SEVI 3013 STRATEGIC MANAGEMENT
EXAM 2 CH 5-10 QUESTIONS AND
ANSWERS
What is informational control? - Answer-Is the organization doing the right things?
Should we work towards something? Scan and monitor the external environment to see
if our strategy should be changed. Monitor the internal environment to see if there are
problems internally to change the strategy implementation. Focus on constantly
changing information, continuous monitoring, testing, review. Data is interpreted and
discussed face-to-face
What is behavioral control? - Answer-is the organization "doing things right" in the
implementation of its strategy. Are we achieving our goals in the most efficient and
effective way. Influences the actions of employees via: culture, rewards,
boundaries/rules.
What are the three behavioral control "levers?" Why are rewards and culture
increasingly emphasized to attain behavioral control? - Answer-the three levers are
rewards, culture, and boundaries/rules
Understand organizational culture and the role it plays in achieving sustained
competitive advantage. How can an effective culture be strengthened and sustained? -
Answer-· an effective organizational culture must be cultivated, encouraged, and
fertilized. It can be sustained by storytelling, rallies, or pep talks by top executives.
What are the benefits and downsides of rewards and incentives in influencing culture
and performance? What are the characteristics of an effective reward/incentive
program? - Answer-· powerful means of influencing an organizations culture, focuses on
high-priority tasks, motivates induvial and collective performance. Downsides are
rewards could be given for the wrong thing such as meeting quotas, different business
units have differing rewards systems. Rewards systems may lead to information
hoarding, basically working so that only they get the rewards and no one else. An
effective reward system is clear with objectives, well understood and accepted.
Rewards are linked to performance measures and desired behaviors. The "system is
looked as fair and equitable. Flexible and can adapt to changing circumstances.
Know what is meant by corporate strategy. What questions does it answer? What is the
relationship between business-level strategy and corporate strategy? - Answer-What
business should a corporation compete in, how can the business be managed to create
"synergy".
, What is diversification? What are the different strategies a firm might pursue to diversify
their business portfolio? - Answer-Diversification creates value for shareholders through
mergers and acquisitions, strategic alliances, joint ventures, and internal development.
Diversification can destroy value by paying a premium for the target firm. failing to
integrate the new business into the corporate family.
What are the benefits of diversification? - Answer-· Benefits include related businesses
horizontal relationships, intangible resources such as core competencies in marketing,
and tangible resources such as production facilities, distribution channels via vertical
integration. Unrelated businesses diversify with benefits as derived from hierarchical
relationships, value creation derived from corporate office, leveraging support activities
in the value chain.
Understand and be able to describe related diversification. How do firms benefit from
related diversification? - Answer-· Diverse the company's portfolio, it can be horizontal
or vertical. If the company want to buy a company that's around the same market using
core competencies and sharing related activities. create market power through pooled
negotiation power and vertical integration.
What is vertical integration? What are the benefits of this form of diversification? What
are the risks? - Answer-· Vertical integration is when a firm becomes its own supplier or
distributor by backward integration, or forward integration. This can lead to market
power through lead to the creation of value and synergy
What is unrelated diversification? How might a firm benefit from this approach to
diversification? - Answer-An example would be in Kraft bought Boeing, it just doesn't
make sense. The way companies make unrelated diversification work is the corporate
parenting advantage: corporate provides function. Portfolio of a company tells
management to: invest/milk/harvest from that different industry or restructure the
company to our advantage to keep useful assets and remove useless ones.
Understand how the "parenting advantage" and restructuring (asset, capital,
management) create value within business units of a diversified firm? - Answer-Asset
restructuring involves the sale of unproductive assets. Capital restructuring involves
changing the debt equity mix, adding debt or equity. Management restructure changes
the top management team, org structure, and reporting relationships
What is portfolio management? - Answer-· Involves a better understanding of the
competitive position of an overall portfolio or family of businesses by suggesting
strategic alts for each business, identifying priorities for the allocation of resources,
using the BCG growth/share matrix.
What is the BCG portfolio matrix? How is it used to make decision regarding the
management of a corporate portfolio of businesses? - Answer-Where am I going to
invest that will give me my return on my investment. Low market growth with high
market share is a cash cow; there are many more. With cow cash we want to milk them,
EXAM 2 CH 5-10 QUESTIONS AND
ANSWERS
What is informational control? - Answer-Is the organization doing the right things?
Should we work towards something? Scan and monitor the external environment to see
if our strategy should be changed. Monitor the internal environment to see if there are
problems internally to change the strategy implementation. Focus on constantly
changing information, continuous monitoring, testing, review. Data is interpreted and
discussed face-to-face
What is behavioral control? - Answer-is the organization "doing things right" in the
implementation of its strategy. Are we achieving our goals in the most efficient and
effective way. Influences the actions of employees via: culture, rewards,
boundaries/rules.
What are the three behavioral control "levers?" Why are rewards and culture
increasingly emphasized to attain behavioral control? - Answer-the three levers are
rewards, culture, and boundaries/rules
Understand organizational culture and the role it plays in achieving sustained
competitive advantage. How can an effective culture be strengthened and sustained? -
Answer-· an effective organizational culture must be cultivated, encouraged, and
fertilized. It can be sustained by storytelling, rallies, or pep talks by top executives.
What are the benefits and downsides of rewards and incentives in influencing culture
and performance? What are the characteristics of an effective reward/incentive
program? - Answer-· powerful means of influencing an organizations culture, focuses on
high-priority tasks, motivates induvial and collective performance. Downsides are
rewards could be given for the wrong thing such as meeting quotas, different business
units have differing rewards systems. Rewards systems may lead to information
hoarding, basically working so that only they get the rewards and no one else. An
effective reward system is clear with objectives, well understood and accepted.
Rewards are linked to performance measures and desired behaviors. The "system is
looked as fair and equitable. Flexible and can adapt to changing circumstances.
Know what is meant by corporate strategy. What questions does it answer? What is the
relationship between business-level strategy and corporate strategy? - Answer-What
business should a corporation compete in, how can the business be managed to create
"synergy".
, What is diversification? What are the different strategies a firm might pursue to diversify
their business portfolio? - Answer-Diversification creates value for shareholders through
mergers and acquisitions, strategic alliances, joint ventures, and internal development.
Diversification can destroy value by paying a premium for the target firm. failing to
integrate the new business into the corporate family.
What are the benefits of diversification? - Answer-· Benefits include related businesses
horizontal relationships, intangible resources such as core competencies in marketing,
and tangible resources such as production facilities, distribution channels via vertical
integration. Unrelated businesses diversify with benefits as derived from hierarchical
relationships, value creation derived from corporate office, leveraging support activities
in the value chain.
Understand and be able to describe related diversification. How do firms benefit from
related diversification? - Answer-· Diverse the company's portfolio, it can be horizontal
or vertical. If the company want to buy a company that's around the same market using
core competencies and sharing related activities. create market power through pooled
negotiation power and vertical integration.
What is vertical integration? What are the benefits of this form of diversification? What
are the risks? - Answer-· Vertical integration is when a firm becomes its own supplier or
distributor by backward integration, or forward integration. This can lead to market
power through lead to the creation of value and synergy
What is unrelated diversification? How might a firm benefit from this approach to
diversification? - Answer-An example would be in Kraft bought Boeing, it just doesn't
make sense. The way companies make unrelated diversification work is the corporate
parenting advantage: corporate provides function. Portfolio of a company tells
management to: invest/milk/harvest from that different industry or restructure the
company to our advantage to keep useful assets and remove useless ones.
Understand how the "parenting advantage" and restructuring (asset, capital,
management) create value within business units of a diversified firm? - Answer-Asset
restructuring involves the sale of unproductive assets. Capital restructuring involves
changing the debt equity mix, adding debt or equity. Management restructure changes
the top management team, org structure, and reporting relationships
What is portfolio management? - Answer-· Involves a better understanding of the
competitive position of an overall portfolio or family of businesses by suggesting
strategic alts for each business, identifying priorities for the allocation of resources,
using the BCG growth/share matrix.
What is the BCG portfolio matrix? How is it used to make decision regarding the
management of a corporate portfolio of businesses? - Answer-Where am I going to
invest that will give me my return on my investment. Low market growth with high
market share is a cash cow; there are many more. With cow cash we want to milk them,
