CHAPTER 1 (BASIC OF STRATEGIC MANAGEMENT)

1. General approach in beating competitors and winning sustainable competitive advantage?

(5 generic strategies)
 low cost provider strategy (achieving a cost-based advantage over rivals, ex:
walmart)
 broad differentiation strategy (seeking to differentiate the company’s product or
service from rivals’ in ways that will appeal to a broad spectrum of buyers, ex:
johnson&johnson in baby product)
 focused low-cost strategy (concentrating on a narrow buyer segment or market
niche and out competing rivals by having lower costs than rivals, ex: coach),
 focused differentiation strategy (concentrating on a narrow buyer segment or
market niche and out competing rivals by offering niche members customized
attributes that meet their tastes and requirements better than rivals, ex: LV and
rolex),
 best-cost provider (giving customers more value for the money by offering an
attractive product lineup at low prices)
2. What is sustainable competitive advantage? It’s when an attractively large number of
buyers develop a durable preference for its products or services over the offerings of
competitors, despite the efforts of competitors to overcome or erode its advantage, ex:
starbucks despite the presence of many other coffee shops it still becomes the leader in
the industry
3. What is business model? How its strategy and operating approaches will create value for
customers, while at the same generate ample revenues to cover costs and realize a profit
which consists of 2 elements: customer value proposition and profit formula
4. Mention 3 questions in testing a strategy? how well the strategy fit the firm, does the
strategy help the firm in achieving its SCA, does the strategy help the firm achieve the best
performance
5. What’s the difference between strategy and strategic? Strategy is its plan for winning the
competition with its competitors, while strategic is a process for formulating and
implementing a strategy
6. What’s the difference between corporate strategy and business level strategy? corporate
strategy focuses more on multi businesses in which its concern is to manage the portfolio
businesses of a firm in increasing the overall competitive advantage, while business level
strategy focuses on single business unit in which its concern is on how to achieve
competitive position
7. What’s the relationship between marketing and strategic management? Strategic
management is a set of strategy in which its main goal is to maximize shareholders value
by choosing a strategy, forming a sustainable business unit and allocating resources to
each business unit where each business unit has its own functional level. Marketing role
will be played in the functional level by forming a superior customer value that could lead
to customers loyalty. Therefore, marketing has a big role in achieving sustainable
competitive advantage with a strategic planning that is created in the corporate level.
8. Explain the strategy-making hierarchy? Corporate level: how to manage multi-businesses
that could bring competitive advantage, business level: maintaining position against rival,
functional level: create a plan such as marketing strategy, etc., operational level: running
the strategy in details and making sure that the strategy is well-implemented
9. Explain about corporate level strategy? it’s a strategy that focuses more on multi
businesses in which its concern is to manage the portfolio businesses of a firm in
increasing the overall competitive advantage
10. What is key success factors? Competitive factors that affect industry members’ ability to
prosper in the marketplace which consists of technology related, manufacturing-related,
distribution-related, marketing-related, skill and capabilities related, etc.

Chapter 2 (company’s direction: vision, mission, objectives and strategy)

1. What are the steps in forming a strategy? mission (why do we exist), vision (what do we
want to be?), values (what do we believe in?), goals or objectives (what do we want to
achieve?), strategy (how could we achieve it?), strategy implementation (how to execute
the strategy?) or developing a strategy, setting objectives, crafting a strategy,
implementing and executing the chosen strategy, and evaluating and analyzing the
external environment and the company’s internal situation and performance
2. What are core competence and distinctive competence? Core competence is s proficiently
performed internal activity that is central to a company’s strategy and competitiveness. If
it is performed with a very high level of proficiency, it’s called as distinctive competence
3. What is the weakness of 5 forces model? It ignores the role of innovation in analyzing the
industry, market structure were seen as relatively static when it’s actually flexible, it
ignores the presence of complementary industry, it only provides the snapshot of the
industry environment
4. Why a company needs to go international? To gain access to new markets, get more
resources with cheaper costs, extending the life cycle of the product
5. Explain and mention the stage in industry life cycle and its strategy? 1) intro/startup stage:
customer demand is limited due to unfamiliarity with the new product’s features and
performance. In this stage companies tend to experience negative cash flows due to large
amount of capital invested in technology and marketing expenses, 2) growth: the product
starts to attract attention from a bigger market segment in which profitability starts to
rise. In this stage the price of product starts to decrease as demand increases but
competitors start to enter the market. Companies need to strengthen their business
model, 3) shakeout: some businesses are naturally eliminated because they are unable to
grow or still generate negative cash flows. Some companies merged or acquired by
competitor to obtain bigger market share, 4) maturity stage: the industry reaches its
saturation point. In this stage companies tend to maintain its strategy to stay in that
position, 5) decline stage: companies might choose to focus on their most profitable
product lines or services in order to maximize profits or selling the company
6. What is the strategy to deter potential competitors? Product proliferation (market many
variations of the same products, serving new market segment such as niches), price cutting
7. What is the strategy to manage competition? Price signaling: increase and decrease price
that gives signals to competitors about the intention to beat the competitor, price leader:
leave other competitors with no options other than lowering prices, non-price
competition: Ansoff matrix (market penetration, market development, product
development, differentiation)
8. What is five forces model? What are the characteristics of an industry to be attractive?
Model that identifies and analyzes five competitive forces that shape industry and helps
determine and industry’s weaknesses and strengths or to analyze attractiveness of an
industry. Those 5 forces are threat of new entrants, rivalry among competitors, bargaining
power of suppliers, bargaining power of buyers, threat of substitute. Industry is said to be
attractive when threat of new entrants is low, threat of substitute is low, bargaining power
of buyers is low, bargaining power of suppliers is low, rivalry among competitors low
9. What a firm should do when their company is experiencing crisis? Increasing efficiency and
committed to keep their product quality
10. Why a firm should make an objective and what are the characteristics of a good objective?
A specific result that a firm aims to achieve within a time frame. A good objective has to
cover financial objective and strategic objective that is measurable and able to be achieved
within a certain period

Chapter 3&4 (firm’s external environment and internal resources and capabilities)
1. What is resource and capability? Resource is a competitive asset that is owned or
controlled by a company, while capability is the capacity of a company to competently
perform some internal activity which is developed and enabled through the deployment of
a company’s resources
2. What is consumer surplus? It’s an economic measurement of consumer benefits which
occurs when the price that consumers pay for a product or service is less than the price
they’re willing to pay
3. What is company’s value chain? Collection of activities such as producing, marketing,
delivering that a company performs internally that will produce an output
4. What is meant by primary and supporting activities? Primary activities are activities that
relate directly to the physical creation, sale, maintenance and support of a product or
service which consists of the following: inbound logistics, operations, outbound logistics,
marketing and sales, service. While supporting activities are the ones that support the
primary functions which consist of procurement/purchasing, human resource
management, technological development, infrastructure.
5. Explain about the building block of competitive advantage? There are 4 generic building
blocks of CA which are:
 superior efficiency: to measure the balance between input and output. A firm is
said to be efficient when input is less than output. It consists of employee
productivity (output produced by its employee) and capital productivity (maximum
capacity produced by each machine)
 superior quality: a product in which the quality exceeds consumer expectation. 2
types: quality as excellence and quality as reliable
 superior innovation
 responsiveness to customers: doing the best in identifying and satisfying consumer
needs which needs a good design, after sale service, etc
6. What is VRIO analysis? Is a strategic analysis tool designed to help org. uncover and
protect the resources and capabilities that give them a long-term competitive advantage
which consists of 4 analysis: Valuable, Rare, Inimitable and Organization (the capability and
a policy of a firm to exploit the resources of the firm optimally)
7. 3 things that affect the durability of competitive advantage? Barriers to imitation,
capabilities of competitor and industry dynamism
8. What are the reasons for company failure?
 Inertia: firm’s tendency to remain unchanged in terms of its strategy due to the
limited capabilities. Ex: Nokia vs. Apple
 Prior strategic commitments: which makes them limit a company’s ability to
imitate and cause competitive disadvantage
 The Icarus paradox: failure of businesses after a period of success because of
unaware of the current condition in the industry
9. What is benchmarking? Measuring the performance of a company’s products or services
against other businesses considered to be the best in the industry
10. How to avoid failure? Focus on building block of competitive advantage, keep on learning
and improving, overcome inertia and keep looking for the best practice in industry
benchmarking
11. What’s the difference between effective and efficient? Effective means the measurement
to fulfil output and the goal of the process, the higher the output and the goal of the
process the activities can be said as effective. While efficient is an action in which a firm is
able to produce output with a minimum input
12. How to implement efficiency?
 Economies of scale & learning curve (the rate of a person’s progress in gaining
experience or new skills). The mix of economies of scale and learning curve is called
experience curve which could lower costs
 HRM: increasing employee productivity by implementing pay for performance
 Org. infrastructure: forming an org. infrastructure that could increase efficiency
13. Explain about BCG matrix? It’s a tool to asses a company’s current product portfolio or its
strategic business units. The result of the assessment will help company in deciding its
long-term strategic planning as it indicates where to invest, to discontinue or develop
products. It’s placed on 2x2 grid and the placement is done by investigating 2 dimensions
 which are: product life cycle and experience curve. Product life cycle is reflected by market
growth while the experience curve is reflected by the relative market share. The 2 values
have to be identified in order to put each product/division/SBU on the grid. Investment
and divestment action can be taken.
 Question marks: low-share business units in high grow markets. It’s relatively
young but promising and have the potentials to become stars if the market share
can be increased. Firms have to decide which ones should be built into starts and
phased out
 Stars: high-growth, high-share business units. It needs heavy investment to finance
their rapid growth. The growth will slow down and turn into cash cows.
 Cash cows: low-growth, high-share businesses or products. These established and
successful SBUs need less investment to maintain their market share. As a result,
they produce cash that the company uses to pay its bills and support other SBUs
that need investment. It usually has high market share in a slowly growing or
mature market
 Dogs: low-growth, low-share business and products. They may generate enough
cash to maintain themselves but don’t promise to be large sources of cash flow.
The company usually should divest dogs since it has negative effect on the overall
profitability of the company

14. Explain about GE matrix! It implies multifactor portfolio matrix that helps firm in making
strategic choices for product lines based on their position on the grid. It has an objective to
prioritize investment among various business units. It’s placed on a 3x3 grid

Business strength is influenced by market share, brand image, profit margins, customer
loyalty, technological capability, etc. While industry attractiveness is influenced by drivers
such as pricing trends, economies of scale, market size, market growth rate, segmentation,
distribution structure, etc.
 15. How to build a business model? There are 3 stages; 1) identify the customer needs, 2)
identify the customer group, 3) identify the distinctive competencies
16. 4 questions to assess the competency of company’s resources? Is the resource or capability
competitively valuable, is the resource or capability rare, is the resource or capability
inimitable/hard to copy, are the structure and policy of the organization able to use the
resources of the organization optimally in achieving competitive advantage
17. What’s the difference between innovation, invention and product development? Invention
is the creation of a product for the first time. Innovation occurs when someone improves on
or makes a significant change to an existing product. While product development is a part of
an innovation in creating different product by transferring the basic structure of the existing
product and adding some new changes.
18. What is M&A? when one company takes over another and clearly establishes itself as the
new owner and the target company ceases to exist, it’s called acquisition. While a merger is
a deal between CEOs of two firms that agree to join together for the sake of the better
performance of the company
19. What’s the difference supply chain and value chain? Supply chain refers to the integration of
all activities involved in the process of sourcing, procurement, conversion and logistics or a
set of activities starts from the manufacturing of raw material into finished products and
end when the product reaches the final customer. While, value chain implies the series of
business operations in which focuses in adding and creating value to the goods and services
offered by the firm so as to enhance customer value
20. What’s the difference between diversification and differentiation? Diversification is going
into different businesses can be related or unrelated. While differentiation is staying in or
entering in a particular business but producing a product or delivering a service that’s
unique and better than rivals
21. Explain about industry competitive structure! Fragmented industry is the one in which many
companies compete and there is no single or small group of companies which dominate the
industry. While consolidated industry, there are only few players which can be categorized
as oligopoly or monopoly
22. What if VRIO resources is also owned by competitor? A firm could maximize its core
competence
23. The example of substitute resources? Having different resources and capabilities with
competitors but with the same goal. E-commerce and retailer
24. What factors affect global strategy decision? Local responsiveness and pressure to lower
costs
25. What’s the difference between relative market share and market share? Market share
shows how a company is performing compared to its competitors while relative market
share shows how a company is performing compared to the leading competitor
26. What are the six managerial actions? Make sure that the company has a good strategy, keep
the company to stay in the path, pushing the performance in a structured way, doing a
corrective action to increase the strategy of the company, leading a development that could
increase competition, initiating CSR
27. Why a firm should implement low cost strategy? to increase the volume of buyers, to win
the price war but it has a weakness such as could lead an excess production is demand
decreases
28. What is the role of superior responsiveness to customers? Increasing customer satisafction
29. Mckinsey 7s? strategy, structure, system, style, staff, skills and shared values
Chapter 5, 6 & 7
1. What’s the difference between strategic fit and resource fit? Strategic fit exists when value
chains of different businesses present opportunities for cross-businesses skills transfer, cost
or brand sharing. While resource fit exists when a parent company of a diversified company
has sufficient resources to support its entire group of businesses
2. Characteristics of a good vision? Fulfils BHAG criteria Big (big enough to be achieved), hairy
(interesting), audacious (challenging), goal (has a purpose)
3. What is 5 generic competitive strategies? Cost leadership, differentiation, cost focus,
differentiation focus, best-cost provider
4. How a firm implement low-cost leadership strategy? by implementing cost-efficient from
value chain activities by economies of scale, implement experience and learning curve, use
the available resources optimally, eliminate unnecessary activities along value chain
activities and outsourcing and vertical integration. Other than that, they can also revamp
value chain by selling products directly to decrease shipping cost and simplify product
design
5. How a firm implement broad differentiation? Making an innovation with a superior feature,
design and performance of a product. They can also invest in R&D to keep improving
product and always improving the quality of the existing products
6. What is blue and red ocean strategy? blue ocean strategy is a market for a product where
there is no competition or very less competition because they are creating the uncreated
market, ex: the botol sosro was the first company to make a bottle tea. While red ocean
strategy is a strategy to outperform their rivals to grab a greater share of existing demand
7. The advantage and disadvantage of first mover? Advantage: being a leader in the market,
buyer-switching costs, economies of scale. Disadvantage: high amount of investment, the
mistakes done by first mover can be avoided by competitors, skeptical from buyers
8. The questions to persuade a firm to be firs mover? Will buyers need time to get used to the
new products or services, will buyers have high switching costs, are there influential
competitors in a position to delay first mover, is the infrastructure ready to serve high
demand
9. What is meant by scope of the firm? The range of activities the firm performs internally, the
breadth of its product and service offerings, the extent of its geographic market presence
and its mix of businesses
10. What is horizontal and vertical scope? Horizontal is the range of product and service
segments that a firm serves within its local market. While vertical scope is the extent to
which a firm’s internal activities encompass all of the activities that make up an industry’s
entire value chain system, ranging from raw-material production to final sales and service
activities
11. The purpose of M&A? broaden target market, increase cost efficiency and faster access to a
new technology and resources
12. What is backward and forward vertically integrated? Vertically integrated firms is one that
performs value chain activities along more than one stage of an industry’s overall value
chain. Backward integration happens when a firm performs value chain activities which is
previously performed by suppliers. While forward integration is when a company performs
value chain activities closer to the end user (acquiring distributor)
13. What are the drawbacks of vertical integration? Large expense in capital investment
14. What is outsourcing? Hiring a party outside a company to perform services and create
goods that traditionally were performed in-house by the company’s own employees and
staff
15. Why companies do outsourcing? Improved focus on core business activities, increased
efficiency, cost-savings
16. What is strategic alliance? An arrangement between 2 companies that have decided to
share resources to undertake a specific, mutually beneficial project. Ex: sky team
17. What is joint venture? Business agreement in which 2 or more parties agree to pool their
resources for the purpose of accomplishing a specific task. Ex: coca-cola & nestle kerja sama
buat produk the sm kopi di jepang
18. What are the factors affecting the failure of strategic alliance? Lack of shared vision, change
of goals between 2 parties, inability to cooperate, lack of trust and adaptability
19. Why a firm broaden their target market into global market? To create a new market share,
lower production costs, exploit the core competence, to gain resources in other countries
20. How to enter global market? Licensing, franchising, direct sales, joint venture, etc.
 21. What are the drawbacks of export strategies? Forex risk, high shipping cost and other export
regulations, threat of losing existing consumers in the home market when being too focused
on exporting
22. What is multidomestic strategy and its weaknesses? Expanding the market by tailoring the
products according to the needs of the domestic markets. It’s usually more expensive to
implement and takes more time to do research. It works against the firm’s ability to develop
a global brand image
23. What is a global strategy (think global, act local)? Expanding in a global market while
maintaining a global brand by using the same marketing approach, products, distribution
channel, etc.
24. What is transnational strategy? more personalized approach to selling and marketing goods
and services or expanding globally while still considering cultural and societal differences
25. Ways to compete in developing countries? Low-price strategy and business model that
could accommodate the needs of local demand
Chapter 8
1. 3 questions to test diversification strategy? industry attractiveness test: the industry chosen
for diversification must be structurally attractive or capable of being made attractive, cost-
of-entry test: the cost of entry must not capitalize all the future profits, the better-off test:
either the new unit must gain competitive advantage from its link with the corporation or
vice versa
2. How a company diversify its business? By acquiring existing company, internal development
(maximizing internal resource) and joint venture
3. What is related and unrelated business? Related business possess competitively valuable
cross-business value chain and resource matchups. While unrelated businesses have
dissimilar value chains and resources requirements, with no competitively important cross-
business value chain relationships
4. What is the criteria that a strategic fit exists in a company? Whenever one or more activities
comprising the value chains of different businesses are sufficiently similar and able to
transfer valuable resources, cost sharing of value chain activities that can be combined and
brand sharing
5. What’s the difference between economies of scale and scope? Economies of scale refers to
savings in the cost due to increase in output produced (due to the volume), while
economies of scope refers to savings in cost due to the production of two or more distinct
products using the same operations (due to the variety)
6. What’s the parameter to say that unrelated diversification strategy is success? If the
diversification can increase shareholder value and the improvement of the business that can
consistently produce good earnings and ROI
7. How to evaluate the strategy of a diversified company? Evaluate the industry attractiveness,
evaluate the ability of business unit to compete by evaluating the market share of SBU or its
competitive strength, determine the competitive value of strategic fit in multibusiness
companies (is there any possibility to do transfer skill, brand sharing, etc.), ranking business
units and setting a priority for resource allocation, crafting new strategic moves to improve
the overall corporate performance
8. What is financial resource fit? It concerns about whether a diversified company can
generate the internal cash flows that are sufficient to fund the capital requirements of its
businesses such as dividend payment, debt obligations, etc.
9. What’s the difference between cash hogs and cash cows? Cash hog generates operating
cash flow that are too small to fully fund its operations and growth, while cash cow
generates operating cash flow above its internal requirements that could provide financial
resources to invest in cash hogs, new acquisitions, etc.
Chapter 9
1. What is business ethics? The application of ethical principles to the actions and decision of
businesses and the conduct of their personnel
 2. What causes business to do unethical conduct? Too focus on achieving the goal that they
don’t pay attention to business ethic, company’s culture that prioritize goal more than
ethical conduct
3. What is CSR and Philanthropic action? It’s a practice that embraces responsibility for its
actions through, its activities that positively affects the environment, society, consumers,
employees, etc. One type of CSR is philanthropic action such as charitable donations or
programs that encourage employee volunteerism by providing paid time off for such
activities
4. What kind of CSR that is good for the business? Encourage employees to do business in an
ethical way, contribute to social activities, aware with the environmental condition
5. Three principles of ethics?
 Ethical universalism: the same standards of what’s ethical and what’s unethical
resonate with peoples of most societies regardless of local tradition and cultural
norms. Hence standards can be used to judge employee conduct in a variety of
country.
 Ethical relativism: different societal cultures and customs create divergent standards
of right and wrong. Thus, what’s right or wrong must be judged in the light of local
customs and can vary from one culture to another.
 Integrative social contract: based on collective views of multiple cultures combine to
form a ‘social contract’. The mix between universalism and relativism, if something
isn’t declared right or wrong according to the universal. Therefore, local ethical
norms are more permissive
6. What should be done when the industry has become saturated? Implement blue ocean
strategy and differentiation
Chapter 10
1. What are the managerial components in executing strategy?
 Building an org. with the capabilities, people and structure needed to execute the
strategy successfully
 Allocating ample resources to strategy-critical activities
 Ensuring that policies and procedures facilitate rather than impede effective strategy
execution
 Adopting process management programs that drive continuous improvement in how
strategy execution activities are performed
 Installing information and operating systems that enable company personnel to
perform essential activities
 Tying rewards directly to the achievement of performance objectives
 Fostering a corporate culture that promotes good strategy execution
 Exerting the internal leadership needed to propel implementation forward
2. Mention the 3 key actions to build organization that’s capable to execute good strategy?
 Staffing and organization: putting together a strong management team and
recruiting and retaining employees with the needed skills and experience
 Acquiring, developing and strengthening strategy-supportive resources and
capabilities
 Structuring the org. work and effort: organizing value chain activities and business
processes, establishing line of authority and reporting relationships and deciding
how much decision-making authority to push down to lower level employees
3. What is corporate culture? Company’s internal work climate that is shaped by its core
values, beliefs and business principles which influence its traditions, work practices and
style of operating

Additional questions
1. How to evaluate external environment of an organization?
 Identify the industry’s dominant economic characteristics: PESTEL analysis
 Identify the competitive force of the industry and how strong each force
  Identify the forces that could drive changes to the industry
 Identify the position in the market
 Identify the strategic moves rivals likely to make
 Identify industry KSF
2. What is PESTEL analysis? To assess the strategic relevance of the six principal components of
the macro-environment: political, economic, social, technological, environmental, and legal
forces