Section Exam II of strategic management

Table of Content

Question I:

The strategic management model is composed of four key elements: environmental scanning, strategy formulation, strategy implementation, and evaluation and control. Environmental scanning is vital in this model as it influences the other elements. The model offers guidelines for strategic decision-making, consisting of eight steps that aid business professionals in making strategic choices. Steps 1 to 6 focus on strategy formulation, incorporating the internal and external environmental scanning from the strategic management model. The process expands on each element and provides interconnected steps to strategically make decisions.

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The process recommends conducting a comprehensive scan and analysis of internal strategic factors, including evaluating current performance, missions, current strategy, and reviewing corporate governance. It is crucial to revise mission and objectives if there are significant changes in the earlier steps of internal and external scanning and analysis. Step 7 & 8 of the model are similar to this process.

The travel industry has encountered several major challenges in recent times, including the 911 attack, the SARS outbreak, the economic crisis, and currently, the impact of the swine flu. As a result of these events, companies within this industry have realized the significance of diversifying their markets. They comprehend that if one market, like the U.S. market, undergoes a decline due to political or social instability, they must have alternate markets to depend on for survival during times of crisis.

The model and the process are interdependent as the process relies on the model. Decision-makers must follow relevant elements of the model during each step of the implementation process.

Question II:

Globalization benefits end customers and corporations, but also presents threats and challenges. Additionally, the use of the internet empowers customers with bargaining power. Globalization expands markets, eliminates national protectionism, and alters import-export taxation. The internet introduces new methods of conducting business transactions, such as distributing products via online channels alongside traditional retail outlets. This allows customers to access products faster and provides them with more choices, increasing market competitiveness.

Due to the influences of globalization and the internet on businesses, corporations must expand beyond their national boundaries and aim to cater to local customization needs with competitive prices. In order to adapt to the changing global business environment and market trends, astute strategic planning is imperative. Corporations should be proactive and prepared for foreseeable challenges.

In Vietnam, joining the WTO has resulted in challenges and possibilities for local businesses. With no national protection, competition has intensified between foreign and Vietnamese companies, leading to an influx of foreign corporations entering Vietnam. Strategic planners must consider how Vietnamese companies can effectively compete with their global counterparts. Options include forming joint ventures to leverage combined strengths or enhancing product quality to meet international export standards. Additionally, many companies have adopted internet sales channels to directly reach customers.

Question III:

Of the seven global trends impacted by the internet, trend number 3, which states that the balance of power is now shifting to customers due to their unlimited access to internet information, is the most challenging and threatening to strategic management, particularly in the travel industry.

Before the internet was introduced in Vietnam in 1998, business transactions relied on faxes, phone calls, and in-person visits. During this time, sending a proposal had a high chance of securing a sale because it was inconvenient to make multiple overseas calls and send faxes for negotiations. The proposals did not undergo many changes as customers had limited online information access. They trusted travel agents to provide quality itineraries.

However, with the introduction of the internet in Vietnam, this dynamic has changed. Customers now have access to a large amount of information and a wide range of products through different travel agents’ websites.

Customers are currently demanding customized travel itineraries and obtaining quotes from various travel agents for comparison. They can opt for the most affordable option or one that offers exceptional pre-sale service. Thanks to the internet, certain customers can even approximate the cost of a package before receiving quotes from agents. Moreover, the internet presents a major obstacle for travel agents as customers can effortlessly book individual services such as air tickets, car rentals, tour guides, and hotels directly with providers without involving agents.

Strategic management must acknowledge, adapt to, and overcome threats and challenges in order to propel the corporation forward.

Question IV:

Financial stability refers to the present state of a business organization, representing one of its strengths. To ensure a secure and continuous financial well-being and progression, conducting long-term forecasting and planning is crucial.

Forecasting is crucial for environmental scanning as it enables the prediction of future situations. By considering these forecasts, businesses can develop long-term strategic plans. A compelling argument for the board of directors is that although the company’s finances are currently stable, it cannot sustain this stability without forecasting and planning. The rapidly changing business environment poses threats and challenges such as new competitors, substitute products, intense industry competition, and higher client demands. Creating action plans through long-term forecasting would aid the company’s future growth.

Financial condition is an internal factor that is controllable, while external factors are beyond our control and require us to be prepared for change. If a company is struggling financially, its long-term forecast should focus on increasing revenue and managing cash inflows and outflows to regain control. Having financial stability is advantageous, and businesses should capitalize on this advantage for the future growth of the company. For instance, in Vietnam, our business operates as a travel agent. With Vietnam’s admission to the World Trade Association, foreign companies have entered the market, posing significant threats and competition to local companies. Regardless of the financial status, the long-term forecast for our business situation should consider this factor.

Long-term forecasting and planning should always be a priority for CEOs in order to ensure the sustainable growth of a business.

Question V:

The time I spent working for a foreign travel agency abroad for 7 years enabled me to gain knowledge and skills in sales, operations, and product development. The company I worked for targeted high-end markets, serving western expatriates and affluent locals. Because our clientele was exclusive, their expectations for our services were extremely high. As a team of service-oriented individuals, we had a strong understanding of our clients’ needs and expectations, surpassing those of our competitors.

As the CEO of a Vietnamese travel agency, I have witnessed the country’s rapid economic growth and increasing travel demands. Numerous travel companies are targeting the large local Vietnamese market by providing conventional tour packages. Nevertheless, I believe that there are several crucial steps that top management should ponder:

With the recent rise in GDP, there will be a greater number of individuals, particularly from the elite circle, venturing overseas. To better cater to this select group, we must create unique itineraries that differentiate us from other companies catering to the larger market. These exclusive itineraries are specifically tailored for affluent families, acknowledging their distinct spending habits in contrast to the general population.

Conduct training for both the sales team and operations team, with a focus on the high-sides and sales-pitch of the products. The training should enable the operations team to outsource and provide services that match the value customers pay for, emphasizing high-quality services.

Marketing team will be responsible for advertising and distribution channels and will monitor market reactions.

Based on the analysis of strategic environmental factors, these steps take into account economic forces (such as an increase in GDP leading to a rise in travel demand, creating an opportunity), the task environment (the absence of similar products from other competitors in the niche market), and internal factors like human resources and marketing.

Question VI:

The organization’s internal strength determines whether it should produce low-priced or high-priced products. Several internal strategic factors must be assessed to make this decision.

Low-priced products can be seen as those that can be produced on a large scale for a low cost and meet high demand. In contrast, high-priced products require more advanced technology, skilled labor, and are produced on a smaller scale due to lower market demand. These high-priced products cater to a niche market. To determine which products to pursue, an analysis of organizational resources and other functional resources such as sales and marketing and operations is necessary. Human assets within the organization play a crucial role in determining what type of production and products to pursue. Questions like “Do our employees possess the ability to utilize advanced technologies to create unique products? Are they skilled enough?” must be answered.

Other concerns regarding physical assets include determining if the production lines and facilities are capable of producing high-priced products or if they are only suited for large-scale production of low-priced products. In terms of sales and marketing resources, it is important to assess whether salespeople possess the necessary knowledge about our unique products and if our brand name is well-known. Additionally, we must consider how to successfully enter niche markets with our distinctive products. Operational considerations include evaluating production costs and determining whether our existing manufacturing activities are appropriate for mass production or customization. Addressing these questions will provide insight into the organization’s strengths and weaknesses.

For organizations offering products or services like travel services, internal factors such as product development (creating unique itineraries for a small number of high-end customers with high profits versus standard itineraries for the masses with minimal profits per person), sales and marketing activities, and office location are crucial for the strategic strategy.

Question VII:

The TOWS matrix is introduced to assist in strategy formulation, in addition to the SWOT analysis which has received some criticisms.

The TOWS approach aims to align external factors (opportunities and threats) with internal factors (strengths and weaknesses) in order to create four distinct sets of alternative strategies. These sets, known as SO, ST, WO, and WT strategies, are developed by analyzing the two corresponding factors (e.g., SO strategy considers strengths and opportunities) and generating strategies that maximize or minimize each factor (with strengths and opportunities maximized while weaknesses and threats minimized or avoided), potentially resulting in the loss of core competencies. For instance, WT strategies involve brainstorming strategies that minimize weaknesses and avoid threats when implemented. The TOWS matrix can be applied in a corporation or within individual business units to provide clear and easily implementable strategies.

The TOWS matrix can be conducted easily as it systematically scans both participating factors and allows for the option to focus on either factor depending on which factors are prioritized.

The WT is expected to be more viable in Vietnam and China because of several managerial weaknesses (less experienced compared to the west) and unstable government regulations. In practice, some companies have struggled to survive or have looked for joint ventures with foreign firms to improve their capabilities. Another option is hiring foreign CEOs to lead and train the team.

Question VIII:

The BCG growth-share matrix was developed by Boston Consulting Group (BCG) to assess businesses or products according to their sales growth rate and market share, indicating their competitive position in relation to the leading competitor.

The BCG matrix is based on two assumptions. The first assumption suggests that a business or product can generate more cash and profit by gaining a larger market share. This is because as the market share increases, the production of the product or service also increases to meet market demands. This increase in production volume allows the business to take advantage of the experience curve, which reduces cost per unit and provides a cost advantage over competitors.

The second assumption focuses on the relationship between cash generation and consumption. To gain market share, a business or product must invest more cash in production and marketing efforts to position itself as a Star with high sales and market share.

The BCG assumptions remain applicable to our product portfolio analysis. We regularly employ the BCG matrix to evaluate our various products and their life cycles. Previously, our tour itineraries to Indochina destinations served as popular products and generated significant revenue for the company. We were pioneers and held a market-leading position in the region. However, traveling to Indochina has become more convenient, allowing travelers to easily backpack. As a result, sales of these products have declined, prompting us to seek investment in more appealing alternatives.

Question IX:

There is a debate surrounding whether to outsource or produce in-house, as some companies have faced more drawbacks than desired benefits from outsourcing.

Outsourcing offers cost advantages to companies as it provides an alternative way to lower the total production cost by not producing in-house items that do not contribute significantly to the product’s added value. By outsourcing such items, companies can benefit from higher quality and efficiency due to the specialization of external suppliers. Furthermore, outsourcing small parts can lead to a shortened completion process for products, thereby gaining a time advantage.

Outsourcing activities have several disadvantages. Firstly, there may be delays in the delivery of outsourced tasks, which can negatively affect the final product. Furthermore, entering into long-term contracts with external suppliers or distributors can decrease competitiveness when compared to other market players. This is because their business is guaranteed for the duration of the contract. Lastly, outsourcing can impede firms from acquiring new skills and lead to the loss of core competencies.

When making a choice between outsourcing and in-house production, it is crucial to consider the advantages and disadvantages mentioned earlier. If particular items are essential to the overall product and contribute significantly to its value, it is advisable to produce them internally. Another useful strategy is to assess the activities based on their total added value and competitive advantage. For example, at our small travel agency, we opt for outsourcing IT services since IT serves as a support activity that adds minimal value to our products.

Question X:

The strategic choice process is the final step in formulating strategies. It includes discussing, assessing, and choosing the most effective strategies. If a strategy receives agreement from all participants involved in the process, it signifies that it is an ideal strategy and can be implemented. This strategy garners support from individuals at all levels of the organization. However, the drawback of consensus is that it does not identify the weaknesses of the strategies. Therefore, consensus is not a flawless approach, leading to two methods for bypassing consensus: devil’s advocate and dialectical inquiry.

Devil’s advocate: Individuals or groups identify weak points and problems without offering any suggestions.

Dialectical inquiry is a process that involves engaging in debates and synthesizing the pros and cons from opposing viewpoints. This process aims to reach a synthesis that combines elements from both the initial thesis and the opposing antithesis. Through dialectical inquiry, suggestions and solutions are compromised for the purpose of creating a new strategy that can potentially be implemented. However, it is important to note that this technique requires extensive arguments and debates, making it time-consuming to prepare proposals.

Strategic managers utilize “programmed conflict” during the valuation process to solicit diverse perspectives and encourage criticism of alternative strategies for improved feasibility.

Considering the two techniques mentioned earlier, I personally favor the use of dialectical inquiry. This is because we typically engage in discussions about the advantages and disadvantages before expanding our travel services to different groups of clients such as students, pensioners, and low-income workers. During these discussions, we gather insights from knowledgeable individuals within the company and engage in debates regarding the weaknesses. Ultimately, we make decisions on the most effective alternative strategies to be implemented.


The source of the text is “Strategic Management and Business Policy (11th ed.)” by Wheelen, T.L. and Hunger, J.D. (2008) from Pearson Education.

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