Topic: Competitive advantage and strategic direction

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  • 10 Marks

BMIS – Nov 2017 – L1 – Q7a – Competitive advantage and strategic direction

Explain Critical Success Factors (CSFs) and stages in managing strategy using CSFs.

a) A strategy is a course of action, including the specification of resources required to achieve a specific objective. Strategy is concerned with the higher direction of an enterprise that involves top management.

As an alternative to a systematic goal-structured approach, an organization may focus on Critical Success Factors (CSFs) to manage strategy. Johnson and Scholes describe SIX stages in the process of managing strategy using CSFs.

Required:
i) What are Critical Success Factors (CSFs)?
(2 marks)

ii) Explain any FOUR of the stages of managing strategy using CSFs.
(8 marks)

a)
i) Critical Success Factors (CSFs):
Critical Success Factors (CSFs) are areas in which satisfactory results will enable successful competitive performance and are essential for an organization to excel in order to outperform competition. Control and improvement can be achieved by setting Key Performance Indicators (KPIs) in these areas and monitoring progress against targets.
(2 marks)

ii) Stages of Managing Strategy Using CSFs:

  • Step 1: Identify CSFs: Determine the essential areas in which successful performance is crucial. The emphasis is on what must be achieved in broad terms.
  • Step 2: Identify Competences Required: Identify the special skills and processes necessary to achieve the CSFs.
  • Step 3: Assess Core Competences: Evaluate whether the identified competences are adequate to provide a competitive advantage or if they need to be improved or supplemented.
  • Step 4: Identify Key Performance Indicators (KPIs): Establish KPIs for each competence to allow for strategic control.
  • Step 5: Monitor Competitors’ Responses: Continuously monitor competitors’ actions and adjust strategies as necessary to maintain a competitive edge.
    (Any 4 stages @ 2 marks each = 8 marks)
  • 10 Marks

BMIS – Aug 2022 – L1 – Q5b – Competitive advantage and strategic direction

Explains Michael Porter's three generic strategies for gaining competitive advantage.

Michael Porter identified three broad generic strategies which he asserted an organisation can utilise to gain competitive advantage over other firms.

Required:

Explain these THREE (3) generic strategies.

Michael Porter’s Three Generic Strategies:

  1. Cost Leadership Strategy:
    This strategy seeks to achieve the position of the lowest-cost producer in the industry. By producing at the lowest cost, the firm can compete on price with every other entity in the industry and earn the highest unit profits. This strategy is best pursued when the manufacturer uses high technology and enjoys economies of scale through mass production.
    (3.33 marks)
  2. Differentiation Strategy:
    This strategy involves raising the quality of the product, and in doing so, raising the product’s cost and sales price. The manufacturer endeavors to improve the quality of the product so that the customer perceives it as more valuable and is prepared to pay more for superior quality. The firm attempts to achieve an optimal balance for the customer between quality and price.
    (3.33 marks)
  3. Focus Strategy:
    The focus strategy is based on segmenting the market and concentrating on a particular market segment. The firm does not sell its products industry-wide but focuses its marketing efforts on a particular type of buyer or geographical area, serving a narrow strategic target more effectively and efficiently than its competitors. This strategy may be cost-focused, where the firm specializes in a particular product, or quality-focused, where the entity competes in a market segment on the basis of product quality.
    (3.33 marks)
  • 20 Marks

BMIS – Nov 2015 – L1 – Q4 – Competitive advantage and strategic direction

Explain competitive advantage, corporate reputation, and key variables of the marketing mix.

Marketing mix refers to the particular combination of key variables under a company’s control that can be used to affect demand and to gain competitive advantage.

Explain the following:
a) Competitive advantage. (4 marks)
b) Corporate reputation. (4 marks)
c) List the key variables of the marketing mix and, within each, FOUR associated sub-variables.

(12 marks)

a) ‘Competitive advantage’ may be termed as anything which gives an organization an edge over its rivals in the products it sells or the services it offers. It can also refer to a situation where an organization does something that its competitors cannot do or which they can do only at a disproportionate cost to them. (4 Marks)

b) ‘Corporate reputation’ is an image that describes an organization for its achievements and what it stands for. It also serves as goodwill to the firm. Circumstances that can result in a company having a positive reputation include integrity, good customer relations, reliability, and quality of products/services. A good corporate reputation results in increased demand for company products. (4 Marks)

c) The key variables of the marketing mix may be listed as:

Key Variables Sub-Variables
Product Product variety, Quality, Design, Features, Brand name
Price List price, Discounts, Allowances, Payment period, Credit terms
Promotion Sales promotion, Advertising, Sales force, Public relations, Direct marketing
Place Channels, Coverage, Locations, Assortments, Inventory

(12 Marks)

Total: 20 Marks

  • 10 Marks

BMIS – Nov 2020 – L1 – Q5b – Competitive advantage and strategic direction

Identifies and explains the four grand growth strategies based on the Ansoff Growth Matrix.

The Ansoff Growth Matrix is a tool which is used in generating corporate-level growth strategies for an organization. The use of the matrix results in four possible grand growth strategies available to an organization.

Required:

Identify and explain these FOUR (4) grand growth strategies.

The Four Grand Growth Strategies Based on the Ansoff Growth Matrix:

  1. Market Penetration (Existing Markets and Existing Products):
    This strategy involves increasing market share within existing markets using existing products. It can be achieved by attracting customers from competitors, or by convincing current customers to use more of the product. The primary focus is on growing the market share by intensifying marketing efforts.
  2. Product Development (Existing Markets and New Products):
    Product development strategy involves introducing new products to existing markets. This requires innovation and investment in research and development. The objective is to cater to the existing customer base by offering them new products, thereby deepening the relationship with current customers.
  3. Market Development (New Markets and Existing Products):
    This strategy focuses on expanding into new markets with existing products. This could include entering new geographical areas, targeting different customer segments, or finding new uses for the product. The goal is to reach new customers by expanding the reach of current products.
  4. Diversification (New Markets and New Products):
    Diversification involves entering new markets with new products. It can be categorized into related (concentric) diversification and unrelated (conglomerate) diversification. This strategy is the most risky as it involves venturing into new areas of operation that may be unfamiliar to the organization, but it also offers the potential for high rewards.
  • 10 Marks

BMIS – April 2022 – L1 – Q5a – Competitive advantage and strategic direction

Explain the concept of the BCG Matrix and its importance in assessing product lines.

Bonus Oil Plantation is a listed company on the Ghana Stock Exchange. For a company with a large portfolio, it is important to assess its product lines regularly to see which products are profitable, which ones are making losses, and which ones need improvement. This practice will help the company to allocate its resources accordingly in order to function more efficiently.

While there are many practices and tools available to accomplish this mission, the CEO has suggested to the Board the BCG Matrix developed by the Boston Consulting Group as a standard.

Required:
At the CEO’s request, explain the concept of the BCG Matrix. (10 marks)

Concept of the BCG Matrix:
The Boston Consulting Group (BCG) Matrix is a strategic planning tool developed by the Boston Consulting Group in the 1970s. It helps organizations assess their product portfolio and allocate resources effectively based on market growth and market share.

The BCG Matrix categorizes products into four quadrants based on their relative market share and the market growth rate:

  1. Stars:
    • High Market Growth, High Market Share
    • Stars are products that operate in high-growth markets and have a high market share. These products are often market leaders and require substantial investment to maintain or grow their position. They have the potential to become cash cows as the market matures.
  2. Cash Cows:
    • Low Market Growth, High Market Share
    • Cash cows are products with a high market share in a low-growth market. They generate more revenue than they require for maintenance, providing a steady cash flow that can be used to support other products in the portfolio, such as stars or question marks.
  3. Question Marks:
    • High Market Growth, Low Market Share
    • Also known as “problem children,” question marks operate in high-growth markets but have a low market share. They consume a lot of resources but generate low returns. The company must decide whether to invest heavily to increase their market share or divest them.
  4. Dogs:
    • Low Market Growth, Low Market Share
    • Dogs are products with low market share in low-growth markets. They may generate just enough revenue to maintain themselves but are not considered viable for long-term growth. Companies typically divest or discontinue these products to free up resources for more promising areas.

Importance:
The BCG Matrix helps companies like Bonus Oil Plantation analyze their product portfolio to determine which products should receive more investment, which ones should be maintained for cash generation, and which ones should be divested. This strategic tool aids in resource allocation, ensuring that the company invests in products that align with its long-term goals and market opportunities.

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