Quiz for Strategic Management Fall 2019 Semester, Dr Ramay

STRATEGY FORMULATION: FUNCTIONAL STRATEGY AND STRATEGIC

CHOICE

1. How can a corporation identify its core competencies? Its distinctive competencies?
In determining your company's core competencies, identify the underlying skill, ability,
knowledge, experience, technology or process that enables your company to provide its
unique set of products or services. Plus vrio frame work.

2. When should a corporation or business unit outsource a function or activity?

3. Why is penetration pricing more likely than skim pricing to raise a company's or a
business unit's operating profit in the long run?
The nature of both the penetrating pricing and skim pricing are completely different. Penetrating
pricing is a market strategy in which the price of the product or service it kept low. This is a
positioning strategy in which the competition is countered with price difference. On the other
hand, skim pricing is aimed at earning profits at a speeding rate by keeping the prices higher.
When a new product is launched which does not have a competition in the market yet, skim
pricing may work for a short time to bring in high profits.
Penetrating pricing is therefore, a long term unit operating profit strategy as it would enable the
product to beat its competitors for a long time. The skim strategy would only be viable as long as
the product remains unique. The time there is a similar competing product with lower price in the
market, skim pricing would no longer be able to bring considerable operating profits.
Penetration pricing offers the pioneer the opportunity to utilize the experience curve to gain
market share and dominate the industry. Skim pricing is purely a short-term phenomenon and
is used to gain high profits quickly in order to pay for expensive R&D and marketing costs
before new entrants engage in price competition. It therefore cannot be used to raise long term
operating profits unless the firm follows a differentiation strategy of continually entering
markets early through exceptional R&D and exiting before the heavy-hitting late movers like
IBM or Procter & Gamble force margins down.
4. How does mass customization support a business unit's competitive strategy?

Mass customization is an operations functional strategy. According to the text, mass

customization requires flexibility and quick responsiveness. Appropriate for an ever-changing
environment, mass customization requires that people, processes, units, and technology
reconfigure themselves to give customers exactly what they want, when they want it. The result
is low-cost, high quality, customized goods and services. Mass customization is one way to
support a differentiation strategy in a hypercompetitive market in which customers are
demanding a highly differentiated product at a reasonable price. The customer is primarily
interested in purchasing a product designed to its own specifications and delivered where and
when it needs them. Even though price may be secondary to specific product characteristics, it
cannot be significantly higher than the price for a mass produced good.

Mass customization offers a business the advantage of rapid support, personalization, flexibility
and low cost to its customer base. Mass customization allows for the production of a large
variety of tailor-made goods and services that best serve a customer's needs. Customers can get
personalized products in bulk at a lower cost, which gives a business an edge over its
competition.

5. What is the relationship of policies to strategies?

A key similarity between strategy and policy is that both are often set at the top-management
level of an organization. A management team usually collaborates to set goals and strategy
for how to operate the company in a profitable way. Going after a new customer market is a
potential strategy to grow market share, for instance. Top managers, or managers in specific
functional areas, then usually establish policies that help employees operate in alignment with
the strategy. A new policy of expanding sales rep territories could fit with this new market
strategy.
The relationship between policies and strategies is strong. Policies are the ideas and rules while
strategies are methods to execute them.
-101
Differences
Policies and strategies do have different purposes. A strategy is essentially a guide, or road map,
for how the company will operate. Setting a strategy at the top allows each department or
business unit leader to set lower-level goals and strategies that align. Policies provide a
framework for employees to make decisions in certain situations that lead to consistent activities.
Consistency helps in building a brand image with the public and in developing an equitable
workplace for employees.

6. What are the pros and cons of R&D leadership versus R&D followership as a
functional strategy?

7. What are the advantages and disadvantages of the devil's advocate, dialectical inquiry,
and consensus approaches to making strategic choices?

8. Should functional strategies be categorized under strategy formulation or under

strategy implementation?

STRATEGY IMPLEMENTATION: ORGANIZING FOR ACTION

1. How should a corporation attempt to achieve synergy between and among functions and
business units?

2. How should an owner-manager prepare the company for its movement from Stage I
to Stage II?

When a company has grown enough so that the owners or managers cannot manage to keep track
of the firm’s activities efficiently, there is a need to move from Stage I to Stage II. The different
functional units or areas of the organization may have evolved to a level where it requires a new
set of expertise and knowledge that what is possessed by the human resource of an organization
at different levels at current.
The owners or managers can contribute in the movement from Stage I to Stage II by organizing
different training programs that would add to the functional skills of the employees. The
employees may be encouraged to take part in evening programs that could be helpful in the
movement from Stage I to Stage II. The owners-manager should also start to delegate some
responsibilities and decision making.
 3. How can a corporation keep from sliding into the decline stage of the organizational
life cycle?
Innovate
Innovation plays an important role in your change program, so it’s essential to create an
environment for innovation. Break down rigid departmental barriers by encouraging teamwork
and collaboration, and set up a forum where employees can contribute ideas for new product
development and other improvements. Identify training requirements and setup programs to
improve workforce performance. Analyze your workforce to identify gaps in essential skills, and
fill those gaps by training or recruiting to key positions
.Develop
A new product development program is key to regaining market share. Research customers’
requirements and develop new products aligned to those requirements. Collaborate with
customers to strengthen relationships and ensure that you continue to meet their changing needs.
Communicate your change program to customers and suppliers to build understanding and
recognition of your long-term viability as a business partner.

4. Is reengineering just another management fad or does it offer something of lasting

value?
REEINGENEERING IS NOT JUST ANOTHER MANAGEMENT FAD, IT OFFERS
SOMETHING OF LASTING VALUE
Using information technology to improve performance and cut costs. Its main premise, as
popularized by the book "Reengineering the Corporation" by Michael Hammer and James
Champy, is to examine the goals of an organization and to redesign work and business
processes from the ground up rather than simply automate existing tasks and functions.
Where restructuring fails, reengineering offers at least the hope, if not always the reality, of
getting better as well as getting leaner. Yet in many companies, reengineering is more about
catching up than getting out in front. While managers in the US, in the 1980s, thought that
quality would be the main source of competitive advantage in the next millennium, Japanese
managers had a primary goal of creating new businesses and products. According to Japanese
managers, quality would just be the necessity of market entry, but not a differentiator.
Downsizing attempts to correct the mistakes of the past, not to create the markets of the future.
Recognizing that restructuring is a dead end, smart companies move to reengineering.
Where there is competition there should be reengineering
According to the authors, reengineering is driven by open markets and competition. No
longer can we enjoy the protection of our own country's borders as we could in the past.
Today, in a global economy, worldwide customers are more sophisticated and demanding.
Where there is need for less management ...

Reengineering has some really beneficial things. It tries to internalize and externalize all
operations towards the facilitation of the customer and market. It can help in the rapid
transformation needed "behind the scenes" or processes and/or systems. Reengineering aims for
dramatic improvements in critical measures of performance such as cost, quality, service and
speed. It offers something of lasting value because it is the first management concept to
emphasize the redesigning of both the organization and jobs in light of environmental and
technological changes. Reengineering is important because it looks at job design as the building
block to organization design

5. What are the advantages and disadvantages of the network structure?

Advantages and Benefits of Network Organization

Eliminate over departmentation

One of the advantages of network organization is to eliminate over departmentation. The

management identifies its core competency, and then it outsources non critical tasks to other
organizations. Tasks are given to those institutions that have core competencies for performing
tasks on the basis of contract. The responsibility of the management is to focus on strategies and
to maintain coordination among experts for uniform progress of work.
Minimize administrative cost

In network form of organization there is a very small staff in head office to perform administrative
work. On the basis of necessity it manages temporary workers and outsources basic support service
to meet the demand of changing situation. It helps to minimize administrative cost of the
organization.
Benefit of specialization

Network organization emphasizes on core competency in certain area of knowledge. In some are
of knowledge, organization should have own core competency or specialization. It outsources non
critical tasks to other organization that have core competency on the basis of agreement.
Combination of service of specialization helps to develop competitive advantages.
Flexible in operation

It is the flexible form of organization. The management can hire new employees whey they have
needed for specialized tasks. Similarly, non critical tasks can outsource on agreement. Therefore,
it is adaptable on the basis of changing environment of the business.
Facilitates for concentration

It facilitates to concentrate in core competency area of performance. Concentration in specific area

of performance supports to gain specialization. Present business environment emphasizes on
specialization in certain sector of knowledge. It is essential to gain competitive advantage of the
organization.
Foster learning

Network form of organization may foster learning by encouraging combination of information and
knowledge among employees. The transformation of qualitative and distinct information helps to
gain new idea, concept, and experience in professional life. Simply the transfer of information
between two teams, the existence and enduring exchange relation may actually yield new
knowledge.
Maintain status

A number of scholars have argued that network form of organization possesses considerable
legitimacy or status through the affiliation. This legitimacy or status may in turn have a number of
positive economic benefits for the organization. It helps for survival, profitability and growth of
business activities of the organization.

Disadvantages and limitation of Network Organization Structure

Possibility of conflict

In network organization there is the possibility of conflict between management and work assigned
organization. The non critical tasks are given to outside organization on the basis of agreement.
There is possibility of conflict due to many reasons such as not completion of assigned task on
specified time, deficiency in quality of work, lack of coordination, financial aspects etc.
Lack of secrecy

It is difficult to maintain secrecy about the internal matters of the organization. The management
needs to work with other organization for non critical performance. It is essential to communicate
information with such organizations to maintain link with core competency performance.
Consequently in some cases, lack of secrecy may be the reason of loss of business.
Difficult to coordinate

Network organization is based on coordination. The management needs to maintain coordination

over all the performance inside and outside the organization. For this purpose close communication
among all the stakeholders is a must. However, if there is lack of effective communication it
becomes difficult to maintain coordination for integration of all the activities to meet common
goals.
Minimize competency

Network organization includes a wide range of joint ventures, strategic alliances, business groups,
franchises, relational contracts and outsourcing agreements. In some cases, such activities may
minimize core competency of the organization. It may create problems for the long term survival
expansion and diversification of business.
Increase dependency

Network organization increases over dependency of the management on other organization. It

emphasizes on strategic alliance and outsourcing agreement for some of non core competency
tasks. In such situation, management needs to depend on other organizations for fulfillment of the
needs of the customers. It can minimize prestige and status of the brand name of products or service
of the organization.
Loss of control

One of the important responsibilities of business organization is to maintain quality of products or

service. It is supportive for long term business in society. Networking organization may be the
reason of loss of control over quality and performance. The deficiency of strategic partners may
provide negative impact on the performance of the organization.

Potential advantages of network structures include:

The development of lean and streamlined organizations
.A reduction in overhead costs and an increase in operating efficiency.
Employment of outsourcing strategies along with contacting out specialized business functions
.Creation of interesting jobs for those who coordinate the entire system of relationships.
Potential disadvantages of network structures include
:Complicated control and coordination of the network due to the complex business or mission
of the organization.Network breakdown can affect the entire system.
Potential loss of control over outsourced activities and lack of loyalty among infrequently used
contractors.
Excessive outsourcing of critical activities can be dangerous to the firm
6. Does structure follow strategy or does strategy follow structure? Why?
Structure supports strategy. If an organization changes its strategy, it must change
its structure to support the new strategy. When it doesn't, the structure acts like a
bungee cord and pulls the organization back to its old strategy. Strategy follows
structure.
organisational structure is seen as a mechanism for implementing a certain strategy.
Furthermore, since each strategy has specific requirements, the choice of an
organisational structure must be adapted to these requirements in order to maximise the
success of the respective strategy.

Structure Follows Strategy:

– Changes in corporate strategy lead to changes in organizational structure
– New strategy is created
– New administrative problems emerge
– Economic performance declines
 – New appropriate structure is invented
– Profit returns to its previous levels

To adapt to the ever-changing environment in which they must operate today, corporations, both
for profit and nonprofit, need to remain flexible - this includes flexibility in an organization's
strategy, its market, its workforce and even its board.

7. Japanese corporations typically involve many more organizational levels and people in
the development of implementation plans than do U.S. corporations. Is this
appropriate? Why or why not?