STRATEGIC

PLANNING
PLANNING

 Provides guidance and direction regarding what an organization needs to do

throughout its operations
 First activity undertaken by management
 Its sets a stage for prioritizing how to develop, communicate and carry out accomplish
company’s goals and objectives
 Provides clear performance standards, enabling better monitoring and control of
results.
PLANNING IN ORDER TO ACHIEVE
SUPERIOR PERFORMANCE
 Most of the companies want to achieve superior performance in comparison with
performance of their competitors
 Result of superior performance is competitive advantage
 Achieving superior performance will helps to achieve profitability and profit
growth.
 Profitability and profit growth helps to improve shareholder value
 Profitability and profit growth for any individual company are determined by two
things:
1) its success relative to other firms in its same industry, and
2) the overall performance of the industry the company is in compared with the
performance of other industries.
STRATEGY: A strategy is a set of actions taken by managers of a company to increase company’s
performance.it includes strategy formulation and implementation.
COMPETITIVE ADVANTAGE: it is the advantage company has over its competitors that it gains
by offering consumers greater value than they can get from its competitors. Result of superior
performance is competitive advantage. It can either be by lower prices for same products or by
providing greater benefits and services than competitors do.
BUSINESS MODEL: A company’s business model is managers idea of how set of strategies and
capital investments the company makes should fit together to generate above average profitability
and profit growth
PROFITABILITY: Profitability is derived from the value customers place on its products, price of
products and cost of creating the products.
The Role of Management in Attaining
Profitable Growth
 The market theory gives management a passive role and views its function
basically as making reactive decisions in response to environmental events as they
occur.
 The “planning and control” theory gives management an active role that
emphasizes its plan-ning function and its ability to control the activities of the
business.
TYPESOF PLANS

 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

 SINGLE PURPOSE PLAN: Developed for a specific item such as construction of

a fixed asset, the development of a new product, or the implementation of a new
accounting system.
 STANDING PURPOSE PLAN: They have relevance and use for many different
items. Plans such as marketing and operational plans are standing-purpose plans.
 Contingency planning is planning that a company develops to prepare for possible
future events (especially negative events). Contingency planning is “what if?”
planning. Preparing different plans for different situations is more expensive
because it entails developing multiple plans. However, multiple plans for different
situations enable the company to be better prepared for what may occur. A
company prepares multiple plans when management thinks that the contingency
planning will eventually lead to greater savings than the cost of the planning itself
STRATEGIC PLANNING PROCESS

 Defining company’s vision, mission, values and goals

 Analyzing external environment
 Analyzing internal environment
 SWOT analysis
 Developing and implementing strategies
Defining company’s Mission, Vision,
Values and goals
 Mission statement include company’s mission or reason to be, vision, values and
goals
 Mission: what a organization is, why it exists, its reason for being.
 Vision: what a company would like to achieve or become.
 Values: How managers and employees should behave and do business.
 Goals: precise and measurable future state that the company wants to achieve.
MISSION:A company’s mission is what the company does. In writing the mission
statement, management should ask itself, “What is our business? What will it be?
What should it be?” In answering the questions, management should think in terms
of the customer.
VISION: The vision is what the company would like to achieve or become, and it
should be challenging. A good vision statement should challenge the company by
stating an ambitious future state that will (1) motivate employees at all levels and (2)
drive the strategies that the company’s management will formulate and implement in
order to achieve the vision
MISSION EXAMPLES

“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

 How managers and employees should behave and do business. A company’s

values are the foundation of its organizational culture. The organizational culture
consists of the values, norms and standards that govern how the company’s
employees work to achieve the company’s mission and goals. These standards are
in turn associated with the company’s performance— either good performance or
poor performance. A deep respect for the interests of customers, employees,
suppliers and shareholders has been associated with high performance in firms.,
 Teamwork, trust,integrity etc
Goals

 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

 An industry analysis involves assessing the company’s industry, the company’s

competitive position within the industry, and the competitive positions of its major
rivals. The nature of the industry, the stage the industry is in, the dynamics and the
history are all part of an industry analysis.
Country or national environment

 Analyzing the national and international environment includes assessing domestic

as well as international political risk and the impact of globalization on
competition within the industry. International political risks include the obvious
risks of government expropriation (government seizure of private property with
some minimal compensation offered, generally not an adequate amount) and war
(which can affect employee safety and create additional costs to ensure
employees’ safety).
Macroenvironment

 Economic growth
 Level of interest rates
 Currency rate fluctuations
 Inflation and Deflation
FIVE FORCES MODEL

Developed by Michael porter,leading authority in Hardvard business school

For analyzing external opportunities and threats
When one or more five forces are strong it creates company’s limitation in generating
competitive advantage and long run profit growth
Strong forces are threat and weak forces are opportunities
1. Risk of entry by potential competitors
2. Intensity or rivalry among established companies within an industry
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. Closeness of substitutes to an industries products.
 ANALYZING INTERNAL

ENVIRONMENT
Identify strength, weakness and limitations within the organization.
 Primary objective is to achieve a sustained competitive advantage.
 A firm creates competitive advantage when it is able to use its resources and capacity to achieve
either a differentiation advantage or cost advantage or both
 Differentiation advantage: It creates value to its customers because it provides
greater benefits that exceeds those provided by the competitors. Here a firm can
price its products higher than competitors leading higher profits.
 Cost Advantage: The firm provides same value to customers as provided by
competitors but at lower cost leading to greater profit.
RESOURCES, CAPABILITIES AND
DISTINCTIVE COMPETENCIES
 RESOURCES: Factors that enable a company to create value to its customers.
There are tangible resource like land, building, inventory, cash etc and intangible
resources like brand name, patent, employee knowledge etc.
 CAPABILITIES: It refers to company’s ability to manage its resources and put
them into productive use.
 DISTINCTIVE COMPETENCIES: they are the strength the company has that
enable to achieve either cost advantage or differentiation advantage. Distinctive
competencies include superior efficiency, superior quality, innovation and
superior customer responsiveness.
 • Superior efficiency. Efficiency is the relationship between inputs and outputs. The more
efficient the company is, the fewer inputs will be required to produce a given output.
 Superior quality. A product has superior quality when customers consider that its
attributes give them higher utility than the attributes of competing products. Superior
quality enables the company to charge a higher price for its product, leading to higher
profit
 Superior innovation. Innovation is the creation of new products or new processes.
Product innovation creates value by developing products that customers perceive as
having more utility, and thus the company’s pricing options for the products are
increased. Process innovation can create value by decreasing costs.
 Superior customer responsiveness. Superior customer responsiveness occurs when a
company is able to do a better job than its competitors of identifying customer needs and
satisfying them.
Utility and Profitability

 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

Durability of competitive advantage is affected by three factors

 Bariers to imitation : Factors that make it difficult for a competitor to imitate. eg:
patent right
 Capability of competitors to imitate the company’s competitive advantage, based
upon their prior strategic commitments and their absorptive capacity.
 Dynamism of industry or how rapidly the industry is changing.
FACTORS CONTRIBUTE TO FAILURE
OF A COMPANY
 Inertia or reluctant to change strategies in order to adapt changing conditions
 Company’s prior strategic commitments
 Icarus paradox
USE OF INTERNAL ANALYSIS TO
AVOID FAILURE
 Focus on distinctive competencies
 Continuous learning and improvement
 Select best practices through benchmarking
 Overcome internal forces of inertia within organization that creates barriers to
change
SWOT ANALYSIS

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

 • Functional-level strategy, for the purpose of improving operations inside the

company. These operations include areas such as manufacturing, marketing,
materials management, product development ,and customer service.
 • Business-level strategy, which includes the position of the business in the
marketplace as well as different positioning strategies that could be used. Some
examples are (1) cost leadership, (2) differentiation, (3) focusing on a particular
marketing niche or segment, or (4) a combination of more than one of these.
 • Global strategy, or considering how to expand operations outside the home
country.
 • Corporate-level strategy, considering what business or businesses the company
should be in so as to maximize its long-run profitability and profit growth.
CORPORATE LEVEL STRATEGY

 Define business areas in which firm will operate.

 Involves integrating and managing the diverse businesses and realizing synergy
at the corporate level.
 Top management team is responsible.
 Horizontal integration, Vertical integration. Diversification, Strategic alliance and
strategic outsourcing
BUSINESS LEVEL STRATEGY

 Involves defining the competitive position of strategic business unit

 Decisions about customers’ needs and what needs have to be satisfied
 Decisions about what products should be offered and to which customers they
should be offered
 Decided upon by heads of strategic business units and their teams.
 FOUR GENERIC COMPETITIVE STRATEGIES BY MICHAEL PORTER
1. Cost leadership
2. Focus cost leadership
3. Differentiation
4. Focus differentiation
FUNCTIONAL LEVEL STRATEGY

 Involve setting up short term objectives

 Developed for improving effectiveness of company’s operations.
 Improved effectiveness helps the company to achieve superior efficiency, superior
quality, innovation and customer responsiveness.
 Formulated by functional head and their teams.
DEVELOPING AND IMPLEMENTING
STRATEGIES
Strategic implementation is successfully done through the context of organizational
design which include:
Organizational structure: specifies who should do what, how it should be done, and
how the various people and groups should work together to increase efficiency, quality,
innovation, and responsiveness to customers.
Control systems: provide managers with incentives to motivate their employees to
work to increase efficiency, quality, innovation, and responsiveness to customers.
Control systems also provide feedback to managers on how well the company and its
employees are succeeding in increasing these building blocks of competitive advantage.
Organizational culture. includes all of the norms, values, beliefs and attitudes that
people in an organization share. It is the company’s way of doing things, and it controls
the way its members interact with one another and also with outside stakeholders.
SITUATION ANALYSIS

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:

 Which of the following is not a significant reason for planning in an organization?

 A. Forcing managers to consider expected future trends and conditions.
 B. Promoting coordination among operation units.
 C. Enabling selection of personnel for open positions
 D. Developing a basis for controlling operations.
 Question: 2What is strategic planning?
A. It establishes the general direction of the organization.
B. It establishes the resources that the plan will require.
C. It establishes the budget for the organization.
D. It consists of decisions to use parts of the organization’s resources in specified
ways.
A company sells a product that is aimed at the broad mass market but is perceived as
unique throughout its industry. The company is earning above average returns on the
product. Which one of the following is the most appropriate term for the competitive
strategy followed by the company?
 A. Market focus.
 B. Differentiation.
 C. Financial leadership.
 D. Cost focus.
Which of the following is an example of an outcome of strategic planning?
A. A formal statement of the organization’s definition of the fundamental truths that
guide its actions.
B. A broad statement of concepts that emphasizes the implementation of
organizational objectives over the long term.
C. A set of general guides for action that channel thinking and allow a certain amount
of discretion in execution.
D. A document specifying a sequence of steps detailing the exact manner in which a
certain activity must be accomplished.
The concurrent action of basic competitive forces as defined by Porter’s 5 forces
model determines the
 A. long-term profitability and the competitive intensity of the industry.
 B. strategy that a firm should follow to achieve its objectives.
 C. entrance barriers that potential players must face to get into the industry.
 D. rivalry inside the industry.
Which one of the following management considerations is usually addressed first in
strategic planning?
A. Outsourcing.
B. Overall objectives of the firm.
C. Organizational structure.
D. Recent annual budgets.
After leading the market for the past decade, the growth of product ABC is slowing
down. In this stage of its life cycle, the product is still generating significant amounts
of cash flows that cover the company’s investment into new product innovations.
According to the BCG Growth-Share Matrix, product ABC is most likely an example
of a
 A. dog.
 B. star.
 C. question mark.
 D. cash cow.
Strategy is a broad term that usually means the selection of overall objectives.
Strategic analysis ordinarily excludes the
A. Trends that will affect the entity’s markets.
B. Target product mix and production schedule to be maintained during the year.
C. Forms of organizational structure that would best serve the entity.
D. Best ways to invest in research, design, production, distribution, marketing, and
administrative activities
The management of a food-processing company is analyzing its internal strengths
and weaknesses as part of its strategic planning process. Which one of the following
is most likely considered a strategic internal variable for the company?
 A. Technological changes in food-processing methods.
 B. The economic forces that regulate the local labor supply.
 C. Changes in the legal code for food processors.
 D. The culture at the company’s food-processing plant
All of the following are characteristics of the strategic planning process except the
A. Emphasis on long run.
B. Analysis of external economic factors.
C. Review of the attributes and behavior of the organization’s competition.
D. Analysis and review of departmental budgets.
When the organization develops a plan or plans to prepare for future, often
unpredictable events, it is called:
 A. Contingency planning
 B. Long-term business planning.
 C. Capital budgeting.
 D. Short-term business planning.
Strategic planning, as practiced by most modern organizations, includes all of the
following except
A. Top-level management participation.
B. A long-term focus.
C. Strategies that will help in achieving long-range goals.
D. Analysis of the current month’s actual variances from budget.
Which of the following is not a significant reason for planning in an organization?
 A. Forcing managers to consider expected future trends and conditions.
 B. Promoting coordination among operation units.
 C. Enabling selection of personnel for open positions
 D. Developing a basis for controlling operations.
Analyzing a company's technological capabilities, employee skills, and sales team
performance will
provide
 A. external factors that identify the company's strengths and threats.
 B. external factors that identify the company's strengths and weaknesses.
 C. internal factors that identify the company's strengths and opportunities.
 D. internal factors that identify the company's strengths and weaknesses
During the strategic planning process, which one of the following is an external
factor to be analyzed?
A. Organizational culture.
B. Societal culture.
C. Employee morale.
D. Organizational structure.
According to the BCG Growth-Share Matrix, all of the following are included in
product life-cycle strategies except:
 A. "Milking" the product.
 B. Superior responsiveness to customers
 C. Increase investment in the product to maximize market share.
 D. Aggressive pricing to increase market share quickly.
A company has established a strategic initiative to increase operating income by
increasing market share through being the lower-cost provider. Assuming the total
market size remains the same, and based on the information provided below, has the
company achieved the stated objectives?

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?

*Source: Retired ICMA CMA Exam Questions.

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?

*Source: Retired ICMA CMA Exam Questions.

Porter's cost strategy

Porter's focus strategy
Porter's differentiation strategy
Porter's segmentation strategy
Which of the following is true of a functional strategy?
It defines an organization's values, expressed in financial and nonfinancial terms.
It defines activities and processes to help the organization maximize its competitive
position.
It determines how organizational resources will be allocated among the firm's
businesses.
It centers on identifying and building key resources.
Identify the threat imposed on an incumbent by the entry of new competitors in the
market.
Heavy start-up losses and near-cost pricing.
Increased cost in order to compete against new entrant.
Economies of scale.
Product differentiation.
Which of the following statements is not correct concerning contingency planning
(sometimes known as continuity or sustainability planning) as it is used in strategic
planning?
Contingency planning cannot cover every possible scenario an organization could
encounter.
Contingency planning can help an organization prepare to effectively respond to
relatively unlikely risks that could have catastrophic results for the organization.
Contingency planning is a part of risk management.
Contingency planning can help an organization prepare to effectively respond to
likely risks that could have catastrophic results for the organization.
Which of the following statements concerning vision statements and mission
statements is correct?
A vision statement is the same thing as a mission statement.
A vision statement provides a clear statement about how the organization will work
toward achieving its mission while a mission statement expresses an organization's
success in terms of its contribution to society.
A vision statement results from an organization's strategic planning process but a
mission statement does not.
A vision statement expresses an organization's success in terms of its contribution to
society while a mission statement provides a clear statement about how the
organization will work toward achieving its vision.
Which of the following statements is true concerning Porter's Five Forces Industry
Analysis?
Porter's Five Forces Industry Analysis is used to better understand the threats posed
by an organization's competitors, customers, and suppliers.
Porter's Five Forces Industry Analysis is used to better understand the threats posed
by an organization's competitors and customers, but not its suppliers.
Porter's Five Forces Industry Analysis is used to better understand the threats posed
by an organization's competitors and suppliers, but not its customers.
Porter's Five Forces Industry Analysis is used to better understand the threats posed
by an organization's customers and suppliers, but not its competitors.
Which of the following components is assessed in an internal capability analysis of
an organization?
Resources
Export
Stakeholder demands
Accounting practices
Intensity of competition is usually influenced by all of the following except:
the organizational mission statement.
the number and diversity of competitors in the market.
the existence of barriers to exit.
the growth rate of the market.
Which of the following statements concerning an organization's mission is not
correct?
An organization's mission statement can help it make a decision to diversify its
product lines.
An organization's mission statement can help it make a decision to add a new product
line.
An organization's mission statement can help it make a decision to enter a new
market.
An organization's mission statement can help it make a decision on which supplier to
use.
Which of the following steps in the strategic planning process should be completed
first?
Translate objectives into goals.
Determine actions to achieve goals.
Develop performance measures.
Create a mission statement.
Metis Corp., a large software services company, has benefited in the past from having a
strong, centralized leadership. The top management makes decisions and sets goals for the
entire organization and tasks mid- and low-level managers with implementing these in
Metis's teams. Which of the following, if true, indicates that a centralized leadership is now
more likely to be a weakness than a strength for Metis?
Metis's top management now consists almost entirely of engineers who have worked for
Metis for a long time and have a high degree of expertise in the services the company offers.
Metis recently won its first contract to provide software services to the U.S. government.
Metis recently changed its business to focus more on product development, and its teams of
product developers cherish creative freedom and autonomy.
Metis's offices are located primarily in countries where organizational hierarchies are
respected.
Analyzing a company's technological capabilities, employee skills, and sales team
performance will provide

*Source: Retired ICMA CMA Exam Questions.

external factors that identify the company's strengths and threats.

internal factors that identify the company's strengths and opportunities.
external factors that identify the company's strengths and weaknesses.
internal factors that identify the company's strengths and weaknesses.
All of the following correctly describes an example of following the focus strategy
except:
A company drops products in all industry segments but one.
A company invests in automated manufacturing equipment to enable it to produce a
product that appeals to a particular industry segment only.
A company sends all its employees to training to improve their skills to enable it to
produce a product that appeals to a particular industry segment only.
A company sends all its employees to training to improve their skills to enable it to
produce a product with features not available in competitors’ products.
Enscribe Inc. is a small firm that provides specialized, industry-oriented articles and features
to medical publications. Founded and run by a team of physicians, Enscribe is a highly
respected vendor in the market and has a dominant market share. However, the firm's market
currently is undergoing a rapid expansion owing to a proliferation of online medical Websites.
The chief executive officer of Enscribe—Dr. Elliot—sees this as a massive opportunity for the
firm. However, the chief editor—Dr. Cruz—believes that this development is a threat. Which
of the following, if true, would strengthen Dr. Cruz's conclusion?
The firm has always struggled to find good-quality new hires.
The medical publishing industry has high entry barriers that discourage new entrants.
The firm has been identified as a cash cow in a BCG Growth Matrix developed by its parent
firm.
The firm lists organizational learning as one of its strengths.