Chapter review questions: Chapter 1: 1. How is “strategic management” defined in the text, and what are its four key attributes? Strategic management is the analysis, decisions, and actions that a company takes to generate and maintain competitive advantages. This concept captures two key characteristics that are at the heart of strategic management. First, an organization's strategic management comprises three constant processes: analysis, decisions, and actions. Strategic management deals with the analysis of strategic goals as well as the company's internal and external factors. Managers must then make strategic decisions. These decisions, in general, address two fundamental questions: Which industries should we compete in? How should we compete in those industries? These inquiries frequently concern an organization's domestic and international operations. Finally, there are the actions that must be performed. Of course, decisions are useless unless they are implemented. Firms must take the required steps to put their strategies into effect. This demands leader to allot the required resources and design the organization so that the planned strategy become reality. The four key attributes of strategic management are first, strategic management is focused on the general goals and objectives of the firm. That is, efforts must be directed on what is beneficial for the entire organization, rather than just one functional area. Second, strategic management involves a wide range of stakeholders in decision making. Stakeholders are individuals, groups, and organizations with a "stake" in the organization's performance, such as owners, employees, customers, suppliers, the community at large, and so on. Managers will fail if they concentrate on a single stakeholder. Third, strategic management demands the incorporation of both short-term and longterm perspectives. Managers must retain both a vision for the organization's future and a focus on its current operational demands. Financial markets, on the other hand, can put enormous pressure on executives to reach short-term performance expectations. Fourth, strategic management requires an understanding of the trade-offs between effectiveness and efficiency. This has been referred to by some authors as the distinction between doing the right thing (effectiveness) and doing things correctly (efficiency). While managers must distribute and use resources wisely, they must also focus their efforts on achieving overall company goals. 2. Briefly discuss the three key activities in the strategic management process. Why is it important for managers to recognize the interdependent nature of these activities? On question number 1, I identified the three constant processes of strategic management—analysis, decisions, and actions. These three processes, also known as strategy analysis, strategy formulation, and strategy implementation, are highly interdependent and do not occur sequentially across most businesses. Strategy analysis can be viewed as the starting point for the strategic management process. It consists of the "advance work" that must be completed to successfully develop and carry out strategies. Many strategies fail because managers may want to formulate and implement strategies without first carefully analyzing the company's overall goal and thoroughly analyzing its external and internal environments. There are four chapters under strategy analysis namely: (1) analyzing organizational goals and objectives; (2) analyzing the external environment of the firm; (3) assessing the internal environment of the firm; and (4) assessing a firm’s intellectual assets. The second key activity in the strategic management process is strategy formulation. There are various levels at which strategy is developed. Business-level strategy begins by addressing the question of how to compete in a specific industry to gain a competitive advantage. Second, corporate-level strategy concentrates on two topics, what industries to compete in and how to manage industries to achieve synergy, which is the idea that industries add more value by cooperating than they do by operating independently. Third, as a company expands internationally, it must create international strategies. Fourth, managers need to create successful entrepreneurial projects. The third and last key activity in the strategic management process is strategy implementation. Strategy implementation includes making sure effective and efficient controls and organizational designs, which involved creating effective methods to coordinate and integrate actions within the firm as well as with its suppliers, customers, and alliance partners. Leadership plays an important role to make sure that the company is committed to excellence and ethical behavior. It also stimulates learning and continuous development and acts entrepreneurially in creating new opportunities. Managers must grasp the interconnectedness of these tasks because they must constantly adjust to changing events and strategies. They learn how to evolve as managers by recognizing this. Moreover, is crucial for managers to have a clear sense of the direction they must follow and the changes they must make to accomplish the goals and vision of the company, particularly in the rapidly changing world of today. Companies may continue to thrive in today's extremely competitive and changing economy by having the correct vision, understanding of what is happening, and strategic plans in place. 3. Explain the concept of “stakeholder management.” Why shouldn’t managers be solely interested in stockholder management, that is, maximizing the returns for owners of the firm—its shareholders? Stakeholder management refers to the inclusion of a variety of people or groups in the strategic management process who have an interest in or have the power to affect an organization's success. The requirements of shareholders as well as those of other stakeholders, including consumers, suppliers, workers, creditors, the government, and the community, will be of interest to senior management. Managers shouldn’t be solely interested in stockholder management because managers who are only concerned with stockholder management are more likely to make choices that meet short-term profit goals. These choices might involve cutting down on asset upkeep, putting off downsizing or putting pressure on suppliers to raise pricing. However, these choices will probably hurt performance over the long run. Top executives who consider all stakeholders are less likely to take actions that are in opposition to the company's long-term profit maximization goal. Chapter 2: If you are considering opening a new pizza restaurant in your community, what would be the threat of new entrants? How would you evaluate Porter’s other forces for this industry? Explain. Porter's Five Forces is an analytical instrument for evaluating the competitiveness of every industry. The five forces to be considered in every industry are as follows: 1) rivalry or competition within the industry, 2) threat of new entrants, 3) suppliers' bargaining power, 4) Buyers' bargaining power, and 5) threat of substitute products and services. The threat of new entrants in the food market is quite significant, causing many new food businesses to fail within their initial year. The basic requirements for opening a pizza store are an oven and a little sum of funds. The existence of big businesses controlling franchises or small independent chains, on the other hand, raises barriers to entry. New entrants are under great pressure to maintain profitability while delivering prices and quality that customers find appealing. Due to these variables, the possible number of rivals is immense. Moreover, the pizza industry caters to clients of all ages who have a strong preference for fast - food, particularly pizza. Such buyers value quality and are looking for a variety of pizzas at low cost. Because transferring from one pizza shop to another does not involve a significant cost, consumers can further easily affect the pricing of menu items. Thus, pizza shops cannot demand high costs to retain client interest in their brand. However, some global brand names may demand a premium price for their pizzas more than competitors, and people keep buying from their restaurants due mainly to the brand image. As a result, consumers in the pizza sector have strong bargaining power. Furthermore, new, and small pizza restaurants have little to no control over the pricing of the basic raw materials they need. The suppliers, in the case of new and small pizza restaurants, could demand a higher price that can give them more profit compared to larger pizza chains. Because of these factors, suppliers in the pizza industry can be considered to have medium bargaining power. In addition, in the pizza industry, the threat of alternative goods is relatively strong. Sandwiches, burgers, and shawarma are among the several fast-food substitutes offered on the market. Aside from the alternative of fast foods, competing pizza businesses are a part of the market, proving buyers with replacements. Also, new pizza businesses must be creative and innovative to minimize the threat of substitute products. Finally, the pizza market is crowded with many businesses that produce a wide variety of pizzas, making it a highly competitive sector. To deal with a strong competitive advantage, pizza industry rivals employ technology to maintain an advantage over the companies. Summarized: The threat of new entrants in the food market is quite significant, causing many new food businesses to fail within their initial year. The basic requirements for opening a pizza store are an oven and a little sum of funds. The existence of big businesses controlling franchises or small independent chains, on the other hand, raises barriers to entry. Because transferring from one pizza shop to another does not involve a significant cost, consumers can further easily affect the pricing of menu items. Thus, pizza shops cannot demand high costs to retain client interest in their brand. In addition, in the pizza industry, the threat of alternative goods is relatively strong. Sandwiches, burgers, and shawarma are among the several fast-food substitutes offered on the market. Aside from the alternative of fast foods, competing pizza businesses are a part of the market, proving buyers with replacements. Also, new pizza businesses must be creative and innovative to minimize the threat of substitute products. Finally, the pizza market is crowded with many businesses that produce a wide variety of pizzas, making it a highly competitive sector. To deal with a strong competitive advantage, pizza industry rivals employ technology to maintain an advantage over the companies. Chapter 3: 1. Using the internet, look up your university or college. What are some of its keyvalue-creating activities that provide competitive advantages? Why? 2. Select a firm that competes in an industry in which you are interested. Drawing upon published financial reports, complete a financial ratio analysis. Based on changes over time and a comparison with industry norms, evaluate the firm’s strengths and weaknesses in terms of its financial position. The firm I chose is Apple Inc., here is its complete financial ratio analysis: I. Short-term solvency, or liquidity ratios Current Ratio = 0.8794 Quick Ratio = 0.8472 Cash Ratio = 0.1536 II. Long-term solvency, or financial leverage ratios Total debt ratio = 0.8564 Debt-equity ratio = 5.9615 Equity multiplier = 6.9615 Times interest earned ratio = 6.2645 Cash coverage ratio = 3.4433 III. Asset utilization, or turnover ratios Inventory turnover = 45.1973 Days’ sales in inventory = 8.0757 Receivables turnover =6.4716 Days’ sales in receivables = 56.4002 Total asset turnover = 1.1179 Capital intensity = 3.9132 IV. Profitability ratios Profit margin = 25.3096 Return on assets (ROA) = 28.2924 Return on equity (ROE) = 196.9589 V. Market value ratios Price-earnings ratio = 23.27 Market-to-book ratio = 44.63 As we can see above, Apple Inc.’s strength, based on their current financial position, 3. How might exemplary human resource practices enhance and strengthen a firm’s value-chain activities? To generate a profit margin, primary and support activities must provide the client with a value greater than their cost. Human resource management supports the entire value chain, including the primary activities and supports activities. Human resource management practices enhance and strengthen a firm’s value-chain activities by performing effective employer retention, growth, and recruitment strategies that will give the company a competitive advantage against its competitors. Also, the human resource management department is in charge of rewards. The HRM motivates the employees by offering tips and incentives. With the rewards and incentive program, the employees will be more effective and efficient in their jobs, resulting in better operational performance of the company. More people will be willing to pay a premium for your goods or services the more value you generate. Businesses that place a high priority on HR development will be successful in their business. Exemplary HR practices unquestionably reinforce and enhance all operations throughout the value chain, and businesses should expect to be compensated appropriately. Chapter 4: 1. Explain the role of knowledge in today’s competitive environment. Because wealth in the growing economy is progressively produced by the successful management of knowledge workers rather than by the efficient administration of physical and financial assets, knowledge plays a crucial role in boosting a company's value in today's competitive market. The skills, expertise, and experience of an organization's employees and management collectively constitute its human capital. Companies need to have something difficult for rivals to copy or steal in today's intensely competitive business world. Intellectual knowledge and expertise are difficult to replicate or steal. Companies that rely on information, innovation, and intellectual assets may maintain their evolution and a lasting competitive advantage by investing in their people. 2. Why is it important for managers to recognize the interdependence in the attraction, development, and retention of talented professionals? The initial stage is simply to hire qualified personnel. To optimize their combined contributions, businesses need to nurture these outstanding employees and take action to keep them by offering salary, recognition, and a pleasant work environment. The efficiency of processes for retention and development is hindered by unsatisfactory recruitment. In creating intellectual capital effectively and efficiently, all three processes are essential. The company won't be able to pick qualified candidates for its organization or acquire enough skilled workers to replace retirees if even one stage, such as attraction, is lacking. On the other hand, if development is poor, the company will be unable to boost the intellectual capital of its workforce and remain competitive. Furthermore, if retention is poor, the firm will spend its limited resources hiring and training replacements for the workers who are exiting. 3. Discuss the key role of technology in leveraging knowledge and human capital. Adopting a technology-driven innovation for organizations to use their knowledge and human capital is essential as it aids in developing social networks. Information sharing, improved collaboration, and knowledge compilation are all possible with the help of technology. Through teleconference, face-to-face conversations are being replicated over long distances. Digital teams that can work together across divisions, geographical locations, and even with suppliers or customers may result from this. Technology is essential for helping business processes in financial and project management by checking and monitoring activity and documentation. All this is achieved by including communication and collaboration technologies in the strategic plan.
