BSE Bachelor of Science in Engineering Management: Strategic Decision Making 3 — Questions and Answers
Question 1: Which strategic analysis tool evaluates a firm's internal capabilities and external environment by categorizing factors as Strengths, Weaknesses, Opportunities, and Threats?
- Porter's Five Forces
- PESTLE analysis
- SWOT analysis (Correct answer)
- BCG Growth-Share Matrix
Correct answer: SWOT analysis
SWOT analysis organizes internal factors (Strengths, Weaknesses) and external factors (Opportunities, Threats) to inform strategic decision making.
Question 2: An engineering firm faces a 'wicked problem'—one that is complex, interdependent, and has no single correct solution. The BEST strategic approach is to:
- Apply standard linear optimization techniques to find a global optimum
- Use iterative, adaptive approaches with stakeholder collaboration (Correct answer)
- Delay decisions until complete information is available
- Delegate the problem entirely to a single technical expert
Correct answer: Use iterative, adaptive approaches with stakeholder collaboration
Wicked problems require iterative, collaborative approaches because they are ill-defined, interdependent, and evolve as stakeholders and conditions change.
Question 3: In the context of strategic decision making, 'scenario planning' is best described as:
- Projecting a single most-likely future state using regression analysis
- Developing multiple plausible future states to test strategy robustness (Correct answer)
- Setting fixed performance targets for the next fiscal year
- Optimizing resource allocation across existing business units
Correct answer: Developing multiple plausible future states to test strategy robustness
Scenario planning constructs multiple distinct future narratives to evaluate how well strategies perform across a range of possible conditions, improving strategic resilience.
Question 4: A manager applies a maximin decision rule to a payoff table under uncertainty. This means the manager will:
- Choose the alternative with the highest maximum possible payoff
- Choose the alternative with the best worst-case payoff (Correct answer)
- Average all payoffs and select the highest mean
- Select the alternative that minimizes the maximum regret
Correct answer: Choose the alternative with the best worst-case payoff
The maximin rule (maximize the minimum) is a conservative strategy that selects the option whose worst possible outcome is better than the worst outcomes of all alternatives.
Question 5: When engineering managers use 'real options analysis' for capital investment decisions, the key advantage over standard NPV is:
- It eliminates the need to estimate future cash flows
- It explicitly values managerial flexibility to adapt decisions as uncertainty resolves (Correct answer)
- It guarantees a higher return on investment than NPV methods
- It removes risk from the investment analysis entirely
Correct answer: It explicitly values managerial flexibility to adapt decisions as uncertainty resolves
Real options analysis captures the value of managerial flexibility—such as options to expand, defer, or abandon a project—which static NPV calculations ignore.
Question 6: The 'garbage can model' of organizational decision making suggests that decisions result from:
- A systematic rational process following defined protocols
- Random collisions among problems, solutions, participants, and choice opportunities (Correct answer)
- Top-down directives from senior engineering leadership
- Consensus achieved through structured group deliberation
Correct answer: Random collisions among problems, solutions, participants, and choice opportunities
The garbage can model (Cohen, March, Olsen) describes organized anarchies where decisions emerge from the simultaneous availability of problems, solutions, participants, and opportunities rather than a rational process.
Question 7: In portfolio management for engineering projects, the primary purpose of the efficient frontier is to:
- Identify projects that maximize budget utilization regardless of risk
- Show the set of portfolios that offer the highest return for a given level of risk (Correct answer)
- Rank all projects solely by their internal rate of return
- Eliminate all projects with negative NPV from consideration
Correct answer: Show the set of portfolios that offer the highest return for a given level of risk
The efficient frontier represents the optimal set of project portfolios that deliver the maximum expected return for each level of risk, guiding resource allocation decisions.
BSE Bachelor of Science in Engineering Management: Strategic Decision Making 3
Which strategic analysis tool evaluates a firm's internal capabilities and external environment by categorizing factors as Strengths, Weaknesses, Opportunities, and Threats?