Strategy Formulation & Development Flashcards

When formulating a corporate-level strategy, which of the following best represents a 'related diversification' approach?

Answer: A pharmaceutical company acquiring a medical device manufacturer to leverage healthcare expertise

Related diversification involves expanding into businesses that share strategic fit with core operations, allowing the company to leverage existing competencies and resources.

The concept of 'strategic fit' in merger and acquisition strategy refers to:

Answer: The degree to which combining two entities creates synergies that enhance competitive advantage

Strategic fit measures the degree to which an acquisition creates value through synergies in resources, capabilities, markets, or technologies that strengthen competitive position.

Which planning horizon is most associated with operational planning versus strategic planning?

Answer: Strategic: 3–5 years or longer; Operational: 1 year or less

Strategic planning typically spans 3–5 years or longer with a focus on direction-setting, while operational planning addresses near-term execution within a 1-year horizon.

A company establishes a highly aspirational long-term goal that stretches the organization beyond its current capabilities. This concept is known as:

Answer: Strategic intent

Strategic intent, introduced by Hamel and Prahalad, describes an ambitious long-term desired leadership position that directs resource allocation and capability development over time.

In scenario planning, what is the primary purpose of developing multiple future scenarios?

Answer: To test strategic robustness against a range of possible futures and reduce uncertainty

Scenario planning helps organizations test strategies against multiple plausible futures, building resilience and flexibility rather than relying on a single predicted outcome.

Which of the following best describes a 'first-mover advantage' in strategic planning?

Answer: Competitive benefits accrued by being the first to establish a significant position in a new market

First-mover advantage refers to the competitive edge a company gains by being first to enter a new market, potentially securing brand recognition, customer loyalty, and switching costs.

A strategic planning team is evaluating whether to vertically integrate a key supplier. Which factor would most strongly support this decision?

Answer: The supplier controls a critical input where disruption would severely harm competitive position

Vertical integration is most justified when a critical supplier controls scarce inputs where supply disruption would significantly harm operations and competitive advantage.