MGMT 4650-Which of the following is/ are always true

Subject: Business    / Management    


Which of the following is/ are always true?

For a firm that is pursuing a network strategy, Delivering the most innovative and efficient technology over the competitors will ensure sustainable competitive advantages

Being a pioneer entails becoming a market-leader

Firms globally disperse their value chains for cost advantages only

Operational effectiveness only does not provide sustainable competitive advantage

a. 1 & 3

c. 1, 2, & 4

b. 4 only

d.2 & 4

Intensity of competition in an industry is usually the most powerful of the five forces. Threat of “destructive” competition in an industry is lower when

a. there are higher fixed costs

c. there are few switching costs

b. rivals compete on different dimensions

d. firms cannot exit the market easily

Southwest Airlines is known for its low fares. In fact, Southwest has lowered its cost base to the point that it is now cheaper to fly from Los Angeles to Phoenix than it is to take a bus or rent a car. The decline in Southwest’s cost structure affects the long distance bus industry (e.g. Greyhound) in terms of …..

a. higher competition within the industry

b. increasing threat of substitute

c. increasing threat of new entrant

d. increasing power of supplier

A major pharmaceutical firm recently received FDA approval and patents on a new drug designed to treat heart disease. What is the most important implication of getting this patent?

a. Increasing competition within the industry

b. increasing threat of substitute

c. increasing entry barrier and lowering threat of new entrant

d. increasing power of buyers

Firms in the industry have incurred major costs by purchasing specialized equipment that cannot be converted to other uses. What is the implication of this for the industry?

a. Powerful buyers

b. High threat of substitute products

c. High bargaining power for suppliers

d. High exit barriers

Cost reduction is crucial for the low-cost strategy. Which of the following is not a method of achieving cost reduction?

a. The experience curve.

b. Economies of scale.

c. Customization

d. Bulk buying raw materials

Which of the following would NOT be a reason for management carrying out a GDPEST analysis?

a. to consider how organizational strategy should take account of changes in the outside world

b. to determine strengths of the company

c. to determine the external factors most likely to impact upon the organization

d. to identify potential influences (e.g. trends about consumers) on the future of the organization


1. Like mission and vision statement, we can access to organizations’ strategy definitions from their websites.

2. Strategy can be about doing similar things, but doing them differently

3. Strategic Fit will always ensure competitive advantage for organizations

4. The sources of industry level differences in profitability can be explained by having something unique and valuable(added value) & Finding an integrated set of choices that distinguish you from the rivals

5. Strategy can inform us how to go beyond Operational Effectiveness

6. When organizations require control over flexibility, doing the activities outside the firm makes more sense

7. Organizations can change the industry structure

8. Organizations have no influence on the external macro factors such as political and sociocultural environment

Short-paragraph questions: Explain briefly.

1.What are the respective objectives of the following analyses?

GDPEST analysis (5PTS)

b. Value chain analysis & enhanced value-chain analysis (5 PTS)

2. Suppose your industry’s supplier attempts to forward integrate. How might this action affect your industry’s profitability and why? (5 PTS)

3. How do organizations can get ready for disruptions? What kind of capabilities they need? (5PTS)

4. What’s the relationship between organizational boundaries, location and level of value-added activities? (5PTS)

5. How are strategic positioning and trade-offs are related? (5PTS)


Strategy Document, the 1992 Version:

    Increase our market share from 40% to 50%

    Regain product-development leadership position.
    Increase sales closings by 50%.


Strategy Document, the Recent Version

Global Fleet Graphics makes premium, durable graphic-marking systems for buildings, signs, vehicles, and heavy equipment. The corporate logos and graphics we see on fleets of package delivery trucks, tractor trailers, and airplanes are typical examples.

Fleet Graphics now faces more demanding customers and more aggressive competitors than it has in previous years. Customers want design flexibility and larger graphics without higher cost. Some customers want easy-to-remove products, while others want durable ones. Bus operators want graphics that cover the windows yet still allow passengers to see out. Total sales of graphic materials have increased, but sales of traditional, painted graphics have declined due to their high cost. 3M has 40% of the market and for some years has been the technological leader.

Fleet Graphics faces three major competitors: AmeriGraphics, GraphDesign, and FleetGlobal. AmeriGraphics has begun to expand its product line by using our older technologies as the patents expire. Its global share has grown from 10% in 1982 to 16% today. GraphDesign uses direct distribution and new manufacturing capability to compete on price but has experienced quality problems. Its market share has dropped from 18% to 15% in the last ten years. The quality of FleetGlobal’s products is comparable to ours, but they sell at a lower price. Its share has grown from 24% in 1982 to 28%today.

In short, we are losing our patent advantages at the same time that we face three strong competitors that are using low-cost strategies.

Without radical changes, Fleet Graphics will not be profitable in the near future. We can expect rapid price erosion once all competitors bring very similar products to market. Given 3M’s higher overhead, we cannot compete in a price-competitive business without a technological advantage.

Our vision: Incremental product or process improvements will not solve this problem. We plan to transform the industry through several technological advances. At the heart of this transformation will be a move from analog to digital printing-and-storage technology. In addition, the quality and economics of the final product will be improved using new film and adhesive technologies. The strategy we propose draws on diverse areas of 3M.

First, we propose a quantum change in Global Fleet Graphics’ production system that will allow us to deliver products much more quickly and at a competitive price. Rather than focus on cost reduction through incremental process changes, we have tried to rethink the entire way we produce fleet graphics. We have contacted numerous R&D areas at both the corporate and divisional levels to locate appropriate and adaptable technologies. The search has resulted in a radical plan for a new, more flexible, lower cost graphics-production system.

Many graphics will be produced and stored digitally. We will convert manual, analog, silk-screen printing into digital form by scanning the art and cleaning it up on a computer screen. We will then be able to send it digitally anywhere in the world. Global Fleet Graphics will create a central repository of images that can be electronically transmitted to production facilities worldwide. IT estimates that the system will cost $3 million and be operational in 24 months.

The repository dramatically decreases product delivery time from as much as four weeks to as little as three hours. It also drastically reduces inventory.

Second, we propose development of a new generation of patented technologies and products to differentiate our offerings from competitors’. Three such products are already in the works. We are in the late stages of developing adhesives and films that can cover windows but allow people to see out. Only the final product-definition and design work still need to be done; design should be completed in five months. Manufacturing has begun to work on production facilities to ensure adequate capacity worldwide.

In addition, we are now close to answering our customers’ need for graphics that can be applied to many nontraditional surfaces (such as corrugated truck sidings) and flexing surfaces (such as European trucks with canvas sides). Films for these applications already exist in our labs.

Last but not least, new adhesives will make graphics easier to install. The Adhesives Division has a product that remains tacky for a time so that graphics can be positioned and repositioned. When the placement is correct, a second adhesive system is activated to bond the graphics in place. The repositioning capacity decreases installation time by 30%, resulting in substantial cost savings.

Third, we need to upgrade our sales and marketing staffs’ skills to match their capabilities with the technology-driven strategy. We will put substantial effort into field testing and marketing. Technical, marketing, and sales personnel will field-test the new products both domestically and overseas. Simultaneously, we will develop and test modifications to the product as well as produce sales and other supporting documentation.

Before we launch the new products, sales, marketing, and technical-service personnel will train all sales reps in how to use and sell the new technology. Training will include both technical and communication skills related to calling on top-level executives: reps will receive intensive training in how to talk those customers’ language, and they will also be able to handle technical questions on their own. Training will begin one year from now, and we expect it to take six months.

To summarize, Global Fleet Graphics has drawn on diverse technological skills at 3M to create a proposal for transforming its business. What has been a hard-copy, analog, design-materials business will become a more fully global, digital, electronic-imaging and repository business. Combining new films with new adhesives will create substantial value and reduce overall cost in both the manufacturing and application of graphics. By these means, Global Fleet Graphics will maintain and enhance its profitability and its industry leadership.

We believe that this new graphics system will radically transform the industry in a manner consistent with 3M’s overall corporate strategy—regaining technological advantage on both the product and process fronts. The competition may duplicate some parts of this strategy (for example, the electronic storage of graphic images), but that will take time. We should have an advantage for several years even in those areas. Other areas have patent protection, and our advantages can be sustained for a decade or more.


Read the 2 strategy definitions of 3M. Answer the following questions:

6. Does the new strategy document past the sniff-test? Why? (5pts)

7. What are the problems with the first strategy document? (5pts)

8. How does the new strategy document set the stage in terms of industry and competition? (5pts)

9. What’s the biggest challenge that 3M is facing? (5pts)

10. What are the capabilities that 3m is proposing to build? Which one of them can become core competencies? (10pts)