Questions and Answers on Company's Strategic Management

The difference between a company's mission statement and its vision statement

The mission statement concerns the present business scope and purpose, whereas the vision statement concerns the long term direction and future business make-up.

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A company's business model

It's the economic logic explaining how the company's strategy can deliver value to its customers and profitability to its owners.

Which of the following statements about a company's strategy is false?

A company's strategy is chosen within a narrow range of strategic options since all industry competitors face the same market conditions and competitive pressures and, therefore, have to cope with them using similar strategies.

Which one of the following most strengthens the rivalry among currently competing sellers?

buyer demand is growing slowly and buyers have low switching costs

Which one of the following factors is not a relevant consideration in judging whether the bargaining power of buyers is relatively strong or weak?

whether buyers have high or low switching costs

The competitive threat posed by substitute products is most weakened when

buyers' costs of switching to substitute products are low and substitute products are not readily available.

Which of the following is not a reason that currently competing sellers are often motivated to enter into strategic partnerships with key suppliers

to reduce bargaining power of buyers

Which of the following is not a potential resource weakness?

higher overall unit costs than rivals

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

a core competence refers to an activity that a company performs well and is central to its profitability, while a distinctive competence refers to an activity that a company performs better than its rivals

For a particular company resource strength or capability to qualify as a basis for competitive advantage, it should

be hard for rivals to copy and not be easily trumped by the different resource strengths or capabilities of rivals

Three areas in the value chain where lower costs can be the basis for competitive advantage are

supplier-related activities, manufacturing-related activities, and distribution-related activities

The most important differences among generic competitive strategies of different companies relate to

whether they target the market broadly or narrowly and whether they seek competitive advantage based on cost or differentiation

Focused strategies involving either low-cost or differentiation are especially appropriate when

most rival companies are also employing focused strategies involving either low-cost or differentiation

The pitfalls of a differentiation strategy include

a, b, and c

Suppose that a company's IFE Matrix score is 2.74. What is the minimum EFE Matrix score that would justify a Grow & Build strategy?

3.76

3.26

2.26

1.26

0.76

A winning strategy is one that

fits the company's internal and external situation and builds sustainable competitive advantage

Complete the following External Factor Evaluation (EFE) Matrix.

Company: ABC Company

Industry/Market: Thingamabobs

Weight Response Rating Weighted Score

Opportunities

Factor A .08 Below average 2.0 0.16

Factor B .26 Above average 3.0 0.78

Factor C .15 Poor 1.0 0.15

Threats

Factor D .21 Above average 3.0 0.63

Factor E .18 Superior 4.0 0.72

Factor F .12 Below average 2.0 0.24

Totals 1.00 2.68

Suppose that a company's IFE Matrix score is 3.14.

What is the range of EFE Matrix scores consistent with a Grow & Build strategy?

2.5- 3.14

What is the range of EFE Matrix scores consistent with a Hold & Maintain strategy?

3.14- 4.0

What is the range of EFE Matrix scores consistent with a Harvest or Divest strategy?

1.0-2.5

Discuss the challenges facing Company A that stem from having to compete against both Company Y and Company Z.

The CEO of Company A finds it problematic to implement the best-cost provider strategy since both Company Y and Company Z have a competitive strategy to cub company A. Executives offering low prices in their firms are not contented on competing based on low prices and goods with unique features. These unique features raise the firm's costs and are difficult to maintain in the long run. Product development and advertisement drive the cost associated with these products up. Moreover, customers may not be enticed by these unique features. However, companies that manage to install best-cost driver always turn up to be very successful. Company A set out to become best cost provider by providing low cost. However, company Y seeking to be unique by providing unique features in products poses a challenge to company A. Buyers perceive company's Y products as having satisfactorily met their needs as opposed to going for products which are offered at a lower price. Company Z, however, has the best low-cost provider strategy therefore, giving the company a run for their money. By uniquely putting low costs for their products, the management has to act fast.

Identify at least three strategic options that will enable you to strengthen your competitive position with Company Y and/or Company Z.

Outsourcing Strategy

This will entail withdrawing from certain value chain activities and allowing external contractors to supply products, support services and other fictional services needed. While dealing with company Z broad differentiation, company A will alternatively outsource their raw materials and other products. Cost saving is incurred and company A will deal with more pressing issues of advertising their products. Company A will therefore, be in a position to offer low cost to their products to counter the effect of Company Z offering low cost. By outsourcing their products at a cheaper price, company A will save on cost and will have strategized on their products which are being offered in the market. Changing environment for technology and buyer preference is catered for. Speed in decision making is enhanced and coordination cost is reduced.

Merger and Acquisition Strategy

This entails alliances, to providing firms with desired resources. This leads to more market share and provides geographic coverage. By merging firms, company A will benefit with new products and new ideas to be injected into the business. Company A will be in a better position to cope with the threats posed by company Y. Advancement in technology and new product categories will provide the much-needed customer base to counter company Y. Although merger and acquisition have some pitfall like loss of decision making and retrenchment of some employees, it's a good measure to cub Company Y.

Vertical Integration Strategy

The main objective is to extend the firm's competitive advantage given the same industries. It has two main objectives, backward sources of supply and forwards to buyers of the products. Backward integration will reduce suppler competitive pressures and improve technology capabilities. Backward integration will bring in the expertise needed to produce differentiation- based competitive advantage. Forward integration will foresee market visibility which will reach a lot of customers. This will break the normal distribution channels and favor direct sales, thereby improving profit margins by greater percentages. Disadvantages of vertical integration are; it requires strong changes in skills and extended capabilities thereby incurring heavy costs in the process.