Business-Level strategies tend to stress strategy as a...
Business and corporate strategy are core elements of strategic management. In which parts splits strategic management on the conceptual level?
Corporate Level and Business Level
Industry Level and Business Level
Product and Service Level
At the corporate level and business level are a few strategic decisions to make that lead to an advantage and the end to success. What Strategic Decision do we mean?
Executing portfolio changes
Determining strategic measures
The strategy implementation sees strategy as "plan". What are the 4 components that describe the "plan"?
Developing structures and systems to support the strategy
Converting strategy into operational plans
Making people act according to the strategy
External Analysis / Internal Analysis
Strategic decision: Choose a set of strategic measures
Evaluation all strategic measures
Which advantages could be achieved after successful strategic decisions?
The dominant perspective is that strategy is a plan, developed and realized in a systematic way. What are the components of the process of strategic management?
Strategy formulation and strategic choice
Developing strategic decisions
Market- and resource-based view are core theoretical perspectives that guide strategic management. These two approaches are the theoretical explanations for high/superior performance.
Market- and resource-based view are core theoretical perspectives that guide strategic management. These two approaches are the theoretical explanations for low performance.
Describe the Market-Based View:
Structure-Conduct Performance Paradigm as basis
Market power as lever to improve performance of diversified companies
Transfer of valuable resources and capabilities between business units (synergies) as basis
Synergy management as lever to improve performance of diversified companies
Describe the Resource-Based View:
Structure-Resource Performance Paradigm as lower basis
Market imperfection as a non central assumption
What led the shared value concept to this dominance in companies?
Interests of stakeholders
What does the term "Strategy" mean (Munzberg)?
The shareholder value concept is still guiding strategic decisions. The perspective is that the firm exists as a coalition of groups acting in joint of interest.
The shareholder value concept is still guiding strategic decisions. The perspective is that the firm exists to create wealth for its owners.
The shareholder value concept is still guiding strategic decisions. The definition of the business success leads to maximizing the differential between the benefits and costs of all groups.
The shareholder value concept is still guiding strategic decisions. The definition of the business success leads to maximizing the future discounted cash flows to owners.
What are the players in the stakeholder value concept?
What are profitability figures for a firm in the financial statement?
Determine the components of the triangle, which is the basis for all considerations around strategies in corporates.
What are the components of the balance sheet?
Fixed Assets (Intangible-, Tangible Fixes Asstes, Long Termn financial assets)
Current Assets ( Inventories, Receivables and other assets, Securities, Currencies)
Equity (Subscribed capital, Capital reserves, Revenue reserves, Retained Profits / Accumulated losses brought forward, Net Income)
Capital Stock (Provisions, Liabilities)
Equity (Provisions, Liabilities, Revenue reserves, Retained Profits / Accumulated losses brought forward, Net Income)
Current Assets ( Inventories, Capital reserves, Revenue reserves, Currencies)
The demand for capital can be seen by considering the capital commitment of finance current assets. At which stage of the production and storage of goods is the demand of capital important?
Period of material storage
Period of finished Material storage
Deadline of debtors
In its core, financial planning aims at ensuring liquidity? What are the 3 Dimensions for liquidity reserves planning?
Cash Flow Planning
Equity and bonded Capital Planning
Firms can seek financing both internally and externally. What are the financing methods (internally)?
Financing through reserved profits
Financing through accrued liabilities
Financing through depreciations
Financing through restructuring of assets
Financing through equity
Financing through debt
Operating profit and annual profit describes completely the company's value creation
The operating income (EBIT) does not consider the financial expenses!
The Net Income does not considers the cost of equity capital
The EVA is an estimate of a firm's economic profit (profit earned by the firm less the cost of the financing the firms capital)
How to calculate the EVA?
(EBIT- Taxes)= NOPAT, (Capital Employed x WACC)= Capital Cost, NOPAT - Capital Cost= EVA
(EBIT- Capital Employed)= NOPAT, (Capital Employed x WACC)= Capital Cost, NOPAT - Capital Cost= EVA
(EBIT- Capital Employed)= NOPAT, (NOPAT x WACC)= Capital Cost, NOPAT - Capital Cost= EVA
How to calculate the ROCE (Return in Capital Employed)?
EBIT / Capital Employed = ROCE
Capital Employed / EBT = ROCE
Capital Employed / EBITA = ROCE
What are drivers for the Operating Income (EBIT)? Profit Management!
What are drivers for the Taxes? Tax Management!
What are drivers for the Operational Capital? Asset Management!
What are drivers for the WACC? Financial Management!
Financial ratios document the result of success - but not its causes!
The Balance Scorecard tries to depict the cause-effect relationship for strategic company management. What are the main components of the BSC?
Internal Business Processes
Learning & Growth
Vision & Strategy
Components of the Parts "Finance, Internal Business Processes, Learning & Growth, Customer" of the Balanced Scorecard:
Components of the MECE Principle:
A ratio system is always based on the definition of a value to be managed and its operationalization. What are the components of the process for developing the ratio system?
Defining values to be managed
Reporting and Analyzing
What are the theoretical concepts of strategy?
Resource Based View
What are the components which describe market imperfection?
The market-based view sees the competition and the conduct of companies as main driver of superior performance!
How was the main representative of the market based view?
Michael E. Porter
Which components lead to "performance" in the market based view?
Feedback for both stages
The resource based view sees resources and capabilities as main driver of superior performance. What is the reasoning of the resource based-view?
What kind of resources are meant in the resources-conduct paradigm?
Strategy means: How can we create value for the company!
A competitive advantage is created if a company's service to its customers is superior to that of its competitors. What are the components of the triangle?
Competitive Advantage: What should the benefit of the customer should be?
Porter introduced four generic positioning approaches to achieve a competitive advantage
The Performance advantage: What is the goal of the company?
Provide something unique that is valuable to buyers
Provide a product with lowest price
Become a cost leader in the industry
The Price advantage: What is the goal of the company?
Become the cost leader in the industry
What are the business strategies of porters generic positioning approach?
The Niche Strategy depends on the size of the market and is derived from the differentiation and cost-leadership strategy
Imagine your are one of the leading airlines in europe. A difficult financial time in your firm makes you think about the upcoming strategy route. Most of your opponents fly with lower costs but the same routes and have a bigger margin. What generic strategy would you propose to the management board of your airline to compete with your competitors?
There are two main reasons for differing cost bases of competitors. Name them!
Exploiting structural cost differences
Neglect cost drivers
Give some examples for "Exploiting structural cost differences":
Experience curve effects
Economies of scale
Economies of scope
Economies of differentiation
Cost management concentrates on experience curve effects and cost level!
The experience curve os one of the most influential concepts in the history of strategic management. It says that, the units costs of a standard product declines by a....
constant percentage of (20-30%) each time cumulative output doubles
unconstant percentage of (20-30%) each time cumulative output doubles
constant percentage of (20-30%) each time cumulative output tripples
Attractive returns can only be achieved in miserable positions and only businesses that can potentially achieve No. 4-5 positions should be supported!
Give some examples for cost level and cost structure instruments:
Zero Base Budgeting
Overhead value analysis
Activity Based Costing
Live Cycle Costing
Describe the customer company interaction model. What are the components of performance not the company side?
Differentiation is the result of customer-company interaction. Describe the customer company interaction model. What are the components of differentiation not the customer side?
Satisfaction / Dissatisfaction
Loyalty / complaint, migration
Two simple questions can help to find sources of differentiation. 1) What creates customer Value 2) What creates uniquenes?
The most important sources of differentiation are:
Differentiation through "Quality"
Differentiation through "Time"
Differentiation through "Brand image"
Differentiation through "Customer Relation"
Differentiation through "Price"
Imagine you have axis system with percieved price (y-axis) and rel. price (x-axis). On the luft uper side you have "Differentiation", in right upper side you have "Outpacing", left bottom side "Monopoly position" and in the right bottom side you have the "Cost-leadership". Which position misses in the diagram?
Stuck in the middle
Imagine you have axis system with perceived price (y-axis) and rel. price (x-axis). On the left upper side you have "Differentiation", in right upper side you have "Outpacing", left bottom side "Monopoly position" and in the right bottom side you have the "Cost-leadership" as well as the stuck in the middle position. What action drives the position from costleader to outpacing?
Constantly upgrading product portfolio
Controlling and managing cost drivers
Adding lower price products
Use low-price position to build value for money image
Invest in brand to create differentiation
Imagine you have axis system with perceived price (y-axis) and rel. price (x-axis). On the left upper side you have "Differentiation", in right upper side you have "Outpacing", left bottom side "Monopoly position" and in the right bottom side you have the "Cost-leadership" as well as the stuck in the middle position. What action drives the position from differentiation to outpacing?
Controll and manage differentiation drivers
Use product differentiation to gain market share / increase volume
Exploit economies of scale to reduce cost
Imagine you have axis system with perceived price (y-axis) and rel. price (x-axis). On the left upper side you have "Differentiation", in right upper side you have "Outpacing", left bottom side "Monopoly position" and in the right bottom side you have the "Cost-leadership" as well as the stuck in the middle position. What action drives the position from stuck in the middle to costleader? It is nearly impossible!
There are problems generic problems within a group of companies. Name them! (Example of Thomas Cook and Lufthansa with Aldiana and German Wings as well as Lufthansa and Neckermann)
Customer expects the same service but gets two different service lvels
Customers can not make a connection between both brands
Remember: What are the components of the strategic management process?
Strategy analysis (External Analysis and Internal Analysis, SWOT)
Strategy Formulation and strategic choice (Strategy options, Evaluation, Objectives and Strategy decision, Choose a Strategy option
Strategy as a plan ( Dev. structures and systems to support the strategy, Converting strategy into operational plans, Making people act according to the strategy, Controlling realisation)
Strategy as a plan ( Dev. structures to support the plan, Converting strategy into operational plans, Making people act according to the strategy, Controlling realisation)
Strategy Formulation and strategic choice (Strategy options, Evaluation, Strategy decision, Choose a win option)
Strategy formulation is based on extensive and intensive analysis. On of the instruments is the SWOT analysis which brings the extensive and intensive view together!
Firms experience impacts from their enviroment. What are the macro components?
Legal and political enviroment
What are the components of the industry enviroment?
The Remote/Macro environment affects all companies in the same way.
The Industry environment is composed of a set of forces that directly shape competition
The industry environment can partly be shaped by firms; the macro environment can easily be influenced!
In the Case of Samsung: What are macro facts which influence a company like Samsung?
Global GDP enviroment
Samsungs national environment
Porters five forces framework helps to understand industry attractiveness. The model also gives you the risks and attractiveness for an industry. What are the components of the framework?
Determines of the five forces: Potential entrants!
Entry barriers (capital requirements, Access to distribution)
Determines of the five forces: Buyers!
Negation levers (concentration, Buying volume, Differentiation, Switching cost)
Price sensitivity / Relevance of quality
Determines of the five forces: Substitutes!
Attractiveness of price-performance relationship
Determines of the five forces: Suppliers!
Dependence on industry
Availability of alternative inputs
Determines of the five forces: Industry competition
Intensity of competition (Growth, Differentiation)
Dimensions of competition
A Fit between business system and competitive positioning is an important prerequisite for success. Business systems have different type of business strategies they want to achive.
Just try to remeber the missing words!
The Porter Value Chain refines the business system analysis. What are the components of the Value Chain
Human Resources Management
Inbound and Outbound Logistics
Marketing & Sales
Resource and capabilities create the distinctive competencies of the firm = Core Competencies. What are core competencies?
Difficult / Impossible to imitate / Substitute
Valuable (Revenues, cost, customers for free)
It is necessary to add a dynamic dimension to the discussion of competitive advantage. What are the reasons for the eroding CA?
Customers change or mobility
External changes (values, regulation)
Loss of resources / capabilities slack
Imitation Innovation / substitution
Avoiding slack / sustained inefficiencies
Growing volatility and complexity create a new challenge for strategic planning. What are the uncertainty drivers in planning situations?
What re the Key Challenges for planning situations?
Combination of internal and external view on planning
Multiple possible futures need to be considered
Simplicity and speed
Flexibility concerning planning horizon
Scenario Planning is useful as a tool for modern strategic planning. Scenario Planning tries to build a plausible views of different possible futures by grouping key environmental influences. Result is a limited 1)______________, but different scenarios. The point is not to predict which outcome will occur, but a) to challenge 2) ____________about environment b) to test the sensitive of possible strategies and develope options how success can be ensured for every scenario.
1)number of logically consistent
1)number of logically inconsistent
2) employees assumptions
The HHL Roland Berger scenario development process: Six Steps and Six tools. What are the 6 components of the Process?
Definition of the scope
Trend and Uncertainty Analysis
Time horizon analysis
Definition of Stakeholder
Strategic level of analysis
Toolset of the HHL SDP: Name the Tool of "Definition of the scope"
360 Degreee Stakeholder feedback
Toolset of the HHL SDP: Name the Tool of "Perception Analysis"
360 Degree Stakeholder Analysis
Toolset of the HHL SDP: Name the Tool of "Trend and Uncertainty Analysis"
Impact / uncertainty analysis
Toolset of the HHL SDP: Name the Tool of "Scneario Building"
Toolset of the HHL SDP: Name the Tool of "Strategy Definition"
Toolset of the HHL SDP: Name the Tool of "Monitoring"
The Framing Checklist allows to define the scope of the strategy project comprehensively.
The Framing List has 5 components. The "Goal of the scenario project", "Strategic level of Analysis", "Definition of Stakeholder", "Participants" and "Time Horizon"
The 360 Degree Stakeholder identifies blind spots, weak signals and general influence factors. What are the components of the Process?
"Weak" Signals are developments that managers do not perceive!
The Impact/ Uncertainty Grid helps to separate trends from uncertainties and allows to identify key uncertainties. Which zone-components are in the grid?
Predetermined Elements / Trends
The Axis of the Impact/ Unvertainty Grid are namend: Potential Impact (Y-Axe) and....
The Scenario Matrix provides the basic framework for the detailed scenario development process. The first step is to group the critical uncertainties in groups of "Core Uncertainty 1-2". After grouping, place the core uncertainties 1 and 2 as axes of the scenario matrix. In the Scenario Matrix a the Scenarios A till D placed as fields.
The scenario dimensions help in defining the strategy corridor as well as strategy actions. The Strategy corridor is one of the parts of the strategy manual. What are the important components that lead to the scenario dimensions at the end?
Timeline from Today till....
The result of the Strategy Manual is a core strategy supported by several strategy options. There is only one right strategy without any options concerned.
The Scenario Cockpit constantly benchmarks reakl-life indicators against the assumptions made in the scenarios. The structured scanning approach includes....
Key Quantitive Data
Key Qualitative Data
Strategy Adjustment Data
The Monitoring Cockpit is a matrix with the KPI (A to ...) and Scenario A to .....
Scenario Planning possesses many positive attributes that enhance strategic decision making. What are the characteristics of the Scenario Method
Development of multiple Scenarios
Integration of external perspectives
Facilitation of Strategic Thinking
Feedback through Group Process
Multibusiness firms are composed of two or more businesses.
The degree of diversification characterizes strategy options at corporate level. What are the types of diversification?
Relational diversification (horizontal + vertical)
The Relationship of businesses at a conglomerate diversification is heterogenous with many businesses. What is the basis of the strategy?
Identify business opportunities and share risks
Transfer and use common resources and capabilities
Exploit economies of scale and experience
The Relationship of businesses at a relational diversification (horizontal or vertical) is heterogenous/homogenous with a lot of businesses (3-8). What is the basis of the strategy?
The Relationship of businesses at a focused diversification is homogenous with one to three businesses. What is the basis of the strategy?
Transfer and use common resources and capabilities
Companies with low market value limit their strategic options. If the share price of a firm is very low, it limits the access to capital, limits the investment and the erosion of the competitive position which lowers and the end also the profit. With a low competitive position also the investment option/need.
The Concept of parenting advantage provides the guideline for shareholder value creation at corporate level. What are the prerequisites for parenting advantage?
All Businesses must have a positive value
The whole must be more than the sum of its parts
The value contribution of the parent must exceed the best alternative parents contribution to each business
There are two ways to create shareholder value.
Maximize value contribution of parent
Maximize business value (stand alone)
Maximize the difference between the cost and the benefit of all joint groups
If your goal is to maximize the value contribution of parent then you have to.....
...design the cop orate portfolio of businesses
...manage businesss and influence single businesses as well as relating businesses
Focus of strategy making is to achieve advantages in competition. Parenting versus competitive advantage. The cause of the advantage in the parenting advantage is...
..Better management at the business level leading to serving customers (better and cheaper)
..Better management at the cop orate level leading to (a exploitation of cross business relationships and b) positive influence on single businesses)
Focus of strategy making is to achieve advantages in competition. Parenting versus competitive advantage. The standard of comparison in the parenting advantage is...
....Other companies operating as suppliers of same/ similar product's ("do we serve customers in a superior way?")
...Other companies as potential owner of businesses a firm owns ("do we contribute value to our businesses in a superior way?")
Why do multi-business firms exist? Multi business firms can, under certain circumstances, be economically more efficient/ successful than single-business firms because of the transaction cost and because of specialized resources and market failures.
Why do multi-business firms exist? Managers are motivated to create multi business firms even if they are not economically justified because managers are not motivated to decrease the size of there firms (theory of managerialism) and because managers in general act according to their own personal goals (principal agent theory)
Corporate strategy is about developing a plan for the company ans "selling the story" to the shareholders. What are the components of the process of cop orate strategy?
Strategy formulation and choice
What is the content of goal setting in the corporate strategy process?
Setting a vision
Defining a mission
Defining a strategy
Determining industry level strategy