Part 1 Secb Topic1
Part 1 Secb Topic1
Part 1 Secb Topic1
PLANNING
PLANNING
STRATEGIC PLANS
TACTICAL PLANS
SHORT TERM PLANS
STRATEGIC PLANS OR LONG TERM
PLANS
Broad, general, long term plans[5 year]and are based on the objectives of
organization
Prepared by top level management
It examines both internal and external factors affecting company.
Company’s capital resources are analyzed
This type of planning is the process of CAPITAL BUDGETING
It is directional rather than operational
Apple’s generic strategy of broad differentiation adds competitive advantage by
making the business stand out. Differentiation in product function and design
supports the firm’s goal of leading the market through technological innovation.
Innovation is at the heart of Apple Inc.’s business.
Increase customer satisfaction and decrease dissatisfaction of plus size customer
INTERMEDIATE OR TACTICAL
PLANS
Plans prepared by upper and middle level management
It answers the question ‘how do we achieve strategic plan?’
It is done for a period of 3 to 5 years
SHORT TERM OR OPERATIONAL
PLANS
Prepared by lower level management.
Prepared for a period of one year
It is the primary basis for budgets
OTHER TYPES OF PLAN
“To connect the world’s professionals to make them more productive and
successful.”
We strive to offer our customers the lowest possible prices, the best available
selection, and the utmost convenience.
“To be Earth’s most customer-centric company, where
customers can find and discover anything they might want to
buy online, and endeavors to offer its customers the lowest
possible prices.”
Create groundbreaking sports innovations, make our
products sustainably, build a creative and diverse
global team, and make a positive impact in
communities where we live and work.
Bring inspiration and innovation to every athlete* in the world.
Values
A goal is a precise and measurable future state that the company wants to achieve.
The purpose of goal setting is to specify what needs to be done to attain the
company’s mission and vision. Well-constructed goals provide a means for
managers’ performance to be evaluated.
Precise and measurable
Crucial and address important issues
Number of goals should be limited
Challenging and realistic
When should be achieved
Difference between Efficency and Effectiveness
ANALYZING EXTERNAL
ENVIRONMENT
Identify opportunities and threats
Examine industry, country or national environment and macroenvironment.
Industry Analysis
Economic growth
Level of interest rates
Currency rate fluctuations
Inflation and Deflation
FIVE FORCES MODEL
Profitability is derived from the value customers place on its products, the price it
charges for its products, and the costs of creating those products.
The utility that customers receive from a product or service, in other words, the
satisfaction they gain from it, determines the value they place on the product or
service.
DURABILITY OF COMPETITIVE
ADVANTAGE
SWOT stands for strength, weakness, opportunities and threats. The purpose of
SWOT is to maximize organization’s strength and minimizing organization’s
weakness to make use of external opportunities and while countering external threats.
LEVELS OF STRATEGY
Situation analysis is the systematic collection and evaluation of external and internal
forces that can affect the organization’s performance . It allows you to use market
research to evaluate projected growth, define your potential customers , asses your
competitors and evaluate the state of your business.
CONTINGENCY PLANNING:
Contingency planning is planning that a company develops to prepare for possible
events. In a way, it is “what if” planning. This widely-used approach is also called
“scenario planning” and, as its name implies, involves considering alternatives that
enable an organization to respond quickly to future events, generally external, that are
often unpredictable.
PEST ANALYSIS
POLITICAL FACTORS:
• Trade regulations, pricing regulations, and tariffs.
• Wage legislation, such as minimum wage requirements.
• Political stability or instability of the country, because when a country is politically
unstable, its citizens’ spending habits change.
• Product labeling requirements that must be adhered to.
• Industrial health and safety regulations.
ECONOMIC FACTORS:
Inflation
Interest rates
Unemployment
Exchange rate fluctuation
SOCIAL
• Demographics can be used to see where in the country people live and work.
• Education level, as education plays a major role in what kind of work people do and
how much disposable income they have.
• Attitudes of the population toward the environment.
• Leisure interests of the population.
TECHNOLOGICAL
• New developments in technology affect how the business operates on a day-to-day
basis and how it delivers its services and interacts with its customers and suppliers.
• Technology can impact the structure of the company’s value chain.
• Technology can affect the cost structure of the business. Technological
advancements can help a business reduce its costs and become more profitable.
COMPETITIVE ANALYSIS
Competitive analysis is similar to SWOT analysis in some ways. It involves analyzing the competitive environment in which a
business operates or is considering operating in to determine the following:
• Strengths and weaknesses of competitors.
• Demographics and needs of the market in which the business operates.
• Strategies to improve the company’s position in the marketplace.
• Impediments to the company’s entering new markets.
• Barriers the company can erect to limit competitors’ ability to erode the company’s place in the market.
Competitive analysis includes:
• Defining the competitors.
• Analyzing the competitors’ strengths and weaknesses.
• Analyzing the company’s own internal strengths and weaknesses.
• Analyzing customer needs and wants.
• Studying impediments to the market for both the company and its competitors, such as patents,
high start-up costs, or a high level of knowledge required for success.
• Developing a strategic plan that reflects the findings from the above activities
The Boston Consulting Group (BCG)
Growth-Share Matrix
The BCG Growth-Share Matrix is a method of analyzing a company’s portfolio of
products to determine where each product is in its life cycle. It was developed by the
Boston Consulting Group in the 1970s to
assist corporations in analyzing the life cycles of their product lines in order to make
better decisions about allocation of resources in planning.
Market growth rate is shown on the vertical (left) axis and relative market share is
displayed along the horizontal (top) axis. A product’s position on the relative market
share scale, either high or low, indicates its cash generation capability and its position
on the market growth rate scale, either high or low, indicates its need for cash for
investment
A star is a product in an industry that has a high market growth rate and the
product has a high market share and is capable of generating substantial revenue.
A question mark is a product in an industry that has a high market growth rate
but the product has a low market share.
A cash cow is a product in a mature industry that has a low market growth rate
but the product has ahigh market share.
A dog is a product in a mature industry with a low market growth rate and the
product has a low market share.
QUESTIONS:
A. Yes, because the company was able to lower costs and increase operating income.
B. No, because the company did not reduce marketing and administrative costs.
C. Yes, because the statements show a reduced cost of goods sold.
D. No, because it does not appear that the company has increased market share.
The sources of a company's distinctive competencies are:
A. High profitability and sustained profit growth.
B. The company's resources and capabilities
C. The company's prior strategic commitments.
D. The company's threats and opportunities.
During the strategic planning process, which one of the following is an external
factor to be analyzed?
A. Societal culture
B. Organizational culture.
C. Organizational structure.
D. Employee morale.
It could be argued that the reason a company has succeeded in a very competitive
market while its rivals have failed is because:
A. The successful company has adopted more steps to its formal strategic planning
process.
B. The strategies that the successful company pursues have a strong impact on its
performance relative to its rivals
C. The company has evolved into a multi-divisional organization.
D. The company has adopted a strategy with a low propensity for risk-taking.
Strategy is a broad term that usually means the selection of overall objectives.
Strategic analysis ordinarily excludes the
A. Target product mix and production schedule to be maintained during the year
B. Forms of organizational structure that would best serve the entity.
C. Best ways to invest in research, design, production, distribution, marketing, and
administrative
activities.
D. Trends that will affect the entity's markets.
Profitability is derived from three basic factors. Which of the following is not one of
those?
A. The amount of value placed on the company's products or services by the
customer.
B. The costs of creating the company's products or services.
C. The price that the company charges for its products and services.
D. Research and development that is highly innovative
An organization that has a competitive advantage over its industry rivals will
A. be able to distribute its product more quickly than other industry competitors.
B. spend more money on advertising than its competitors do.
C. be more profitable than the average company in its industry.
D. have distribution channels that are wider than others in its industry.
Michael Porter's Five Forces Model helps managers to analyze forces that shape
competition within an industry in order to identify opportunities and threats in their
industry environments. Which of the
following forces is not one of the Five Forces?
A. The closeness of substitutes to a company's products.
B. The bargaining power of competitors
C. Risk of entry by potential competitors.
D. The bargaining power of suppliers.
To avoid failure, a company must maintain a constant focus on all of the following
except:
A. Identification and adoption of the best industrial practices.
B. The nature of the organization's previous strategy and strategic commitments.
C. Continuous improvement and learning.
D. The foundation and practices of competitive advantage.
The plan that describes the long-term position, goals, and objectives of an entity
within its environment is the
A. Capital budget.
B. Strategic plan
C. Cash management budget.
D. Operating budget.
A company has developed and implemented a wireless charging feature into one of
its flashlights. No other competitor in the marketplace currently offers this feature. In
a marketing research study, the vast majority of consumers indicated that they would
pay a premium for this feature. Which one of the following is the best strategy to
bring this product to the market?
A. Porter's cost strategy.
B. Porter's focus strategy.
C. Porter's differentiation strategy
D. Porter's segmentation strategy.
All of the following are characteristics of the strategic planning process except the
A. Analysis and review of departmental budgets
B. Review of the attributes and behavior of the organization's competition.
C. Analysis of external economic factors.
D. Emphasis on the long run.
Which one of the following management considerations does the company usually
address first in strategic planning?
A. Overall objectives of the company
B. Recent annual budgets.
C. Outsourcing.
D. Structure of the organization.
Some of the benefits that horizontal integration may provide include the all of the
following except
A. Increased bargaining power over supplier, providers and buyers.
B. Cost reduction.
C. Diseconomies of scale.
D. Increase in the value of a company's product offering through differentiation
Which one of the following describes what an organization wants to accomplish and
leads to the formulation of long-term business objectives?
A. Strategy.
B. Mission Statement
C. Competency.
D. Values.
The method(s) that managers employ to attain one or more of the organization's goals
can be defined as:
A. Choosing the company's organizational structure.
B. Strategy
C. Capital investments.
D. Determining the company's business model.
Which of the following is not a characteristic of a tactical plan:
A. Top management is responsible for development and overall implementation
B. It relates to production, materials requirements, inventory, cash flows and
income statements.
C. It is quantitative in focus.
D. It covers a period of time one year to five years.
The four factors that derive from a company's distinctive competencies and which
create competitive
advantage are
A. superior efficiency, quality, innovation, and customer responsiveness
B. continuous improvement, continuous learning, prior strategic commitments and
absorptive capacity.
C. employee productivity, capital productivity, product innovation and process
innovation.
D. the value (utility) customers place on the company's products, the price it
charges for its products, the costs of creating those products, and the profitability of
the company.
Four generic competitive strategies can be used to achieve competitive advantage.
Which of the following is not one of those strategies?
A. Differentiation.
B. Innovation
C. Focused cost leadership.
D. Cost leadership.
Companies group customers in order to gain a competitive advantage. This is called:
A. Positioning.
B. Product differentiation.
C. Market segmentation
D. Customer differentiation.
Products that are identified in the BCG Growth-Share Matrix as Cash Cows possess
relatively
A. high market share in a low growth market
B. low market share in a low growth market.
C. high market share in a high growth market.
D. low market share in a high growth market.
A company's mission statement is, above all, intended to define:
A. The specific actions that the company should take.
B. The company's profit objectives.
C. The weaknesses of the firm.
D. Why the company exists, or its "reason to be."
Strategic managers use different business-level strategies to put the company's
business model into action. Business-level strategies include all of the following
except
A. How and where to invest the company's capital in ways that will result in
competitive advantage.
B. How much to differentiate and how to price the company's product or service.
C. What products should be offered and to which customer groups (market
segments).
D. How to improve the product attributes, the service attributes and personnel
attributes associated with the company's product
A company is the leading company in the premium bottled water industry. Its growth is mainly driven
by the negative health publicity on carbonated soft drinks and other sweetened beverages.
Extensive inventory and distribution infrastructure is needed to compete in this industry. Its main
packaging materials can be sourced either locally or easily imported from overseas. With its 60%
market share, the company is able to influence prices and competitive activity. The second biggest
competitor holds 20% market share, while the remaining 20% is shared by many small companies.
Supermarkets and other grocery retailers are the largest customer segment, accounting for
approximately 45% of sales. The supermarkets and grocery retailers are driving volume growth and
are undergoing consolidation into larger supermarket conglomerates. Using Porter’s 5 Forces, which
one of the following statements best reflects the industry environment?
A. Low profitability due to low threat of substitutes and new entrants.
B. High profitability due to high power of buyers and sellers.
C. Low profitability but can increase due to increasing power of buyers.
D. High profitability but can decrease due to increasing power of buyers.
Cerawell Products Company is a ceramics manufacturer that is facing several challenges in its
operations. Which one of the following is subject to the least control by the management of Cerawell
in the current fiscal year?
A. Vendors have asked that the contract price for the goods they supply to Cerawell be renegotiated
and adjusted for inflation.
B. Experienced employees have decided to terminate their employment with Cerawell and go to
work for the competition.
C. A competitor has achieved an unexpected technological breakthrough that has given them a
significant quality advantage, and has caused Cerawell to lose market share
D. A new machine that was purchased this year has not helped reduce Cerawell's unfavorable labor
efficiency variances.
One of the steps in the the strategic planning process is analyzing external factors in
order to identify the organization's opportunities and threats. Which of the following
is not a part of external analysis?
A. Examination of the industry in which the company operates.
B. Analysis of the national environment in which the company operates.
C. Identification of the company's strengths and weaknesses
D. Analysis of the macroenvironment.
Which of the following statements concerning strategic planning is correct?
A company selling electronic products to consumers may use a longer or shorter time
frame for strategic planning than does a company selling baseballs, depending on
management's preferences.
A company selling electronic products to consumers and a company selling baseballs
both likely use a 5-year time frame for strategic planning.
A company selling electronic products to consumers likely uses a longer time frame
for strategic planning than does a company selling baseballs.
A company selling electronic products to consumers likely uses a shorter time frame
for strategic planning than does a company selling baseballs.
Which of the following would be a valid definition of product differentiation?
Competing on the basis of a product being cheaper than the competition
Competing on the basis of a product being more popular than the competition
Competing on the basis of a product being better than the competition
Competing on the basis of a product being similar to the competition
Which of the following statements concerning a clothing store's mission is correct?
It can help it make a decision whether to open stores in five additional states.
It can help it make a decision whether to upgrade its single-light store sign to a multi-
color store sign.
It can help it make a decision whether to place some slow-selling merchandise on
sale.
It can help it make a decision whether to run advertisements on local television
stations to promote extra Christmas hours.
Which of the following two organizational strategy types compete with each other on
a head-to-head basis?
Cost leadership vs. product differentiation
Cost leadership vs. market segmentation
Product differentiation vs. product differentiation
Quick response vs. product differentiation
Which of the following statements concerning a “cash cow” on the Boston
Consulting Group (BCG) Growth Share Matrix is correct?
A “cash cow” is a product or service with a high cash generating capability and a low
growth rate.
A “cash cow” is a product or service with a high cash generating capability and a
high growth rate.
A “cash cow” is a product or service with a low cash generating capability and a high
growth rate.
A “cash cow” is a product or service with a low cash generating capability and a low
growth rate.
Which of the following is an external factor that should be analyzed during the
strategic planning process?
A company acquiring your largest competitor and investing money in the company
The ability of a manufacturing company to reduce waste such that selling prices can
be reduced
The ability of R&D personnel to develop a new product
The ability of a company to fund an expansion with operating cash flow
Which of the following correctly describes an example of following the focus
strategy?
A company hires experts in lean manufacturing to help improve production
efficiency.
A company hires research scientists to enable it to develop products that are higher
quality than competitors’ products.
A company hires research scientists to enable it to develop product features not
available in competitors’ products.
A company hires research scientists with industry expertise to enable it to produce a
product with features attractive to one industry segment.
Which of the following statements is not correct concerning competitive analysis
(sometimes known as competitor analysis) as it is used in strategic planning?
Competitive analysis can help an organization understand its actual competition, not
who it thinks is its competition.
Competitive analysis can help an organization identify new customers.
Competitive analysis involves getting as complete a picture as possible about
competitors.
An industry leader is not likely to benefit from competitive analysis.
Which of the following is not an internal factor that should be analyzed during the
strategic planning process?
A new administration's attitude toward anti-trust regulation
The ability of a company's manufacturing equipment to handle an increase in volume
from expanding into a new geographic region
The ability of a company to fund an expansion with operating cash flow
The ability of a tax return company to prepare returns that are error-free and on-time
How is strategic planning different from strategy formulation?
Strategic planning addresses how to implement business strategies, whereas strategy
formulation results in new strategies.
Strategy formulation develops designs to implement strategies and achieve the goals,
whereas strategic planning creates strategies and defines goals.
Strategy formulation identifies the opportunities and threats in the short term,
whereas strategic planning continually reevaluates strategies based on perceived
long-term opportunities and threats.
Strategy formulation typically identifies external opportunities, limitations, and
threats, whereas strategic planning identifies internal factors, such as organizational
strengths, weaknesses, and competitive advantages.
Which of the following statements concerning a “star” on the Boston Consulting
Group (BCG) Growth Share Matrix is correct?
A “star” is a product or service with a high cash generating capability and a low
growth rate.
A “star” is a product or service with a high cash generating capability and a high
growth rate.
A “star” is a product or service with a low cash generating capability and a high
growth rate.
A “star” is a product or service with a low cash generating capability and a low
growth rate.
Which one of the following describes what an organization wants to accomplish and
leads to the formulation of long-term business objectives?
Values
Strategy
Competency
Mission statement
Which of the following correctly describes an example of following the
differentiation strategy?
A company heavily invests in R&D to develop more efficient manufacturing
techniques.
A company heavily invests in R&D to develop products with features competitors’
products do not have.
A company heavily invests in R&D to develop a more efficient product packaging
process.
A company heavily invests in R&D to enable it to produce a product that appeals to a
particular industry segment only.
Which of the following statements concerning mission statements is not correct?
An organization's mission statement is based on its vision statement.
A mission statement expresses an organization's success in terms of its contribution to
society.
A mission statement should answer the question “Why are we in business?”
A mission statement results from an organization's strategic planning process.
Alturo Technologies is a manufacturer of machines used in the automotive industry. Most of
its business comes from three automotive manufacturers that are located in neighboring
counties. During a board meeting to revise and prepare a new strategy, one board member
expressed concern that the buyers' bargaining power is very high as the company has only a
handful of buyers. What would you, as a board member of the company, say to your
colleague to reassure him/her that buyers' bargaining power is not a threat to the business?
The owners of two of the three companies that buy Alturo's products used to be top
executives at Alturo.
The buyers are aware of how critical their business is to Alturo's survival.
Alturo's products are very expensive to install, and only spare parts manufactured by the
company can be used in its machines.
Several other manufacturers offer products similar to Alturo's products.
Which of the following statements concerning an accounting firm's mission is
correct?
It can help it make a decision whether to diversify from providing only cost analysis
services to also offering IT system installations.
It can help it make a decision whether to use a different software package to handle
client billings.
It can help it make a decision whether to set up a line of credit.
It can help it make a decision whether to sponsor a local sports team.
Which of the following correctly describes an example of following the cost
leadership strategy?
A company invests in automated manufacturing equipment to reduce production
costs.
A company invests in automated manufacturing equipment to enable it to produce
products that are higher quality than competitors’ products.
A company invests in automated manufacturing equipment to enable it to produce a
product with features not available in competitors’ products.
A company invests in automated manufacturing equipment to enable it to produce a
product that appeals to a particular industry segment only.
The management of Mateo Inc., a manufacturer of printer cartridges, has set the
following tactical goal for its marketing department: "To increase product sales by
15% this year." In order to help achieve this goal, Ravi, a team lead in the marketing
department, has formulated the following supporting objective for his team: "Every
member in the team must sell more units in the next four quarters than he or she did
in the last four quarters." As Ravi's manager, what advice would you give Ravi to
make the objective more effective?
Clearly state the consequences of not achieving the target.
Provide a clear timeline for performing the required action.
Make the target more measurable.
Specify a clear, quantitative target.
Which of the following items, in part, reflects the competitive intensity of an
organization's industry?
Quick response strategies
Threats from new entrants and substitutes
Product differentiation
Cost leadership
Organizations have a number of strategies in place at any given time (e.g., personnel
strategy, operations strategy, and marketing strategy). What is common to all of these
strategies?
All of these strategies derive from the overall organizational strategy and mission
statement.
These strategies are all relevant to specific segments of the overall organization.
These strategies are determined independently by the segment managers.
These individual strategies are all established by organizational department heads.
Which of the following will likely affect budgeting but not long-range planning?
A presidential election
A spike in sales at Christmas
Speculation that a new small company will be a major competitor in three years
Plans to expand production in two years
Which of the following statements concerning an automobile dealership's mission is
correct?
It can help it make a decision whether to stop selling new cars and only sell used
cars.
It can help it make a decision whether to offer free snacks to people test-driving a car.
It can help it make a decision whether to hire an additional salesperson.
It can help it make a decision whether to send its sales staff to a 2-hour seminar on
selling more effectively.
Which of the following statements concerning strategic planning is not true?
An organization's vision and mission flow from its strategic plan.
An organization's long-term goals are typically laid out in its strategic plan.
To help achieve its long-term goals an organization typically establishes milestones in
its strategic plan.
An organization's strategic plan takes into consideration its industry, competitors, and
environment.
Which of the following is an internal factor that should be analyzed during the
strategic planning process?
A greater number of political leaders calling for an increase in tariffs on imported
goods
The availability of high-speed wireless access on customers’ ability to access your
product
A major competitor going out of business
The ability of a tax return company to prepare returns that are error-free and on-time
Which of the following statements is true concerning situational analysis as it is used
in strategic planning?
Situational analysis is used to analyze an organization's internal environment but not
its external environment.
Situational analysis is used to analyze an organization's external environment but not
its internal environment.
Situational analysis is used to analyze an organization's external and internal
environment.
Situational analysis is used to analyze a specific situation affecting an organization.
Which of the following correctly describes an example of following the
differentiation strategy?
A company heavily invests in R&D to develop more efficient manufacturing
techniques.
A company heavily invests in R&D to develop products with features competitors’
products do not have.
A company heavily invests in R&D to develop a more efficient product packaging
process.
A company heavily invests in R&D to enable it to produce a product that appeals to a
particular industry segment only.
A company has developed and implemented a wireless charging feature into one of its
flashlights. No other competitor in the marketplace currently offers this feature. In a marketing
research study, the vast majority of consumers indicated that they would pay a premium for
this feature. Which one of the following is the best strategy to bring this product to the market?