CS Strategic Planning & Development 3 — Questions and Answers
Question 1: In Porter's Five Forces model, the threat of substitutes is highest when:
- Switching costs are high and buyer propensity to substitute is low
- Substitute products offer lower price-performance than industry products
- Buyers face minimal switching costs and substitutes perform comparably (Correct answer)
- Industry concentration is high among existing competitors
Correct answer: Buyers face minimal switching costs and substitutes perform comparably
Threat of substitutes intensifies when buyers can easily switch to alternatives that deliver equivalent or superior value at comparable or lower cost.
Question 2: A balanced scorecard approach to strategy implementation measures performance across four perspectives. Which perspective directly links customer satisfaction to financial outcomes?
- Learning and growth
- Internal business processes
- Customer perspective (Correct answer)
- Financial perspective
Correct answer: Customer perspective
The customer perspective captures how the organization is perceived by customers and links their satisfaction metrics to financial results.
Question 3: When applying the BCG Growth-Share Matrix, a business unit with high relative market share in a low-growth industry is classified as a:
- Star
- Question mark
- Cash cow (Correct answer)
- Dog
Correct answer: Cash cow
Cash cows have dominant market positions in mature, slow-growing industries and generate strong cash flows with limited reinvestment needed.
Question 4: A company's strategy map is primarily used to:
- Document the geographic territories the firm will enter
- Visualize cause-and-effect relationships between strategic objectives (Correct answer)
- Assign budget allocations to individual business units
- Outline the organizational hierarchy for strategy execution
Correct answer: Visualize cause-and-effect relationships between strategic objectives
A strategy map illustrates how value is created by showing the causal links between objectives across the four BSC perspectives.
Question 5: Which of the following best describes a 'blue ocean strategy'?
- Competing aggressively in a well-defined, existing market
- Creating uncontested market space by making competition irrelevant (Correct answer)
- Focusing on cost leadership within a highly competitive industry
- Differentiating products through incremental innovation
Correct answer: Creating uncontested market space by making competition irrelevant
Blue ocean strategy involves creating new demand in uncontested market space rather than competing in overcrowded existing markets.
Question 6: In strategic planning, 'strategic drift' refers to:
- Deliberate repositioning to align with market shifts
- A planned pivot following a disruptive acquisition
- Gradual strategic decay when incremental changes fail to keep pace with environmental change (Correct answer)
- Rapid strategic pivoting in response to a crisis
Correct answer: Gradual strategic decay when incremental changes fail to keep pace with environmental change
Strategic drift occurs when an organization's strategy gradually becomes misaligned with its changing environment through accumulated small, insufficient adjustments.
Question 7: A strategist evaluating vertical integration weighs 'make vs. buy' decisions. Which condition most strongly favors making (vertical integration) over buying?
- The activity is non-core and widely available from competitive suppliers
- Transaction costs are low and the capability is a commodity
- The capability is a source of differentiation and supply market is unreliable (Correct answer)
- The firm has limited capital and management bandwidth
Correct answer: The capability is a source of differentiation and supply market is unreliable
Vertical integration is most justified when internalizing a capability protects a key differentiator and reduces dependency on an unreliable supply market.
CS Strategic Planning & Development 3
In Porter's Five Forces model, the threat of substitutes is highest when: