OROMIA STATE UNIVERSITY COLLEGE OF FINANCE
AND MANAGEMENT STUDIES
STRATEGIC MANAGEMENT GROUP ASSIGNMENT FOR WEEKEND STUDENTS
By
1. Buchu Firaol id
Introduction
Strategic management is crucial for organizations aiming for sustained success in a
dynamic and competitive environment. It involves formulating and implementing major
goals and initiatives by top management, considering resources and the internal and
external environments.
This assignment explores key concepts and frameworks in strategic management,
including portfolio analysis tools like the BCG Matrix, competitive advantage, analytical
models such as Porter's Five Forces, the strategic management process, strategic
options like retrenchment, the role of functional strategies, reasons for neglecting
strategic planning, and the importance of vision and mission statements.
Understanding these elements is fundamental for analyzing organizational strategies
and making informed decisions.
1. What is the BCG matrix? What are its uses and limitations?
The Boston Consulting Group (BCG) matrix is a strategic planning tool that analyzes business
units (or product lines) based on relative market share and market growth rate, plotted on a
four-quadrant grid.
○ Uses:
■ Portfolio Analysis: Helps companies decide which business units to invest in,
divest, or hold.
■ Resource Allocation: Guides the allocation of financial resources among business
units.
■ Strategic Decision Making: Provides a framework for understanding each business
unit's strategic position.
○ Limitations:
■ Oversimplification: Reduces complex decisions to two dimensions.
■ Market Definition: "Market" and "market share" definitions can be ambiguous.
■ Static Nature: Provides a snapshot and may not account for future changes.
■ Ignore Synergies: Doesn't explicitly consider potential synergies between business
units.
2. Explain the chief properties of BCG matrix?
Chief Properties (The Four Quadrants):
■ Stars (High Growth, High Market Share): Leaders in high-growth markets;
require significant investment. Strategy: Invest for growth.
■ Cash Cows (Low Growth, High Market Share): Mature, successful
businesses generating more cash than needed. Strategy: "Milk" cash to
fund other units.
■ Question Marks / Problem Children (High Growth, Low Market Share):
Operate in high-growth markets with low market share; require significant
investment. Strategy: Invest selectively or divest.
■ Dogs (Low Growth, Low Market Share): Operate in low-growth markets with
low market share; generate low or negative returns. Strategy: Divest or
harvest.
3. Explain the concept of competitive advantage.
Competitive advantage refers to the attributes that allow a company to outperform its
competitors, generating greater sales or margins and retaining more customers. It can
stem from:
○ Cost Advantage: Producing goods/services at a lower cost (e.g., economies of
scale, efficient processes).
○ Differentiation Advantage: Offering unique, valued products/services (e.g.,
superior quality, brand image).
○ Focus Advantage: Targeting a specific niche market effectively (can be cost-
focus or differentiation-focus).
A sustainable competitive advantage is difficult for competitors to imitate.
4. Discuss Michael Porter’s analysis.
Michael Porter's analysis, particularly his Five Forces Framework, analyzes industry
attractiveness based on:
○ Threat of New Entrants: High barriers to entry reduce this threat.
○ Bargaining Power of Buyers: High buyer power drives down prices.
○ Bargaining Power of Suppliers: High supplier power increases input prices.
○ Threat of Substitute Products or Services: Substitutes limit prices.
○ Intensity of Rivalry Among Existing Competitors: Intense rivalry reduces
profitability.
By analyzing these forces, companies can understand industry structure and
improve their competitive position
5. Explain the strategic management process.
The strategic management process is a continuous cycle of planning, execution, and
evaluation:
○ Environmental Scanning (Analysis): Analyzing the external (e.g., PESTEL,
Porter's Five Forces) and internal (e.g., VRIO, strengths, weaknesses)
environments.
○ Strategy Formulation: Developing vision, mission, objectives, and strategies
(corporate, business, and functional).
○ Strategy Implementation: Putting strategies into action through organizational
structure, resource allocation, and culture.
○ Strategy Evaluation and Control: Monitoring performance, evaluating against
objectives, and taking corrective actions.
6. Define a retrenchment strategy. Discuss the more popular options.
A retrenchment strategy is used when a firm faces declining performance and involves
reducing scope to improve efficiency. Options include:
○ Turnaround: Reversing negative trends to restore profitability through cost and
asset reduction.
○ Divestment (or Divestiture): Selling off underperforming or non-core business
units.
○ Liquidation: Terminating the entire business and selling all assets (a last resort).
○ Harvesting: Minimizing investment in a business unit to maximize short-term
cash flow.
7. What is a functional strategy?
A functional strategy pertains to specific functional areas (e.g., marketing, finance) within a
business unit. These strategies support business-level and corporate-level strategies by
maximizing resource productivity and efficiency. For instance, if a business strategy emphasizes
differentiation through superior product quality, the R&D strategy might focus on innovation.
8. Give at least seven reasons why some firms do no strategic planning.
Firms may neglect strategic planning due to:
○ Lack of Knowledge/Expertise
○ Poor Reward Structures
○ Firefighting
○ Waste of Time Perception
○ Cost
○ Laziness/Complacency
○ Fear of Failure/Unknown
○ Overconfidence
○ Resistance to change
9. Compare and contrast vision statement with mission statement.
Vision and mission statements set an organization's direction and purpose.
○ Vision Statement:
■ Focus: Future
■ Nature: Inspirational, broad
■ Purpose: To motivate and provide a picture of the desired future
■ Question Answered: "Where are we going?"
■ Example: "To be the most customer-centric company on Earth."
○ Mission Statement:
■ Focus: Present
■ Nature: Concrete, specific
■ Purpose: To define core purpose, stakeholders, and main products/services
■ Question Answered: "What is our business?"
■ Example: "To provide high-quality, affordable widgets..."
○ Contrast: Vision is long-term and broad; mission is present-focused and
specific.
○ Comparison: The mission outlines how the organization will work towards
achieving its long-term vision.
Summary
This assignment explored core concepts in strategic management, including the BCG
Matrix, competitive advantage, Porter's Five Forces, the strategic management process,
retrenchment strategies, functional strategies, reasons for neglecting planning, and the
roles of vision and mission statements. A strong understanding of these elements is
essential for navigating the complexities of the modern business environment.
References
1. David, F. R., & David, F. R. (2017). Strategic Management: Concepts and Cases
(16th ed.). Pearson.
2. Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and
Competitors. Free Press.
