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Management, Marketing and Entrepreneurship

EXAMINATION

Mid-year Examinations, 2019

MGMT344-19S1 (C) Strategic Management

PART A: Multiple Choice Questions

Marks from these 15 questions will be scaled up to make 40% of the exam score.

You should aim to spend around 3 minutes on each question.

Please give one answer for each question on the “scantron” (computer-readable) answer sheet (not on this question sheet).

Your answer should represent the best of the alternatives given.

1   Which of the following corresponds most closely with Michael Porter’s definition of ‘strategy’ in a management context?

A firm whose strategy is to internationalise

The pattern evident a firm’s stream of actions

Deliberately choosing a different set of activities to deliver a unique mix of value A systematic and functionally-located set of actions within a firm

A firm whose strategy is to outsource more of its production

2   When using the Stakeholder Mapping method to help manage the influence of stakeholders on a strategic initiative, managers should

Focus exclusively on undermining any key players who oppose the initiative

Discard any identified low power, low interest stakeholders as having no further relevance Avoid giving information to high attention stakeholders as this is likely to alienate them      Keep high power, low attention stakeholders satisfied

Focus exclusively on exploiting any key players who support the initiative

3   Which of the following is true of the ‘logical incrementalism’ explanation of how strategies may emerge?

It explains the need for firms’ strategic plans to change incrementally each year.

It is about building strategies in logical fashion by incrementally bringing in different aspects of strategic analysis.

It is known to be effective in preventing the influence of political behaviour in strategy-making.

It is about making strategy in logical fashion, from the top down, avoiding the confusion that results otherwise.

It is about experimentation and learning from side-bets and sub-systems.

4   Which of the following is recommended as a way to mitigate the influence of cognitive biases in strategic analysis?

5   A pension fund that owns a significant holding in the Canadian industrial company Bombardier made a public call for the existing Executive Chair to be replaced by an independent director. Which of the following statements most accurately characterises the situation?

This is an example of an institutional investor actively exercising their power and responsibility in the governance chain.

It runs counter to the normal expectation that an executive chair can exercise stronger governance oversight.

It typifies the shareholder view of corporate governance, which privileges shareholder interests over other key stakeholders such as executives.

It typifies the stakeholder view of corporate governance, in which the interests of external       stakeholders such as a pension fund rank equally with those of internal stakeholders such as executives.

This is an example of an institutional investor exploiting their voting power to reduce the ability of the firm’s managers to exercise executive authority.

6   Which of the following is incorrect when carrying out a PESTEL analysis for a business?

The analysis should focus on a specified future timeframe

The focus should be on factors of likely strategic importance to the business Analysts should give priority to the factors expected to change

Trend forecasting, using data where possible, tends to produce better analysis

The analysis should prioritise identifying strategic threats

7   Which of the following is true in relation to the supermarket retailing industry in New Zealand?

PART B: Written Short Answers

Marks from the five questions that follow this short case will be scaled up to make 60% of the exam score. You should aim to spend up to 12 minutes reading the case and 12 minutes answering each question.

Founded in 1896, by 2009 Swiss pharmaceutical company Roche had 80,000 employees worldwide, sales of   $33.6bn, and a 56% stake in San Francisco biotechnology company Genentech. Genentech, meanwhile, was   jealous of its autonomy. When Roche took advantage of a fall in the US$ value to launch a takeover, at $89 per share, Genentech’s management refused the offer. They reluctantly accepted an increased offer of $94 per       share, an offer that made a number of Genentech’s top people extremely wealthy.

Genentech had been founded in 1976 by a young venture capitalist who was also an academic at the University of California. In 1977, it became the first company to express a human gene in bacteria, and in the following       year it was the first to produce synthetic human insulin. Roche had bought its stake in the successful young        company in 1990, but until the 2009 takeover taken a hands-off approach.

Genentech allowed its scientists to pursue their own research projects one day a week, and to publish articles in scientific journals. In 2008, Genentech had been awarded more patents in molecular biology than the U.S.          government and the ten campuses of the University of California combined. Its CEO since 1995, Dr Art                Levinson, was a supporter of the company’s traditional Friday ‘beer fests’ and had been voted by one magazine as America’s ‘nicest’ CEO.

Roche had a very different culture. Based in Basel, Switzerland, it was still half-owned by descendants of the      founding families. Its products are typically based on chemical compounds, very different to Genentech’s             genetic engineering. Like many other ‘big pharma’ companies, moreover, the stream of new products from its     research laboratories was drying up . Roche hoped to replenish its product portfolio by getting full access to         Genentech’s research, while also saving costs by merging its U.S. headquarters with that of Genentech in           California. In common with other large firms in its industry, Roche profited from a portfolio of high-value patented drugs, but found this portfolio threatened by lower-cost producers of equivalent ‘generic drugs’ as the patent       protection came to an end.

(adapted from Illustration 10. 1, Exploring Strategy, Johnson/Whittington/Scholes, 2011)

Please write your answers to these questions in the answer book provided. Demonstrate your understanding of the relevant theory and knowledge from the course by answering the following questions based on the case above. Be sure to apply course material, and be sure to answer the question. Do not simply recite notes you might have memorised about a related topic.

(i) Explain from a corporate governance perspective the advantages and disadvantages of (a) significant shareholdings in Roche by descendants of founders, and (b) Genentech having a longstanding and    charismatic CEO. (5 marks)

(ii) Draw the beginnings of a strategic group map representing the structure of the pharmaceuticals industry

as far as can be gleaned from the short case. What mobility barriers exist inhibiting movement from one strategic group to another? (5 marks)

(iii) Explain how Roche exhibits action within each of the three major categories of dynamic capability

proposed by Teece, Pisano and Shuen. (5 marks)

(iv) Analyse the merged entity of Roche and Genentech using the Boston Consulting Group matrix. Set out

the implications for managing each business unit, including any drawbacks inherent in the arrangement.

(5 marks)

(v) Compare the characteristics the case sets out for Roche and Genentech with expectations for firms    operating in ‘explore’ and ‘exploit’ modes of innovation. From this perspective, how should the merged entity manage these differences? (5 marks)