Common exam mistakes, with why they cost points and how to do it right. (67 mistakes)
In a PESTEL question, writing that competitors or buyers cause a development.
Why it goes wrong. Competitors and buyers belong to Five Forces (module 2), not the macro-environment. It shows you mix up the two models.
Name the PESTEL factor (Political, Economic, Social, Technological, Ecological, Legal) that fits the development and justify it in one sentence.
Filling in PESTEL as a list of six boxes without choosing what really matters.
Why it goes wrong. PESTEL is not a fill-in matrix. The marking scheme rewards the key drivers for change: the factors with the biggest impact on the industry.
Name the factors with the most impact, explain why, and show that factors are linked (for example AI touches economic, social and ecological).
In scenario analysis, calculating probabilities or picking a 'most likely' scenario.
Why it goes wrong. Scenario analysis does not predict. Forecasting predicts; scenarios explore alternative futures.
Say that scenarios let the firm test its strategy for robustness across several possible futures, without assigning probabilities.
Choosing two drivers that strongly influence each other (for example policy and subsidy) and building four scenarios from them.
Why it goes wrong. The axes must be independent. Otherwise scenarios drop out and the matrix gives false certainty.
Pick two drivers with high impact and high uncertainty that are not related to each other.
Describing an emergent strategy as a bad plan or as 'no strategy'.
Why it goes wrong. Emergent means arising bottom-up through experimenting and learning. Realized strategy is deliberate plus emergent and can differ from the intended strategy.
State: not planned, arose on the work floor, and the realized strategy consists of a deliberate and an emergent part.
Writing 'most profitable player' as the objective in a strategy statement.
Why it goes wrong. An objective is quantified and time-bound. This has no number and no deadline.
An objective with a number and a year, for example a revenue or market share target by a given year.
In the scope of a strategy statement, naming only what the firm does.
Why it goes wrong. A good scope also says what you do not do. Without those choices it is a wish list, not a scope.
Name customers, offering, geography and vertical integration, and give at least one clear exclusion.
Treating competitive advantage as 'we are cheaper' without the internal alignment.
Why it goes wrong. Competitive advantage has two parts: the customer value proposition and the activity system that only you can deliver this way.
Name the value proposition and the internal alignment, including the trade-offs that protect the choice.
Mixing up corporate strategy and business strategy.
Why it goes wrong. Corporate strategy is about scope and portfolio of the whole group; business strategy is about competing in one market. Mixing them means missing the level of the question.
First place the question at the right level of strategy (corporate, business, functional) and answer within it.
Writing a general management truth ('clear communication is important') without a concept from the course.
Why it goes wrong. Without a model or concept there is nothing to award points for. The marking scheme rewards the link to the material.
Name the model in English, apply it to a fact from the case and draw a conclusion.
Presenting a descriptive theory as an instruction for what to do.
Why it goes wrong. Descriptive theory explains how strategy arises; prescriptive theory says what you should do. The two do not exclude each other.
For each theory say whether it describes or prescribes, and show that they complement each other.
Writing 'competition' where rivalry is meant.
Why it goes wrong. In Porter's eyes all five forces are competition. With 'competition' it is unclear which force you mean and you lose the points for the term.
Use the name of the force: threat of entry, threat of substitutes, buyer power, supplier power or rivalry.
Judging the forces from the wrong party, for example from the buyer when the question is about the supplier.
Why it goes wrong. Five Forces says how profitable the industry is on average for the players in it. High entry barriers are good for incumbents, not for the entrant.
State explicitly from whose perspective you reason and whether the effect is favourable or unfavourable for that party.
For buyer power, writing only 'the buyers are powerful' without drivers from the case.
Why it goes wrong. The marking scheme gives points per driver: buyer concentration, low switching costs, threat of backward integration.
Name three drivers with a fact from the case and finish with stronger or weaker.
Looking for a substitute inside the own industry.
Why it goes wrong. A substitute comes from outside the industry and meets the same need. Another brand or a rival is not a substitute.
Name a product from another industry that meets the same need, with the price/performance ratio and the switching costs.
Confusing an industry with a single firm or with a market segment.
Why it goes wrong. An industry is a group of firms that in essence deliver the same product or service. Without a sharp definition the rest of the analysis does not hold.
Start by delimiting: vertical, product or service, geographic. Only then apply the forces.
Assuming a cost leader always charges the lowest price.
Why it goes wrong. Cost leadership means lowest costs, not necessarily lowest price. The cost leader can charge the same price and earn a larger margin.
Separate cost from price and judge in the case which of the two happens.
Thinking a generic strategy removes the forces.
Why it goes wrong. A generic strategy protects you relative to the average player; the forces remain.
Say the strategy gives you a better position within the forces, and that the industry structure stays the same.
For a source of cost advantage, writing only 'scale'.
Why it goes wrong. Scale is too bare. The marking scheme wants a recognisable source with an explanation.
Pick from economies of scale, experience curve, input costs or design, and explain how it leads to lower costs.
Mistaking a business model for a strategy.
Why it goes wrong. A business model describes how value is created, delivered and captured; a strategy is about choices in competition.
Name the three parts (creating value, delivering value, capturing value / value capture) and keep it separate from strategy.
Calling complementors competitors.
Why it goes wrong. A complementor makes your product more valuable to the customer. They belong in the ecosystem view, not in rivalry.
Explain that a complementor raises the value of your offering and give an example from the case.
Applying the industry life cycle to a firm instead of the industry.
Why it goes wrong. The phases (introduction, growth, shake-out, maturity, decline) describe the industry. A firm can behave differently from the phase.
First place the industry in a phase and then explain what it means for rivalry and price pressure.
Describing dynamic capabilities as 'skills that change'.
Why it goes wrong. Too tautological and it misses the core. Eisenhardt and Martin call them specific, identifiable routines.
Define as processes or routines that use resources to match or create market change, with a concrete example such as product development or acquisition routines.
Only listing sensing, seizing and reconfiguring.
Why it goes wrong. A list is not an explanation. The lecturer calls them outcomes; the marking scheme wants you to explain what happens.
Explain each of the three in one sentence and give a routine that makes it possible.
Calling a one-off adaptation a dynamic capability.
Why it goes wrong. A dynamic capability is repeatable and specific to the organisation. A one-off product or project is not.
Test: is it a repeatable routine with repeated results? If yes, dynamic capability; if no, it is not.
Not stopping at the first 'no' in VRIO, or stopping after inimitability.
Why it goes wrong. Each criterion is necessary. If you forget organisational support you miss that the advantage does not carry through. Saying yes after a no makes the table inconsistent.
Go through the four criteria in order, stop at the first no and then conclude according to the table.
Mixing up temporary and sustained competitive advantage.
Why it goes wrong. Valuable and rare without inimitable gives a temporary competitive advantage. Only with all four criteria is it sustained.
Tie the conclusion to the number of criteria you answer with yes: parity, temporary or sustained.
Saying something is 'never' imitable under inimitability.
Why it goes wrong. The lecturer finds 'never' too strong. 'Extremely hard' is defensible.
Name a source (causal ambiguity, path dependency or complexity) and link it to a fact in the case.
Seeing threshold resources as a source of advantage.
Why it goes wrong. Threshold resources and capabilities are the minimum to take part and lead to parity. Only distinctive resources give competitive advantage.
Say: threshold gives entry and parity; distinctive is valuable to customers and hard to imitate.
Equating resources with money.
Why it goes wrong. Resources are broader: physical, financial, human, intangible. Money is only one part.
Make the distinction: a resource is what you have, a capability is what you can do with resources. Justify your classification briefly.
Using a SWOT as a replacement for PESTEL, Five Forces and VRIO.
Why it goes wrong. SWOT is a summary, not an analysis. Without the underlying analysis SWOT leans on prejudice and vagueness.
Say that SWOT confronts internal and external and produces strategic options via the TOWS matrix.
Writing a long list in a SWOT (listing).
Why it goes wrong. Long lists without priority give no strategic direction and earn no points for the conclusion.
Prioritise, look relative to competitors and draw a concrete conclusion.
Claiming 'unique' without saying for whom.
Why it goes wrong. Outside-in: unique only exists relative to customers, market and competitors.
Say for which customers and against which competitors the resource or capability is valuable and rare.
Mixing up Coase and Williamson.
Why it goes wrong. Coase is about transaction costs and the size of the firm; Williamson about opportunism and asset specificity. Mixing them earns fewer points on both parts.
Use Coase for 'why does the firm exist / why in-house'; use Williamson for 'buy or make' with the three characteristics.
With Coase, writing 'it is cheaper' without naming or splitting transaction costs.
Why it goes wrong. The marking scheme gives points for the term and for the link to the case (search, bargaining and enforcement costs).
Name transaction costs, split them into search, bargaining and enforcement costs and link one to a fact in the case.
With Williamson, treating only one of the three characteristics of opportunism.
Why it goes wrong. Opportunism is large with few alternatives, complex and changing circumstances and asset specificity. The question demands all three.
Treat all three with case evidence, name backward or forward integration and close with advice.
Confusing market development and diversification.
Why it goes wrong. In market development the product stays the same and goes to a new market or geography. Only a new product in a new market is diversification.
First check two questions: new product? new market? Then name the direction in the Ansoff matrix.
Naming an Ansoff direction without an advantage backed by the case.
Why it goes wrong. The marking scheme gives the direction and the advantage separate points, often with a number from the case.
Name the direction, then one or two advantages with a fact from the case, and only then the limitation (retaliation, legal or economic constraints).
For 'name a diversification driver', naming three without the case, or only saying 'spreading risk'.
Why it goes wrong. Spreading risk is a potentially value-destroying driver: shareholders spread risk themselves. Without that nuance and case evidence points are lost.
Name a driver in English (for example economies of scope), explain and give case evidence. For spreading risk, mention the nuance.
Describing economies of scope as 'bigger is cheaper'.
Why it goes wrong. That is economies of scale. Scope is about the same resources or capabilities serving more activities.
Say which shared resource or capability serves several activities, tangible or intangible.
Naming all three parenting roles when asked for one role.
Why it goes wrong. The question wants you to recognise the role that fits the case. Listing is not choosing.
Choose the role (portfolio manager, synergy manager or parental developer) and justify with the size and emphasis of the head office.
Describing a value trap as something bad.
Why it goes wrong. A value trap looks attractive: fit on the opportunities, misfit on the KSFs. That is the danger.
Explain the fit and the misfit and often advise divesting.
Treating the BCG matrix and the parenting-fit matrix as the same thing.
Why it goes wrong. BCG looks at market growth and relative share; the parenting-fit matrix at the value added by the parent. They can lead to different advice.
Say what each matrix measures, and explain why a business can end up in a different place.
Equating conglomerate diversification with always bad.
Why it goes wrong. The conglomerate is distrusted because the added value of the parent is unclear, not because it is wrong by itself.
Link to parenting advantage: is there a reason why the business does better under this parent?
For 'name a Yip driver', naming only the label (for example 'cost driver').
Why it goes wrong. A label without explanation and case earns only part of the points. The marking scheme wants the driver, how it works and the link to the case.
Name a driver (market, cost, competitive or government), explain with the key terms (similar customers, scale economies, trade policies) and link to a fact.
Thinking only one Yip driver is right.
Why it goes wrong. Often several drivers are defensible. The marking scheme gives points for a consistent justification.
Choose the driver that fits best and justify it consistently with the case.
Seeing the four strategies of Bartlett & Ghoshal as a free choice.
Why it goes wrong. They are stages in a development path under increasing competitive pressure. Transnational is more and more a necessity.
First determine how high the pressures for global integration and local responsiveness are, name the reason from the case and then choose.
Swapping multi-domestic and global.
Why it goes wrong. Global has high integration pressure and low local pressure; multi-domestic is the other way round. Getting it backwards costs the full points.
Link: high integration pressure / low local pressure = global; low integration pressure / high local pressure = multi-domestic.
For entry mode, writing only 'an acquisition is cheaper'.
Why it goes wrong. Cheaper is not proven. The advantage of an acquisition over greenfield is speed and that a failed one is easier to sell on.
Name speed and resaleability, then give the drawback (culture, valuation, unwanted parts).
Choosing an entry mode without using urgency, uncertainty and soft capabilities.
Why it goes wrong. These are the choice factors from the book. Without them the choice is an opinion.
Make the choice explicit, use urgency and uncertainty, name advantages and drawbacks and address soft capabilities such as culture.
Using CAGE as a quality judgement about a country.
Why it goes wrong. CAGE measures the distance between two countries, not the quality of a country.
Use the four distances (Cultural, Administrative, Geographic, Economic) and name at least one, between home country and target country.
Confusing Internalization with internationalization.
Why it goes wrong. In Dunning's OLI, Internalization is about doing it yourself instead of licensing or using the market, not about going international.
Name the three parts: Ownership, Location and Internalization, and explain Internalization as keeping control.
Writing liabilities of foreignness as only 'language barrier'.
Why it goes wrong. LOF are the extra costs relative to local competitors: unfamiliarity, discrimination and the geopolitical home front. Language is only a part.
Name unfamiliarity with the context, discrimination and geopolitics, and weigh them against the advantages from OLI.
Treating geopolitics as a one-off disaster.
Why it goes wrong. Geopolitics is a structural factor in international strategy and fits administrative distance in CAGE.
Link to CAGE and use the term conflict equilibrium: a stable, self-reinforcing state of counteraction between states.
Applying Porter's diamond to a firm instead of a country or cluster.
Why it goes wrong. The diamond explains why certain industries are internationally successful in certain countries.
Use the four corners (factor conditions, demand conditions, related and supporting industries, firm strategy and rivalry) for a country or region.
Calling the axis in the power/attention matrix 'interest'.
Why it goes wrong. The axis is called attention, not interest. The marking scheme rewards the right axes.
Use power and attention, place each stakeholder and name the approach: key players cultivate support, sleeping giants keep satisfied, gadflies information provision.
Putting a stakeholder in one place for ever.
Why it goes wrong. Positions differ per issue, and a gadfly can wake a sleeping giant.
Determine the position per issue and mention the risk that a gadfly wakes a sleeping giant.
Choosing a CSR stance based on what the annual report says.
Why it goes wrong. You place an organisation on what it does, not on what it says.
Use behaviour from the case to justify the stance (laissez-faire, enlightened self-interest, forum for stakeholder interaction, shaper of society).
Equating laissez-faire with unethical.
Why it goes wrong. Laissez-faire means the firm obeys the law. That is not the same as unethical.
Say: only comply with the law, peripheral leadership, defensive mode.
Mixing up identity, image and culture.
Why it goes wrong. Identity is how insiders see the organisation, image how outsiders see it, culture what really happens.
Use the three terms separately and use the cultural web (paradigm, stories, symbols, rituals & routines, power structures, organisational structures, control systems) for culture.
Describing strategic drift as doing nothing.
Why it goes wrong. The organisation does change, but too little and too slowly relative to the environment.
Name the gap with the environment and the four phases: incremental change, strategic drift, flux, transformation or death.
Confusing adverse selection and moral hazard.
Why it goes wrong. It is about timing: adverse selection before the contract (the agent knows more about what he can do), moral hazard after the contract (behaviour changes).
Name the moment, recognise the problem from the behaviour in the case and name a measure such as monitoring or adjusted incentives.
Equating the agency problem with principal-principal.
Why it goes wrong. Agency is about principal and agent; principal-principal about clashes between large and small shareholders. They are different problems.
Use agency for the relation between owner and manager and name the matching governance measure.
In SAFE, using return as the only measure of acceptability.
Why it goes wrong. Return is only a part of acceptability. A financially strong option can fail on stakeholder Reactions (the 3 R's).
Treat Suitability, Acceptability (Risk, Return, stakeholder Reactions) and Feasibility explicitly and separately.
In the payback or gap analysis, not showing how you calculate.
Why it goes wrong. In a calculation question the partial points are for the calculation, not only for the final number.
Write the formula and the intermediate step (gap = target minus current, payback = investment divided by annual return).
Confusing procedural justice and distributive justice.
Why it goes wrong. Procedural justice is about a fair process (the three E's: Engagement, Explanation, clarity of Expectations), distributive about a fair outcome.
Name at least two of the three E's to prevent resistance and say which kind of justice it is.
Treating planning and financial control as the same Goold & Campbell style.
Why it goes wrong. They are different parenting styles with a different emphasis on steering and numbers.
Name the style and link it to the way head office steers.