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Chapter 9- Strategy Formulation

Terms in this set (26)

Blue Ocean Strategy
A growth strategy contingent on inventing or discovering a new industry or industry segment that creates new demand.
Capabilities
A firm's skills at coordinating and leveraging resources to create value (often called strategic capabilities or dynamic capabilities).
Gap Analysis
Identifying the distance between a firm's current position and its desired position with regard to an internal weakness. All things equal, it is desirable to take action to close the gap, especially when the gap leaves a firm vulnerable to external threats in its environment.
Human Resources (HR)
The experience, capabilities, knowledge, skills, and judgment of the firm's employees.
Organizational Resources
The firm's systems and processes, including its strategies at various levels, structure, and culture.
Physical Resources
An organization's plant and equipment, geographic locations, access to raw materials, distribution network, and technology
Strategy Level-Strategy Complexity (SLSC) Matrix
A tool for evaluating strategic alternatives that considers the organizational level of the alternative and the degree of strategic complexity.
SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis
An analysis intended to match the firm's strengths and weaknesses (the S and W in the acronym) with the opportunities and threats (the O and T) posed by the environment.
SW/OT Matrix
A tool for generating alternative courses of action by identifying relevant combinations of internal characteristics (i.e., strengths and weaknesses) and external forces (i.e., opportunities and threats).
Value Chain
A useful tool for analyzing a firm's strengths and weaknesses and understanding how they might translate into competitive advantage or disadvantage. The value chain describes the activities that comprise the economic performance and capabilities of the firm.
VRIO (Valuable, Rare, Inimitable, and Organization) Framework
A tool for assessing the competitive quality of a firm's resources by examining value, rarity, imitability, and organization.
The first step in crafting a strategy is the SWOT analysis.
TRUE. The first step in crafting a strategy, a SWOT analysis, can enable the firm to position itself to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats.
The value chain is an analytical technique for identifying organizational opportunities and threats.
FALSE. The value chain is a useful tool for analyzing a firm's strengths and weaknesses and understanding how they might translate into competitive advantage or disadvantage.
Opportunities and threats should emanate from the analysis of macroenvironmental and industry forces.
TRUE. Opportunities and threats are developed from the analysis previously performed on the macroenvironment and the industry.
An internal factor can be both an opportunity and a strength.
FALSE. Only external factors can be opportunities and/or threats whereas only internal factors can be strengths and/or weaknesses.
Another name for an opportunity is an alternative.
FALSE. Opportunities represent the application of macroenvironmental forces to a specific organization whereas alternatives emanate from the SW/OT matrix and represent specific courses of action that the organization may choose to pursue.
Choosing the "no change" strategy and thereby recommending that the current strategy be continued is the least risky option.
FALSE. Choosing not to institute any strategic changes can be more risky than recommending major changes in the strategy, depending on the situation.
The tool that enables executives to position an organization to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats is called __________.
A. PEST analysis
B. SWOT analysis
C. total quality management (TQM) analysis
D. none of the above
B. The SWOT analysis enables executives to position a firm to take advantage of particular opportunities in the environment while avoiding or minimizing environmental threats.
The description of activities that comprise the economic performance and capabilities of the firm is known as __________.
A. the value chain
B. process innovation
C. quality assessment
D. none of the above
A. The value chain describes activities that comprise the economic performance and capabilities of the firm.
To sustain competitive advantage, firms must acquire or develop resources that are __________.
A. difficult for competitors to imitate
B. long lasting
C. difficult for competitors to acquire on the market
D. all of the above
D. A firm must utilize resources that are long lasting and not easily acquired by rivals through imitation, transfer, or replication if the firm is to sustain competitive advantage.
Physical resources include __________.
A. production facilities
B. plant locations
C. production capacity
D. all of the above
D. Physical resources include currency of technology, quality, and sophistication of the distribution network, production capacity, access to suppliers, and favorable locations.
Which of the following could not be an example of a weakness?
A. product quality
B. fierce competition
C. human resources
D. all of the above
B. Fierce competition comes from outside of the organization and would be a threat, not a weakness.
Which type of alternative is always defensive in nature?
A. strength-opportunity
B. strength-threat
C. weakness-opportunity
D. weakness-threat
D. Weakness-threat alternatives are always defensive in nature. Strength-opportunity alternatives are always offensive. Other alternatives can be either offensive or defensive.
What are the firm's sources of organizational strengths and weaknesses?
1. Human resources (The experience, capabilities, knowledge, skills, and judgment of all the firm's employees)

2. Organizational resources (The firm's systems and processes, including its strategies at various levels, structure, and culture)

3. Physical resources (Plant and equipment, geographic locations, access to raw materials, distribution network, and technology)
What are the 4 categories of alternatives in the SW/OT matrix?
1. Strength-Opportunity: "Offensive" alternatives, utilize a strength to address an opportunity

2. Weaknesses-Threat: "Defensive" alternatives, eliminate or minimize a weakness in order to minimize the effect of a threat

3. Strength-Threat: Utilize a strength to minimize the effect of a threat

4. Weakness-Opportunity: Shore up a weakness to enable the organization to take advantage of an opportunity
What are the 4 main issues in strategy formulation?
1. Strategic change: Do the benefits outweigh the costs?

2. Social responsibility and ethics: Is the strategy compatible?

3. What effect does the change in strategy have on existing resources?

4. How will competitors respond when the change is implemented?
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