Strategic Management Exam Questions
Question 1 – Strategic Management
Strategic management is an ongoing process that entails planning, monitoring, evaluation, and analysis of different aspects required to meet organizational goals and objectives. Before the 1940s, strategy was mostly applicable in the military, with leaders contemplating effective offensive and defensive moves to counter their enemies. It became evident that the same concept was applicable in the business setting, resulting in the development of strategic management. According to McKiernan (2017), there were five phases in the evolution of strategy including budgeting, extrapolation, planning, management, and complex systems.
History and Development
In the 1950s, business managers started synthesizing financial changes into the budgeting process to support strategic objectives. Extrapolation emerged in the 1960s, and it encompasses elements of growth and diversification within the organizational setting. Several linear approaches emerged during this phase including operations research and game theory. Strategic planning thrived in the 1970s as more organizations started focusing on external forces impacting their sustainability. However, there was a need to make adjustments to strategic planning as it provided mixed results. This resulted in the development of strategic management as the fourth phase. Strategic management was more comprehensive with emphasis on the internal and external environments. Complex systems emerged as a suitable response to understanding the competitive environment and establishing a suitable equilibrium between planning and other concepts of management (McKiernan, 2017).
Alignment within the VVMOST Concepts
Achieving strategic alignment requires a clear comprehension of the VVMOST (values, vision, mission, objectives, strategies, and tactics). The management collects all information regarding their organizational structure and culture, and trains employees on how to meet the set goals effectively. It is also vital to determine the impact of learning on the achievement of specific objectives in line with the strategic vision. Additionally, documenting the learning and development process enables organizations to identify best practices and areas that require improvement. The learning process should fit into the overall business plan, with emphasis on identifying key issues and solutions in the business environment.
Corporate Governance and Evaluation of Strategic Options using SHA
Stakeholders play an important role in impacting organizational strategy particularly in terms of corporate governance. This concept guarantees that firms, under the guidance of directors and managers, operate in the best interest of its shareholders. An effective corporate governance framework ought to reduce agency costs while resolving problems pertaining to the separation of control and ownership (Bottenberg, Tuschke, & Flickinger, 2017). Organizations need to incorporate different strategies to align or control the objectives and interests among stakeholders. One such approach entails strengthening stakeholders’ rights thereby giving them the privilege of monitoring management procedures. Another strategy entails incorporating indirect corporate control similar to the methods used by capital markets or managerial labor markets. With such influence, stakeholders can contribute to the development of suitable strategies both directly or indirectly.
Complexities of Strategic Decision-making
Strategic decision-making can be a challenging endeavor as there are several aspects and individuals involved. There might be a lack of clarity in the level of decision-making particularly when the conclusion requires input from various stakeholders. People tend to have differing opinions or suggestions regarding a project, and it may be difficult to come to one conclusion within a given timeframe. On occasion, decisions require to be made promptly, and the organization might overlook important data or opportunities. An example of this is when developing a new product for the market. There are several factors to consider ranging from consumer market, pricing, promotion strategies, and risk assessment. These decisions require comprehensive research which often takes time. Additionally, the organization would have to amend its plan progressively as they gain further insights on external factors.
Ways of Considering and Developing Strategies
When developing a strategy, it is essential to conduct extensive research on the organization, its industry, and the market in general. This also entails analyzing past performances, the current situation, and the potential future. The organization should also develop mission and vision statements that would help in guiding the process of strategy development. These statements outline the objectives, purpose, and values for the company, ultimately providing a framework for how a strategy can be incorporated. Another approach would involve evaluating what other companies and competitors are doing. This method can help to identify potential weaknesses and how they can be mitigated to provide the organization with a competitive edge.
Structured Design Approach
The structured design approach is a process-oriented strategy that centers on the framework within which organizations determine their communication processes and management authority. It entails various aspects including responsibilities, duties, and policies within the organization. There is a need to integrate the strategy with the organizational structure to guarantee the achievement of the mission and goals. Typically, this approach requires breaking down a complex project into manageable modules to guarantee efficiency. It is mostly applicable in large-scale projects involving extensive coordination between different teams in an organization and in other systems. As such, organizations get to benefit from a structured design as there is better communication among teams and efficient coordination. Companies need to develop suitable structures during the planning process and they should factor in the type of management and the type of business being conducted.
Question 2 – Identifying Opportunities and Threats
Opportunities are the suitable external conditions that provide a competitive advantage to an organization. Conversely, threats are the detrimental factors that might affect overall success. It is important to identify threats and opportunities for an organization to gain clear insight into their external environment and how to mitigate potential risk. One way of recognizing these aspects is by analyzing the economic and market trends through time. The company should determine if the market is expanding or shrinking, and how to use it to their advantage. Organizations can also evaluate their funding and any cash flow changes to determine potential investments. This also entails examining if particular revenue streams are within or out of the company’s control. In other instances, it may be necessary to gain political support based on the industry and the government regulations. If there is a shift in political impact, this might affect the company either positively or negatively. Companies also need to consider their business relationships and the changing consumer needs.
The PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) framework is useful in the assessment of the macro-environmental factors impacting an organization. Political factors refer to the extent to which a government is involved in the economy. These factors include foreign trade policy, political stability, labor laws, tax policy, and trade restrictions among others. Economic factors determine an organization’s profitability across geographical borders. They include interest rates, disposable income, economic growth, inflation, and exchange rates. On the other hand, social factors relate to the cultural aspects such as beliefs, values and attitudes within a community. Companies need to evaluate these factors as they highlight consumer needs and they include consumer behavior, career attitudes, age distribution, and population growth.
Technological advancements are rapidly taking over the global market, and organizations need to understand how they might be affected. These factors pertain to the production process, distribution, and communication within and out of the organizational setting. Environmental conservation is currently at the forefront of corporate social responsibility, and companies need to understand their role in pollution and conservation. They should also determine their compliance with environmental regulations both nationally and internationally. Legal factors impact the internal and external business environment. Internally, the company should assess their compliance with health and safety issues, employment laws, and equal opportunities. External issues include product labelling, consumer rights, product quality, and advertising standards.
Many companies apply the PESTEL framework as it is cost-effective and straight-forward. As such, it is useful when making fast decisions. It also sheds light into the direct and indirect factors affecting the organization, thereby providing a more comprehensive picture. The tool is also applicable in different contexts such as departments, an entire organization, or the industry at large. However, it also presents some challenges. For one, it may be difficult for an organization to anticipate potential technological changes that might affect profitability. Its simplicity makes it insufficient as it may be necessary to have a more in-depth assessment of the surrounding factors. Additionally, it only focuses on the external environment and as such, it is difficult to understand their interrelationship with internal factors.
Strategic Group Analysis
This framework focuses on identifying and evaluating organizations that have similar foundations, strategies, and tactical characteristics. Using this approach, a company can evaluate their competitive dynamics along with the underlying factors affecting profitability. Strategic group analysis characterizes a company’s strategies in comparison to those of its competitors. Broad strategic dimensions are implemented to differentiate players into groups based on project issues, profitability factors, and the industry structure. A common example of SGA used in organizations is the extent of geographic reach. Companies can determine how they compare to their competitors in the market, thereby being able to make necessary adjustments.
SGAs are beneficial as they evaluate the strategic shifts and dynamics within the industry, thereby providing a clear picture for the organization. They also define the underlying advantages that a company has against its competitors, and helps in evaluating how to exploit their differences. Using SGAs can be instrumental in developing future strategies based on the market and the firm’s profitability. However, it may be difficult to understand competitors’ strategies or goals, along with the mobility barriers. Additionally, finding useful dimensions presents a challenge that requires persistent trial and error, an aspect that might be time-consuming.
Porter’s Five Forces
These forces include buyer power, supplier power, threat of new entrants, threat of substitution, and competitive rivalry. Buyer power is the influence that the buyer has on the prices set by an organization. Critical factors to consider include market size, consumer needs, and the capacity of the organization to meet these needs. Supplier power relates to the economic ability of the suppliers to change their prices. Companies need to determine the number of suppliers, the uniqueness of their products, and the cost of changing services. The threat of new entrants is determined by the factors that might facilitate or prevent competition in the market. Organizations also need to evaluate their competitive rivalry to determine their advantage and their position in the industry. Furthermore, they need to assess their possibility that consumers can substitute their product for other alternatives in the market.
Question 3 – Identifying Strengths and Weaknesses
An organization’s strengths are the internal factors influencing the profitability of an organization. They may include strong leadership, suitable working conditions, or high integrity. Conversely, weaknesses are the factors inhibiting the achievement of organizational goals such as poor customer service, process inefficiency, and poor employee attitudes. Organizations require identifying these factors early enough to have a clear comprehension of how to exploit their strengths to mitigate their weaknesses. Typically, the strengths and weaknesses are identified when a company is trying to launch a new product, expand its business internationally, or introduce new products into the market. There are different tools and frameworks used in decision-making to this extent including, valuable, rare, imperfectly imitable, non-substitutable (VRIN), resource-based view, and other generic strategies.
This analytical framework is particularly useful in evaluating a company’s resources and how they can be used to gain a competitive advantage. If a company is aware of its resources, it is easy to understand its strengths and limitations. The technique assesses the value of the company’s capital and raw material in terms of cost and availability in the market. If the costs are too high, it may be necessary to outsource. It also evaluates the rarity in terms of competitive conformity. Rare resources might be expensive to procure, but they might provide a long-term competitive advantage. Imitability relates to the ability of competitors to utilize the same resource or other substitutes. If the resource is easily imitable, the company might lose its market share. Non-sustainability pertains to the competence of an organization to effectively utilize its resources while maintaining low production costs and suitable profit margins.
VRIN analysis presents a significant advantage as it is easily applicable in different contexts within an organization. It is useful in determining new suppliers and in exploring cost-efficient approaches in the production process. The model helps in the identification of untapped potential that an organization can exploit to develop a sustained competitive advantage. Nevertheless, there are some challenges with using this approach. For example, it can be ineffective in smaller businesses as they might lack the capabilities or resources to identify their competitive edge. Additionally, its rigidity prevents organizations from anticipating changes in the market over the long term. To mitigate these disadvantages, it is vital to use this technique with another tool such as the PESTEL analysis.
This managerial framework is also convenient in determining the resources available to a company in the achievement of a sustainable competitive advantage. It assesses and interprets the internal resources while emphasizing an organization’s capabilities within the industry. Proponents of this tool argue that it is more practical to use internal resources to exploit external opportunities rather than acquiring new skills. As such, resources have the highest priority in improving organizational performance. Companies need to assess their tangible and intangible resources to identify their strengths and weaknesses. Tangible resources are the physical properties such as land, capital, and equipment. They offer a limited advantage as they are easily available and rivals can acquire similar assets. Intangible resources are assets without a physical presence under a company’s ownership. They include intellectual property, trademarks, and brand reputation. These assets are developed or acquired over time, and provide a better advantage as they are not readily available.
RBV is beneficial as it can be manipulated to meet the needs of any industry. It also provides a comprehensive overview of available resources and untapped income for the organization. However, the broad definitions of resources make it difficult to determine how far an analysis should go. Certain resources are subjective, and evaluating their value can present a challenge. To add on, this model does not factor in other important factors influencing performance and growth such as strategic planning and regulatory policies. Another mitigating aspect is that emerging trends and technologies might affect a company’s key resources.
Value Chain Analysis
The goal of value chain analysis is to identify the most valuable activities and those that require further improvement to achieve organizational goals. Porter’s value chain model outlines the primary activities to include operations, services, inbound logistics, marketing and sales, and outbound logistics. The support activities are human resource management, technology, procurement, and firm infrastructure. Current business dynamics mainly dictate that organizations should derive their competitive advantage from innovative strategies and technological improvements. Consequently, the most important aspects to consider in developing a differentiation advantage are research and development, information systems, and general management. Cost advantages mainly stem from primary activities where it is easy to identify the cost and management of each task.
Companies can use this framework to evaluate their primary activities, ultimately creating efficiencies that can boost their profitability. They can also identify redundant tasks early enough, and find suitable solutions for improving their production process. However, companies can lose sight of their overall strategy and vision when their operations become segmented. Each department would focus on their value and how they could improve themselves. As a result, it might affect collaboration and cohesion within the organization, leading to a decline in productivity.
4– The Critical Importance of Corporate Parents
An interesting thing about being a parent is a person can choose from a great variety of strategies that they can utilize to raise their children. At the same time, it is possible to identify numerous common features from one parent to another. Actually, the similarities between parents are so many that researchers have opted to categorize parents into various categories. A parenting approach refers to the combination of techniques and strategies that a person uses to raise their children. Likewise, the concept of parenting exists in business where the parent company must offer adequate support, form resources and ensure they have the suitable environment to enable the business grow. Corporate parenting refers to a situation where a company takes control in the operations and interests of another firm. The parent company can either be the hands-off or hands-on proprietors of the organisation’s subsidiaries, but this would depend on the magnitude of managerial oversight offered to leaders in the subsidiaries. Corporate parenting usually becomes a reality when an organisation develops other subsidiaries or through mergers and acquisitions (M&As). Some of the leading parent companies in the UK include Tesco, HSBC Holdings, Uniliver, BP and Shell among others.
Corporate parenting has some merits and demerits that businesses under such structures must understand to perform operations without much inconveniency. An advantage with corporate parenting is that companies are likely to enjoy the stronger brand image of the parent company. Franchises, for example, already gain a stable business image even before they commence marketing because of their partnership with the parent company. Additionally, a wide consumer base may already exist for the goods and services that the companies sell, and it is apparent that the preexisting strong image about the brand company may benefit the subsidiaries or groups serving under the parent firm. The other benefit of corporate parenting is the other firms have the opportunity to receive guidance for running the business, which results in a more stable outcome. The parent company in this instance offers a blueprint for becoming successful, as well as having access to knowledgeable information. Corporate parenting, however, has some limitations that would mostly harm the firms functioning under the parent company. The franchisor, for example, must pay some share of the profit to the parent company for benefiting from the guidance and the brand image. The payments to the parent company usually differ from one sector to the other, and based on the profits an organization generated from its operations. The other limitation of corporate parenting is the following firms have to adhere to the rules and regulations set by the parent company. Adhering to the rules and regulations set by the parent company may not be an easy task, especially if they present dissimilar provisions from that of the dominant culture or beliefs. Knowing the benefits and demerits of corporate parenting, therefore, may provide suitable guidance on whether to either become a parent company or to serve as a subsidiary or franchisor.
Corporate parenting falls into three major categories, and this may be deemed as a strategy for settling on the best approach. The initial one is financial control, and under this structure the function of the corporate parent is to assess and evaluate the financial outcome of the investment portfolio of the various business units. The corporate leaders in this instance serve as agents representing financial markets and shareholders to recognize and get viable businesses and assets. The second category is strategic planning and under this plan the function of the corporate parent is to improve synergy across the business components. The third category is strategic control, and under this approach the parent company utilizes its competences and strategies to create value for its business units. Parent companies would choose an approach that suit them and work with it.
Corporate parents settle on suitable business level strategies that would allow them compete effectively in their field considering that competition is increasingly becoming stiffer. Such organizations usually consider several factors before assuming the position of a parent company to avoid making inappropriate decisions. Such firms, for example, often consider keenly the business that they need to own, and pays attention to applying the most suitable configuration, structures and processes to facilitate the realization of the desired outcome. Most parent companies tend to gain competitive advantage by adhering to the provisions of the Porter’s generic strategies that require businesses to focus on two critical areas. The initial one is cost leadership by setting favorable prices that would attract many buyers and the second one is differentiation where the company targets a wide market base with unique services and products. In addition to the techniques to gain competitive advantage, parent companies usually embrace portfolio management techniques, including applying unique skills and competence, technology and oversight to manage the assets or companies under them. The companies apply a wide range of techniques to fit into the modern market that is increasingly becoming competitive and businesses must adjust to survive.
5– Generating Strategic Options
Generating the strategic options is a vital process that follows once the business owners know everything about the organization, including the market, competitors and how the future is likely to unfold it is significant now to create strategic options that would steer the corporation forward. Contrary to the belief of many people, one should not expect strategic options to fall from the sky. A suitable approach would be to use the Ansoff’s matrix to take into account all the possible options of reaching out to the consumers. The Ansoff’s matrix that provides an effective framework to develop approaches for moving into the future requires business leaders to consider market penetration as a possible way of gaining buyers’ attention. The organization while using the strategy tries to widen the strategy utilizing its provisions (the services and goods) in the local markets. The company using the strategy tries to embrace measures that would widen its market share, such as lowering prices, increased promotional activities, entering into mergers and acquiring rival firms and offering quality services and products. The Ansoff’s matrix requires the firm to develop strategic options by focusing on market development where the company tries to widen to new markets using its available offers. The company becomes successful in this category by embracing market segmentation, which entails categorizing buyers depending on certain similar features and exploring foreign markets. The company may also develop its market by exploring other or new areas of the country to acquire more buyers, and strengthen the brand name. Market development is likely to yield the anticipated results if the corporation applies advanced technology, and the company does not have to face new practices and regulations in the new markets. The Ansoff’s matrix then requires the company or the management to shift to product development where the firm strives to formulate new services and products targeting at its local and international markets to become more prosperous. The company can also improve its attempts towards product development by acquiring the rights to produce the products of other companies or brands. Diversification is the last step when using the Ansoff’s matrix and here the company pays attention to widening its market share by developing more products and services in different markets. The firm and its leaders must be cautious during this process because it must focus on both market and product development.
Business leaders should consider the benefits and demerits of the Ansoff’s matrix to evade any shortcomings. The main benefit is it offers a suitable chance for businesses to identify, explore and know the growth possibilities. The framework also challenges the company to explore several options while developing strategy options. The Ansoff’s matrix, however, may be misleading because it does not take into account the competitor’s ability, and fails to consider the possible constraints the organisation may encounter while exploring new markets. Several scholars also question the credibility of some aspects presented in the Ansoff’s matrix. Issues regarding what comprise a new product or service, for instance, continue to evoke varying views among scholars.
Alternatively, the company can use the TOWS framework to generate strategic options that would help the company achieve its goals. The management in this case analyses how external factors such as threats, opportunities, weaknesses and strengths impact or are likely to influence organisational outcome. The leadership may use the information from the analysis to take suitable measures that would prevent interference and promote steady growth and good performance. An advantage with the TOWS framework is it offers much insight into how the external environment impact on the business, but its limitation is that it does not specify the suitable or specific intervention mechanism to use.
Companies should embrace the habit of comparing the generated strategic alternatives against each other using suitable mechanisms. The comparison provides the chance to understand whether they suit the firm and will make it possible to achieve the desired goals and objectives. The comparison also offers the chance to know which strategy requires more attention, thereby creating the chance to allocate more resources and time. A suitable framework is SAF, which requires the management to focus on three major areas, which include suitability, acceptability and feasibility. An effective strategy must meet the three features before it can be prosperous and because of this, the utilization of a SAF model is a superb way to effectively weigh the possible strategic options. Achieving sustainability requires the company to consider several factors such as whether the strategy it employs is effective and whether the strategies help to overcome the hardships which were recognized in the analysis phase. Acceptability looks at the reaction or response from stakeholders concerning a particular strategy the firm uses to perform its activities. The company must also consider other essential factors such as the likelihood of strategy failure and the possible financial repercussions. The final aspect is feasibility where the management considers whether the organisation has the necessary resources to achieve or materialize certain strategies. An alternative approach of comparing the generated strategic options is stakeholder analysis, which entails examining a structure of possible changes as they connect or influence the stakeholders. The information acquired from the analysis may also help to know how the interests of the various parties may be presented in a plan, program or other initiatives.
6 – Strategic Management and Change Management
Change is inevitable in any situation, including in business operations, which requires business leaders to employ the concept of change management while handling strategic management. Business leaders employ the concept of strategic management to manage effectively the company’s resources, and to attain the set goals and objectives. Strategic management entails setting clear goals and objectives assessing the competitor’s environment and capacity, assessing the firm’s internal organisation, assessing strategies and ensuring that the leadership applies the most effective strategies to achieve the desired results across the organisation. An effective technique to strategic management elaborates how strategies should be formed, while the descriptive form pays attention to how strategies should be implemented. Strategic management is an effective tool that can help various organisations, including learning institutions, companies and not-for-profit institutions realize the desired objectives, and more flexible firms have higher chances of developing effective plans and structures, while less flexible firms may have considerable challenges adjusting.
Assessing strategic management and its components shows that the approach entails causing organisational change, which makes the concept of change management very essential. The leaders while handling strategic management should consider several aspects related to change management to achieve the best results. The leaders while handling strategic management, for example, should consider several essential factors related to change management such as why the change is really necessary, and what outcome is expected from the measures put in place. The leaders or planners should also consider the possible risks associated with the change process, and know the necessary resources needed to achieve the strategic management goals, which will be a change within the firm. The team while dealing with strategic management has to consider essential change management concepts such as identifying the persons in charge of the creation, testing and implementing the project and knowing the connection between the proposed change and other changes. The connection between strategic management and change management shows that business leaders must have adequate information on how both areas work to be able to relate the key aspects that would enable them achieve the most desirable results.
Business leaders while implementing change and strategic management techniques have to consider the possible implications of cultural influence and take appropriate actions. Today, multinational firms are increasingly becoming diverse in the composition of their workforce, which requires leaders to consider appropriate ways of incorporating all cultures while making decisions and developing strategies. The manager in this case should have advanced skills in cross-cultural management to be able to infuse ideologies or perceptions that consider all workers regardless of their cultural background. The leaders should not focus on strategic plans or changes that would discriminate against workers based on what they wear, food, religion, sexual orientation, music, beliefs and ideologies and their language. Still, the leader should know that cultures differ as it appears with the western and eastern cultures. The strategic management initiatives, therefore, should consider the possible repercussions of their decisions on their workers and their buyers who also make decisions based on their cultural influence. A for-profit institution that seeks to expand its enrolment for new students and enrolled leaner graduation over the next half a decade, should consider promoting change by incorporating more students from diver backgrounds. Being culture sensitize while developing the strategy and managing change will have long-term benefits to the company because stakeholders will have the perception that the company values cultural diversity and is ready to work with everyone.
Organizations should rely on a culture alignment framework to create a structure that aligns culture and strategy quite effectively. The tool would help business leaders establish their target cultures and assess the level to which the management is likely to adapt and influence the culture. The framework encourages business leaders and planners to focus on creating a positive attitude towards people as well as fostering appropriate attitude towards change while focusing on being flexible and stable. Similarly, business leaders should rely on the cultural web that helps to understand the cultural fluctuation within the business, thereby making it possible to make decisions that covers or takes the interest of everyone.