BMO Strategic Planning 2 — Questions and Answers
Question 1: A company discovers a major competitor has entered its core market with a lower-cost product. Which strategic response is most aligned with Porter's Generic Strategies?
- Immediately match the competitor's price
- Differentiate by enhancing product quality and brand value (Correct answer)
- Exit the market and diversify into unrelated industries
- File a patent lawsuit to delay the competitor
Correct answer: Differentiate by enhancing product quality and brand value
Porter's differentiation strategy allows a firm to compete on value rather than price, reducing direct head-to-head cost competition.
Question 2: In the context of strategic planning, what does a 'Blue Ocean Strategy' primarily seek to do?
- Dominate an existing competitive market through cost leadership
- Create uncontested market space by making competition irrelevant (Correct answer)
- Acquire competitors to consolidate market share
- Focus exclusively on high-margin premium customers
Correct answer: Create uncontested market space by making competition irrelevant
Blue Ocean Strategy, developed by Kim and Mauborgne, focuses on creating new demand in uncontested market space rather than competing in saturated markets.
Question 3: Which analytical tool helps an organization identify the forces that shape competitive intensity within an industry?
- Balanced Scorecard
- Porter's Five Forces (Correct answer)
- BCG Growth-Share Matrix
- McKinsey 7-S Framework
Correct answer: Porter's Five Forces
Porter's Five Forces analyzes competitive rivalry, supplier power, buyer power, threat of substitutes, and threat of new entrants to assess industry attractiveness.
Question 4: An organization's strategy states it will grow by acquiring companies in related industries. This is best described as:
- Horizontal diversification
- Concentric (related) diversification (Correct answer)
- Conglomerate diversification
- Market penetration
Correct answer: Concentric (related) diversification
Concentric or related diversification involves expanding into industries that share technological, marketing, or operational synergies with the existing business.
Question 5: The concept of 'strategic fit' in planning refers to:
- Matching employee skills to job descriptions
- Aligning internal capabilities with external market opportunities (Correct answer)
- Ensuring the IT system supports daily operations
- Setting financial targets that match industry averages
Correct answer: Aligning internal capabilities with external market opportunities
Strategic fit measures how well an organization's internal resources and competencies align with the demands and opportunities in its external environment.
Question 6: A firm's 'core competency,' as defined by Prahalad and Hamel, is best characterized as:
- A product line that generates the most revenue
- A collective learning capability that provides sustainable competitive advantage (Correct answer)
- The department with the highest employee satisfaction scores
- Patents and intellectual property holdings
Correct answer: A collective learning capability that provides sustainable competitive advantage
Prahalad and Hamel defined core competencies as the collective knowledge and skills embedded in an organization that competitors cannot easily replicate.
Question 7: When conducting a stakeholder analysis during strategic planning, which group typically receives the MOST strategic attention?
- Stakeholders with low power and low interest
- Stakeholders with high power and high interest (Correct answer)
- Stakeholders with high interest but low power
- Stakeholders with low interest but high power
Correct answer: Stakeholders with high power and high interest
Stakeholders with both high power and high interest are classified as 'key players' and require active management and close engagement throughout the strategy process.
BMO Strategic Planning 2
A company discovers a major competitor has entered its core market with a lower-cost product.
Which strategic response is most aligned with Porter's Generic Strategies?