STRATEGIC MANAGEMENT AND BUSINESS POLICY
FIRST TERM EXAM, 2011/12 ACADEMIC YEAR
1.-The following text has been taken from an interview carried out to the CEO of a
certain company:
To prepare our strategic plan, we established where the group was and where we wanted to
take it. This could not be done with the profiles or the management culture that then
existed. It was necessary to transform them. Thus we created a fairly extensive Strategic
Plan, with 30/40 different projects, each focused on particular needs. Within this global
framework (plans for renewal, for development, etc.) there was a clear objective: to change
the ways and the attitudes of individuals with respect to knowledge. We wanted people to
stop being exclusive, jealous hoarders of their knowledge they "owned", and instead to put
that knowledge at the service of the organisation, sharing what they know with the rest.
A complicated change, because the first thing it generates is insecurity. The immediate and
natural reflection is: I am here because of what I know. Therefore the more I know and the
less the rest know, the better for me; they will have to come to me to ask for what I know; if
I share with others everything that I know, they will not need me any more. The pre-existing
culture was like that. That is the first thing to change. It is the most difficult to do, and it is
what we are involved in at the moment. The aim is that people should be valued for what
they are capable of explaining, not for what they keep quiet about and resolve on their own.
The important thing is what you can tell others, how you can help others to resolve problems
themselves.
Answer the following questions: What are the possible obstacles to effective knowledge
management? What can be done to overcome these obstacles?
2.-It is widely assumed that, for instance, the Universal Declaration of Human Rights and the
Global Compact promoted by the United Nations
(http://www.un.org/en/documents/udhr/ - http://www.unglobalcompact.org/) are references
at international level that deserve to be taken into account by managers when defining the
institutional values and code of conduct of their companies.
Could you describe, in brief, the role of values in the process of strategic management? In
which stages are values involved mainly?
3.-Considering the following information taken from an airline, please identity which
element/s of the company’s model of strategic thinking has/have been described and justify
why:
“Air New Zealand is the designated international carrier providing scheduled domestic and
international air transport services. The primary market focus is commercial and leisure
travellers within the Pacific rim.
We will provide standards of customer services at the highest level and an innovative range
of competitive products.
We will grow the business by developing bilateral access rights, expanding our markets, and
achieving profit level satisfactory to our shareholders.”
4.-When analyzing the macro-environment of a company operating at European level, its
managers found in Eurostat an index (Gini coeffcient) measuring social inequality in each EU
country (available here:
http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&plugin=1&language=en&pcode=t
essi190).
Typify these data into the PEST categories and explain, in brief, your classification and
implications.
5.-Assess, factor by factor, the intensity of rivalry under the following industry
characteristics:
F1.-Numerous competitors that are competing for the same customers and resources.
F2.-Declining sales revenues and volumes resulting in slow market growth.
F3.-High economy of scale effect.
F4.-Highly perishable products.
F5.-Plant capacity is being added by existing players.
F6.-High switching costs for buyers.
F7.-High levels of product differentiation.
F8.-Low exit barriers.
F9.-High fixed costs.
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F10.-Competitors have high stakes, economic and others.
Afterwards, make and evaluation of the degree of attractiveness of that industry, factor by
factor also.
Use a three point scale: high – intermediate – low.
6.-Having identified a niche for design-oriented, good quality sofas available at affordable
prices in Honk Kong, in 1999 Kelvin Ng and his wife Jane Tong established “Giormani” to
provide “one-stop-shop” custom-made sofa services.
…
Rather than just selling a piece of household furniture, Giormani embraces a “loving home
concept” and aims to bring it into homes of its customers. “Through our products, we want
to entire families to stay home more and enjoy the family life”, Tong says. “The sofa
becomes part of their lifestyle and attitude”.
Giormani has 11 retail outlets in Hong Kong and exports its sofas to the United States,
Australia, Japan, South Korea, Europe and mainland China. The brand is recognised
worldwide, thanks to its vertically integrated business model…
In addition, the company’s customisation service is based on the “sofa style tailor” concept.
Customers can order designs with width, depth, height, back support, arm rests, feet, and
materials tailored to their specifications.
The stylish designs are complemented with consistent quality and efficient services that help
to set the brand apart, Tong says. “We are also very focused on just designing and producing
sofas. Resources have been invested in product research and development so that we can
constantly upgrade the quality”.
(Source: South China Morning Post, December 13, 2011).
With this information: how could you describe the value chain of this company? Are you able
to identify any linkage between the activities being part of its value chain?
7.-ONUBA is a corporation comprising five businesses (product-market combinations or
SBUs), on which the following data are available:
NA
PR
SB
SMC
SMC
SI
SI
Business
(2011)
(2011)
(2011)
(2011)
(2010)
(2009)
(2010)
O
600
90
750
650
500
2000
2400
N
800
120
600
1200
1000
6000
6600
U
500
60
450
500
500
2000
2700
B
1000
450
2500
2000
1000
10000
10500
A
2000
700
5000
3000
2800
25000
27000
NA: Net Assets.
PR: Profits after taxes.
SB: Sales of the Business.
SMC: Sales of the Main Competitor.
SI: Sales of the Industry.
You are requested to:
1.-Construct the BCG growth-share matrix, considering a Market Growth Rate (MGR) of more
than 12% p.a. as strong.
2.-Analyze the characteristics of this business portfolio, bearing in mind that at this point,
the priority of the corporation is to keep all its business units. To do so, ONUBA can
withstand a global negative cash-flow, but never above 2% of its total net assets for the
overall corporation, without setting limits on individual businesses.
Note: Consider also that: MGR will keep stable; investment needs are calculated based on
MGR.
NOTES:
ITEM
1
2
3
4
5
6
7
POINTS
1
1
0.5
0.5
1
1
1
-Time available for the exam: 1 hour and 45 minutes.
-Any comment you consider necessary to clarify your answer, please reason it in your exam
sheet.
2
SOLUTION
1.-Corresponding to theme 6.
The obstacles derived of a cultural change, mainly the resistance of our employees.
The process of transforming individual knowledge into organizational knowledge is
also critical.
Dealing with both issues requires manage the both sides of knowledge
management: the human side (connected with the Human Resources Management
Policies) and the technological side (providing technological solutions in order to
facilitate knowledge sharing, which has been previously encouraged through those
already mentioned policies). The first pillar is mainly useful to put into value the
people’s tacit knowledge; the second one for the explicit knowledge (both internal
and external).
2.-Corresponding to theme 1.
Mainly in two:
-The definition of the firm’s identity (vision, mission and values).
-The election of the strategic guidelines and actions.
3.-Corresponding to theme 2.
Mission in the first paragraph. Vision in the second and third ones.
4.-Corresponding to theme 3.
Social in nature, although with economic implications.
5.-Corresponding to theme 4.
FACTOR
1
2
3
4
5
6
7
8
9
10
LEVEL OF RIVALRY
High
High
High
High
High
Low
Low
Low
High
High
LEVEL OF ATTRACTIVENESS
Low
Low
Low
Low
Low
High
High
High
Low
Low
6.-Corresponding to theme 5.
A value chain where most of the activities are made in house, so under the full
company’s control, from product design conceptualisation, production to retailing
operations.
For instance, a linkage is described between R&D and operations.
7.-Corresponding to theme 7.
Global Net Assets (GNA) = 600 + 800 + 500 + 1000 + 2000 = 4900
Limit for a global negative cash-flow = GNA x 0,02 = 98 (*)
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BCG Matrix
High MGR > 12%
MGR = [SI(2010) / (SI(2009)] – 1
RMS = SB(2011) / SMC(2011)
Cash-Flow = PR - IN = PR – (MGR x NA)
Business
O
N
U
B
A
RMS
1.15 (**)
0.50
0.90
1.25
1.67
MGR
Type
Cash-Flow
20%
Star (**)
-30
10%
Dog
40
35%
Question Mark
-115
5%
Cow
400
8%
Cow
540
Global Cash-Flow
835 (*)
(*) Therefore, no problem with the established financial constrain.
(**) Apparently, it is in its way to become a solid star (leader). Maybe this is why
its cash-flow is still negative.
It is also interesting to check the main competitor’ sales growth:
Business
O
N
U
B
A
Sales Growth
MC (***)
Industry (MGR)
30%
20%
20%
10%
0%
35%
100%
5%
7%
8%
(***)[SMC(2011) / (SMC(2010)] – 1
For ONUBA, following the MGR path won’t be enough to keep its position against its
main competitors in some businesses: O, N and B, where they are growing faster.
This situation has special relevance in the cases of O (star) and B (cow), to
consolidate and preserve their leaderships, respectively.
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