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MIDTERM EXAMINATION

Bagobe, Cherry Mae

TTh/2:30 4:00

1. The strategic management process include strategy analysis, strategy formulation and
strategy implementation. Discuss each strategy.
Strategy Analysis This is the starting point of the strategic management process. The
company identifies its vision and mission and assess its current situation in the market. The
environment of the organization must be analyze or evaluate both external and internal factors to
determine development and forecasts of factors that will influence organizational success. It may
be refers to possession and utilization of information about patterns, trends and relationships
within an organizations internal and external environment. This includes employee interaction
with other employees, employee interaction with management, manager interaction with other
managers, etc. Analysis of exploring macro-economic, social, government, legal, technological
and international factors that may influence the environment. It also identify the strengths,
weaknesses, threats, and opportunities existing in the environment. While strategy formulation,
an organization must take advantage of the opportunities and minimize the threats. It is
evaluating an organizations external and internal environments and analyzing its competitors.
Strategy Formulation Successful analysis is followed by creation of long-term
objectives. Formulating strategies involves determining appropriate courses of action for
achieving objectives in the long run. This part deals primarily with the strategy formulation
process. The process of strategy formulation begins with analysis with the principal factors in a
firm's internal and external environment and ends with functional strategies designed, on how to
compete in a given business to attain competitive advantage, how they create more value in
business world, the best method in developing its competitive plan of action and formulating this
to effectivity of entrepreneurial initiatives that could improve the companys competitive
position..
Strategy Implementation - No matter how creative the formulated strategy, the
organization will not benefit if it is incorrectly implemented. Strategy implementation is the
translation of chosen strategy into organizational action so as to achieve strategic goals and
objectives. Strategy implementation is the manner in which an organization should develop,
utilize, and unite organizational structure, control systems, and culture to follow strategies that
lead to competitive advantage and a better performance. Organizational structure allocates
special value developing tasks and roles to the employees but organizational structure is not
sufficient in itself to motivate the employees there would be motivational incentives.
2. Discuss some of the limitations of forecasting.
The limitations of forecasting is that managers may view uncertainty as black and white
and ignore important gray area. The problem is that underestimating uncertainty can lead
strategies that neither defend against threats nor take advantage of the opportunities. It is not
possible to accurately forecast what the future will be with complete certainty. Regardless of the
methods that we use there will always be an element of uncertainty until the forecast horizon has
come to pass.Because of the qualitative nature of forecasting, a business can come up with
different scenarios depending upon the interpretation of the data. Making a decision on a bad
forecast can result in financial ruin for the organization, so an organization should never base

decisions solely on a forecast.There will always be blind spots in forecasts. We cannot, for
example, forecast completely new technologies for which there are no existing paradigms.
Providing forecasts to policy-makers will help them formulate social policy. The new social
policy, in turn, will affect the future, thus changing the accuracy of the forecast.
3. Discuss the six segments of the general environment. Provide examples of how might be
they related.
Demographic the most easy to understand and quantifiable elements of the general
environment because this is a genetic and observable characteristics of the population.
Sociocultural the values, beliefs and lifestyle of a society.
Political/ Legal - influence environmental regulations with which industries must comply.
Government Legislations can have significant impact on the governance corporations and can
affect the firms high-tech sector of the economy.
Technological development in technologies lead to new product and services and how they
are produced and delivered to end user. Innovations can create entirely new industries and alter
the boundaries of existing industries.
Economic characteristics of the economy including national income and monetary
conditions. Economy affects all industries from the supplier of raw materials to manufacturer of
goods and services as well as the organizations.
Global influences from other countries for more firms are expanding operations and market
reach beyond the borders of their country. This provide opportunities to access larger potential
markets and a broad base of production factors.
The global segment like global trends and trade agreements among regional blocs. The
political segment primarily covers governmental actions, such as taxation, trading policy and
general government stability. The economic segment deals with macroeconomic issues,
including inflation, interest and unemployment rates, as well as the overall health of the
economy. The social segment is mostly concerned with population demographics, which
involves watching cultural as well as sociological changes over the short and long term. The
technological segment includes any technological changes in the market, such as the rate of the
development of new products, and advances in automation or service industry delivery speeds.
The demographic segment includes the aging populations, changes in ethnic compositions, and
disparities in income level.
Through analysis of the six segments, can have a dramatic effect on your firm. A company
can minimize the damage resulting from negative changes or take advantage of those changes
that prove useful or neutral impact or none at all on others.
4. Discuss and provide examples of factors that would lead to greater buyer power.
The buyer group is concentrated, or purchases large volumes relative to the sellers
sales.
When buyers are fewer in number and more concentrated, they have a higher
power over the producer. The producers sales revenue will be dependent on these few
customers and they will not be able to ignore any demands. Conversely, if the buyers are
widespread, then their business is also smaller and they are easy to ignore for a producer.
Ex. Steel Manufacturing; DOD purchases from defense contractors
Products purchased from the industry are standard or undifferentiated
Alternative suppliers are easy to find and competitors are played against each other.
If the producer sells a standard or undifferentiated product, then they will usually have the

potential threat of a buyer switching producers. If there are many producers supplying the
same type of product, a buyer will have the option of exploring possibilities.
Ex. identical products (such as gasoline, milk, packaged ice)
Few switching costs exist (little penalty for moving to another supplier)
If switching costs are low for a buyer, then any dissatisfaction with a producer or a
product will lead to loss of business as the buyer will be able to find an alternate with
minimum hassle and inconvenience.
Ex. cellular phone carriers
Profits earned are low (greater incentive to reduce purchasing costs)
Low profits create incentives to lower purchasing cost.
Ex. Farmers; Parking lot attendants; Laborers
Buyers pose a significant threat of backward integration
Buyers demand concessions, and may engage in tapered integration (producing
some components in-house and purchasing the rest from outside suppliers).
Ex. Large auto manufacturers purchases of tires; if a bakery business bought a
wheat processor and a wheat farm.
The industrys product is not important to the quality of the buyers products or
services
When the quality of the buyers products is not affected by the industrys product,
the buyer is more price sensitive.

5. Address how internet and digital technologies affect Porters five factors.
The internet and technologies have significant impact in the industry. Through the changes
in technologies it affect the way how business interact with the others and to its customers.
In the emergence and development of technology the business to internet basis, the five
forces, as described by Porter are significantly affected. The bargaining power of both
suppliers and customers increase as the information accessibility is increased and the
information gap is narrowed. This leads to lower bargaining power for the firm, and may
transcend into lower profits. It extends beyond internet based advertising and
communications to include technologies, supporting numerous marketing functions such
as customer relationship management, sales activity, and customer support. Through
internet and digital technologies, business models will enable easier entry into the industry,
as now, companies may only look to perform very few activities in-house, and outsource
the rest to other firms in the value chain. This decreases the management complication
among new entrants, and thus the threat of new entrants may go up.
6. SWOT analysis is a technique to analyze internal and external environment of a
firm. What are its advantages and disadvantages?
Advantages
Knowing one's strengths helps a person apply focus on strong points that can accentuate a
business.
Knowing weaknesses allows knowledge into what needs to be improved on for bettering
efficiency and the business.
Using opportunities wisely leads to ways to better a business if they're put to proper use.
It's best to always try to advance one's resources and stay on top of the game so there's no
falling behind.

Knowing one's treats is important because it keeps people one step ahead and offers time
to think of ways to lessen the impact of the threat on a business.
Disadvantages
Focusing too much on strengths can lead to ignorance of one's flaws and can eventually
lead to the weakening of one's business.
Focusing too much on weaknesses can lead to the neglecting of strengths or cause a
person too look down on their business. Be positive!
Missing opportunities is basically a missed chance to possibly get a business known. P.S.
Not all opportunities can help. You have to think if you'll benefit positively in the long
run.
The basic idea with threats is that if you don't know them harm will come if not sooner,
then later.
Overemphasizes a single dimension of strategy.

7. What are the advantages and disadvantages of conducting financial ratio analysis
of a firm?
Advantages
It is an important and useful tool to determine the efficiency with which working capital
is being managed in a business organization.
It is a health test for a business firm in that it can gauge whether the firm is financially
healthy or not.
It aids the management of business concern in evaluating its financial position and
performance efficiency.
It clearly shows the trend of changes in the market position (upward, downward or static),
as it covers a number of previous accounting (financial) periods.
The progress or downfall of a firm is clearly indicated by this analysis.
It assists in preparing financial estimates for the future (financial forecasting).
It facilitates the task of managerial control to a great extent.
It helps the credit suppliers and investors in deciding upon a business firm as a potential
investment outlet or desirable debtor.
Ideal or Standard ratios can be established which can be used as reference points of
comparison for a firms progress over a period of time.
It communicates important information with relation to financial strength, earning
capacity, debt (borrowing) capacity, liquidity position, capacity to meet fixed
commitments, solvency, capital gearing, working capital management, future prospects
etc. of a business concern.
This analysis is also useful for bench marking purpose- to compare the working result
and efficiency of performance of a business enterprise with that of other firms engaged in
the same industry (inter-firm comparison).
It helps the management to discharge their basic functions of planning, coordinating,
controlling etc.
It serves as an instrument for testing management efficiency too.
It acts as a useful tool for deciding on certain policy matters.
Disadvantages

Accounting ratios calculated based on ratio analysis will be correct only if the accounting
data on which they are based are correct.
It is only an analysis of past financial data.
In certain cases ratio analysis might prove to be misleading with regard to profits.
Continuous fluctuation in price levels ( or, purchasing power of money) seriously affect
the validity or comparison of accounting ratios calculated for different accounting periods
and make such comparisons very difficult.
Comparisons become difficult also on account of difference in the definition of several
financial (accounting) terms like gross profit, operating profit, net profit etc.
There is lot of diversity in practice as regards to the measurement of ratios.
Different firms use different accounting methods and the validity of comparison is
severely affected by window dressing in the basic financial statements.
A single ratio will not be able to convey much information.
This analysis only gives part of the total information required for proper decisionmaking.
This should not be taken as a substitute for sound judgement.
It should not be overlooked that business problems cannot be solved mechanically
through ratio analysis or other types of financial analysis.