Arab Academy for Science, Technology & Maritime Transport

College of Management & Technology

Coventry University Program

Seventh Week assessment – Spring 2020-2021

Course Title: Strategic Management Course Code: MGT421E

Exam Duration : 90 minutes Lecturer : Dr. Eman Mohamed Abd-El-Salam
Grades : 30 Marks

Student’s Name: Dina Ahmed Fawzy Alfawal

Registration Number : 17100450

Question1: Choose the right answer for the following questions : (ILOS 1.1) (5 marks)
(10 minutes)

1. _______ is a company's game plan.

a. Strategy
b. Pricing policy
c. Value statement
d. Long-term objective

2. Strategic issues require which level of management decisions? 

a. Operative
b. Top
c. Front-line
d. Middle 

3. The mission: 
a. Describes the firm's product
b. Sets policy
c. Identifies stakeholders
d. Creates the board of directors

4. Which of the following goals is taken for granted to such an extent that it is neglected as a
principal criterion in strategic decision-making?
a. Maturity
b. Ethics
c. Survival
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 d. Competitiveness

5. Profitability is the ______ goal of a business.

a. Mainstay
b. Least important
c. Non economic
d. Subjective

6. The ______ environment compromises factors that originate beyond and usually
irrespective of, any single firm's operating situation.
a. Remote
b. Industry
c. Operating
d. Internal

7. Which of these is a determinant of entry, according to Porter?

a. Presence of substitute input Industry
b. Ability to backward integrate
c. Exit barriers
d. Economies of scale

8. One of the limitations of the SWOT analysis is that it can ______ internal strengths and
______ external threats. 
a. Overemphasize; downplay
b. Underemphasize; downplay
c. Overemphasize; enhance
d. Underemphasize; enhance

9. Which of the following is an example of a primary activity in the typical firm? 

a. Human resources management 
b. Research, technology and systems development
c. General administration
d. Logistics

10. A set of ideas on organizational control based on the belief that the separation of the
ownership from management creates the potential for the wishes of owners to be ignored
refers to the 
a. Agency theory
b. Adverse selection principle
c. Moral hazard problem

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 d. Self-concept

Question number answer

1 a
2 b
3 a
4 c
5 a
6 a
7 d
8 a
9 d
10 a

Question 2: State whether the following statements are true or false, correct
the false statements ONLY: (ILOs 1.2) (5 Marks) (10 minutes)

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 1. According to Mintzberg’s formality forces, very large firms typically use the entrepreneurial
mode of strategic management.
False as large firms use the planning mode of strategic management
2. A capability or skill that a firm emphasizes and excels in doing while in pursuit of its overall mission is
Capability strength
False because a capability or a skill that a firm emphasizes and excels in doing while in pursuit
of its overall mission is called the core competency

3. Description of the company's product, market and technological areas of emphasis is contained
in the company’s vision.
False because the product, market and technological areas are contained in the company’s
mission

4. VCA disaggregates the business into a set of activities that occur within the industry.
……………………
…………………………………………………………………………………………………true
……………………………………………………………………………

5. is an example of support activities in the typical firm.

…false ……

6. The learning curve effect is an example of economies of scale barrier to entry

……………………
………………………………………………………………………………………………True
………………………………………………………………………………

7. A supplier group is powerful if its market is unique

……………
…………………………………………………………………………………………………true
……………………………………………………………………………………

8. Exit barriers represent a determinant of supplier power.

…false …as the entry barrier represents a determinant of competition rivarly …………………

9. Concern for quality is NOT a newest trend in mission components.

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 False as quality is the newest trend in mission statement components as it has been said that
”!“Quality is job one

10. SWOT is an internal tool of analysis.

False because SWOT analysis is divided into external environment scanning that generates
opportunities and threats and internal environment scanning than generates strength and
capabilities SWOT’s main objective is to align the company’s internal resources with the
external environment to choose the best option and help the corporation achieve its long-term
objectives and goals according to the grand strategy and mission of the company.

Question 3: (15 marks)

Compare and contrast vision statements with mission statements. (5 Marks)

Formulating the mission statement is the first step in the strategic management process which
simply represents the main purpose behind the company’s existence or broadly “what business
are we in?”. on the other hand, the vision statement is somehow future-oriented as it is a general
statement of the company’s aspirations and intended direction in the future it shows in broad
terms “what we want to become?” for example in 10 years or more. Firstly, the company’s
mission can be defined as the unique purpose of the company that differentiates the company
from other rivals and competitors in the market place, it is also intended to give information to
the public about the company’s main domain and operations for example the products offered by
the company, the market in which the company intends to serve and the technology terms upon
which the company rely in order to excel in its domain. Different businesses try to formulate
their mission statement to be as catchy and informative as possible, however, it has been agreed
upon that a market or customer-oriented mission statement is better than a product-oriented
mission statement as a market-oriented mission statement shows that the company focuses more
on the customers which means that it is customer-centric which is definitely better than a myopic
product oriented mission statement that focuses only on the features and the products offered.
There are many questions that a perfectly formulated mission statement has to respond to such
as: why is this firm in business? what are the firm’s economic goals? what is the firm’s operating
philosophy in terms of self-concept, quality, company image? what are the firm’s core
competencies and competitive advantages that sets the company apart from its competitors? what
are the main customers that the company intend to serve? And finally, how does the company
view its responsibilities towards its stockholders, employees, communities, environment social
issues and competitors? On the other hand, a vision statement is mainly devoted to present the
firm’s strategic intent to concentrate the resources, assets, skills and competencies of the firm on
achieving a certain favourable future outcome. A vision statement can be thought of as a
roadmap where the company wants to be within a certain timeframe. The vision statement is as
important as the mission statement as it is used to set a broader strategic plan for the organization

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as it helps the organization plan long-term. Another goal for the vision statement is to motivate
the employees and provide them with inspiration to achieve the company’s goal as it
communicates the purpose of the organization to the employees and other stakeholders. Shared
vision creates a commonality of interests that can lift workers out of the monotony of daily work
and put them into a new world of opportunity and challenge. To conclude, the main difference
between the mission and vision statements is that the mission statement is used to describe the
future state of the organization “what the organization hopes to become in the future?” whereas
the mission statement describes the current state of an organization and its primary goals or
objectives. Unlike the vision statement it is short-term in nature. However, it is related to the
vision statement in that it outlines the primary goals that will help to achieve the future the
organization desires (the vision).

Describe why a mission statement is so important in the strategic-management process (5 Marks)

The mission statement formulation is considered the most important step in the strategic
management process as it is the first base upon which the strategies and long-term objectives of
the organization are selected in order to achieve the company’s long-term goals whether survival,
growth or profitability. The mission statement formulation is important as it specifies what
business is the organization operating in such as what products the organization sells where does
it sell them and what are the organization’s main competitive advantage. Moreover, the mission
is considered a critical component of the strategic planning process as it serves as the starting
point from which the strategies, procedures, programs and budgets are formulated in order to
achieve the long-term organizational goals. In addition, the mission statement gives the
organization the right direction, the strategic and operational plans become the road map, without
the mission statement priorities and resource allocation decisions would become difficult and
consequently the strategic management process will not succeed.

On the other hand, the mission statement can also serve as basis upon which the success of the
organization can be judged, as the actual performance and outcomes can be compared to the
desired performance and outcome (i.e. the mission statement), therefore it can serve as a tool for
the evaluation of the strategic processes. In other words, the mission statement can help the
organization verify whether it is the on the right track or not and whether it is making the right
decisions, it also helps the organization to adhere to its primary purpose and serves as a mainstay
for decision making during the times of conflict and high uncertainty. To conclude, a strong
mission statement, it would be very easy for the organization to identify their goals, grand
strategies and policies.

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Briefly describe the problems that can result from agency and what steps can be taken to resolve
them. (5 Marks)

The agency theory suggests that there is an agency problem which arise from the agency
relationship, where the principals (shareholders) delegate the agents (management) to perform
decision making practices and some services on their behalf. As a result of the agency
relationship, the costs of the agency occur as a result of the conflict of interest between the
management and the stakeholders, the costs of the agency are the sum of the control costs, the
bonding costs and the residual losses. The information asymmetry problem occurs because
managers have more access to corporate information than shareholders do. As a result of the
information asymmetry and agency problem, two problems occur. The first problem which is
the adverse selection that occurs before assigning the management as it results due to the limited
ability of stockholders or the owners (board of directors) to determine the skills, competencies
and priorities of executives when hiring them. The second problem that occurs as a result of the
agency relationship is the moral hazard which occurs after hiring the management. The moral
hazard is mainly caused due to the information asymmetry between the owners and the
executives as they often pursue their own interest regardless of the interest of the owners. The
manager, acting as the agent for the shareholders, or principals, is supposed to make decisions
that will maximize shareholder wealth even though it is in the manager’s best interest to
maximize his own wealth. Examples of the moral hazard that may occur as a result of
information asymmetry is that executives are more motivated to increase the company’s growth
rather than the earnings per share and profitability so they focus on the long-term goals in order
to secure their job and avoid losing it. In addition, executives tend to diversify their corporate
risk and minimize it in order to increase their job security so they tend to engage in less risky
projects that provide less return. Moreover, managers tend to act in a manner to enhance their
personal gains and income and protect their status as executives in the company.

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In order to minimize the problems caused as a result of the agency relationship, the board of
directors suggested some procedures as a solution for the agency problem in order to decrease
the information asymmetry and align the interest of both the owners and managers to pursue
company’s success and profitability. The first solution is that owners pay a premium for the
executives in recognition for their service and consequently increase their loyalty towards their
principals (owners) and make them act in the company’s best interest. Another solution is that
management receives a back loaded compensation so that they feel appreciated and motivated to
pursue the interest of the owners. Another solution is to create executive teams across different
units of the organization in order to focus the performance measures on organizational goals
rather than personal goals.

On the other hand, there are other techniques that are aimed at aligning the owners’ interest with
the management interest such as specifying a certain amount of stock to the managers which is
called the stock option plans so that managers become keen on enhancing the company’s
performance in order to increase their own return on the stocks. Another tactic is providing the
employees with bonus plans. Generally, a bonus is a form of pay outside of an employee’s base
pay. It’s usually given after the fact to reward specific behaviour or for a specific purpose.
Bonuses can play a role in the attraction, motivation and retention of employees and reducing
the moral hazard caused by the agency problem. To conclude, these tactics are used widely by
managers in order to reduce the information asymmetry and reduce the negative consequences
of the agency problem.

Question 4: Case Study :( 5 marks) (20 Minutes) (ILO 2.1, 2.2)

Taking into account the major forces driving industry competition, The president
of a large manufacturer of household appliances (such as dishwashing machines,
refrigerators, washers and dryers that are manufactured and sold in the United
States, Japan, Mexico and Europe) has asked you to develop a system for
monitoring and evaluating the impact of major environmental trends on his
company’s strategies and programmes. Briefly describe your proposed system in
terms of

 How you would organise your scanning activities,

 Identify environmental issues and
 Evaluate the impact of each.

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Best wishes