and retail dealers)?

A. Shifting to a more economical distribution strategy such as putting more emphasis

on cheaper distribution channels (perhaps direct sales via the Internet) or perhaps

integrating forward into company-owned retail outlets

B. Trying to make up the difference by cutting costs earlier in the value chain

C. Pressuring distributors-dealers and other forward channel allies to reduce their

costs and markups so as to make the final price to buyers more competitive with the

prices of rivals

D. Insisting on across-the-board cost cuts in all value chain activities—those

performed by suppliers, those performed in-house, and those performed by

distributors-dealers

E. Working closely with forward channel allies to identify win-win opportunities to

reduce costs

84. A company that does a first-rate job of managing its value chain activities

relative to competitors

A. is likely to have more distinctive competencies than rivals.

B. stands a good chance of achieving competitive advantage by performing its value

chain activities either more proficiently or at lower cost.

C. is almost certainly going to have a longer and more profitable value chain.

D. usually has strong proficiencies in activity-based costing and benchmarking.

E. usually has the fewest primary activities and the lowest costs in the industry.

85. Properly managing the value chain activities in comparison to the rivals

A. is one of the most dependable ways a company can build a competitive

advantage over rivals.

B. allows a company to avoid the impact of the five competitive forces.

C. is one of the best ways for a company to avoid being impacted by the industry’s

driving forces.

D. allows a company to move into a higher strategic group.

E. helps neutralize external threats to a company’s future business prospects.

86. For a company to translate its performance of value chain activities into

competitive advantage, it must

A. develop core competencies and maybe a distinctive competence over rivals and

that are instrumental in helping it deliver attractive value to customers or else be

more cost efficient in how it performs value chain activities.

B. have more core competencies than rivals.

C. have at least three distinctive competencies.

D. have competencies that allow it to produce the highest quality product in the

industry.

E. have more competitive assets than competitive liabilities.

87. To build a competitive advantage by out-managing rivals in performing value

chain activities, a company must

A. position itself in the industry’s more favorably situated strategic group.

B. develop resources strengths that will enable it to pursue the industry’s most

attractive opportunities.

C. develop core competencies and maybe a distinctive competence that rivals don’t

have or can’t quite match and that are instrumental in helping it deliver attractive

value to customers or else be more cost efficient in how it performs value chain

activities such that it has a low-cost advantage.

D. outsource all of its value chain activities to world-class vendors and suppliers.

E. eliminate its resource weaknesses.

88. A resource analysis

A. is often based on cross-department combinations of intellectual capital and

expertise.

B. uses a company’s valuable and rare resource strengths and competitive

capabilities to deliver value to customers that rivals have difficulty matching.

C. is typically based on a stand-alone resource strength such as technological

expertise.

D. refers to a company’s most efficiently executed value-chain activity.

E. uses industry key success factors to provide a company with a core competence

that rivals cannot effectively imitate.

89. Value-creating activities

A. focuses on exploiting a company’s best-executed operating strategy.

B. is based upon efficient performance of the company’s primary value chain

activities.

C. concentrates on minimizing the costs associated with the design of a product or

service.

D. deliberately develop valuable competencies and capabilities that add to a

company’s competitive power in the marketplace.

E. focuses on working with forward channel allies to develop capabilities to outmatch

the capabilities of rivals.

90. The value of doing competitive strength assessment is to

A. determine how competitively powerful the company’s core competencies are.

B. learn if the company’s market opportunities are better than those of its rivals.

C. learn whether a company has a distinctive competence.

D. learn how the company ranks relative to rivals on each of the important factors

that determine market success and ascertain whether the company has a net

competitive advantage or disadvantage vis-à-vis key rivals.

E. determine whether a company’s resource strengths are sufficient to allow it to

earn bigger profits than

rivals.

91. Doing a competitive strength assessment entails

A. determining whether a company has a cost-effective value chain.

B. ranking the company against major rivals on each of the important factors that

determine market success and ascertaining whether the company has a net

competitive advantage or disadvantage versus major rivals.

C. identifying a company’s core competencies and distinctive competencies (if any).

D. analyzing whether a company is well positioned to gain market share and be the

industry’s profit leader.

E. developing quantitative measures of a company’s chances for future profitability.

92. Assigning a weight to each measure of competitive strength assessment is

generally analytically superior because

A. a weighted ranking identifies which competitive advantages are most powerful.

B. an unweighted ranking doesn’t discriminate between companies with high and low

market shares.

C. it singles out which competitor has the most competitively potent core

competencies.

D. weighting each company’s overall competitive strength by its percentage share of

total industry profits produces a more accurate measure of its true competitive

strength.

E. all of the various measures of competitive strength are not equally important.

93. Competitive strength can be determined by assigning measures based on

perceived importance because

A. it provides a more accurate assessment of the strength of competitive forces.

B. it eliminates the bias introduced for those firms having large market shares.

C. the different measures of competitive strength are unlikely to be equally

important.

D. the results provide a more reliable measure of what competitive moves rivals are

likely to make next.

E. weighting each company’s overall competitive strength by the size of its market

share produces a more accurate measure of its true competitive strength.

94. In a weighted competitive strength assessment, the sum of the weights should

add up to

A. 100%.

B. 1.0.

C. 10.

D. 100.

E. None of these.

95. In a weighted competitive strength analysis, each strength measure is assigned

a weight based on

A. its percentage share of total industry revenues.

B. the importance of each competitive strength measure in building a sustainable

competitive advantage.

C. its perceived importance in determining a company’s competitive success in the

marketplace.

D. its percentage share of total industry profits.

E. what it takes to provide better analytical balance between the companies with

high ratings and the companies with low ratings and thus get the sum of the weights

to add up to 1.0.

96. A higher company’s overall weighted strength rating does not signal

A. greater implied net competitive advantage

B. stronger overall competitiveness versus rivals.

C. weaker overall competitiveness versus rivals.

D. possession of competitive advantage.

E. None of these.

97. Calculating competitive strength ratings for a company and its rivals using the

industry’s most telling measures of competitive strength or weakness

A. is a way of determining which competitor has the biggest overall competitive

advantage in the marketplace and which competitor is faced with the biggest overall

competitive disadvantage.

B. is the most reliable indicator of which industry member has the highest overall

product quality.

C. is a powerful way of revealing which competitors are in the best and worst

strategic groups.

D. is the most reliable indicator of which industry member has the lowest overall

costs and is the low-cost leader.

E. pinpoints which industry rivals are most insulated from the industry’s driving

forces.

98. Quantitative measures of a company’s competitive strength

A. signal which competitor has the most distinctive competencies and which

competitor has the fewest.

B. provide useful indicators of how a company compares against key rivals, factor by

factor and capability by capability—thus indicating whether the company has a net

overall competitive advantage or disadvantage against each rival.

C. reveal which competitors are in the best and worst strategic groups.

D. show which industry rival has the best overall market opportunities and which

competitor has the poorest market opportunities.

E. pinpoint which industry rival is subject to the least amount of competitive

pressures from the five competitive forces.

99. Which one of the following is an accurate interpretation of the scores that result

from doing a competitive strength assessment?

A. High scores signal a strong competitive position and possession of a competitive

advantage over companies with lower scores.

B. High scores indicate that a company is a power-user of best practices while low

scores signal minimal or ineffective adoption of best practices.

C. The company with the lowest score has the lowest-cost value chain.

D. The company with the lowest score has the strongest net competitive advantage

over its rivals.

E. High scores indicate which rivals are most vulnerable to competitive attack.

100.Which one of the following is not something that can be learned from doing a

competitive strength assessment?

A. The factors on which a company is competitively strongest and weakest vis-à-vis

key rivals

B. Whether a company should correct its weaknesses by adopting best practices and

revamping the makeup of its value chain

C. Which of the rated companies is competitively strongest and what size

competitive advantage it enjoys

D. Whether a company has a net competitive advantage or a net competitive

disadvantage relative to key rivals (with the size of the advantage/disadvantage

being indicated by the differences among the companies’ competitive strength

scores)

E. Which rival company is competitively weakest and the areas where it is most

vulnerable to competitive attack

101.Calculating competitive strength ratings for a company and comparing them

against strength ratings for its key competitors helps indicate

A. which weaknesses and vulnerabilities of competitors the company might be able

to attack successfully.

B. which competitors are in profitable strategic groups and which competitors are in

unprofitable strategic groups.

C. which competitors are employing offensive strategies and which competitors are

employing defensive strategies.

D. which competitors are likely to make money and which are likely to lose money in

the years ahead.

E. what the industry’s key success factors are.

102.Identifying the strategic issues a company faces and compiling a “worry list” of

problems and roadblocks is an important component of company situation analysis

because

A. without a precise fix on what problems/issues a company confronts, managers

cannot know what the industry’s key success factors are.

B. the “worry list” sets the management agenda for taking actions to improve the

company’s performance and business outlook.

C. without a precise fix on what problems/roadblocks a company confronts,

managers are less clear about what value chain activities to benchmark.

D. the “worry list” helps company managers clarify their thinking about how best to

modify the company’s value chain.

E. these issues and obstacles must be cleared before management can focus clearly

on what is the best strategy for the company to pursue.

103.Identifying the strategy-related issues and problems that company managers

need to address and resolve entails

A. drawing on what was learned from having analyzed the company’s industry and

competitive environment.

B. drawing on the evaluations of the company’s own resources, internal

circumstances, and competitiveness.

C. looking in on what challenges/obstacles/roadblocks the company has to overcome

in order to be financially and competitively successful in the years ahead.

D. developing a “worry list” of “how to…,” “whether to….,” and “what to do

about…..”

E. All of these.

104.Identifying the strategic issues and problems that merit front-burner managerial

attention

A. is accomplished in part by using the results of analyzing the company’s external

environment to help come up with a “worry list” of “how to…,” “whether to….,” and

“what to do about…..”

B. helps set management’s agenda for taking actions to improve the company’s

performance and business outlook.

C. is done in part by evaluating the company’s own internal situation—its resources

and competitive position—to help come up with a “worry list” of “how to…,”

“whether to….,” and “what to do about…..”

D. is done in part as a basis for drawing conclusions about whether to stick with

company’s present strategy or to modify it.

E. All of these.

105.Which of the following is not part of the task of identifying the strategic issues

and problems that merit front-burner managerial attention?

A. Analyzing the company’s external environment

B. Evaluating the company’s own resources and competitive position

C. Surveying a company’s board members, managers, select employees, and key

investors regarding what strategic issues they think the company faces

D. Developing a “worry list” of “how to…,” “whether to….,” and “what to do

about…..”

E. Assessing what challenges the company has to overcome in order to be financially

and competitively successful in the years ahead

106.Which of the following is not accurate as concerns the task of identifying the

strategic issues and problems that merit front-burner managerial attention?

A. It entails drawing upon the results and conclusions from analyzing the company’s

external environment.

B. It entails drawing on the results and conclusions from evaluating the company’s

own resources and competitive position.

C. It entails developing a “worry list” of “how to…,” “whether to….,” and “what to do

about…..”

D. Identifying the strategic issues and problems that the company faces is the first

thing that company managers need to do before starting to analyze the company’s

internal and external environment.

E. Developing a list of what issues and problems that managements need to address

(and to resolve) should always precede deciding upon a strategy and what actions to

take to improve the company’s position and prospects.

Q-1 What are the different Heads of Income according to Income Tax Act ?There are 5 different Income heads. The Income under each head will be charged to Income Tax. Thus the tax will be computed on the basis of total income.

1. Salaries including Allowances, value of Perquisites, Profits in  lieu of salary and Pensions.2. Income from House Property whether residential, commercial or let out.3. Profits & Gains of Business / Profession.4. Capital Gains - Short & Long Term.

Income from other Sources including Bank Interest, Interest on Securities, Lotteries, Cross word Puzzles, Races, Games, Gift received on or after 1-9-2004 in excess of Rs. 50,000 in cash etc. from unrelated persons.

Q-2 Who All Have To Pay Income-Tax ?a. Individual including Non-resident, Hindu Undivided Families (HUF), Bodies of Individuals

(BOI), Association of Persons (AOP) & Artificial Juridical Persons ( such as Deities of Temples) having taxable income exceeding Rs.1,60,000 (Rs. 1,90,000 for Resident Women assesses below 65 Years and Rs. 2,40,000 for Resident Senior Citizens for Asssessment Year 2011-2012)

b. Societies & Charitable / Religious Trusts having taxable income exceeding Rs.1,60,000.c. All Partnership Firms irrespective of their Income.d. Co-Op. Societies irrespective of their Income.e. All Companies irrespective of Income.f. Local Authorities like, Panchayats, Municipal Corporation etc.

Q-3 How Income-Tax Will Be Charged By The Income Tax  Department ?Income Tax is charged on 5 different heads. Aggregate of taxable income under each head of income is known as Gross Total Income and

so Taxable Income = Gross Total Income - Allowance Deductions.

Deduction of Expenditure :

In computing income under various heads, deduction is allowed towards expenditure incurred in relation to earning the income. However, no deduction shall be allowed  in respect of expenditure incurred in relation to incomes exempt from tax.

Computation of Gross Total Income :

It is the aggregate of incomes under various heads of income calculated after set-off of unabsorbed depreciation/loss, carried forward from earlier years.

Set-off and Carry Forward :

Set-off means adjustment of certain losses against the income under other sources / heads. Carry forward implies carrying forward of certain losses for set-off in subsequent years.

Total / Taxable Income :

Total / Taxable Income is computed after deducting permissible deductions under section 80A to 80U, from the Gross Total Income.

Where the Gross Total Income of the Assesses includes Short-Term Capital Gains from transfer of equity shares / units of an equity oriented mutual fund subject to Securities Transaction Tax or any Long-Term Capital Gains, then no deduction shall be allowed against such Capital Gains.

On this Taxable Income, Income Tax will be calculated as per the applicable rates

Q-4 Meaning of Assessment Year & Previous Year :Assessment Year : [ Sec. 2 (9)]“ Assessment Year” means the period of 12 months commencing on the 1st day of April every year.

In India, the Govt. maintains its accounts for a period of 12 months i.e. 1 st April to 31st March every year. As such it is known as Financial Year.  The Income Tax department has also selected same year for its Assessment procedure.

The Assessment Year is the Financial Year of the Govt. of India during which income a person relating to the relevant previous year is assessed to tax. Every person who is liable to pay tax under this Act, files Return of Income by prescribed dates. These Returns are processed by the Income Tax Department  Officials and Officers. This processing is called Assessment. Under this Income Returned by the assessee is checked and verified.

Tax is calculated and compared with the amount paid and assessment order is issued. The year in which whole of this process is under taken is called Assessment Year.

At present the Assessment Year 2010-2011 ( 1-4-2010 to 31-3-2011) is going on.

Example- Assessment year 2008-09 which will commence on April 1, 2010, will end on March 31, 2011.

Previous Year : [ Sec. 3 ]As the word ‘Previous’ means ‘coming before’ , hence it can be simply said that the Previous Year is the Financial Year preceding the Assessment Year  e.g. for Assessment Year 2008-2009 the  Previous Year should be the Financial Year ending 31st March 2008.

Previous Year in case of a continuing Business :

It is the Financial Year preceding the Assessment Year. As such for the assessment year 2008-2009, the Previous Year for continuing business is 2007-2008 i.e. 1-4-2007 to 31-3-2008.

Previous Year in case of newly set up Business :

 The Previous Year in case of newly started business shall be the period between commencement of business and 31st March next following . e.g. in case of a newly started business commencing its operations on Diwali 2007, the Previous Year in relation to Assessment Year 2008-2009. shall be the period between Diwali 2007 to 31 March 2008.

Previous Year in case of newly created source of income :

In such case the Previous Year shall be the period between the day on which such source comes existence and 31st March next following.

Sl. No.

Income Section Previous Year

1. Cash Credit [68] Financial Year in which found to be entered.2. Unexplained Investment [69] Financial Year preceding the Assessment Year3. Unexplained Bullion, Cash,

Jewelley[69A]

Financial Year in which found in the possession of the assessee.

4. Partly explained Investment [69B] Financial Year in which Investment was made.5.

Unexplained Expenditure [69C]Financial Year in which expenditure was incurred.

6. Payment of Hundi, Money in Cash

[69D]Financial Year in which such payment was made.

Q-5. Income earned against the following Investments are totally Tax-FREE !

1. Dividend received on Shares, Equity Oriented Funds of UTI & other Mutual Funds.2. Interest received on 6.5%,7%,8%,8.5%  & 9% RBI Tax3. Free Relief Bonds.4. Interest on PPF/GPF/EPF5. Any amount received from Life Insurance against insurance policies (except on Jeevan Aadhar, Key-

man    Insurance, Jeevan Dhara, Jeevan Akshay, New Jeevan Dhara & New Jeevan Akshay & similar other policies of Private Life Insurers).

However, from F/Y 2003-2004 Premiums exceeding 20% of the SA, in any year, will not enjoy Tax Free  Return u/s 10 (10 D) (except on death).6. Long Term Capital Gain earned on Sale of listed securities (Shares)

A person is a being, such as a human, that has certain capacities or attributes constituting personhood, which in turn is defined differently by different authors in different disciplines, and by different cultures in different times and places. In ancient Rome, the word "persona" (Latin) or "prosopon" (πρόσωπον: Greek) originally referred to the masks worn by actors on stage. The various

masks represented the various "personae" in the stage play.[1]

As`sess`ee´n. 1. One who is assessed                Is called assesse

income  

Definitions (4) 1. The flow of cash or cash-equivalents received

from work (wage or salary), capital (interest or profit), or land (rent).

2. Accounting: (1) An excess of revenue over expenses for an accounting period.

Also called earnings or gross profit. (2) An amount by which total assets increase in

an accounting period.

3. Economics: Consumption that, at the end of a period, will leave an individual with

the same amount of goods (and the expectations of future goods) as at the

beginning of that period. Therefore, income means the maximum amount an

individual can spend during a period without being any worse off. Income (and not

the GDP) is the engine that drives an economy because only it can create demand.

4. Law: Money or other forms of payment (received periodically or regularly)

from commerce, employment, endowment, investment, royalties, etc.

3.winning strategy

In set theory, a branch of mathematics, determinacy is the study of under what circumstances one or the other player of a game must have.

4 key success factorsDefinition The combination of important facts that is required in order to accomplish one or

more desirable business goals. For example, one of the key success factors

in promoting animal food products might be to advertise them in a way

that appeals to those consumers who love animals

5

Definition of 'Backward Integration'A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it will result in improved efficiency and cost savings. For example, backward integration might cut transportation costs, improve profit margins and make the firm more competitive.

By way of contrast, forward integration is a type of vertical integration that involves the purchase or control of distributors.

backward integration  

Definition

Type of vertical integration in which a consumer of raw materials acquires

its suppliers, or sets up its own facilities to ensure a more reliable or cost-

effective supply of inputs.

strategic visionDefinition Ideas for the direction and activities of business development. Generally included in

a document or statement so all company managers can share the same vision for

the company and make decisions according to the shared principles and company

mission.

Big Business

SME

Sole Trader

Strategic group mappingA mechanism for understanding the other players that operate in your fieldThe big idea

Strategic group mapping is a technique for looking at your position in your sector, field or market. Hunt coined the term ‘strategic group’ in 1972 when he noticed sub-groups of businesses with similar characteristics in the same market. Michael Porter then expanded the concept in the 1980s. There are a number of benefits to strategic group mapping:

It can help you identify who your direct and indirect competitors (or possible partners) are

It can illustrate how easy it might be to move from one strategic group to another

It may help identify future opportunities or strategic problems

It ensures you take your customers’ or beneficiaries’ views into account when developing or assessing your strategy

sustainable competitive advantage

Competitive advantage is a position of a company in a competitive landscape that allows the company earning return on investments higher...

Sustainable Competitive AdvantageCompetitive advantage is gained when a firm acquires attributes that allow it to perform at a higher level than others in the same industry.

Vertical integration describes a company's control over several or all of the production and/or distribution steps involved in the creation of its product or service.

strategic intentDefinitionA readily grasped declaration of the course that the management

plans on taking the company in over some future time frame

a business needs to be easily understood by every member of the firm so that

all staff can be working toward a consistent overall goal

Which of the following are common shortcomings of company vision statements?Answer:

They do not provide direction to decision makers when faced with product/market choices.

B. They are not motivational.C. They are too broad and do not rule out any opportunity management might wish to pursue.D. They are externally focused instead of having an internal focus.

Strategic Management Process - Meaning, Steps and Components

The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

Strategic Management Process - Meaning, Steps and Components

The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

SUCCESS FACTORS

Some managers use the phrase "key success factors" to refer to those competitive factors that are most important to the industry in question.

Some managers prefer to get at the same issues by asking: What makes the difference between success and failure in this business? Unfortunately, this type of assessment often becomes a simple exercise in developing lists.

Key success factors are those few critical or strategic factors that mean the difference between success and failure. Insightful conclusions are preferred over

long lists. Key success factors will vary from industry to industry, but within an industry each

factor becomes a challenge to all firms competing for the same market.

Key success factors generally include exceptional management of several of the following:

Product design

Market segmentation

Distribution ad promotion

Pricing

Financing

Securing of key personnel

Research and development

Production

Servicing

Maintenance of quality/value

Securing key suppliers

Strategy, Strategic Advantages And Competing On Business Capabilities Part 1:  The External Environment and Strategy Formulation - By Matt Kermode

« Futures Trading And The Transfer Of Risk - By Matt Kermode

Options Trading And How They Can Reduce Risk - By Matt Kermode »

What is strategy and why is it important?

Johnson and Scholes (2006) define strategy as

“the direction and scope of an organization over the long-term: which

achieves advantage for the organization through its configuration

of resources within a challengingenvironment, to meet the needs

of markets and fulfill stakeholderexpectations”.

Deconstructing the sentence provides insight into the meaning of this

definition.

1.   Strategy selects the direction of the organization.  In other words,

strategy plots the course for the future of the business.

2.  Strategy selects the markets in which the business will compete and

the activities it performs (scope).

3.  Strategy focuses on how the business will perform better than the

competition (advantage).

   4.  Strategy determines what resources (skills, assets,

finance, relationships, technical competence, facilities,

people) are required to compete in the market

(resources).

   5.  Strategy manages the external factors that affect the

business (environment).

   6.  Finally, strategy is a guide used to meet the needs of

those who have a vested interest in the organization such

as investors, shareholders, employees, suppliers, and the

community (stakeholder).

Why is strategy important?  The business environment can be thought of

as a chess tournament.  You might be able to win a few games without

having a strategy.  However, there are grandmasters in the tournament,

just as there are strong players in the marketplace.  In order to compete

and win, you need a good strategy.  Similar to chess, your strategy will

depend on your competitors moves.

Organizations rely on the judgments of employees to perform activities

that benefit the company.  Strategy provides a framework that guides the

decision-making process.  An organization that does not singularly focus

on aligning decisions with strategy will eventually be outcompeted by

one that does.  The lack of focus results in inefficiencies, lower profits,

and higher costs.

Formulating a strategy

 “Insightful analysis of a company’s external environment is a

prerequisite for crafting a strategy that is an excellent fit with the

company’s situation, is capable of building competitive advantage, and

holds good prospect for boosting company performance – the three

criteria of a winning strategy” (Gamble, 2010).   Analysis of a firm (or

potential firm) revolves around seven questions.

       What are the industry’s dominant economic features?

Answering this question requires considering eleven factors: market size

and growth rate, number of rivals, geography of competitive rivalry,

number of buyers, degree of product differentiation, speed of product

innovation, supply and demand conditions, pace of technological change,

vertical integration, economies of scale, and learning curve effects.

   What kinds of competitive forces are industry members

facing, and how strong is each force?

The standard analytical framework used to answer this question is the

five forces model of competition.

The answers to these questions will help determine the

attractiveness of new markets and what strategies to

employ in existing ones.  For example, if I am building a

time machine in my basement I will need a flux capacitor

(obviously).  However, if there is only one company that

supplies this product; they have a strong bargaining

position. Suppliers hold a strong position when: (1)

suppliers are concentrated, (2) too few goods are chased

by too many buyers, (3) a supplier's goods are unique or

highly differentiated with few or no substitutes, (4)

suppliers are forward integrated, and/or (5) high costs are

involved in switching from one supplier to another.

Suppliers in these positions can demand a premium for

their products.

Upon completion of the time machine, if Doc Brown and

Marty McFly are the only people interested in my time

machine, they have a very strong bargaining position.

More specifically, buyers tend to have power when: (1) the

buyers are concentrated or organized, (2) their purchases

represent a large part of the supplier's revenue, (3) their

purchases represent a large part of their own costs or, (4)

there are too many suppliers chasing too few buyers.

The threat of substitute products is another consideration.

One consideration is how easy is it to replicate the

product.  If Bill and Ted can build a time machine to go on

an excellent adventure, my product must easy to

replicate.  Furthermore, how will partial substitutes affect

revenues?  If I am using my product to sell time tourism,

will flights to the Orion Nebula affect sales?  One way to

protect yourself from substitutes is branding. There are

many MP3 players on the market, but the iPod dominates

the market share.

 Finally, one must consider the treat of new entrants.  The

main consideration in this segment of the analysis is

determining the barriers to entry.  A barrier to entry in the

time travel business is a throughout understanding of

string theory and quantum gravity.  More common

barriers to entry are: (1) heavy advertising expenditures

to get a foothold in the market, (2) economies of scale,

necessitating heavy investment in large plants to achieve

competitive pricing, (3) restricted access to distribution

channels, (4) well established brands, and/or (5) fierce

competition.

What forces are driving industry change and what impact

will these changes have on competitive intensity and

industry profitability?

 The most powerful change agents are driving forces.  The most common

driving forces are: changes in an industry’s long-term growth rate,

globalization, new internet capabilities and applications, product

innovation, technological change and manufacturing process innovation,

marketing innovation, entry or exit of a major firm, buyer preference

shifting towards product customization, reductions in industry uncertainty

and business risk, government policy change, and evolving societal

concerns, attitudes, and lifestyles (Gamble, 2010).  It is imperative to

grasp how the driving forces are interacting.  Specifically, are these

forces conjointly creating an environment that is increasing demand,

competition, and/or profits or are they decreasing these factors?

   What market positions do industry rivals occupy – who is

strongly positioned and who is not?

The best practice for answering this question is to use the strategic group

mapping technique.  This technique compares the market positioning of

different firms, or strategic groups.  It is most useful when there are

numerous firms competing in an industry and in-depth analysis is not

pragmatic.  It is important to define the x and y-axis in terms of value-

propositions.  As a rule of thumb, the closer the firms are on the map, the

more competitive the rivalry.  A gap in the map may be a market to

exploit.

 What strategic moves are rivals likely to make?

Answering this question this question requires gather business

intelligence.  It is important to monitor competitors’ press releases and

financial statements.   In addition, it is prudent to analyze competitors’

strengths and weaknesses and determine which firms are likely to

increase or decrease their market share.  Evaluation of these factors

requires analyzing why the competition is poised to do better or worse

than rivals.  Are they driving forces affecting a strategic grouping?  Has

the competition’s strategy resulted in competitive advantages or

disadvantages?  Does the competition have the resources and adaptability

to compete in the changing environment?

Predicting the competitions’ actions requires careful analysis.  However,

there are two principle components that increase the probability of

accurate predictions.  The first is the rivals’ financial position. 

Financially sound organizations have the resources to explore a greater

number of options.  Financially weak organizations may be prone to try

something drastic.  The second component is incentive.  Which

organizations have strong incentive to expand to new geographic regions,

acquire competitors, or move to new markets?  In other words, how much

growth are investors requiring?

What are the key factors for future competitive success?

“An industry’s key success factors (KSFs) are those competitive factors

that most affect industry members’ ability to proper in the

marketplace…” (Gamble, 2010).   KSFs are of primary importance to all

members within the industry.  For example, KSFs for the Smartphone

industry are design, and production costs.  Poor design and high

production costs will inevitably lead to losses.  There are three questions

that can generally determine an industry’s KSFs.   What are the criterion

buyers use to choose between competing sellers?  What resources and

competitive capabilities are essential for success in the industry?  What

factors will put organizations at a competitive disadvantage?  It is rare

that there are more than 5 or 6 KSFs for an industry.

KSFs and sound strategy are inextricably linked.  Strategy should focus

on being good at all the industry’s KSFs and great at 1 or 2.  Companies

that are better at distinct KSF than their rivals almost always enjoy higher

market share and a competitive advantage.

Does the outlook for the industry offer the company a good opportunity

to earn attractive profits?

The final question requires integrating the information from all the

preceding analyses and formulating an informed opinion.  However, there

are certain questions that are more important than others.  For example,

does the industry have growth potential?  Are there driving forces that are

increasing or decreasing industry profitability?

These 7 questions are a necessary prerequisite to the formation of a sound

strategy that will result in competitive advantages.  Because the external

environment is dynamic, constant re-evaluation of these questions is

required to be assured your strategy has not become obsolete.  The

pinnacle of sound strategy is the development of sustainable competitive

advantages.  Competitive advantages and competing on business

capabilities is discusses in article 2.