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Bus 4275 – 050
Winter 2013
Business Strategy and Competitive Analysis
Mid-Term Exam Study Guide
Term Exam
Wednesday, Mar 6, 2013

Purpose

Short Answers: To test your conceptual understanding of the material covered in the text so far. The exam will assess your understanding of basic strategic planning tools and concepts we have covered in the class by testing your ability to describe them accurately and support your answer with examples from the cases we have studied. Will include understanding of definitions or terms used in the strategic planning process. Long Answers: This question is designed to test your conceptual understanding of the strategic planning framework so that you can logically derive a conclusion from a diverse set of facts and a variety of situations. Scenarios: A scenario tests your ability to judge what tools and models can be usefully applied given the particular circumstances of the case and your ability to utilize a logical framework to generate specific action recommendations supported by case facts.

General Information

Exam Coverage
Ch. 1 – 6
Cases: Toyota, Drinks Industry, Whole Foods, Buying Clubs, Blue Nile, Smuckers.

Questions
1) Essay Style questions:

a. Short Answers and Definitions: 5-10 Marks each
b. Long Answer and/or Scenarios: 10 - 15 Marks

2) Long Take Home Question

3) No Multiple Choice

Topic Coverage
Major Topics as noted below as well as references to cases we have studied that illustrate or provide examples of the concepts.

Short Answer Topics

CH. 1 – WHAT IS STRATEGY resilient

1) What is the goal of an effective strategic plan? S 14, 15, 16 A company’s strategy consists of the competitive moves and business approaches that managers are employing to compete successfully improve performance and grow the business. Strategy is about competing differently with rival- doing what competitors don’t do or even better doing what they can’t do. Every strategy needs a distinctive element that attracts the customers and produces a competitive edge. In short the goal of an effective strategy is to gain a sustainable competitive advantage. A company achieves sustainable competitive advantage when it can meet customer needs more effectively or efficiently than rivals and when the basis for this is durable, despite the best efforts of competitors to match or surpass this advantage. An effective strategy properly identifies and allocates organization’s resources and capabilities to the opportunities in the environment to find out the organization’s opportunities and achieve a competitive advantage. • the key to gaining competitive advantage is:

1. creating value:

□ This means the perception by the customer of the value of the product or service.

□ Value is creating through the concept of value proposition.

□ Value proposition can be:

□ Excellent quality/higher price

□ Good quality/lower price

□ Adequate quality/lower price

2. Attracting and retaining customers:

← In this instance, we use the 4 Ps to improve the value chain for attracting and retaining customers.

← It allows the company to build trust, loyalty and lasting preference with the customer.

3. By effectively executing the above 2 steps, we are able to create and sustain advantage. Resilient organizations are excellent at following all the 3 steps.

2) What 3 basic questions will an effective strategic plan answer? S 11 The three big questions are:
1. Where are we now?

2. Where do we want to be?

3. How do we get there?

• the first question “What is our present situation?” prompts managers to evaluate industry conditions, the company’s current financial performance and market standing, its resources and capabilities, its competitive strengths and weaknesses and changes taking place in the business environment that might affect the company. • The answer to the question “Where do we want to go from here?” Lies within management’s vision of the company’s future direction-what new customer groups and customer needs to endeavor to satisfy and what new capacities to build or acquire. • The question “How are we going to get there?” challenges managers to craft and execute a strategy capable of moving the company in the intended direction. • Read more on pages 4-5 of the text.

3) Explain why strategy changes and evolves over time and what forces act on the company to stimulate these changes. S 13 • Changing circumstances and ongoing management efforts to improve the strategy cause a company’s strategy to evolve and change over time- a condition that makes the task of crafting strategy a work in progress, not a one-time event.

• A company’s strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and learning by doing.

• A company’s proactive or deliberate strategy consists of strategy elements that are both planned and realized as planned;

• Its reactive or emergent strategy consists of new strategy elements that emerge as changing conditions warrant.

• In most cases, much of company’s current strategy flows from previously initiated actions and business approaches that are working well enough to merit continuation and form newly launched initiatives aimed at boosting financial performance and edging out rival. This part of management’s action plan for running the company is its deliberate strategy, consisting of strategy elements that both planned and realized as planned.

• But managers must always be willing to supplement or modify the proactive strategy elements with as needed reactions to unanticipated condition. Inevitably, there will be occasions when market and competitive conditions take an unexpected turn that call for some kind of strategic reactions or adjustment. Hence, a portion of company’s strategy is always developed on the fly, coming as a response to fresh strategic maneuvers on the part of rival firms, unexpected shifts in customer requirements, fast changing technological developments, newly appearing market opportunities, changing political or other unanticipated happenings in the surrounding environment. Under conditions of high uncertainty, strategy elements are more likely to emerge from experimentation, trial and error and adaptive learning processes than from a proactive plan. These unplanned, reactive and adaptive strategy adjustments make up the firm’s emergent strategy, consisting of the new strategy elements that emerge as changing conditions warrant. A company’s strategy thus tends to be a combination of proactive and reactive elements with certain strategy elements being abandoned because they have become obsolete or ineffective.

4) What are the 5 tests of a winning strategy? Using one of the cases we have studied, be able to explain how these tests are used to evaluate the strategy of a company with illustrations from the case. S 17 The 5? Test can be applied to determine whether a strategy is a winning strategy: 1. The Fit Test: how well does the strategy fit the company’s situation? To qualify as a winner, a strategy has to be well matched to industry and competitive conditions, a company’s best market opportunities and other pertinent aspects of the business environment in which the company operates. No strategy can work well unless it exhibits good external fit and is in sync with prevailing market conditions. At the same time, a winning strategy has to be tailored to the company’s resources and competitive capabilities and be supported by a complimentary set of functional activities. That is, it must also exhibit internal fit and be compatible with a company’s ability to execute the strategy in a competent manner. Unless a strategy exhibits good fit with both the external and internal aspects of a company’s overall situation, it is likely to be underperformer and fall short of producing winning results, Winning strategies also exhibit dynamic fit in the sense that they evolve overtime in a manner that maintains close and effective alignment with the company’s situation even as external and internal conditions change. -does the strategy fit circumstance

-is company capable to execute the strategy?
2. The Competitive Advantage Test: Can the strategy help the company achieve a sustainable competitive advantage? Strategies that fail to achieve a durable competitive advantage over rivals are unlikely to produce superior performance for more than a brief period of time. Winning strategies enable a company to achieve competitive advantage over key rivals that is long lasting. The bigger and more durable the competitive advantage, the more powerful it is. 3. The Performance Test: Is the strategy producing good company performance? The mark of winning strategy is strong company performance. Two kinds of performance indicators tell the most about the caliber of a company’s strategy: 1) profitability and financial strength and 2) competitive strength and the market standing. Above average financial performance or gains in market share, competitive position or profitability are signs of a winning strategy.

Strategies that come up short on one or more of the above tests are plainly less appealing than strategies passing the entire test with flying colors. Managers should use the same questions when evaluating either proposed or existing strategies. New initiatives that don’t seem to match to the company’s internal and external situations should be scrapped before they come to fruition, while existing strategies must be scrutinized on a regular basis to ensure they have good fit, offer a competitive advantage, and are contributing to above average performance or performance improvements.

Note: Ask Bill about the other two tests for a winning stra...

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