CQP Advanced Level
Strategy and Governance flashcards
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What is the fuller working definition of strategy, and what does each clause require?
Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences, with the aim of fulfilling stakeholder expectations. Each clause names something a strategic decision must address: direction, scope, advantage, the changing environment, resources and competences, and whose interests it serves. A proposal missing one is not a strategy.
What are Porter's five forces, and what does the framework analyse?
Threat of entry, threat of substitutes, power of buyers, power of suppliers and competitive rivalry. It analyses the attractiveness (profit potential) of an industry, not how one firm should compete. Define the industry first and at the right level: cement is not construction materials.
What four questions does VRIO ask, and what is the verdict when each fails?
Valuable? If not: competitive disadvantage. Rare? If not: competitive parity (where most quality certifications sit). Inimitable? If not: temporary competitive advantage. Organised to capture value? If not: unexploited advantage. Passing all four gives sustained competitive advantage. The order matters: failing an earlier question makes the later ones irrelevant.
What problem does corporate governance exist to address, and why does it recur along the governance chain?
The agency problem: separating ownership from control means those who run the organisation are not its owners, know more than they do, and may have different interests. In a listed company the chain runs saver, institutional investor, trustee or fund manager, board, management, business. Every link is an agency relationship, information thins at each one, and the saver who bears the loss knows least.
What are the six elements of the cultural web, and what sits at the centre?
Stories, symbols, power structures, organisational structures, control systems, and rituals and routines. At the centre is the paradigm, the taken-for-granted assumptions, which nobody states and which is inferred from the six. Control systems are the most reliable element, because what is measured and rewarded is what gets done.
What are the eight positions on the strategy clock, and which are failure strategies?
1 no frills, 2 low price, 3 hybrid, 4 differentiation, 5 focused differentiation, 6 increased price with standard value, 7 increased price with low value, 8 low value at standard price. Positions 6, 7 and 8 are failure strategies, named so they can be recognised, not chosen. Position 8 is the commonest, reached through a series of individually reasonable cost cuts.
Why do two rational competitors in a prisoner's dilemma both end up worse off?
Each has a dominant strategy to defect (cut price), because cutting is better whatever the other does. Both cutting is the Nash equilibrium: neither can improve by changing alone, yet both earn less than if both had held. Repetition can sustain cooperation without agreement, but an agreement to hold price is price fixing under the Competition Act, 2010.
How is relative market share calculated, and what are the four BCG quadrants?
Relative market share = our share / share of the largest rival. The dividing line is 1.0; for the leader, the largest rival is the second-placed firm. Star: high growth, high share. Cash cow: low growth, high share. Question mark: high growth, low share. Dog: low growth, low share.
Distinguish intended, deliberate, unrealised, emergent and realised strategy.
Intended: what management planned. Deliberate: the part of the intention actually carried out. Unrealised: the part that was not. Emergent: a pattern of action that developed without being intended. Realised: what the organisation actually did, the sum of deliberate and emergent.
What four questions should a board scorecard answer?
Is the strategy still valid (do the assumptions hold)? Is it being executed (are the milestones met)? Is it delivering (are the outcome measures moving)? Are we within our risk appetite and within the law? Eight to twelve measures on one page answer those four; everything else belongs in the appendix.
What question does each of the three levels of strategy answer?
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Under section 143 of the Companies Act, 2015, to which six matters must a director have regard?
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What standard of care does section 145 of the Companies Act, 2015 impose on a director?
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What does Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 establish?
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What are the four strategy lenses, and what does each reveal?
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What are the three components of a business model, and how does it differ from strategy?
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Where did M-Pesa's advantage actually sit, according to the guide?
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What are the five stages of the industry life cycle, and the strategic priority in shake-out?
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What response does each VUCA condition call for?
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How does a TOWS matrix turn a SWOT into strategic options?
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What are the sources of inimitability?
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Which layers make up Kenya's governance regime, and to whom does each apply?
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What does Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 decide about directors' profits?
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What is the rule in Foss v Harbottle (1843) 2 Hare 461, and how has Kenya modified it?
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What are the four quadrants of the power-interest matrix?
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What does each of the four main board committees oversee?
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What are the four corporate stances on social responsibility?
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What does the Bribery Act, 2016 require, and to whom does it apply?
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What are the four phases of strategic drift?
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What are the three forms of isomorphism in an organisational field?
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What is strategic lock-in, and what reinforces it?
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What are the four quadrants of the Ansoff matrix, in order of risk?
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What are the four categories of the parenting matrix?
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What are the four determinants of Porter's Diamond, and the two influences outside it?
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How do the four international strategies combine integration and responsiveness?
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What are Bartlett and Ghoshal's four subsidiary roles?
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What is logical incrementalism, and why is it not muddling through?
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What are Goold and Campbell's three tests of an organisational structure?
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What are the three parenting styles, and where does each fit?
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Why should the quality function not report to the production manager?
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How is economic value added calculated, and why can a profitable division destroy value?
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Why are middle managers strategic actors rather than mere implementers?
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Why must every business case include the do-nothing option?
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What does Re Barings plc (No 5) [1999] 1 BCLC 433 establish about delegation?
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Why must compliance reporting to the board be exception-based?
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Why does the audit committee, not the finance director, appoint the external auditor?
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What is the limitation of governance ratings, and what is it called?
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How do the Anglo-American and Continental European governance models differ?
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What is the test of competitive advantage, and what question replaces it where there is no competitor?
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What is the blind spot of each of the four strategy lenses?
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What is a macro-environmental scan for, and when is scenario analysis used instead of a forecast?
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How do strategic groups differ from market segments?
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What is blue ocean thinking, and what four questions does the value curve ask?
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What is the strategic dilemma in codifying tacit knowledge?
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Why can an organisation in drift not detect it with its own measures, and what does detection need?
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Why does the last phase of strategic drift so often end in death rather than transformation?
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What are the three distinct reasons history matters strategically?
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Why is path dependency double-edged, and how is it managed?
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What are the four layers of culture, and which one actually governs?
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How does an organisational culture persist, and why can it be the strongest advantage?
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What do subcultures imply for implementing a strategy such as cost reduction?
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What is the test for a strategic business unit, and what goes wrong with too few or too many?
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Why must a price-based strategy rest on being the cost leader, not merely a low-cost operator?
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What conditions must a differentiation strategy meet to earn its premium?
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When is quality a basis for differentiation, and what makes it one?
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How does the strategic objective change under hypercompetition?
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What does it mean to attack an incumbent's incentive to respond rather than its capability?
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How is a differentiation-based advantage sustained against imitation?
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What are the three ways a corporate parent adds value, and which most often destroys it?
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What are the four standing criticisms of the BCG matrix?
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What are Yip's four drivers of internationalisation?
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How does performance typically change as a firm internationalises, and what follows for the decision?
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Why are strategic planning systems most valuable as a process and least valuable as an output?
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Where is strategy externally imposed, and what is the right response to it?
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Why are organisational politics a strategy development process, and how should governance respond?
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Why does the measure chosen become the strategy under performance targeting?
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What is the strategic test for outsourcing an activity?
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What is usually the binding constraint on strategic change, and what is its symptom?
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How does information technology threaten an incumbent's business model rather than its execution?
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How does quality improvement act on both terms of the EVA equation?
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Why must EVA not be applied mechanically to judge a division?
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How does a manager get a strategic issue onto the senior agenda?
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What structural remedies counter escalation of commitment and other decision biases?
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What is benefits realisation, and why does it change how business cases are written?
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What does Re Continental Assurance Co of London plc [2001] BPIR 733 establish about relying on management?
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On which powers does the board's practical influence over execution rest, and what is the limit on it?
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Why must strategy, performance and risk be governed together, and what follows for the risk register?
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On what four grounds does the business case for sustainability rest, and why is greenwashing a governance failure?
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- Shuffle once you know the order, so you are not answering from memory of the sequence.
- When a card catches you out, read the chapter it links to, then try the topic in a past paper.