Question Tag: Strategy

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  • 20 Marks

CSEG – Nov 2018 – L2 – Q4 – Strategy evaluation and control

Discuss how the Balanced Scorecard can assist in delivering the company’s vision and strategy and explain its limitations.

An insurance company has developed a new mission statement following a detailed analysis of the company’s operations and marketplace. The mission statement states: “We want to continually grow through our commitment to quality and delivering quality to customers.”

The management developed the following set of vision statements to complement the mission statement:

  • Provide superior returns to our shareholders
  • Continually improve our business processes
  • Delight our customers
  • Learn from our mistakes and work smarter in the future

Required:

a) Advise on how the Balanced Scorecard can assist the insurance company in delivering its vision and strategy. (12 marks)

b) Explain FOUR (4) limitations of the Balanced Scorecard. (8 marks)

a) How the Balanced Scorecard Can Assist in Delivering Vision and Strategy (12 marks):

  1. Better Strategic Planning:
    • The Balanced Scorecard provides a powerful framework for building and communicating strategy. The business model is visualized in a Strategy Map, which forces managers to think about cause-and-effect relationships. The process of creating a Strategy Map ensures that consensus is reached over a set of interrelated strategic objectives, helping to align business processes with the company’s vision and mission.
  2. Improved Strategy Communication & Execution:
    • The Balanced Scorecard enables companies to communicate strategy internally and externally in a more effective way. A visual representation of the strategy, such as a Strategy Map, helps employees and stakeholders understand the strategy and their role in executing it. This facilitates better engagement and alignment across the organization.
  3. Better Management Information:
    • By identifying key performance indicators (KPIs) for various strategic objectives, the Balanced Scorecard ensures that companies measure what truly matters. This leads to higher quality management information, which supports better decision-making and performance management.
  4. Improved Performance Reporting:
    • Companies using the Balanced Scorecard tend to produce better performance reports. These reports provide a comprehensive view of performance, linking financial and non-financial measures to strategic objectives, and ensuring transparency for both internal and external stakeholders.
  5. Better Strategic Alignment:
    • The Balanced Scorecard helps in aligning the organization’s strategic objectives across different business units and departments. This alignment ensures that all parts of the organization are working towards the same strategic goals, enhancing overall efficiency and effectiveness.
  6. Better Alignment of Projects and Initiatives:
    • By mapping projects and initiatives to specific strategic objectives, the Balanced Scorecard ensures that resources are allocated to activities that are most critical to achieving the company’s vision. This focus on strategic priorities improves the likelihood of successful strategy implementation.

b) Limitations of the Balanced Scorecard (8 marks):

  1. No Single Overall Measure:
    • The Balanced Scorecard does not provide a single overall measure of performance, such as Return on Capital Employed (ROCE). This can make it difficult for stakeholders to quickly assess the overall health of the organization.
  2. Potential Conflicting Measures:
    • The Balanced Scorecard includes multiple measures, which can sometimes give conflicting signals. For example, improving customer satisfaction may require additional investments, which could negatively impact short-term financial performance. Managing these trade-offs can be challenging.
  3. Cultural Shift Requirement:
    • Implementing the Balanced Scorecard often requires a substantial shift in corporate culture. This can be difficult to achieve, especially in organizations with deeply ingrained practices and mindsets. Without strong leadership and commitment, the Balanced Scorecard may fail to be effectively adopted.
  4. Complexity and Cost:
    • Developing and implementing a Balanced Scorecard can be complex and costly. It requires significant resources to design, monitor, and maintain the system, which may be prohibitive for smaller organizations or those with limited resources.
  • 20 Marks

CSEG – May 2019 – L2 – Q3 – Strategic alternatives, analysis and selection

Analysis of competitive advantage bases and factors influencing industry rivalry, with application of Porter’s Five Forces model to the mobile money industry.

a) Asawasi Company, a relatively new company, is in the business of designing and building farm equipment and machinery. Whilst it has been successful in its first few years of operation, sales are now in decline as competition in the industry has intensified and there is greater rivalry between the competing organisations.

A review undertaken by consultants has recommended that in order to gain sustained competitive advantage, the company needs to establish the basis on which it can compete more effectively against its rivals in the future.

Required:

i) Describe the concept of competitive advantage and include references to the different bases Asawasi Company could use to achieve competitive advantage.
(5 marks)

ii) Describe the factors that can create competitive rivalry between organisations.
(5 marks)

b) An introduction of a new technology is an introduction of a new business. This is a statement of fact and evidence abounds in many African economies. The introduction of mobile phones came with space-to-space business and eventually gave rise to mobile money services.

Required:

Using Porter’s Five Forces model, identify the competitive forces that influence the state of competition in the mobile money industry and the profit potential of the industry as a whole.
(10 marks)

a) i) Concept of Competitive Advantage

Competitive advantage refers to any activity or factor which gives one organisation an edge over its rivals. The edge that an organisation has over its competitors may be viewed from three angles: superior position, superior skills, and superior resources. Organisations should adopt a strategy that is intended to achieve some form of competitive advantage. Doing something better or more efficiently than competitors should ultimately lead to profitability. If this can be done long-term, despite the efforts of competition, then the organisation possesses a sustainable competitive advantage.

(2 marks)

Bases of Competitive Advantage:

  1. Cost Leadership:
    • Being the lowest cost producer in the industry as a whole. By producing at the lowest cost, the company can compete on price with every other producer in the industry and earn higher unit prices.
  2. Differentiation:
    • Exploiting a product or service that the industry as a whole believes to be unique. This can be achieved via brand image, product special features, marketing techniques, etc.
  3. Focus:
    • Restricting activities to only part of the market (a segment). This is also known as a niche strategy. It can be achieved by providing goods/services at a lower cost to that segment (cost focus) or by providing a differentiated product/service to that segment (differentiation focus).

(3 points @ 1 mark each = Total of 3 marks)

ii) Factors Creating Competitive Rivalry

Organisations that provide a similar product/service aimed at the same target market will experience a certain degree of competitive rivalry. The intensity of competitive rivalry within an industry will affect the profitability of the industry as a whole, as price wars and advertising fees reduce the profits of the rivals.

Factors Creating Competitive Rivalry Include:

  1. Low Barriers to Entry:
    • Low barriers to entry increase the number of organisations in that industry, thus creating rivalry.
  2. Market Growth:
    • Rivalry is intensified when firms are competing for a greater market share in a total market where growth is slow or stagnant.
  3. Cost Structure:
    • High fixed costs can tempt firms to compete on price, as any contribution from sales is better than none at all.
  4. Switching Costs:
    • Low switching costs make it easier for customers to change suppliers, leading to increased competition.
  5. Uncertainty:
    • Uncertainty in the environment can increase rivalry as firms compete to secure their position.
  6. High Exit Barriers:
    • Difficulty in exiting the industry forces firms to fight for market share, intensifying competition.
  7. Strategic Importance:
    • When success in a particular market is a prime objective for many firms, competition is likely to be more intense.

(2 points @ 2.5 marks each = 5 marks)

b) Porter’s Five Forces Analysis of the Mobile Money Industry

1. Threat of New Entrants:

  • New entrants bring additional capacity and more competition to the industry. The strength of this threat depends on the barriers to entry, such as the amount of capital required to start the business and the likely response of existing competitors.

2. Availability of Substitutes:

  • A substitute product is one produced by another industry that satisfies the same customer needs. For example, online banking through mobile apps could serve as a substitute for mobile money services.

3. Bargaining Power of Customers:

  • Customers’ ability to force down prices or demand better quality affects profitability. Factors influencing this power include the cost of the service, its importance to the customer’s business, and switching costs.

4. Bargaining Power of Suppliers:

  • Suppliers of key inputs or services can exert pressure for higher prices. The strength of this power depends on the availability of substitute services, the importance of the supplier’s input to the mobile money industry, and the cost of switching suppliers.

5. Rivalry Among Existing Competitors:

  • The intensity of competitive rivalry affects overall profitability. Rivalry might take the form of price competition, advertising battles, or the introduction of new products and services. Increased competition can lead to market expansion or reduce profitability if demand remains unchanged.
  • 10 Marks

BMIS – May 2017 – L1 – Q5b – Introduction to business strategy

Explain key concepts related to strategic planning, including strategy, policies, procedures, budgets, and rules.

Question:

Strategic planning has been defined as the process of setting objectives for the organisation and laying down the policies which are to govern the acquisition, usage, and disposal of the resources used to achieve those objectives.

Required: Explain the following:

i) Strategy
ii) Policies
iii) Procedures
iv) Budget
v) Rules
(10 marks)

i) Strategy:
A strategy is a course of action that includes the specification of all the resources required to achieve a specific objective. It is concerned with the overall direction of an organization. Strategy formulation is the responsibility of the top management of an organization.
(2 marks)

ii) Policies:
Policies are general statements or understandings that provide guidelines for management decision-making. They allow managers to exercise their discretion and freedom of choice within certain limits. An example of a policy might be that the staff of the purchasing department of an organization should not accept gifts from suppliers, subject to certain exceptions.
(2 marks)

iii) Procedures:
Procedures are sequences of required actions or activities for performing specific tasks. They exist at all levels of an organization, though they are more extensive at the lower levels. Procedures result in efficiency and standardization of work.
(2 marks)

iv) Budget:
A budget is a formal statement of expected results set out in numerical terms and summarized in monetary values. It is a plan for carrying out certain activities with specified resources within a given period of time to achieve certain goals. A budget is a numerical statement and tends to ignore qualitative aspects of planning and achievement.
(2 marks)

v) Rules:
Rules prescribe a specific, definite action that should be taken in a given situation. They do not allow for deviations or exceptions, unlike policies, which are general guidelines that allow the exercise of some management discretion. An example of a rule might be that employees with access to a telephone must not use it for personal calls.
(2 marks)

  • 10 Marks

BMIS – Aug 2022 – L1 – Q2a – The business organisation and its stakeholders

Explains the concepts of mission, vision, values, strategy, and objectives as they relate to a business organization.

Explain the following as they relate to a business organisation:

i) Mission
ii) Vision
iii) Values
iv) Strategy
v) Objective

i) Mission:
The mission of an organization is its declaration of what it is and why it exists; that is, its reason for being and the values it holds. A mission has two main parts: the purpose for which it exists and what it does to achieve that purpose.
(2 marks)

ii) Vision:
The vision of an organization represents a desired optimal future state of what the organization wants to achieve over a stated period of time. It relates to where the firm wants to be in the future as opposed to a mission which tells the current state of the organization.
(2 marks)

iii) Values:
Values are the core principles or standards that guide the behavior and decision-making processes within the organization. They reflect what the organization stands for and are foundational to its culture and identity.
(2 marks)

iv) Strategy:
A strategy refers to a course of action together with an indication of the resources required to achieve a specific company objective. In an organizational setting, strategy formulation is the responsibility of top management.
(2 marks)

v) Objective:
An objective is an aim derived from the goals of an organization, expressed in a measurable form. A specific time by which the objective should be achieved is usually given.
(2 marks)

  • 20 Marks

BMIS – Nov 2015 – L1 – Q5 – Finance, R&D and marketing strategies

Describe the contents of a marketing plan, including executive summary, situation analysis, strategy, financial projections, and controls.

You are employed by a local company, AllFresh Ltd, specializing in the production and sales of fresh fruit drinks. At a recent Management meeting, a 3-member team was selected to prepare a marketing plan for the company. Your letter appointing you as a member of the team also specifies that you will be chairman of the team.

Required:
Describe the contents of the marketing plan.

(20 marks)

A marketing plan is a written document that summarizes what the marketer has learned about the marketplace and indicates how the firm plans to reach its marketing objectives.

The contents of the marketing plan include:

  1. Executive Summary and Table of Contents:
    The marketing plan should open with a brief summary of the main goals and recommendations. The executive summary helps senior management grasp the plan’s major thrust. A table of contents that outlines the rest of the plan and all the supporting rationale and operational details should follow the executive summary. (4 Marks)
  2. Situation Analysis:
    This section presents relevant background data on sales, costs, the market, competitors, and the various forces in the macro environment. It seeks answers to questions such as: How is the market defined? How big is it and how fast is it growing? What are the relevant trends affecting the markets? What is the product offering and what are the critical issues facing the company? All this information is used to carry out a SWOT analysis. (4 Marks)
  3. Marketing Strategy:
    At this point, the product manager defines the mission, marketing, and financial objectives, as well as the groups and needs that the market offerings are intended to satisfy. The manager then establishes the product line’s competitive positioning, which will inform the game plan to accomplish the plan’s objectives. This section should also specify the branding strategy and customer strategy that will be used. (4 Marks)
  4. Financial Projections:
    The projections include a sales forecast, expense forecast, and break-even analysis. On the revenue side, the projections show the forecasted sales volume by month and product category. On the expense side, the projections show the expected cost of marketing, broken down into finer categories. The break-even analysis shows how many units must be sold monthly to offset the monthly fixed costs and average per-unit variable cost. (4 Marks)
  5. Implementation Controls:
    This final section outlines the controls for monitoring and adjusting the implementation of the plan. The goals and budget are spelled out for each month or quarter for management to review each period’s results and take corrective action as needed. Some firms include contingency plans outlining the steps management would take in response to specific environmental developments, such as price wars or strikes. (4 Marks)

Total: 20 Marks

  • 12 Marks

BMIS – May 2021 – L1 – Q2b – Finance, R&D and marketing strategies

Explain the marketing concept and four elements of a marketing plan for a company producing fresh, natural fruit drinks.

You have been appointed as the leader of a five-member technical committee to prepare a marketing plan for your company, Quality Fresh Drinks Limited, which is well noted for the production and sale of fresh, natural fruit drinks.

Required:
i) Explain the marketing concept to the other members of the technical committee. (4 marks)
ii) Explain FOUR (4) elements of a marketing plan you would recommend to the technical committee. (8 marks)

i) Marketing Concept:
The marketing concept is a business philosophy that assumes that the extent to which an organization can satisfy the needs of its customers more effectively and more closely than its competitors largely determines its success. This means that in whatever activity the firm engages, it has the customer as its central focus.
(4 marks)

ii) Elements of a Marketing Plan:

  1. Executive Summary: The marketing plan should begin with a summary of the main goals and recommendations. The executive summary assists management in grasping the major goal of the plan.
  2. Situation Analysis: This portion of the plan provides the required background information on sales, costs, the market, competitors, and environmental factors. It attempts to find answers to how the market is defined, its size, and whether it is growing or declining. The information collected is then used to conduct a SWOT analysis.
  3. Marketing Strategy: At this stage, the marketer defines the mission, marketing, and financial objectives together with the target groups and needs the market intends to satisfy. The strategy should be specific about the branding strategy and customer strategy used.
  4. Financial Projections: These include a sales forecast, expense forecast, and break-even analysis. The projections show the expected cost of marketing and the minimum number of units sold monthly to cover the fixed and variable costs per unit.
  5. Implementation Controls: This section of the marketing plan outlines the mechanisms for monitoring and revising the plan where possible. This is facilitated when goals and budgets are clearly defined for each month or quarter.
    (8 marks)

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