Mastering C714: Business Strategy is essentially learning how to play high-stakes chess with a company’s future. It’s about moving past “we have a good product” to “we have a plan to crush the competition and keep our customers happy.”

Here is your 45-question comprehensive study guide.

Section 1: External Analysis (The World Around You)

1. Question: What does the PESTEL framework analyze?
   • Answer: It examines the macro-environmental factors affecting an industry: Political, Economic, Sociocultural, Technological, Environmental, and Legal.

2. Question: In Porter’s Five Forces, what determines the “Threat of New Entrants”?
   • Answer: Barriers to entry, such as high startup costs, brand loyalty, patents, and economies of scale.

3. Question: What is the difference between a competitor and a substitute?
   • Answer: A competitor offers a similar product in the same industry (e.g., Ford vs. Toyota). A substitute is a product from a different industry that satisfies the same need (e.g., a bicycle vs. a car).
4. Question: How do Economies of Scale act as a barrier to entry?
   • Answer: They allow large, established firms to produce goods at a lower per-unit cost than new, smaller competitors, making it hard for the “new guy” to compete on price.
5. Question: What is a Strategic Group?
   • Answer: A set of firms within an industry that emphasize similar strategic dimensions and use similar strategies (e.g., luxury car brands like BMW and Mercedes form one group, while budget brands like Kia form another).
6. Question: When is the Bargaining Power of Suppliers high?
   • Answer: When there are few suppliers, the product is unique, or there are high switching costs to change suppliers.
7. Question: What are Switching Costs?
   • Answer: The one-time costs customers incur when they buy from a different supplier (e.g., the time spent learning new software).
8. Question: What is the General Environment?
   • Answer: Dimensions in the broader society that influence an industry and the firms within it (captured by PESTEL).
9. Question: What is Industry Consolidation?
   • Answer: When an industry moves from many small players (fragmented) to a few large dominant players (concentrated), usually through mergers and acquisitions.
10. Question: Define Complementors.
    • Answer: Companies that sell products or services that make your product more valuable (e.g., app developers are complementors to smartphone manufacturers).
11. Question: What characterizes the Maturity Stage of the Industry Life Cycle?
    • Answer: Slow growth, intense price competition, and market saturation.
12. Question: What is Backward Vertical Integration?
    • Answer: When a firm moves “upstream” to own its suppliers (e.g., Netflix started producing its own shows instead of just licensing them).
13. Question: What is Forward Vertical Integration?
    • Answer: When a firm moves “downstream” to own its distribution or retail (e.g., Apple opening its own Apple Stores).
14. Question: What is a Blue Ocean Strategy?
    • Answer: Seeking to create an uncontested market space (a “Blue Ocean”) where the competition is irrelevant, rather than fighting in a crowded “Red Ocean.”
15. Question: What is Environmental Scanning?
    • Answer: The surveillance of a firm’s external environment to predict environmental changes and detect changes already under way.

Section 2: Internal Analysis (The Tools You Have)

16. Question: What are Core Competencies?
    • Answer: Unique strengths, embedded deep within a firm, that allow it to differentiate its products or services from those of its rivals.
17. Question: What does the VRIO framework stand for?
    • Answer: Valuable, Rare, Inimitable (costly to imitate), and Organized to capture value.

18. Question: If a resource is Valuable and Rare but not costly to imitate, what kind of advantage does the firm have?
    • Answer: A Temporary Competitive Advantage.
19. Question: What is the difference between Tangible and Intangible resources?
    • Answer: Tangible resources can be seen and quantified (factories, cash). Intangible resources are invisible (brand reputation, intellectual property, culture).
20. Question: What are the two categories of activities in the Value Chain?
    • Answer: Primary Activities (direct value creation: logistics, operations, marketing) and Support Activities (enable primary activities: HR, Tech, Procurement).

21. Question: What is Causal Ambiguity?
    • Answer: When it is unclear to competitors exactly how a firm uses its resources to create an advantage, making it difficult to copy.
22. Question: Define Social Complexity.
    • Answer: Interpersonal relationships, trust, and culture within a firm that are difficult for competitors to replicate.
23. Question: What is Benchmarking?
    • Answer: Comparing a firm’s processes and performance metrics to industry bests or best practices from other companies.
24. Question: What is the Resource-Based View (RBV)?
    • Answer: A model that sees certain types of resources (VRIO) as key to superior firm performance.
25. Question: What is Path Dependency?
    • Answer: The idea that current options are limited by past decisions; some resources are built over a long period and cannot be easily bought.
26. Question: Define Dynamic Capabilities.
    • Answer: A firm’s ability to create, deploy, modify, or upgrade its resources over time to maintain a competitive advantage in a changing environment.
27. Question: What is Outsourcing?
    • Answer: The purchase of a value-creating activity from an external supplier.
28. Question: When should a firm not outsource an activity?
    • Answer: When that activity is a Core Competency or is critical to the firm’s competitive advantage.
29. Question: What is the SWOT analysis?
    • Answer: A framework for identifying an organization’s internal Strengths and Weaknesses, and external Opportunities and Threats.
30. Question: What is Intellectual Capital?
    • Answer: The collective knowledge and skills of the employees, as well as the value of patents and trademarks.

Section 3: Formulation & Implementation (The Move You Make)

31. Question: What is a Cost Leadership strategy?
    • Answer: Producing standardized goods or services at the lowest cost in the industry to appeal to a broad market.
32. Question: What is a Differentiation strategy?
    • Answer: Producing goods or services that customers perceive as being different or unique in ways that are important to them, allowing for a premium price.
33. Question: What does it mean to be “Stuck in the Middle”?
    • Answer: When a firm fails to clearly choose between cost leadership and differentiation, resulting in low profitability.
34. Question: What is the BCG Matrix?
    • Answer: A corporate-level strategy tool that classifies business units based on market share and market growth into Stars, Cash Cows, Question Marks, and Dogs.

35. Question: What is Related Diversification?
    • Answer: Entering a new business that shares links (products, technologies, or distribution channels) with current businesses.
36. Question: What is Unrelated Diversification?
    • Answer: Entering a business with no meaningful connection to current businesses (often to spread financial risk).
37. Question: What is the Agency Problem?
    • Answer: A conflict of interest that occurs when the agents (managers) act in their own self-interest rather than in the interest of the principals (owners/shareholders).
38. Question: What is the Balanced Scorecard?
    • Answer: A strategic management framework that tracks performance across four perspectives: Financial, Customer, Internal Processes, and Learning/Growth.

39. Question: Define Corporate Social Responsibility (CSR).
    • Answer: The idea that a company should play a positive role in society and consider the environmental and social impact of its business decisions.
40. Question: What is a Strategic Alliance?
    • Answer: A cooperative agreement between firms to share resources or knowledge for a competitive advantage (e.g., Starbucks inside Target).
41. Question: What is the primary role of the Board of Directors?
    • Answer: To provide oversight of the CEO/management, ensure ethical behavior, and protect shareholder interests.
42. Question: What is Synergy?
    • Answer: The condition where the whole is greater than the sum of its parts ($1 + 1 = 3$).
43. Question: What is Business Ethics?
    • Answer: The principles and standards that determine acceptable conduct in business.
44. Question: What is an Integrated Cost Leadership/Differentiation strategy?
    • Answer: Providing relatively low-cost products with some differentiated features (e.g., Target).
45. Question: What is a Mission Statement?
    • Answer: A declaration of the firm’s core purpose and the focus of its operations (the “Who we are and what we do” of the company).