Strategic Management

The Saigon International School

Strategic Management Final Exam

November 26 , 2011

Set A ( 3 marks each)

1. Briefly describe The Quantitative Strategic Planning Matrix QSPM. Explain with the help of examples.

The Quantitative Strategic Planning Matrix QSPM is a higher-level of analytical method for assessing and comparing between feasible alternative actions.

This QSPM compares two alternatives. Based on strategies in the stage 1 (IFE, EFE) and stage 2 (BCG, SPACE, IE), company executives determined that this company XYZ needs to pursue an aggressive strategy aimed at development of new products and further penetration of the market.

They also identified that this strategy can be executed in two ways. One strategy is acquiring a competing company. The other strategy is to expand internally.

(Attractiveness Score: 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 = most acceptable)

From a above conclusion that acquiring a competing company is a better option. This is given by the Sum Total Attractiveness Score figure. The acquisition strategy yields higher score than the internal expansion strategy. The acquisition strategy has a score of 4.04 in the QSPM shown above whereas the internal expansion strategy has a smaller score of 2.70.

2. What do you understand by tangible and intangible components of differentiation? Explain Give five examples each of tangible and intangible products and give reasons for their classification.

Tangible differentiation is concerned with the observable characteristics of a product or service that are relevant to customers’ preferences and choice processes. These include size, shape, color, weight, design, material and technology. Tangible differentiation also includes the performance of the product or service interms of reliability, consistency, taste, speed, durability and safety

3. Write short note on any two of the following:

(a)BCG Matrix :

BCG model related to marketing. The BCG matrix is portfolio management tools used in product file cycle theory. The BCG based on classification of products in four categories depend on combination of market growth and market share relative to largest competitor.

BCG matrix reaches more benefit such as knowing what company are selling help manager to make decisions about what priorities to assign to not only product but also company departments and business units.

Four categories:

BCG Star: high growth, high market share

BCG mark: high growth, low market share

BCG cash cows: low growth, high market share

BCG dogs: low growth, low market share

(b)Balanced Score Card (BSC) is a performance management framework used by strategic decision maker to make right decisions about their business. Balanced scorecard is not only a form of strategic goals but it is also a method for monitoring progress toward organization's strategic goals. The balanced scorecard method is designed to provide a view of an organization from both internal and external perspective. Decision maker

depends on strategic management models, such as SWOT analysis, IFE, EFE, BCG matrix, SPACE matrix and specially is analytical model, QSPM model.

Balanced scorecard views organization from four perspectives:

Customer perspective, Internal-business processes, Learning and growth, Financials.

4. 'Strategy includes the determination and evaluation of alternative paths to an already established mission or objective and eventually, choice of the alternatives to be adopted.' Explain the statement underlining the process of strategy formulation.

1.Setting Organizations’ Objectives: The key component of any strategy statement is to set the long-term objectives of the organization. The decision maker should give out 2 more strategies to solve operating and financial problems and improve their business

2.Evaluating the Organizational Environment: this is one of step to determinate evaluation of alternative by assessing the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position and existing product line. The purpose of review is to identify company’ strength and weakness competitive factor as well as those of competitors.

3.Performance Analysis: A critical evaluation of the organizations to past performance, present condition and the desired future conditions must be done by the organization.

4.Choice of Strategy: This is the ultimate step in Strategy Formulation. The best of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

5. . Technological factors represent major opportunities and threats, which must be taken into account while formulating strategies. Discuss. How can a firm build a sustainable technology based competitive advantage?

Technological factors: equipment of producing, knowledge product and machine

A firm build a sustainable technology based competitive advantage: flow the demand and supply formular, built a sustainable technology must be based on the profit which company can get from its output. If technology support and raise competitive advantage and revenue of company, technology- improving project will be appropriate to implement.

6. Corporate culture plays an important role in the success of an organization. Explain giving suitable example.

Culture plays a important role at everywhere in the success of organization. For example, company A bought and plant to mine mineral at a land that citizen used for their religion for long time. The company can finish procedure but they will get citizen’s resistance. The company will face with a lot of disadvantages for

business operation, such as wasting time for construction and expenses for suit, specially is limitation of utilization of local labor resource.

7. . The low-cost leadership strategy at times enables the firm to defend itself against each of five competitive forces. Explain.

1. Entry of competitors. How easy or difficult is it for new entrants to start competing, which barriers do exist.2. Threat of substitutes. How easy can a product or service be substituted, especially made cheaper.3. Bargaining power of buyers. How strong is the position of buyers. Can they work together in ordering large

volumes.4. Bargaining power of suppliers. How strong is the position of sellers. Do many potential suppliers exist or only

few potential suppliers, monopoly?5. Rivalry among the existing players. Does a strong competition between the existing players exist? Is one player

very dominant or are all equal in strength and size.

8.. Explain the following:

(a) Types of resources:capital resource, human resource, technology resource.

(b) Strategic importance of resources : whole resources tie together and become condition for develop of company. Without any resource the company will be less efficiently in operation and develop.

9. Discuss the importance of differentiation strategy in the present competitive environment. Explain taking into consideration its advantages and disadvantages.

Advantages:

Product development: competition between companies will conduct improving continuously their own product.

Improve internal element that required for differentiation strategy: product flexibility, greater compatibility, lower cost, improved service, less maintenance, greater convenience and more features.

Higher price for product and loyal customer: a successful differentiation strategy will allow those because customers become strongly attached to differentiation features.

Disadvantages: not guarantee competitive advantages if standard products sufficiently meet customer need or if rapid imitation by competitors

The unique product may not be highly valued enough by customers to justify the higher price.

Undurable differentiation will be imitated quickly by competitors.

10. Every strategic alliance incurs certain costs and comes with a set of risks. Explain any five costs/risks of entering into a strategic alliance.

Costs:

-Strategic alliance is formed for purpose of capitalizing on some opportunities.

-Improving communication and net working: 2 organization established or operated at different place.

-Globalize operation.

-Minimize risk.

-Technology

Risks:

-Too much diversification

-Difficult to integrate different organizational cultures

-Large debt

Set B. ( 30 marks)

a) Swot Analysis Of Fedex

Strengths:

Integrated business solutions are provided through a group of operating companies

One of the company’s greatest strengths is undoubtedly its business concept

No matter what the economy is doing, there will always be a need for package delivery of some sort by companies and individuals

FedEx has less expensive delivery alternatives from which to choose.

Fedex has become synonymous with idea of express package delivery in mind of customers.

Company’s philosophy is “People- Service- Profit” which dictates that company puts its people first above everything. Then, employees will be motivated to provide the best customer service possible, and profitability will follow.

Award for outstanding performances are tickets to special events and paid time off to participate in community volunteer projects.

A well-managed logistics operation such as reduce the length of the order cycle, handling and warehousing.

Use IT to manage its divers and customer’s backage.

Continuously, upgrade faster than competitors newer technologies that are more powerful and less expensive

Weakness:

FedEx’ greatest weakness is the corporation’s large size. It is often difficult to maintain tight control over all operations.

Opportunities:

The global leader in transportation industry provide e-commerce and supply chain management services to clients in more than 210 countries.

215,000 employees and contractors and offers a plethora of delivery options including worldwide express delivery, ground small parcel delivery, freight delivery, and customs brokerage.

Threats:

Local customer is loyalty to local transportation agency.

FedEx is look like a strange giant of transportation industry, people don’t know and care too much to famous foreign carrier for domestic delivery package.

(b) Explain the Decision-making process and how does it contribute to performance of the company.

Fred Smith, Chairman, President and Chief Executive officer of FedEx Corporation realize that “overnight delivery of time-sensitive document and package were excellent”. So he decided to invest in the physical transportation infrastructure of the business. The corporations lose in the first three years and began to get profit from 1975. The core of FedEx’s strategy was to “use IT to help customers take advantages of international markets”

FedEx was executive a large project which was to own a transportation fleet. After tenth year of operation FedEx became the first US Company to achieve the US$1 billion revenues mark within a decade without corporate acquisitions and mergers.

Early 1974, FedEx began built multiple-client warehouse, those also FedEx’s value-added services beyond basic transportation.

The reason for Smith’s decision making is because he predicted customer’ demand in the future and recognize lack of type of expected transportation service in that time. Smith’s decision made FedEx became pioneer of express delivery on the world and uses IT to manage its divers and customer’s package.

In January 2000, FedEx served 2010 countries, operated 34,000 drop-off location and managed over 10 million square feet of warehouse space worldwide. It own 648 aircraft and more than 60,000 vehicles and with nearly 200,000 staffs. FedEx became world’s largest overnight package carrier, with about 30 percent of the market share.

(c) What are the various strategies that you recommend for the company division in domestic and foreign markets .

Domestic market:

Management is progress of continuous alteration, so company must concentrate on improving in IT management systems.

Improve and manage human resources are always in process such as, training, retention, retirement and subsidiary policies.

Foreign market:

Company must begin to use IT to mange operations of its oversea business.

Local or national transportation companies is always strong competitors because their familiar with local people. So, FedEx promote powerful marketing strategies whose goals is to close with customers and perform advantages about prices and value-added services.

( d ) Critically examine the reactions of the various executives as stated in the case.

Worth of strategic project based on results that benefit acquisition of organization. But all of decision was made by Smith lead FedEx to a top position in transportation so we can identify appropriately that that’s RIGHT and not able to be criticized until now (e) Discuss the importance of a three - year plan.

a three-year plan is neither too long nor short for a process of strategic implement. The organization will be active and flexible on a three- plan because:

it kept high morale and the company’s goals in focus. effective and efficient for plant that is impossible to shorten time, such as built infrastructures,

education for employees.

The three-year plan is importance and essential process for success of FedEx today. Despite losses in first 3-years, Smiths still keep going on his strategies as well as solving appropriately issues and realize new opportunities for development of corporation.

Set C. ( 40 marks)

Write a case analysis for second case ( see attached case). and follow the format below.

1. Investigate and Analyze the Company’s History and Growth.

Cisco’s history and growth seem like a nice story. Leon and Sandy, two computer scientist at Stanford University and get troubles with network system of University could not send e-mail messages. They researched and solved this problem by built a IP router( Internet propotol router). But the University reflected them permission to use school resources to develop routers. They left Stanford ín984 and establish their own company. In order to increase market share of Cisco, Sandy and Leonard approached to Don Valentine, a venture capitalist to take $2.5 million is equal to 32percent stake of company. This is a crucial decision for development of company later but is also make them felt heavy headache later because of Valentine’s expanse in company. In late 1988, Cisco’s cash resources quickly accumulated and then ended up not using the $2.5 million venture capital. In 1988, Don Valentine begin to express his right to choose the executive management team. On August 28th 1990, Sandy was dismissed and thereafter Leonard resigned as a member of Broad after Sandy and current CEO, Morgridge, had conflict in management. Finally, Sandy and Leonard sold their two-thirds of Cisco stocks for $ 170 million.

A general view, we can say that, “the organization is established based on brain’s creativeness and management based on others brain”.

2. Identify Strengths and Weaknesses Within the Company.

STRENGTHS:

Putting customer first, always listen to customer. Customer change is what was important to them to change company.

A compensation system to team success

New technologies and, diversity product: internet hardware and software to asynchronous transfer mode switches and routers, hubs, internet phones and wireless LANs,…

Acquisition strategic based on a particular analysis because too far behind its competitors

Flexibility of company and acquisition strategic

Strong management team

Strong brand equity

Strong financial position

WEAKNESS:

Each acquisition represented a small strategic step away from Cisco’s core business of routers.

No fixed ideas on new technology and rigid approach that favours one technology over another.

Relatively weak presence in China

Constant re-engineering of network engineers

3. Gather Information on the External and Internal Environment.

  STRENGTHS WEAKNESSINTERNAL

ENVIRONMENTPutting customer first, always listen to customer. Customer change is what was important to them to change company.

Each acquisition represented a small strategic step away from Cisco’s core business of routers.

A compensation system to team success No fixed ideas on new technology and rigid approach that favours one technology over another.

New technologies and, diversity product Relatively weak presence in ChinaAcquisition strategic based on a particular analysis

 Constant re-engineering of network engineers

Flexibility of company and acquisition strategic

Strong management team  Strong brand equity  Strong financial position  

OPPORTUNITIES THREATSEXTERNAL

ENVIRONMENT80 percentage market share of routers Debt finance from purchase acquisitions.Can expand market share on many yield of industry by base on its acquisitions

Economic slowdown

Acquisitions Price warsStrategic alliances Product substitutionGrowing demand for unified communication solutions

Dell

Growing enterprise security market Intense competition

OPPORTUNITIES :

80 percentage market share of routers

Can expand market share on many yield of industry by base on its acquisitions

Acquisitions

Strategic alliances

Growing demand for unified communication solutions

Growing enterprise security market

THREATS:

Debt finance from purchase acquisitions.

Economic slowdown

Price wars

Product substitution

Dell

4. Construct a Competitive Profile Matrix (CPM)

    Cabletron 3 Com Juniper

Critical Success Factors

Weight

Rating

Weighted Score

Rating

Weighted

Score

Rating

Weighted

ScoreMarket Share 0.2 2 0.4 2 0.4 3 0.6Product Quality 0.14 3 0.42 3 0.42 4 0.56Price 0.08 4 0.32 4 0.32 4 0.32Customer loyalty 0.08 3 0.24 3 0.24 3 0.24Financial position 0.12 3 0.36 3 0.36 3 0.36Advertisement 0.07 2 0.14 2 0.14 3 0.21Management 0.15 3 0.45 3 0.45 3 0.45Customer Service 0.16 2 0.32 3 0.48 3 0.48Total 1.00   2.65   2.81   3.22

5. Construct External factor Evaluation (EFE) Matrix

EFE of Cisco

Opportunities Weight RatingWeighted

Score80 percentage market share of routers 0.1 4 0.4Can expand market share on many yield of industry by base on its acquisitions 0.07 3 0.21Acquisitions 0.1 3 0.3Strategic alliances 0.07 2 0.14Growing demand for unified communication solutions 0.08 3 0.24Growing enterprise security market 0.12 4 0.48Threats  Debt finance from purchase acquisitions. 0.1 4 0.4Economic slowdown 0.07 3 0.21Price wars 0.08 2 0.16Product substitution 0.09 3 0.27IBM 0.07 3 0.21Dell 0.05 3 0.15Total weighted Score 1   3.17

6. Construct Internal Factor Evaluation (IFE) Matrix

IFE of Cisco

Strengths Weight RatingWeighted

ScorePutting customer first, always listen to customer. Customer change is what was important to them to change company. 0.15 4 0.6A compensation system to team success 0.1 3 0.3New technologies and, diversity product 0.1 3 0.3Acquisition strategic based on a particular analysis 0.07 2 0.14Flexibility of company and acquisition strategic 0.08 3 0.24Strong management team 0.1 3 0.3Strong brand equity 0.05 2 0.1Strong financial position 0.1 3 0.3Weaknesses      Each acquisition represented a small strategic step away from Cisco’s core business of routers. 0.1 4 0.4No fixed ideas on new technology and rigid approach that favours one technology over another. 0.07 3 0.21Relatively weak presence in China 0.08 2 0.16Total weighted Score 1   3.05

7. Prepare for SWOT , SPACE,BCG, IE and QSPM Matrix as appropriate. Give advantages and disadvantages of alternative strategies.

SWOT MATRIX

  STRENGTHS WEAKNESSINTERNAL

ENVIRONMENTPutting customer first, always listen to customer. Customer change is what was important to them to change company.

Each acquisition represented a small strategic step away from Cisco’s core business of routers.

A compensation system to team success No fixed ideas on new technology and rigid approach that favours one technology over another.

New technologies and, diversity product Relatively weak presence in ChinaAcquisition strategic based on a particular analysis

 Constant re-engineering of network engineers

Flexibility of company and acquisition strategic

Strong management team  Strong brand equity  Strong financial position  

OPPORTUNITIES THREATSEXTERNAL

ENVIRONMENT80 percentage market share of routers Debt finance from purchase acquisitions.Can expand market share on many yield of industry by base on its acquisitions

Economic slowdown

Acquisitions Price warsStrategic alliances Product substitutionGrowing demand for unified communication solutions

Dell

Growing enterprise security market Intense competition

Space Matrix:

  Internal Strategic Position External Strategic Position

Asi

x X

Competitive (CA) Industry (IS) -1 Product quality +6 Barrries to entry -1 Market Share +5 Growth potential -3 Brand & Image +6 Access to financing -2 Product life cycle +5 ConsolidationAverage -1.75 Average +5.5

Total Asix X score: +3.75

Asi

x Y

Financial (FS) Environmental (ES)

+4 EPS -2 Flexibility of company and acquisition strategic

+6 ROE -3 Taxation +6 Net profit -2 Demand elasticity +6 Cash flow -3 InflationAverage +5.00 Average -2.5

Total Asix Y score: +2.5

Suggested Strategy Type+2.5

-1.00 +3.75

-6.00

+1.00

+6.00

+1.00

Conservative Aggressive

CompetitiveDefensive

-6.00 +6.00

BCG Matrix:

:

Cisco company are in STARS area. Because company are get hight level at growth rate and market share

IE Matrix:

EFE Score

EFE 3.17

IFE 3.05 IFE Score

Company is considered in Growth area depend on analysis on EFE and IFE matrix

QSPM Matrix:

4

Growth

0

4

0

QSPM of CISCO SYSTEM

Key Factors

Alternative 1- Acquire Competitor

Alternative 2- Expand Internally

Weight Attractiveness Score

Total Score Weight Attractiveness

ScoreTotal Score

Strengths            Putting customer first 0.15 4 0.6 0.08 1 0.08A compensation system to team success 0.1 3 0.3 0.14 3 0.42

New technologies and, diversity product: internet hardware and software

0.1 4 0.4 0.07 3 0.21

Flexibility of company and acquisition strategic 0.08 3 0.24 0.08 4 0.32Strong management team 0.1 2 0.2 0.16 4 0.64Strong brand equity 0.05 2 0.1 0.04 0 0Strong financial position 0.1 2 0.2 0.05 3 0.15   Weaknesses            

Each acquisition represented a small strategic step away from Cisco’s core business of routers.

0.1 4 0.4 0.1 0 0

No fixed ideas on new technology and rigid approach that favours one technology over another.

0.07 4 0.28 0.12 3 0.36

Relatively weak presence in China 0.08 2 0.16 0.06 0 0Constant re-engineering of network engineers 0.07 3 0.21 0.1 4 0.4

Sum Weight 100% 100%  

Opportunities     0      80 percentage market share of routers 0.15 4 0.6 0.08 2 0.16Can expand market share on many yield of industry by base on its acquisitions

0.15 4 0.6 0.15 4 0.6

Strategic alliances 0.08 2 0.16 0.05 3 0.15Growing demand for unified communication solutions 0.04 2 0.08 0.04 0 0

Growing enterprise security market 0.12 4 0.48 0.08 1 0.08   Threats            Debt finance from purchase acquisitions. 0.08 0 0 0.15 2 0.3Economic slowdown 0.05 2 0.1 0.15 2 0.3Price wars 0.1 4 0.4 0.04 1 0.04Product substitution 0.08 3 0.24 0.15 4 0.6IBM 0.08 3 0.24 0.06 2 0.12Dell 0.07 3 0.21 0.05 2 0.1

Sum Weight 100%     100%    

Sum Total Attractitiveness Score     6.2 > 5.03

8. Analyze Your Findings.

From analysis, we can see that Cisco system occupy largest market share of industry. Considerately, Cisco dominate to all product related to internet industry, from hardware to software.

According to IE Matrix, Cisco Corporation is in growth-process and Strategic Aggressive Plant which considered as a best suggestion based on analysis of Space Matrix.

Based on all strategic analysis model, Cisco system is suggested to adopt strategic alternativeness of Acquire Competitor. It’s considered that more efficient and appropriate to current Cisco’s situation.

9. Identify Corporate Level Strategy.

Buy potential acquisitions instead begin at empty and bunch of confusion

Integration: product line integration, operation integration and risks inherent any new market.

Alliance and partnership: deals with 13 Japanese company including, NEC, Hitachi and Fujitsu,

Acquisition.

10. Identify Business Level Strategy.

Management their resources of development, such as engineer, technology capital and specially acquisition

Building transition team, appointment with employees to talk about their expectation. Acquisition employee retention.

11. Analyze Implementations.

Acquisition strategic of Cisco company: there are more than 70 acquisition.

There are 4 Step Plan:

Evaluate: assessment of compatibility of acquisition with Cisco. Persuade: design to accommodate the people first and then product. Only way to ensure success of

acquisition was to ensure that company’s staff wanted to work for Cisco. Appraise: like a trial for new company’s upper management, employees and engineer. Cisco’s

acquisition team would spend 2 weeks to determine if the potential target acquisition complied with Cisco’s guide-lines for evaluation.

Integrate: develop a Cisco’s integration team collaborate and research on employees, such as making private meeting with employees for their expectation to company, electronic mail, ….

12. Make Recommendations

They implement policy of acquisition is actually effective and efficient. But 1 thing corporation must focus on their major product, router. Don’t go away thing made them success.

Work Cited

http://www.maxi-pedia.com/quantitative+strategic+planning+matrix+QPSM

http://www.maxi-pedia.com/SPACE+matrix+model+strategic+management+method

http://www.yousigma.com/comparativeanalysis/ciscosystems.html

http://www.cisco.com/en/US/products/ps6241/index.html

http://www.cisco.com/web/about/doing_business/corporate_development/acquisitions/ac_year/

about_cisco_acquisition_years_list.html