Question 1

Why is environmental uncertainty an important concept in strategic management?

Accepted Answer

A key part of strategic management, environmental scanning is a tool used to help avoid strategic surprise and cope with an uncertain environment. If the environment was certain and predictable, environmental scanning would be a rather easy chore. Simple extrapolation would be the only type of forecasting needed. In a complex and changing world, however, those corporations that engage in environmental scanning and strategic planning tend to deal better with environmental uncertainty and to be more successful than their nonplanning brethren.

Question 2

If most long-term forecasts are usually incorrect, why bother doing them?

Accepted Answer

This question is based on the assumption that most long-term forecasts are usually incorrect. One must keep in mind that some things are easier to forecast than others. For example, a forecasted drop in the demand for tricycles in three years will very likely occur if it is based on a strong drop in the present birth rate. Nevertheless, most people would probably agree that forecasts going out five to ten years have a low probability of becoming reality in today's dynamic world. The text takes the position that even if predictions prove to be wrong, the very act of scanning and forecasting the environment helps managers take a broader perspective. It also forces managers to take an active rather than a passive orientation toward its external environment. It encourages calculated risks over WAHs (wild a** hunches) and is more likely to result in strategic management instead of reactive management.

Question 3

What can a corporation do to ensure that information about strategic environmental factors gets the attention of strategy makers?

Accepted Answer

This is a very real problem in most large corporations given the usual obstacles to good communication. The very people who are in the best positions to gather this data are often the ones who either fail to pass it on because it's too much of a chore, or they fail to notice it because no one told them how important certain developments are to top management. Because proper information dissemination is an important part of environmental scanning, corporations attempt to schedule a series of analytical reports for top management's information. Some of these reports are depicted in Figure 4.1 in the chapter. The purchasing department, for example, might be tasked with the job of compiling a quarterly analysis of the availability and reliability of present and future suppliers. The market research department might prepare analyses of present and future customers for certain products and services with special attention to demographic shifts. Each report would need to conclude with a list of strategic factors to monitor in the coming months or years. Other approaches are, of course, possible to get needed information to the attention of strategy makers. It might be useful to generate some of these ideas in class.

Question 4

Explain why environmental analysis is considered to be an important activity for the strategy formulation process of an organization.

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Question 5

How would you determine the level of competitive intensity in an industry?

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Question 6

The effects of climate change on companies can be grouped into six categories of risk. Use any two of these to explain the impact upon the resort hotel industry.

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Question 7

How does STEEP analysis aid in the development of the strategy in a company?

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Question 8

Is Pepsi Cola a substitute for Coca Cola?

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Question 9

How is Porter's five force framework related to the identification of key success factors?

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Quiz 4: Diabetes and Other Carbohydrate Disorders