Questions and answers Strategic management (Cardiff Metropolitan University): Graded A+

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Exam 10 October, questions and answers

Strategic management (Cardiff Metropolitan University)

Strategic Management Exam Questions

Question -1-

What do we mean by the nature of environment and how can we improve our understanding of it?

Answer:

The formulation of strategy is concerned with matching the capabilities of the organization to its environment. But the word environment encapsulates different influences and it is difficult to understand its diversity.

There are two responses which are dangerous in their limitations. The first is the balance sheet approach, The second piecemeal which means understand the environment from overall impact.

Second:

Understanding Complex Conditions:

Organizations in complex situations are faced with environmental influences difficult in themselves to comprehend organization facing complexity may also face dynamic conditions.

First:

Second:

Question -2-

A- What are the main characteristics of strategic decisions?

B- What measures can we use for assessing resource utilization? (how resources influence our strategy)

Answer to question (A)

The characteristics usually associated with the word strategy and strategic decisions are:

1-      The scope of organizations activities:

2-      The matching of the activities of an organization to the environment in which it operates,

3-      The matching of the organization’s activity to its resource capability:

4-      The allocation and reallocation of major resources in organization:

5-      The values, expectations, and goals of those influencing strategy:

6-      Strategic decisions may well affect the long term direction of an organization.

7-      Strategic decision are often complex in nature,

Answer to question (B)

how efficiently effectively.

Efficiency

Effectiveness

Assessing Efficiency:

There are number of different measures of efficiency in resources analysis:

1-      Profitability:

2-      Labor productivity:

3-      Yield:

4-      Capacity fill:

5-      Working capital:

6-      Production system:

Assessing Effectiveness (ineffectiveness leads to inefficiency)

A full understanding of company’s use of resources also requires an analysis of the effectiveness with which resources has been used. There are number a number of different measures of effectiveness:

1-      Use of people:

2-      Use of capital:

3-      Organization structure:

4-      Use of marketing and distribution resources:

5-      Use of research knowledge:.

6-      Use of production system:

7-      Exploitation of intangible assets: measure of effectiveness

Question -3-

Porter’s Model helps with the structural analysis of the environment. How does this model work?

Answer:

Porter’s model is essentially a structural means of testing the competitive environment of an organization so as to provide a clear understanding of the forces at work. Porter argues that competition in an industry is

1-      The Threat of Entry:

The threat of entry will depend in the extent to which there are barriers to entry (things stop the company to enter the market).

(a)    Economies of scale:.

(b)    The capital requirements of entry:

(c)    Product differentiation:

(d)   Access to distribution channels:

(e)    Cost disadvantages independent of size:

(f)     Legislation or government action:

2-      The Bargaining Power of Buyers and Suppliers:

Buyers and suppliers are influencing margins, the greater their power the more likely it is that margins will be low.

(a)    Suppliers power is likely to be high when:

·         There is concentration of suppliers rather than fragmental sources of supply.

(b)    Buyers power is likely to be high when:

·         There is concentration of buyers, if the volume purchases of buyers is high.

3-      The Threat of Substitutes:

4-      The Extent of Competitive Rivalry (The Rivalry Against Existing Competitors):

Competitors concerned with the degree of rivalry between themselves in their own industry. The The Significance of Identifying Market Segments:

.

Question -4-

The resource factor cuts across all phases of strategic management, discuss?

Answer:

Strategic management is concerned with deciding on strategy and planning how the strategy is to be put into effect. It can be thought of as having three main elements within it; strategic analysis, strategic choice,

and strategic implementation. Organization’s ability to survive and prosper in its environ influenced by the’ standing’ of the organization which in turn is determined by its resources.

ent is strongly

Str tegic analysis seeks to understand the strategic position of the organization. Analysis of organization’s

resources aims to unders

Analysis which provide database

Comparing the strategic

Very often an

organization strategic capability is impaired because the balance of the

resources

is in

appropriate. The company is required to have balanced portfolios, managerial skills, and flexibility and adaptability of resources under uncertainties.

The resource analysis must be capable of identifying key issues which are of particular strategic importance in any given situation. This is done by conducting strength and weakness analysis, and then identifying the company's distinctive competencies.

Str tegic choice is to do with the formulation of possible course of action, the evaluation and choice

between them.

Suitability measures the extent to which any strategy addresses itself to the situation described in the strategic analysis.

Acceptability of resources is concerned with an assessment of whether the consequences of proceeding with a strategy are acceptable, this is difficult area since acceptability is strongly related to people’s value.

Strategic implementation

Three questions can be used to identify the resource issues that have to be dealt with in implementing strategy.

Two questions can help in setting the planning steps.

The last question tackles assumption testing. What are the key assumptions on which the plan is based? All

Question -5-

What are the main factors which shape and change values?

Answer:

There are three major sources of influences on an individual’s values:

·         External influences.

1-      External Influences:

It can be classified under general influences which referred to as values of society and specific influences exerted by organized groups.

A- Values of society:

Attitudes to work, authority, equality and a whole range of other important issues are

B- Organized groups:

2-      Nature of the Business:

These are a number of issues concerning the nature of a business which will also influence attitudes to company policy. They concern with market situation and the nature of the product/technology within the company:

A- Market situation:

B- Product/technology:

3-      Company Culture:

There are factors within companies which shape a company’s culture and are very influential on the values of individuals within the company. This culture arises from a number of sources which are: A- History and age of the company:

B- Management style:

C- Planning and control:

Question -6-

A- Discuss the sources of power within the organization?

B- Explain the method used for the selection of strategic options?

Answer to question (A):

1-      Hierarchy:

2-      Influence:

3-      Control of strategic resources:

4-      Control of the environment:

5-      Answer to question (B):

It is important to recognize that the selection of one or more strategies for the future may occur by a number of very different processes. We will list some of the more common methods of selecting strategies:

1-      Selecting against objectives:

2-      Referral to a high authority:

3-      Incrementalism:

4-      Using outside agencies: sometimes

Question -7-

Explain the strategic option that takes the organization away from its existing products and markets showing its main advantages and disadvantages and the appropriate methods for its implementation?

Answer:

Diversification as a description of strategy is used in different ways by different people.

Related diversification:

It represents development beyond the present product and market but still within which the company operates. It is important to be clear what is meant by industry and to understand some terminology which is commonly used:

·         Industry:

·         Backward integration:

·         Forward integration:.

·         Vertical integration

·         Horizontal integration:

The major advantages of related diversification are:

·         Control of suppliers because of quality, quantity, and price.

·         Control of market.

·         Access to information because of technological change and market trends.

·         Cost saving.

·         Profit or growth.

·         Indirect competition.

·         Spreading risk.

·         Resources utilization.

The major disadvantages of related diversification are:

·         Management control:.

·         Inefficiencies:

Unrelated diversification:

Advantages of unrelated diversification:

·         Values and aspiration of decision making.

·         Disadvantages of unrelated diversification:

·         Diversification as related or unrelated is not straightforward matter.

The Appropriate Methods for Implementation:

We can divide these methods into three types: 1- Internal development (from within).

2- Acquisition (from without – buying another company). 3- Joint development (with another company).

1-      Internal Development:

It has always been the primary method by which strategy has developed and there are some reasons why this should be so:

2-      Acquisition:

·         The most compelling reason to develop by acquisition is the speed with which it allows the company to enter new product/market area.

3-      Joint Development (combination of internal and external):

There are different types of joint development:

·         Franchising: (

·         Licensing:

·         Agents:

Question -8-

Take any two operational areas and discuss the main elements of their strategies?

Answer:

Operational areas are important in resource planning. The aim of the operational issues is to indicate the nature of and importance of the relationship between a change in corporate strategy and the operational strategies of an organization. There are many operational areas which are:

Production Strategy:

Some important questions as far as production strategy is concerned:

·         What level of production capacity is desirable? at least three levels can be considered:

1-      Demand matching: entails attempting to match levels of demand with levels of

2-      Operational smoothing:

3-      Subcontracting: entails

·         Where should plant be located? influences on this might include: 1- Proximity of markets.

·         What should be the timing of investment in plant? While demand may rise smoothly, costs of investment do not.

·         Given a change in production process, is it more sensible to convert existing plant or build new plant?

·         Should the company make or buy the product? If it makes or if it buy, to what extent should it do so?

·         Is the production resources flexible enough?

·         What manning levels and skills are required for the production resource? Will this mean increasing or decreasing the workforce?

Manpower Strategy:

The success of a strategy is likely to depend very heavily on the people required to put it into effect. Some of the issues which need to be considered are:

·         What skills are required to implement a course of action? These skills may be at a managerial levels or operative levels.

·         Associated with this may be the actual size of the manpower requirement of the organization.

·         The identification of training needs is important. Which individuals need what sort of experience to develop general management and operating abilities?

·         In terms of change is manning levels, how are numbers to be increased or reduced? In the case of reductions, will this be through natural wastage, redundancy or redeployment. Will skills that are needed be met from within the organization or by recruitment.

·         To what extent and what matter is consultation with unions and employee representatives important? A failure to do so could result in expensive industrial action and an uncooperative workforce.

·         What will be the financial implications of an extensive redundancy programme? In the short term, redundancy payment can reach such high levels that they may mean the difference between relatively healthy overall profits and a loss.

·         Increasing emphasis is being placed on team development for managers and staff that are capable of working together productively. Has sufficient consideration been given to the teams of managers or staff needed to implement strategic change?

Question -9-

Review the three areas relating to resources as part of planning the allocation of resources?

Answer:

The following three questions identify the sort of resource issue that have to be dealt with in implementing strategy.

1-      Exactly what resources will strategy require for its implementation? (Resource identification).

2-      To what extent do these required resources build on or are a change from existing resources? (Fit with existing resources).

3-      Can the required resources be integrated with each other? (Fit between required resources).

Resource identification:

The most basic requirement is the identification of what resources are required to carry out the strategy.

Fit with Existing Resources:

Fit Between Required Resources:

Question -10-

A.     Discuss the criteria used for evaluating strategic options?

B.      Discuss the personal and political implications of strategic change?

Answer to question (A)

The major difficulty in evaluating strategy is the need to use a number of different measures or criteria that cannot all be satisfied simultaneously. These criteria falling into three categories:

1-      Criteria of suitability.

2-      Criteria of feasibility.

3-      Criteria of acceptability.

Criteria of suitability:

It attempts to measure how far proposed strategies fit the situation identified in the strategic analysis. Does

Criteria of feasibility:

It is used to assess how any strategy might work in practice, for example, whether the strategy is achievable in resource terms. At the evaluation stage there are number of questions which need to be asked when assuming the feasibility of any strategy:

·         Can the strategy be funded? This can be examined by producing a future funds flow forecast showing estimated sources and uses of funds.

·         Is the organization capable of performing to the required level? For example, quality level.

·         Can the necessary market position can be achieved and will the necessary marketing skills be available?

·         Can competitive reaction be coped with?

·         How will the organization ensure that the required skills at both managerial and operative levels are available? Training and recruitment.

·         Will the technology (both product and process) to compete effectively be available?

·         Can the necessary materials and service be obtained? (Availability of raw material).

Criteria of acceptability:

·         What will be the financial performance of the company in profitability terms?

·         How will the financial risk change?

·         What will be the effect on capital structure?

·         Will any proposed changes be acceptable to the general cultural expectations within the organization? For example, attitudes to greater levels of risk.

·         Will the function of any department, group, or individuals change (according to strategy) significantly?

·         Will the company’s relationship with outside stakeholders (suppliers, government, customers) need to change?

·         Will the strategy be acceptable in the company’s environment (for example, will the local community accept higher levels of noise)?

·         Will the proposed strategy fit existing systems (control system, reward system, HR system) or will it require major change?

These are the criteria which can be used to assess alternative strategy; these criteria are developed from the understanding of the ways in which strategy is evaluated by managers in practice.

Answer to question (B):

Personal Implications of Strategic Change:

There are several points which can help managers to cope better with the personal aspects of performance during strategic change.

Political Implications of Strategic Change:

Question -11-

A- Discuss the concepts of centralization and decentralization and how their relationship to strategic implementation?

B- Discuss the personal and political implications of the reward system?

Answer to question (A):

Centralization and Decentralization:

Answer to question (B):

Rewarding Individuals:

The Political Impact of Rewards:

Question -12-

Take any four influences on organizational design and show how they relate to your workplace?

Answer:

1-      The Influence of Size and Diversity:

2-      The Influence of Product and Technology:

3-      The Influence of Competition:

4-      The Influence of Accountability and Ownership: