REwriting answers !

Questions and Answer

1-Define Strategy & discuss how this definition frames this strategic management course ?

1. In strategic management, a strategy is a set of actions, which a company takes in order to be competitive and gain an advantage. A strategy a firm chooses makes it different from its competitors that do the same business. Strategic management is related to the evaluation of strategies, analysis of a business environment, and setting objectives for the company’s management.

2.Define strategic competitiveness and above-average returns. Describe the connection between strategic competitiveness and returns on investment?

2. Strategic competitiveness is the ability of a company to create a value-creating strategy, which is difficult and costly for other businesses. When a company’s strategic competitiveness is on a high level, its returns are above average, which means that the company eans more than its competitors.

3.What is hypercompetition? Describe its importance to the current business environment and identify its primary drivers. How do organizations successfully compete in a hypercompetitive environment?

3. Hyper competition relates to the conditions of rapidly changing and dynamic markets so that companies are not able to keep competitive advantage for a long time. The main factors that contribute to hyper competition are the rapid technological development and the emergence of global economy and technology (Hitt, Ireland & Hoskisson 8). Companies that are successful in an hypercompetitive environment introduce a lot of changes to their strategies, such as reinventions of the business and creation of an emotional link with their customers.

4.Discuss the I/O model described by your book, particularly its primary assumptions and key to success. What are the limitations of this model?

4. I/O model assumptions: 1) pressure created by the external environment allow companies adopt effective strategies; 2) all firms in the same field are assumed to adopt similar strategies; 3) resources should be mobile; 4) the organization’s management should be ration in decision-making. The greatest limitation of this model is that the competitiors can easily copy the company’s innovations.

5.Describe and discuss the Resource Based View of the Firm (RBV). How does this model lead to competitive advantage?

5. Resource -based View of the Firm lies in the application of both tangible and intangible resources. Resources, which a company uses, can increase the value a company offers to customers. These resources increase differentiation and decrease the cost of production at the same time.

6.What are a firm’s vision and mission? Using Strategic Management Insights, compare and contrast vision and mission statements. What is the value to the firm of having a specified vision and mission?

6. The vision of a company is a long-term view on its actions and strategies to become profitable. The mission of a company defines its fundamental purpose of existence as well as its long- and short-term goals. A specified vision and mission statements allow a company to organize its business better.

7.What are stakeholders? Discuss their differing interests. Can a firm satisfy all stakeholders? Why? Why not? Which ones must it satisfy to survive?

7. Stakeholders are all people that contribute to the business of a company. Those are employees, creditors, suppliers, directors, unions, and government. Taking into account the fact that stakeholders have different views and objectives, a company can not satisfy all of them at the same time.

8. Describe the strategic management process?

8. Strategic management process is a continuous process of taking decisions and implementation of new strategies. It consists of the following steps: goal setting, analysis of business environment, formulation of a strategy, implementation of a strategy, and evaluation of a strategy.

9. What is, and what are the consequences of globalization?

9. Globalization is a process in which businesses become international and different companies influence each other. Globalization has a number of advantages and disadvantages. One of advantages of globalization is the creation of opportunities for businesses. At the same time, a significant disadvantage is that it takes companies much time to become competitive in the glogal market.

10. Explain why organizations need to know what’s happening in the external environment. What are its three major parts? Why do firms collect information about these parts?

10. The external environmental analysis is very important because it helps to identify a firm’s opportunities and threats. The three major parts of the external environment are: general environment (society and demographics), industry environment (threats and opportunities), and the competitor’s environment (the competitors’ strategies).

11. Describe and discuss the four activities of the external environmental analysis process ?

11. The four activities of the external environmental analysis process are scanning, monitoring, forecasting, and assessing. Scanning helps to track any changes in the external environment; monitoring observes these changes, forecasting relates to the development of strategies to comply with the possible outcomes of these changes, and assessing relates to evaluation of a strategy’s effectiveness (Hitt, Ireland & Hoskisson 41).

12. The book discusses seven segments of the general environment, I use PESTLE – describe either method for breaking down the general environment ?

12. The general environment consists of the so-called PESTLE — political, economic, social, technological, legal, and environmental factors. This framework of analysis is crucial for any business because this makes a company able to identify not only what it should do but also its main goals and strategies.

13. Identify and explain briefly the five forces and how they affect industry profit potential ?

13. Five forces: the threats of the new entrants (new entrants decrease a firm’s profitability), the power of suppliers (provides a firm with source material), the power of customers (they can either put a firm under pressure or increase its profits), substitutes (customers have alternatives to choose from), and the rivalry in an industry (for many firms it is a determining factor).

14.Discuss the factors that increase competitive rivalry ?

14. There is a large number of factors that increase the competitive rivalry in industry. The major ones are a large number of competitors that strive for leadership is a market; a slow-growing industry, which makes companies capture shares from each other; high market shares that pose a temptation for competitors.

15. Define exit barriers. How do they affect industry competition ?

15. Exit barriers are the obstacles that prevent a company from leaving an industry. The factors that create exit barriers are: high redundancy cost, high levels of investments in non-transferrable fixed assets, costs of closure, and the potential of an upturn. These factors can prevent a company from leaving even when it earns negative returns on investment (Hitt, Ireland & Hoskisson 58).

16. What is a strategic group and how does it affect an organization?

16. A strategic group consists of firms that use similar strategies. Strategic groups increase rivalry among the members of theses groups as well as between different groups. Moreover, it can make a company less profitable (Hitt, Ireland & Hoskisson 60).

17. What do firms need to know about their competitors? What legal and ethical intelligence-gathering techniques can be used to obtain this information?

17. It is important to analyze the competitor’s business in order to know his strengths and weaknesses and identify what should be improved. Competitive intelligence is the most widely used to technique to gather information about one’s competitor: products, customers, market, suppliers.

18. Define barriers to entry and describe their effect on an industry?

18. Barriers to entry are the factors that prevent a company from entering an industry. Those barriers may include high startup costs, pressure from the existing firms, and difficulties to attract customers. These barriers make a strong influence on the competitive advantage.

19. Why is internal analysis important? Should all firms do it? (Why / Why not?)

19. Internal analysis is important because it helps to develop an effective strategic plan. It helps to determine a firm’s strengths and competency, weakness, and competitive liability. Moreover, it defines any potential threats. That is all companies should conduct an internal analysis.

20. Define tangible and intangible resources. Which are the most valuable to the firm?

20. Tangible resources of a company can be subdivided into such categories: financial (the ability to borrow), organizational, physical (raw materials, inventory), technological (software). Intangible resources include knowledge, skills, ideas, brand name, and quality. All of these resources are equally important.

21. Describe how one would use VRIO (or VRINE, or the book’s model) to decide firm capability would lead to sustainable competitive advantage. Is any sustainable competitive advantage ‘forever’? Why / Why not?

21. VRIO is the framework of questions used to define a company’s strategic scheme: value (whether a firm is able to neutralize external threats), rarity (whether the resources are new), imitability (whether the strategy is easy or difficult to imitate), and organization (whether the firm is well-organized).

22. Define and discuss value chain analysis. How does it help in gaining competitive advantage?

22. Value chain analysis is used to analyze the internal activities that take place in a firm. This type of analysis allows companies to determine which competencies should be upgraded and developed and which should be outsourced. This identification of valuable competencies further contributes to the competitive advantage of a company.

23. Define and discuss core competencies and core rigidities. Why are core rigidities bad?

23. A core competency is a combination of numerous skills and resources that distinguish a firm from its competitors. Competitive rigidities are the so-called reverse sides of core competencies. Core rigidities appear when there is overreliance on the companies advantages and managers do not make any improvements. In this case, competitors can even make the company’s advantages obsolete.

24. Define and discuss ‘value’. Why is it important?

24. Value means the difference between the way a customer evaluates a product or a service and the actual cost of the product or service. Core values are the principles that support a company’s vision and mission statements. Those values are the principles and beliefs according to which every employee works. Core values perform a number of functions: they help in the decision-making process, educate customers about the company, and are the main recruiting tools.

25. What is outsourcing? Why and when should businesses outsource?

25. Outsourcing is purchasing support functions from external suppliers (Hitt, Ireland & Hoskisson 91). Outsourcing is crucial for increasing a firm’s profitability because it has a number of advantages. First of all, it increases a company’s flexibility and reduces capital investments. Secondly, outsourcing allows a company to achieve competitive superiority among other companies. At the same time, before deciding to outsource, firms should decide which activities create a significant disadvantage for them.

26.Is it important to identify internal strengths and weaknesses? Why / Why not?

26. Identification of internal strengths and weaknesses is crucial for making a company as successful as possible. The analysis of internal strengths and weaknesses provides a company with an opportunity to introduce changes, which, later on, will give a business a competitive advantage among other businesses.

27. Describe an organization with which you are familiar. Does it have a sustainable competitive advantage?

27. Coca-Cola is the best example of a company with sustainable competitive advantage. Its competitive advantage has been proven its sustainability for over 100 years. Coca-Cola constantly develops new products; its worldwide distribution made it accessible to billions of people. Moreover, Coca-Cola is sold in such areas here other companies would not sell their products.