1. Briefly explain the concept of strategic thinking?

Strategic thinking is a process that defines the manner in which people think about,
assess, view, and create the future for themselves and others. Strategic thinking is an
extremely effective and valuable tool. One can apply strategic thinking to arrive at
decisions that can be related to your work or personal life. Strategic thinking involves
developing an entire set of critical skills.
List of critical skills that the best strategic thinkers possess and use every day.
 Critical Skill #1: Strategic thinkers have the ability to use the left (logical) and right
(creative) sides of their brain. This skill takes practice as well as confidence and can
be tremendously valuable.
 Critical Skill #2: They have the ability to develop a clearly defined and focused
business vision OR personal vision. They are skilled at both thinking with a strategic
purpose as well as creating a visioning process. They have both skills and they use
them to complement each other.
 Critical Skill #3: They have the ability to clearly define their objectives and develop a
strategic action plan with each objective broken down into tasks and each task having
a list of needed resources and a specific timeline.
 Critical Skill #4: They have the ability to design flexibility into their plans by
creating some benchmarks in their thinking to review progress. Then they use those
benchmarks to as a guide and to recognize the opportunity to revise their plans as
needed. They have an innate ability to be proactive and anticipate change, rather than
being reactive to changes after they occur.
 Critical Skill #5: They are amazingly aware and perceptive. They will recognize
internal and external clues, often subtle, to help guide future direction and realize
opportunities for them and their companies or organizations. Great strategic thinkers
will listen, hear and understand what is said and will read and observe whatever they
can so that they will have very helpful and strategic information to guide them.
 Critical Skill #6: They are committed lifelong learners and learn from each of their
experiences. They use their experiences to enable them to think better on strategic
issues
 Critical Skill #7: The best and greatest strategic thinkers take time out for themselves.
Their time out may be in the form of a retreat (some prefer to call it an “advance”
since it “advances” their thinking”); a walk in a special environment; relaxing in a
 comfortable chair in the lobby of an historic hotel; or an afternoon in a quiet place
with a blank sheet of paper or their lap top computer with “their thinking caps” on
 Critical Skill #8: They are committed to and seek advice from others. They may use a
coach, a mentor, a peer advisory group or some other group that they can confide in
and offer up ideas for feedback.
 Critical Skill #9: They have the ability to balance their tremendous amount of
creativity with a sense of realism and honesty about what is achievable in the longer
term. This ability to balance does not deter them in their thinking. Sometimes they
refer to themselves as realistic optimists.
 Critical Skill #10: They have the ability to be non-judgmental and they do not allow
themselves to be held back or restricted by judging their own thinking or the
thinking of others when ideas are initially being developed and shared.
 Critical Skill #11: They have the ability to be patient and to not rush to conclusions
and judgments. Great ideas and thoughts require time to develop into great successes
in the future to reach your defined vision.
The greatest and most successful organizations in the world, over many years and
decades, would think ahead and encourage great strategic thinking at least somewhere in
their business plans. However, the challenge to that in too many organizations today is
the “self-centered,” “greedy,” and too often “unethical” focus on the short-term measures
of the current year’s bonus and dividend. A sustainable successful future requires much
more, no matter how big or small your business is, and a major requirement is strategic
thinking. Therefore, I strongly recommend that you develop these eleven (11) critical
skills of a strategic thinker to use in your business and personal life to ensure success.
2. How does horizontal growth differ from vertical growth as a corporate
strategy? From concentric diversification?
Students often confuse these three strategies. Horizontal growthis the expanding of a
firm's activities into other geographic regions and/or by increasing the range of
products and services offered to current markets. It often involves the acquisition of
another firm in the same industry (an example of external growth), but it could also be
through the expansion of a firm's products in its current markets (e.g., through line
extensions) or expansion into another geographic region (an example of internal
growth). One example of external horizontal integration would be if Anheuser-Busch
bought Coors. An internal example was Coors' expansion into the eastern U.S.
Vertical growth, in contrast, involves a firm's taking over a function previously
performed by a supplier or a distributor. This would typically involve the addition of
activities in other industries either forward (downstream) or backward (upstream) on
 the industry value chain of current products or services. The additions are primary
justified in terms of support of the current product lines regardless of their being in
other industries (and thus can be argued to be diversification). Concentric
diversification, in contrast, is the addition of products or divisions which are related to
the corporation's main business, but are added because of the attractiveness of other
industries rather than because they support the activities of the current product lines.
The additions may be through acquisition or through internal development. The firm
buys or develops another division which is similar to its present product-line.
Anheuser-Busch's diversification into snack foods (Eagle Snacks) to complement its
line of beers was an example of concentric diversification. The products are not alike,
but have a "common thread" relating them. If Coca Cola bought PepsiCo, it would be
an example of horizontal integration. If it purchased its distributors, this would be an
example of forward vertical integration. Its acquisition of Taylor Wines, however, was
an example of concentric diversification.

3. According to Porter, what determines the level of competitive intensity

in an industry?
The level of this intensity is determined by basic competitive forces. In carefully
scanning its industry, a corporation must assess the importance to its success of
each five forces:
 Rivalry among existing firms: The first of the five forces refers to the
number of competitors and their ability to undercut a company. The larger
the number of competitors, along with the number of equivalent products
and services they offer, the lesser the power of a company. Suppliers and
buyers seek out a company's competition if they are able to offer a better
deal or lower prices. Conversely, when competitive rivalry is low, a
company has greater power to charge higher prices and set the terms of deals
to achieve higher sales and profits.
 Threat of new entrants: A company's power is also affected by the force of
new entrants into its market. The less time and money it costs for a
competitor to enter a company's market and be an effective competitor, the
more an established company's position could be significantly weakened. An
industry with strong barriers to entry is ideal for existing companies within
that industry since the company would be able to charge higher prices and
negotiate better terms
 Threat of substitute products or services: Substitute goods or services that
can be used in place of a company's products or services pose a threat.
 Companies that produce goods or services for which there are no close
substitutes will have more power to increase prices and lock in favorable
terms. When close substitutes are available, customers will have the option
to forgo buying a company's product, and a company's power can be
weakened.
 Bargaining power of buyers: The ability that customers have to drive
prices lower or their level of power is one of the five forces. It is affected by
how many buyers or customers a company has, how significant each
customer is, and how much it would cost a company to find new customers
or markets for its output. A smaller and more powerful client base means
that each customer has more power to negotiate for lower prices and better
deals. A company that has many, smaller, independent customers will have
an easier time charging higher prices to increase profitability.
 Bargaining power of suppliers: model addresses how easily suppliers can
drive up the cost of inputs. It is affected by the number of suppliers of key
inputs of a good or service, how unique these inputs are, and how much it
would cost a company to switch to another supplier. The fewer suppliers to
an industry, the more a company would depend on a supplier. As a result,
the supplier has more power and can drive up input costs and push for other
advantages in trade. On the other hand, when there are many suppliers or
low switching costs between rival suppliers, a company can keep its input
costs lower and enhance its profits.
In addition, a sixth – otherstakeholders – is added to reflect the power that
government, local communities, and other groups from the task environment wield
over industry activities.

4. How can value-chain analysis help identify a company’s strengths

and weaknesses?
Each of a company’s product lines has its own distinctive value chain. Because
most corporations make several different products and services, an internal
analysis of the firm involves analyzing a series of different value chains.
The systematic examination of individual value activities can lead to a better
understanding of a corporation’s strengths and weaknesses. According to Porter,
“Differences among competitor value chains are a key source of competitive
advantage”. Corporate value chain analysis involves the following three steps:
1. Examine each product line’s value chain in terms of the various activities
involved in producing that product and service
2. Examine the “linkages” within each product line’s value chain
3. Examine the potential synergies among the value chains of different product
lines or business units
5. Is it possible for a company to have a sustainable competitive
advantage when its industry becomes hypercompetitive?

 Hyper competition: A situation in which there is a lot of very strong

competition between companies, markets are changing very quickly, and
it is easy to enter a new market, so that it is not possible for one company
to keep a competitive advantage for a long time.

 It is not possible for every company to have sustainable advantage when

its industry becomes hyper competitive. But firms that have unique,
valuable, inimitable resources leading to sustainable competitive
advantages can retain its competitive advantage is hyper competitive
situation by doing rapid changing in technology. Such as Apple, P&G
etc..

6. Identify and establish a relationship between ‘Strategic

Directions’ and ‘Vision’ of a company. Give an example to support
your answer?
  Companies rising to prominence in their markets pursue strategic
directions relentlessly. A first step is to have a strategic direction that
refers to the network of vision, goals. A company can expect to achieve a
competitive advantage or leadership position only when it has laid out its
strategic direction. The success of every company is based on a direction,
preferably long-term, that differentiates the company’s approach from
that of others.

 A vision determines what the company should work toward, in the light
of long-range opportunity. A company’s strategic vision constitutes the
activities that the company intends to pursue in creating its customers. To
make a vision explicit and action-oriented, many companies have
adopted what is known as a “mission statement,” which defines the goals,
values, and overall direction of the company.

EXAMPLE: L & T’s ‘vision’ given below highlights a relationship between it

and its ‘strategic directions’:

7. Why are many strategic alliances temporary

Because some alliances are very short-term, only lasting long enough for
one partner to establish a beachhead in a new market. Over time, conflicts over
objectives and control often develop among the partners. For these (and other
reasons), between 30-50% of all alliances perform unsatisfactorily.
8. Are functional strategies interdependent, or can they be formulated
independently of other functions?
Even though functional strategies may be formulated separately they are
interrelated because of the overriding objectives.
Even though functional strategies may be formulated in isolation they have
to coordinate with other functions. For example, even if the financial strategy is
formulated separately it has to be implemented through other functions.
Functional strategies by definition have to support line management in
unison with other functions and so they are interdependent.
9. What are differences (distinguish) between strategy and tactics?

Strategy defines your long-term goals and how you’re planning to achieve them. In
other words, your strategy gives you the path you need toward achieving your
organization’s mission.

Tactics are much more concrete and are often oriented toward smaller steps and a
shorter time frame along the way. They involve best practices, specific plans,
resources, etc. They’re also called “initiatives.”

Strategies CAN change to adapt to new internal or external factors in an

organization, but these changes shouldn’t be made lightly. Tactics can change
based on the success of your strategy. It’s much easier to adjust tactics to course-
correct than it is to overhaul your strategy, so make sure your strategic planning is
thorough.

10. What are the tradeoffs between an internal and an external growth
strategy?
-Internal Growth Pros
More likely to be based on some proprietary development giving competitive
advantage.
More likely to fit well with current business units/products
Can finance slowly out of returned earnings.
If plan no good, can always cut losses before in too deep.
-Cons
May take a long time to develop a new product or new concept.
May be hard to get current managers to try something new.
May ignore other uses of money with quicker return.
Favored program may take time away from current businesses
-External GrowthPros
Can grow quickly.
Good way to use financial leverage to boost Emloyment Permit System.
Don't have to build anything from scratch.
Can generate a lot of excitement on Wall Street and boost stock price.
-Cons
All or nothing gamble.
Need a lot of money and/or financial moxie to do it right.
Can purchase someone else's problems.
50% of all acquisitions fail to achieve the purchaser's objective.

 CASE 1: IBM
Strengths(S) Weaknesses(W)
S1 Dominant market share W1 Uncrucial to its profit
S2 Excellent employee problems
policies W2 Costs were too high
S3 Reliable products and it was unable to raise
S4 Close relationships its prices
with national W3 Difficulty in
governments, responsible responding quickly to the
local rapid market and
S5 Sound finances and technological changes that
extensive modern plant applied across its global
investment around the markets
world

Opportunities(O) S-O strategies W-O Strategies

O1 Had a remarkable S1, S3,S4 & O1, O2,O3: W1, W2, W3 & O1,
global market share – market development O2,O3: Enhancing
approaching 60 per cent. improvement of machines
O2 IBM became the first- and product development
choice computer company
for many of the world’s
leading companies
O3 IBM offered large, fast
and reliable machines that
undertook tasks never
before operated by
machinery: accounting,
invoicing and payroll

Threats(T) S-T strategies W-T stragies

T1 Its competitors were S1,S3, S4 & T1 : Focus on W1, W2, W3& T1:
able to exploit the new low cost Alliance affiliation
common IBM-compatible
PC design to produce
faster, reliable and
cheaper machines than
IBM

CORPOATE DIRECTIONAL STRATEGIES

GROWTH
Concentration: Vertical Growth
Diversification: concentric
STABILYTY
Proceed with Caution
RETRENCHMENT:
Turnaround : Break up the company into a series of smaller and more responsive
subsidiaries in different product areas – a PC company, a mainframe company, a
printer company and so on
Khi Upjohn Dược phẩm của Kalamazoo, Michigan và Pharmacia AB của
Stockholm, Thụy Điển sáp nhập vào năm 1995, nhân viên của cả hai bên đã lạc quan
cho Pharmacia & Upjohn, Inc. . Cùng nhau, các công ty sẽ tạo ra một công ty toàn cầu
có thể cạnh tranh khoa học với các đối thủ lớn hơn. Bởi vì Pharmacia đã mua l ại m ột
công ty Ý vào năm 1993, nên nó cũng có một hoạt động lớn ở Milan. Các giám đốc điều
hành của Hoa Kỳ đã lên lịch các cuộc họp trong suốt mùa hè năm 1996 - chỉ để hủy bỏ
chúng khi các đối tác châu Âu của họ không thể tham dự. Mặc dù đó là kiến thức phổ
biến ở châu Âu rằng hầu hết người Thụy Điển dành toàn bộ tháng 7 cho kỳ nghỉ và
người Ý cất cánh cả tháng 8, nhưng đây không phải là kiến thức phổ biến ở Michigan.
Sự khác biệt trong phong cách quản lý trở thành một kích thích đặc bi ệt. Ng ười Th ụy
Điển đã được sử dụng cho một hệ thống mở, với các nhóm làm việc tự trị. Các nhà điều
hành đã tìm kiếm sự chấp thuận của cả nhóm trước khi đưa ra một quyết định quan
trọng. Giám đốc điều hành Upjohn theo cách tiếp cận từ trên xuống truyền thống h ơn
của Mỹ. Khi nắm quyền chỉ huy công ty mới sáp nhập, Dr.Zabriskie (người từng là CEO
của Upjohn), đã chia công ty thành các bộ phận báo cáo cho trụ sở mới ở London. Ông
yêu cầu báo cáo thường xuyên, ngân sách và cập nhật nhân sự. Người Thụy Điển đã
phản ứng tiêu cực với phong cách phân cấp quản lý từ trên xuống này. "Nó đã xu ống
cấp," Stener Kvinnsland, người đứng đầu nghiên cứu ung thư của Pharmacia tại Ý
trước khi ông rời công ty mới. Các hoạt động của Ý gây trở ngại cho người Mỹ, mặc dù
người Ý cảm thấy thoải mái với phong cách quản lý phân cấp. Luật pháp và công đoàn
của Ý làm cho việc sa thải trở nên khó khăn. Dữ liệu và kế toán của Ý thường không
chính xác. Bởi vì người Mỹ không tin tưởng vào dữ liệu, họ liên tục yêu c ầu xác minh.
Đổi lại, người Ý lo ngại rằng người Mỹ đang cố gắng tiếp quản các hoạt động của Ý. Tại
Upjohn, tất cả các công nhân đã được kiểm tra lạm dụng ma túy và rượu. Upjohn c ũng
cấm hút thuốc. Tuy nhiên, tại trung tâm thương mại của Pharmacia, người phục vụ rót
rượu tự do vào mỗi buổi chiều trong phòng ăn của công ty. Các phòng họp c ủa
Pharmacia đã được tích hợp máy tạo độ ẩm cho các giám đốc điều hành hút xì gà
trong các cuộc họp dài. Sau một nỗ lực ngắn ngủi để thực thi các chính sách của
Upjohn, công ty đã bỏ cả chính sách cấm uống rượu và không hút thuốc đối với ng ười
lao động châu Âu. Mặc dù công ty kết hợp đã cắt giảm chi phí hàng năm 200 triệu đô
la, nhưng tổng chi phí của việc sáp nhập đạt 800 triệu đô la, nhiều hơn 200 triệu đô la
so với dự kiến. Tuy nhiên, Jan Eckberg, CEO của Pharmacia trước khi sáp nh ập, v ẫn t ự
tin về khả năng thành công của công ty mới. Tuy nhiên, ông thừa nhận rằng "chúng tôi
phải thực hiện một số thay đổi nhỏ hơn để giải phóng toàn bộ sức mạnh của hai công
ty".