# Planning and Strategy

Business I · Business Administration · https://tryals.app/learn/business-i/planning-and-strategy

## From Mission to Moves

Planning converts intention into commitments. The hierarchy runs downhill from identity to calendar: **Mission** (why we exist), **Vision** (destination photo), **Objectives** (milestones), **Strategies** (routes), and **Plans & budgets**.

Well-formed objectives are **SMART**: specific, measurable, achievable, relevant, time-bound. **SWOT** scans internal **Strengths** and **Weaknesses**, and external **Opportunities** and **Threats**. Value lives in _crossings_: strengths aimed at opportunities (attack), weaknesses exposed to threats (defend).

| Level | Question | Horizon |
| --- | --- | --- |
| Mission | Why do we exist? | Permanent |
| Objectives | Which milestones? | Quarters |
| Strategies | Which route? | Path |

**Porter's generic strategies** ask why customers pick us: **Cost leadership** (same value, lower cost), **Differentiation** (premium value), and **Focus** (niche). Firms refusing to choose are **stuck in the middle**.

## The Experience Curve

**The experience curve** states **every doubling of cumulative output cuts unit cost by a constant percentage** (typically 15-25%).

$$c(Q) = c_1 \cdot Q^{-b}$$

Where $Q$ is _cumulative_ units ever produced. An 80% curve leaves costs at 80% per doubling: unit 1 at 100%, 2 at 80%, 4 at 64%, 8 at 51.2%, 16 at 41%.

| Cumulative units | Unit cost (% of first) |
| --- | --- |
| 1 | 100% |
| 2 | 80% |
| 4 | 64% |

**Pitfall:** Plotting against _annual_ volume. The x-axis is **cumulative output ever produced**. First movers compound advantages, but disruption resets the curve.

## Practice questions

8 of this lesson's 13 practice questions, with answers. The full set is in the app.

### 1. Which moves follow the experience-curve logic of buying share early?

A. Pricing a new console below unit cost to build the installed base
B. Harvesting maximum margin from the very first units
C. Penetration pricing to reach volume before competitors
D. Subsidizing early adoption to accelerate cumulative output

**Answer:** A. Pricing a new console below unit cost to build the installed base; C. Penetration pricing to reach volume before competitors; D. Subsidizing early adoption to accelerate cumulative output

**Why:** The curve rewards whoever accumulates volume first: early losses buy the doublings that make later costs unbeatable. Skimming maximum early margin (option 2) is the *opposite* bet, rational only when experience effects are weak or the market window is short.

Page: https://tryals.app/practice/business-i/planning-and-strategy/which-moves-follow-the-experience-curve-logic-of-buying-share-early

### 2. On an 80% experience curve, unit cost falls 20% each time CUMULATIVE volume doubles. Why does holding annual volume constant stop delivering savings?

A. Because constant volume means cumulative volume is not increasing
B. Because experience effects reverse once workers reach maximum skill
C. Because a constant yearly output doubles the total ever more slowly
D. Because the curve applies only during a product’s first year

**Answer:** C. Because a constant yearly output doubles the total ever more slowly

**Why:** The savings track doublings, and doublings get further apart under constant output. Continuing to cut costs at a steady rate requires accelerating volume, which is the strategic point of the curve.

Page: https://tryals.app/practice/business-i/planning-and-strategy/on-an-80-experience-curve-unit-cost-falls-20-each-time-cumulative

### 3. Order the planning cascade from identity to execution.

**Answer:**

1. Mission: why we exist
2. Vision: what we intend to become
3. SMART objectives: measurable milestones
4. Strategy: the chosen route
5. Operational plans and budgets

**Why:** Each level constrains the next: a budget that contradicts the strategy, or a strategy detached from the mission, is the cascade running backwards.

Page: https://tryals.app/practice/business-i/planning-and-strategy/order-the-planning-cascade-from-identity-to-execution

### 4. File each finding from a retailer’s situation scan into its SWOT box.

**Answer:**

- Threat → A rival entering with deep-discount prices
- Strength → Best logistics network in the region
- Opportunity → E-commerce demand growing 20% a year
- Weakness → Aging store formats customers find dull

**Why:** Internal versus external is the axis people miss: the logistics network and dull stores are *ours* (S/W); the rival and the e-commerce wave happen *to* us (T/O).

Page: https://tryals.app/practice/business-i/planning-and-strategy/file-each-finding-from-a-retailers-situation-scan-into-its-swot-box

### 5. Mission, vision, or SMART objective? Sort each statement.

**Answer:**

- Mission: "We make healthy food affordable for every family"
- Vision: "To be Europe’s leading fresh-food retailer by 2035"
- SMART objective: "Raise repeat-purchase rate from 40% to 48% by Q4", "Open 25 stores in Portugal within 24 months"

**Why:** Mission is the permanent job, vision the destination photo, and objectives carry numbers and deadlines, if you can’t tell whether it was achieved, it wasn’t SMART.

Page: https://tryals.app/practice/business-i/planning-and-strategy/mission-vision-or-smart-objective-sort-each-statement

### 6. Match each competitive position to Porter’s label.

**Answer:**

- Cost leadership → Same value, structurally lower cost
- Differentiation → Distinct value commanding a premium
- Focus → Either weapon aimed at a narrow niche
- Stuck in the middle → Neither cheapest nor distinctive, outcompeted twice

**Why:** The generic strategies are answers to "why us?", and Porter’s warning is that refusing to answer is itself an answer, the losing one.

Page: https://tryals.app/practice/business-i/planning-and-strategy/match-each-competitive-position-to-porters-label

### 7. An airline offers mid-range fares, mediocre service, average costs, and no distinctive route network. Porter’s diagnosis?

A. Cost leadership
B. Stuck in the middle
C. Differentiation through balance
D. Successful focus strategy

**Answer:** B. Stuck in the middle

**Why:** Every customer segment has a better option: price-hunters fly the low-cost carrier, comfort-seekers pay the premium airline. "Balanced" positioning without a cost or value edge is not moderation, it is being everyone’s second choice.

Page: https://tryals.app/practice/business-i/planning-and-strategy/an-airline-offers-mid-range-fares-mediocre-service-average-costs

### 8. Porter argued that a firm pursuing both cost leadership and differentiation usually ends up 'stuck in the middle'. What is the mechanism?

A. Customers cannot understand a firm that offers both, so the brand becomes confusing
B. The two strategies demand opposite activity systems
C. It is a resource constraint; large firms can pursue both successfully
D. Regulators prevent firms from competing on two dimensions at once

**Answer:** B. The two strategies demand opposite activity systems

**Why:** Strategy is a set of reinforcing choices, and the two positions want incompatible ones, so a firm hedging between them inherits the costs of both and the advantages of neither. The point is about trade-offs rather than perception, which is why option 2 mistakes the symptom for the cause.

Page: https://tryals.app/practice/business-i/planning-and-strategy/porter-argued-that-a-firm-pursuing-both-cost-leadership-and