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Stmg 548: Strategic Tools And Analysis Question Paper
Stmg 548: Strategic Tools And Analysis
Course:Master Of Business Administration
Institution: Kenya Methodist University question papers
Exam Year:2013
KENYA METHODIST UNIVERSITY
SCHOOL OF BUSINESS AND MANAGEMENT
END OF SEMESTER EXAMINATION FOR MASTER IN BUSINESS ADMINISTRATION APRIL, 2013
UNIT CODE : STMG 548
UNIT TITLE : STRATEGIC TOOLS AND ANALYSIS
TIME: 3 HOURS
Instructions
Read the case study below and answer the questions that follow.
Question One
THE BEST LAID PLANS-CHRYSLER HITS THE WALL
In 1998, after Germanys Daimler-Benz acquired Chrysler, the largest U.S automobile manufacturer to form Daimler-Chrysler, many observers though Chrysler would break away from its trouble U.S brethren, Ford GENERAL Motors, and join ranks with the Japanese automobile makers. The strategic plan was to emphasize bold design, better product quality, and higher productivity by sharing designs and parts between the tow companies. Jurgen Schrempp, the CEO of the combined companies, told share holders to ’expect the extraordinary’ and went on to say that Daimler Chrysler ’has the size, profitability and reach to take everyone.
The grand scheme proved extraordinary, but for all of the wrong reasons. In 2006, Chrysler saw its market share fall to 10.6% and the company announced that it would lose $1.26 billion. This shocked share holders, who had been told a few months earlier that the Chrysler unit would break even in 2006.
What went wrong? First, Schrempp and his planners may have overestimated Chrysler’s competitiveness prior to the merger. Chrysler was the most profitable of the three U.S auto companies in the late 1990’s, but the U.S economy was very strong and the company’s core offering of pick up trucks, SUV’S and minivans provided the right products for a time of low gas prices. After the merger, the Germans discovered that Chrysler a mass market manufacturer and it would take years to redesign Chrysler cars so that they could use Daimler parts and benefit from Daimler engineering. In addition, Daimler’s engineers and managers were not enthusiastic about helping Chrysler, which many saw as a black hole into which profitable Mercedes-Benz line would pour billions of Euros.
To be fair, the new cars that Chrysler did produce, including the 300c sedan and the PT Cruiser, garnered good reviews. Sales of the 300c were strong, but not enough to shift the balance of Chrysler’s business away from the small truck segments.
Despite several years of financial struggle, by 2004 it looked as if things might finally be turning around at Chrysler. In 2004, and then gain in 2005, the company made good money. The company actually gained market share in 2005.
Deiter Zetsche, then Chrysler German CEO, hope to capitalize on this with the introduction of a new SUV, the seven seat jeep commander. The timing of the commander launched in mid 2005 could not have been worse. In 2005, the price of oil surged dramatically, as strong as demand from developed nations and China combined with tight supplies (which were made worse by supply disruptions caused by Hurricane Katrina). By mid 2006, oil had reached $70 a barrel, up from half that just eighteen months earlier, the gas prices hit $3 a gallon.
To make matters worse, Ford and General motors, which themselves were hemorrhaging red ink, were engaged in aggressive price war, offering deep incentives to move their own excess inventory, and Chrysler was forced to match prices or loose market share. Meanwhile Japanese manufacturers and particularly Toyota Honda, which had been expanding their U.S production facilities for fifteen years, were gaining share with their small fuel-efficient offerings and popular hybrids.
In September 2006, Chrysler announced that due to a build up of inventory dealers’ lots; it would cut production by 16%, double the planned figure announced in June 2006. In addition to slumping sales, the new CEO, Thomas Lasorda, revealed that the company was facing sharply higher costs for its raw materials and parts, some of which were up as much as 60%. Chrysler was also suffering from high health care costs and pension liabilities for its unionized workforce. Scrambling to fill the gap in its line, Chrysler announced that it might enter into a partnership with China’s Cherry Motors, to produce small fuel efficient cars in Chins, which would then be imported to the United States.
Chrysler’s woes however continued and in February 2007 Chrysler announce a dramatic restructuring plan, including the closing down of a factory and laying of 13,000 employees. Executives Daimler concluded that its plans for Chrysler had failed and announced the company might be sold. This transpired in May 2007, when Chrysler was purchased by Cerberus, a private equity group, for $4.7 billion. Cerberus brought in a new CEO at Home Depot and before that a senior executive and general electric. Under Nardelli Chrysler is exploring potential alliances with foreign car makers to design cars that Chrysler will build, the company is taking steps to merge its Chrysler and Dodge brands, poorly performing dealers have been culled from the company’s network, the powerful Jeep brand is being refocused on its rugged outdoor image, and Chryslers struck a deal with the United Auto Workers union under which retiree health care liabilities, a major source of costs, have been transferred to an independent trust.
Required
Question One
Undertake a SWOT analysis of Chrysler based in the strategic issues it was facing during the period in question.
(8 marks)
Discuss the ’Pros’ and ’Cons’ of the SWOT framework and explain how it compared with the critical questions analysis framework using the experiences of Chrysler Ltd.
(12 marks)
Based on your SWOT analysis explain whether the company’s product strategy made sense.
If you were asked to undertake a strategic planning exercise for the company, what steps would you follow to complete this exercise?
(14 marks)
Question Two
How does miles and snow typology of prospectors, analyzers, defenders and reactors differ from porters five forces model in relation to business strategies? (20 marks)
Question Three
The B.C.G matrix is old but has stood the test of time. Discuss its significance and practicability in the light of vast developments in management tools used to asses market conditions.
(12 marks)
How has the general electric multifactor portfolio model helped to overcome the weaknesses of the B.C.G framework in strategy formulation for large diversified forms?
(8 marks)
Question Four
In relation to Global Strategy discuss the Diamond of National advantage model as proposed by Michael Porter.
(12 marks)
Outline the provisions of value chain in the development of sustainable competitive advantage of firms in Kenya.
(8 marks)
Question Five
The arguments of resource based view are that origins of competitive advantage are viable resources or competences that firms posses. Using a firm in the communication industry discuss this view. (20 marks)
Question Six
Using the stakeholder management model discuss how the ministry of Higher Education would have averted the recent industrial disputes with education providers by understanding the claims and interest of its stakeholders.
(20 marks)
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