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SME Consultant · LESSON 3

Business management theoryEqual subject marks; equal sampling here · 13 topics

Connect strategy, organization, people and marketing. SWOT separates internal strengths and weaknesses from external opportunities and threats, but a list is not a strategy. Choose target customers and a value proposition, then check whether authority, roles and incentives support execution. Evaluate customer relationships beyond the first sale.

3.1Business management theory

Concept

Connect strategy, organization, people and marketing. SWOT separates internal strengths and weaknesses from external opportunities and threats, but a list is not a strategy. Choose target customers and a value proposition, then check whether authority, roles and incentives support execution. Evaluate customer relationships beyond the first sale.

How it works / steps

  1. A favorable internal capability is a strength; opportunities and threats concern external conditions.
  2. Differentiation focus combines a narrow target market with distinctiveness.
  3. A cross-functional team combines expertise but still needs clear roles and authority.

Workplace example

Before deploying support AI to every customer, identify the segment and problem it serves and check that staff incentives support the change.

Common confusions and exam tips

Reference links

3.2Competitive strategy and five forces

Concept

Five forces examines rivalry, entry, substitutes and buyer/supplier bargaining power. Cost leadership requires a lower cost structure, rather than merely lower prices. Differentiation requires differences customers value; focus limits the competitive scope to a chosen segment.

How it works / steps

  1. Concentrated purchasing and low switching costs strengthen buyers’ negotiating position.
  2. A difference must affect customer choice or willingness to pay to support differentiation returns.
  3. Focus narrows the competitive scope; cost focus seeks cost advantage within it.

Workplace example

Concentrated sales to a few large customers with low switching costs can strengthen buyer power; consider customer diversification and distinctive value.

Common confusions and exam tips

Mini quiz

Q1. A few large customers can easily switch standardized products to rivals. Which force strengthens?

  1. Supplier monopoly power
  2. Height of entry barriers
  3. Buyer bargaining power
  4. Supplier bargaining power
Show answer and explanation

Answer: C Buyer bargaining power

Concentrated purchasing and low switching costs strengthen buyers’ negotiating position.

Q2. What is especially necessary for differentiation?

  1. An identical product for all markets
  2. Distinct value recognized by customers
  3. More features than every rival
  4. A uniform lowest-price policy
Show answer and explanation

Answer: B Distinct value recognized by customers

A difference must affect customer choice or willingness to pay to support differentiation returns.

Reference links

3.3VRIO, growth strategy and alliances

Concept

VRIO checks value, rarity, difficulty of imitation and organizational support. Ansoff classifies growth by existing/new products and markets. Alliances can complement resources but require assessment of dependency, knowledge leakage and conflicting objectives.

How it works / steps

  1. Existing products plus new markets means market development.
  2. Decision rights, incentives and processes must support realizing the resource’s value.
  3. Vertical integration internalizes upstream or downstream activities; same-stage consolidation is horizontal.

Workplace example

Taking an existing product to a new overseas market is market development; diversification adds both new products and new markets.

Common confusions and exam tips

Mini quiz

Q1. An existing product is sold to a new customer market. Which Ansoff category applies?

  1. Market development
  2. Market penetration
  3. Product development
  4. Diversification
Show answer and explanation

Answer: A Market development

Existing products plus new markets means market development.

Q2. What does O in VRIO primarily assess?

  1. The age of the resource owner
  2. International patent-filing rank
  3. The industry’s market growth rate
  4. Organization to exploit resources
Show answer and explanation

Answer: D Organization to exploit resources

Decision rights, incentives and processes must support realizing the resource’s value.

Reference links

3.4Portfolio analysis and product life cycles

Concept

The growth-share matrix classifies businesses by market growth and relative share. Stars have high growth and high share; cash cows low growth and high share. It is a cash-generation hypothesis, not an automatic divestment rule. Product life-cycle paths differ across markets.

How it works / steps

  1. A cash cow has low growth and high share; a star has high growth and high share.
  2. 30/20=1.5, distinct from the firm’s absolute 30% market share.
  3. Slower growth and stronger rivalry call for differentiation, replacement demand and cost control.

Workplace example

A high-share business in a mature market may fund investment in a low-share growth business, but synergies and business economics need separate assessment.

Common confusions and exam tips

Mini quiz

Q1. In the growth-share matrix, low market growth and high relative share identify what?

  1. Dog
  2. Cash cow
  3. Star
  4. Question mark
Show answer and explanation

Answer: B Cash cow

A cash cow has low growth and high share; a star has high growth and high share.

Q2. Own share is 30% and the largest rival’s share 20%. What is relative market share?

  1. 1.5
  2. 0.67
  3. 10
  4. 50
Show answer and explanation

Answer: A 1.5

30/20=1.5, distinct from the firm’s absolute 30% market share.

Reference links

3.5Structure, authority and contingency

Concept

Functional structures emphasize specialization; divisions clarify product or market responsibility. Matrix structures introduce dual authority and coordination demands. Contingency theory selects structure to fit strategy, environment and technology rather than assuming one universally best design.

How it works / steps

  1. Grouping similar work supports specialization and standardization.
  2. Functional and project authority intersect, requiring priority and evaluation coordination.
  3. Effective organization depends on environment, technology and scale.

Workplace example

When growth slows customer decisions, design delegated authority together with accountability and define the role of shared headquarters functions.

Common confusions and exam tips

Mini quiz

Q1. What is a typical advantage of a functional structure?

  1. Resource sharing through dual authority
  2. Elimination of headquarters coordination
  3. Concentration of specialist knowledge
  4. Fully independent product profit responsibility
Show answer and explanation

Answer: C Concentration of specialist knowledge

Grouping similar work supports specialization and standardization.

Q2. What particularly needs management in a matrix structure?

  1. A ban on cross-functional information
  2. Coordination between authority lines
  3. The absence of product managers
  4. The inability to employ specialists
Show answer and explanation

Answer: B Coordination between authority lines

Functional and project authority intersect, requiring priority and evaluation coordination.

Reference links

3.6Motivation and leadership

Concept

Herzberg distinguishes hygiene factors from motivators such as achievement and recognition. Expectancy theory examines effort–performance expectancy, performance–reward instrumentality and reward valence. Leadership should account for both task and relationship needs in context.

How it works / steps

  1. Achievement, recognition and responsibility concern the work itself; conditions are hygiene factors.
  2. Instrumentality links performance to reward; valence is the reward’s attractiveness.
  3. Enrichment adds vertical responsibility and autonomy; same-level tasks are job enlargement.

Workplace example

If staff believe achievement will not affect recognition, clarify the performance–reward link rather than assuming more training solves motivation.

Common confusions and exam tips

Mini quiz

Q1. Which is a Herzberg motivator?

  1. Removal of pay dissatisfaction
  2. Achievement and recognition
  3. Company workplace rules
  4. Physical working conditions
Show answer and explanation

Answer: B Achievement and recognition

Achievement, recognition and responsibility concern the work itself; conditions are hygiene factors.

Q2. In expectancy theory, belief that performance leads to reward is what?

  1. Instrumentality
  2. Valence
  3. Only self-efficacy
  4. A hierarchy of needs
Show answer and explanation

Answer: A Instrumentality

Instrumentality links performance to reward; valence is the reward’s attractiveness.

Reference links

3.7Development, appraisal and employment basics

Concept

OJT develops skills through work; off-JT separates training from regular duties. Appraisals require comparable goals, evidence and checks for rater bias. Align development, placement and rewards. Employment-law questions require checking current rules and their applicability.

How it works / steps

  1. Training through actual work is OJT; separate classroom-style training is off-JT.
  2. A general impression spills into separate criteria; central tendency instead clusters ratings near the middle.
  3. Job evaluation concerns relative job worth; appraisal concerns an employee’s results, capabilities or behavior.

Workplace example

Rating collaboration highly solely because sales are strong is a halo effect; collect behavioral evidence for each criterion.

Common confusions and exam tips

Mini quiz

Q1. A supervisor demonstrates real work, then has an employee practice and reflect. What is this?

  1. Job evaluation system
  2. OJT
  3. Off-JT
  4. Self-reporting system
Show answer and explanation

Answer: B OJT

Training through actual work is OJT; separate classroom-style training is off-JT.

Q2. One strong characteristic influences ratings on other criteria. What bias is this?

  1. Halo effect
  2. Central tendency
  3. Leniency
  4. Contrast error
Show answer and explanation

Answer: A Halo effect

A general impression spills into separate criteria; central tendency instead clusters ratings near the middle.

Reference links

3.8STP, buying behavior and brands

Concept

Segmentation groups customers with meaningful similarities; targeting selects groups; positioning defines the intended place in customers’ minds. Evaluate accessibility, differential response and capability as well as market size. Brands accumulate identification, associations and trust.

How it works / steps

  1. Identify market differences, choose a group and define the value position for it.
  2. Positioning concerns customer perceptions relative to alternatives, not physical placement.
  3. The chosen action conflicts with perceptions of attractive alternatives; useful post-purchase support can help.

Workplace example

A supplier may target small restaurants with cramped kitchens and position a product around space savings instead of an undifferentiated low-price message.

Common confusions and exam tips

Mini quiz

Q1. What is the usual STP sequence?

  1. Segment → target → position
  2. Position → segment → target
  3. Target → position → segment
  4. Segment → position → target
Show answer and explanation

Answer: A Segment → target → position

Identify market differences, choose a group and define the value position for it.

Q2. What does marketing positioning primarily concern?

  1. Physical shelf position in a store
  2. An employee’s organizational rank
  3. Physical placement of factory equipment
  4. Perceived position versus competitors
Show answer and explanation

Answer: D Perceived position versus competitors

Positioning concerns customer perceptions relative to alternatives, not physical placement.

Reference links

3.9Product policy and pricing

Concept

The four Ps coordinate product, price, place and promotion. Pricing considers demand value and competition as well as cost. Skimming targets early high willingness to pay; penetration emphasizes adoption. Product-line extensions require checks for cannibalization and brand fit.

How it works / steps

  1. P−100=0.2P, so 0.8P=100 and P=125.
  2. Skimming captures early high willingness to pay; penetration instead seeks adoption with a low launch price.
  3. Evaluate net incremental sales after the loss on existing products rather than counting every new-product sale as additional.

Workplace example

A 20% markup on cost 100 gives price 120. A 20% margin on selling price requires 100/(1−0.2)=125.

Common confusions and exam tips

Mini quiz

Q1. Cost is 100. What price achieves a margin of 20% of selling price?

  1. 80
  2. 150
  3. 125
  4. 120
Show answer and explanation

Answer: C 125

P−100=0.2P, so 0.8P=100 and P=125.

Q2. Which launch policy charges a high price to early customers with high willingness to pay?

  1. Bundle pricing
  2. Price skimming
  3. Penetration pricing
  4. Odd pricing
Show answer and explanation

Answer: B Price skimming

Skimming captures early high willingness to pay; penetration instead seeks adoption with a low launch price.

Reference links

3.10Channels, promotion and relationships

Concept

Intermediaries reduce transaction complexity, create assortments and perform logistics. Push targets channel members; pull stimulates end-customer demand. CRM connects acquisition, retention and development using retention and contribution value, rather than sales alone.

How it works / steps

  1. Three manufacturer links plus four retailer links make seven, versus 12 direct links.
  2. Pull uses end-customer demand to influence channels; retailer incentives illustrate push.
  3. Track relationship contribution including retention and service costs.

Workplace example

Three manufacturers and four retailers need 12 direct relationships; one common wholesaler reduces this to 3+4=7 in a simple model.

Common confusions and exam tips

Mini quiz

Q1. One wholesaler connects three manufacturers and four retailers; all trade only with it. How many relationships are needed?

  1. 12
  2. 4
  3. 3
  4. 7
Show answer and explanation

Answer: D 7

Three manufacturer links plus four retailer links make seven, versus 12 direct links.

Q2. Advertising to consumers creates requests for a brand at retailers. Which strategy is this?

  1. Vertical integration
  2. Backward integration
  3. Pull
  4. Push
Show answer and explanation

Answer: C Pull

Pull uses end-customer demand to influence channels; retailer incentives illustrate push.

Reference links

3.11Research, service quality and digital metrics

Concept

Research requires clear populations, sampling and unbiased questions. Correlation is not causation. Service characteristics include intangibility, simultaneity, variability and perishability, making process design important. Digital metrics require consistent denominators and reporting periods.

How it works / steps

  1. 30/1,000×100=3%; compare consistent units and periods.
  2. Unused capacity today cannot be stored; reservations and demand smoothing help.
  3. Enthusiastic members may differ from other customers, limiting generalization.

Workplace example

Thirty purchases from 1,000 visits gives a 3% conversion rate. A survey of loyal customers alone may not represent new-customer demand.

Common confusions and exam tips

Mini quiz

Q1. There are 1,000 visits and 30 purchases. What is conversion rate using visits as denominator?

  1. 3%
  2. 30%
  3. 0.3%
  4. 33.3%
Show answer and explanation

Answer: A 3%

30/1,000×100=3%; compare consistent units and periods.

Q2. Which action addresses service perishability?

  1. Carrying empty seats into tomorrow
  2. Assuming all service quality is identical
  3. Increasing throughput without feedback
  4. Off-peak reservation discounts
Show answer and explanation

Answer: D Off-peak reservation discounts

Unused capacity today cannot be stored; reservations and demand smoothing help.

Reference links

3.12Case I workshop: Delegation and skill transfer

Concept

A is a 30-person custom precision-parts firm. Its president decides quotations, delivery commitments and staffing. Five experts handle difficult machining while juniors only assist. Quality is respected, but quotations stop when the president is absent and the experts approach retirement.

Writing workshop (self-assessed)

In roughly 80–100 words, recommend delegation and skill-transfer actions grounded in this case.

Show model answer and self-check criteria

Standardize quotation and delivery criteria, delegate routine decisions to supervisors and escalate exceptions. Pair experts with juniors for staged OJT, recording skills and quality checkpoints. Align evaluation with quality, delivery and teaching so experts have incentives to develop successors.

Self-check: cite president dependency; specify decision rules and escalation; include staged learning and skill records; align quality and teaching incentives. Recruitment alone does not resolve the stated bottlenecks.

How it works / steps

  1. Quotations stop during the president’s absence, showing a person-dependent decision bottleneck.
  2. Break down difficult operations and progress through skill records and checks, addressing juniors’ lack of experience.
  3. Define authority and exceptions so reduced dependency preserves quality and feasible delivery.

Mini quiz

Q1. What is the direct organizational cause of A’s quotation delays?

  1. All factory equipment being stopped
  2. Decision authority concentrated in the president
  3. Universally poor machining skill
  4. Complete loss of the customer market
Show answer and explanation

Answer: B Decision authority concentrated in the president

Quotations stop during the president’s absence, showing a person-dependent decision bottleneck.

Q2. Which action fits A’s skill-transfer problem?

  1. Staged OJT pairing experts with juniors
  2. Permanently restricting difficult work to experts
  3. Only increasing juniors’ auxiliary tasks
  4. Removing quality checks and leaving juniors alone
Show answer and explanation

Answer: A Staged OJT pairing experts with juniors

Break down difficult operations and progress through skill records and checks, addressing juniors’ lack of experience.

Reference links

3.13Case II workshop: Targeting and relationships

Concept

B is a neighborhood bakery with skilled allergen explanations and small-batch production. Price competition with a chain reduces profits. Nearby families want ingredient information and reserved pickup. Evening leftovers are high, and no purchase history is collected.

Writing workshop (self-assessed)

Recommend a target, value proposition and relationship/demand actions in roughly 80–100 words.

Show model answer and self-check criteria

Target nearby families concerned about ingredients. Combine clear ingredient information and personal explanations with small-batch reserved pickup. With appropriate consent, record preferences and purchases, use relevant repeat-purchase messages, and feed reservations into batch planning to improve convenience and reduce waste.

Self-check: specific target, link to existing strengths, reservation/relationship measures, and waste or planning effects. Do not claim guaranteed allergen safety without evidence.

How it works / steps

  1. The stated needs match ingredient explanations and small batches.
  2. It combines customer convenience with advance demand signals for production and waste reduction.
  3. Use preferences and history appropriately to provide relevant repeat-purchase support.

Mini quiz

Q1. Which target best fits B’s strengths?

  1. Nearby families concerned about ingredients
  2. Nationwide buyers concerned only with price
  3. Unrelated overseas wholesalers
  4. Factories seeking only bulk standard products
Show answer and explanation

Answer: A Nearby families concerned about ingredients

The stated needs match ingredient explanations and small batches.

Q2. What can reserved pickup help B achieve?

  1. Eliminating all allergen risks
  2. Perfectly fixing every customer’s volume
  3. Legally banning rivals’ discounts
  4. Convenience and earlier demand information
Show answer and explanation

Answer: D Convenience and earlier demand information

It combines customer convenience with advance demand signals for production and waste reduction.

Reference links

Lessons are written by this site based on public information and do not guarantee exam content. Product specifications change, so check the latest information at the reference links.

Notes (unofficial, original questions, no pass guarantee)