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Business Policy exam
| Question | Answer |
|---|---|
| Romantic view | leader is the key force in the organization's success |
| External control perspective | focus on external factors that affect an organization's success |
| leaders must be aware of | opportunities and threats faced in the external environment and have a thorough understanding of the firm's resources and capabilities |
| A CEO made a lot of mistakes such as committing errors in assessing the market and competitive conditions and improperly designing the organization into numerous business units. Such errors led to significant performance declines. This illustrates | the romantic perspective of management |
| What is strategic management? | Given challenges and opportunities of the global market, managers must do better than set short term strategies and hope for the best |
| Strategic management must become both | a process and a way of thinking throughout the organization |
| leaders in strategic management must be | proactive, anticipate change, and continually refine changes to their strategies |
| Strategic management defined | study of why some firms out perform others, how to compete in order to create competitive advantages in the market place, unique, valuable, and difficult to copy |
| on going processes of strategic management | analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages |
| Strategic management processes- analyses | strategic goals (vision, mission, strategic objectives), internal and external of the firm |
| strategic decisions | formulation, what industries should we compete in? How should we compete in these industries? |
| Actions (implementation) | allocate necessary resources, design the organization to bring intended strategies to reality |
| 2 fundamental questions of strategic management | How should we compete in order to create competitive advantages in the marketplace? How can we create competitive advantages in the marketplace that are unique, valuable, and difficult for rivals to copy or substitute? |
| essence of strategic management is not | operational effectiveness |
| key attributes of strategic management | directs the organization toward overall goals and objectives, includes multiple stakeholders in decision making, needs to incorporate short term and long term perspectives, recognizes trade offs b/w efficiency and effectiveness |
| efficiency | performing actions at a low cost relative to a bench mark- doing things right |
| effectiveness | tailoring actions to the needs of an organization rather than wasting effort- doing the right thing |
| ambidexterity | managers ability to be both proactive in taking advantage of future opportunities as well as in exploiting an existing resource base |
| ambidextrous behaviors in individuals | take time and are alert to opportunities beyond the confines of their own job, cooperative and seek out opp. to combine their efforts with others, brokers, always looking to build internal networks, multitaskers |
| intended strategy | decisions are determined only by analysis- rarely survives in original form |
| realized strategy | decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and changes in managerial preference- combo of deliberate and emergent strategies |
| strategic analysis | consists of advance work that must be done in order to effectively formulate and implement strategies, starting point in the strategic management process |
| strategy formulation developed at several levels: | business, corporate, international, entrepreneurial |
| business level | how to compete in a given level |
| corporate level | what business and how achieve synergy |
| international level | how enter and attain competitive advantage internationally |
| entrepreneurial level | recognize opportunity and formulate effective strategy |
| strategy implementation | ensuring proper strategic controls and organizational designs, establishing effective means to coordinate and integrate activities within the firm as well as with suppliers, customers, and alliance partners |
| corporate governance | the relationship among various participants in determining the direction and performance of corporations |
| board of directors | elected reps of the owners, ensures interests and motives of management are aligned with those of the owners |
| 3 mechanisms to ensure effective corporate governance | an effective and engaged board of directors, shared activism, proper managerial rewards and incentives |
| stakeholder management | firm's strategy for recognizing and responding to the interests of all salient stakeholders |
| stakeholder | individual or group, inside or outside the company, that has a stake in and can influence an organization's performance |
| 2 views of stakeholder management | zero sum view and stakeholder symbiosis view |
| zero sum view | stakeholders compete for attention and resources of the organization, gain of one is a loss to the other |
| symbiosis view | stakeholders are dependent upon each other for their success and well being, mutual benefits |
| Outback steakhouse has developed a sophisticated quantitative model and found that there were positive relationships b/w employee satisfaction, customer satisfaction, and financial results. This is an example of | stakeholder symbiosis |
| crowdsourcing | practice wherein the internet is used to tap a broad range of individuals and groups to generate ideas and solve problems |
| social responsibility | the expectation that businesses or individuals will strive to improve the overall welfare of society |
| proponents claim that social responsibility | burnishes a company's rep and attracts talent |
| detractors will argue that social responsiblitiy | costs too much, is misguided |
| There is an emerging need for empowerment and a strategic management perspective throughout organizations due to | complex, interconnected, and ever changing global economy |
| regarding strategic management, all managers and employees must | take an integrative strategic perspective of issues facing the organization, assess how functional areas and activities fit together to achieve goals and objectives |
| 3 types of leaders in strategic management | local line leaders, executive leaders, internal networkers |
| local line leaders | first line supervisor, have significant profit and loss responsibility |
| executive leaders | champion and guide ideas, create a learning infrastructure, establish a domain for taking action |
| internal networkers | informal leader, little position of power or formal authority, but generate power through conviction and clarity of their ideas |
| organizations express priorities best through | stated goals and objectives that form a hierarchy of goals |
| hierarchy of goals | goals ranging from those that are less specific yet able to evoke powerful and compelling mental images to those that are more specific and measurable |
| organizational vision | goal that is massively inspiring, overarching, and long term, represents a destination that is driven by and evokes passion |
| Why do visions fail? | the walk doesn't match the talk, irrelevance, too much focus leads to missed opportunities, not the holy grail, an ideal future reconciled with the present |
| mission statement | set of goals that include both the purpose of the organization, its scope of operations, and the basis of its competitive advantage, has the greatest impact when it reflects an organization's enduring overarching strategic priorities |
| strategic objectives | goals that are used to operationalize the mission statement, help provide guidance on how to achieve higher level goals, more specific and cover a more well defined time frame |
| strategic objectives are meaningful if | measurable, specific, appropriate, realistic, timely |
| Management innovations such as total quality, benchmarking, and business process reengineering can lead to sustainable competitive advantage. True or false? | False, Porter argues that sustainable competitive advantage cannot be achieved through operational effectiveness alone |
| Strategic management involves the recognition that both effectiveness and efficiency must be fully satisfied. True or False? | False, Strategic management involves the recognition of trade offs between effectiveness and efficiency. |
| The idea that organizations are not only accountable to stockholders but also to the community at large is known as social responsibility. True or false? | False. Social responsibility is the expectation that businesses or individuals will strive to improve the overall welfare of society. |
| Farming out serious tasks to individuals and groups on the internet in known as internetsourcing. True or false? | False, Crowdsourcing was defined as the tapping of the latent talent of the online crowd. |
| Vision statements are less specific than strategic statements. True or false? | True |
| The 4 key attributes of strategic management include | directing the organization toward overall goals and objectives, including multiple stakeholders in decision making, needing to incorporate short term and long term perspectives, recognizes trade offs between effectiveness and efficiency |
| The three components of this approach to corporate accounting include financial, environmental, and social performance measures | triple bottom line |
| Where should the strategic management perspective be emphasized? | throughout the organization |
| What is the hierarchy of organizational goals? (least specific to most specific) | vision statements, mission statements, strategic statements |
| What do effective vision statements include? | massive inspiration |
| external scanning | surveillance of the firm's external environment: predict environmental changes to come, detect changes already under way, proactive mode |
| external scanning alerts the firm to critical trends before | changes have developed a discernible pattern and before competitors recognize them |
| external monitoring | track evolution of environmental trends, sequence of events or streams of activities |
| how to spot hot trends | listen, pat attention, follow trends online, go old school |
| scenario analysis | involves experts detailed assessments of societal trends, economics, politics, technology, or other dimensions of the external environment |
| Firm's strategy must: | build on its strengths, remedy the weaknesses or work around them, take advantage of the opportunities presented by the environment, protect from threats |
| the general environment | factors external to an industry usually beyond a firm's control: demographic, sociocultural, legal/political, technological, economic, global |
| the bargaining power of buyers, buyers threaten an industry by: | forcing down prices, bargaining for higher quality or more services, playing competitors against each other |
| the bargaining power of suppliers | exert power by threatening to raise prices or reduce the quality of purchased goods or service |
| the threat of substitute products and services | limit the potential returns of an industry, ceiling on the prices that firms in that industry can profitably charge, price/performance ratio |
| the intensity of rivalry among competitors in an industry | price competition, advertising battles, product introductions, increased customer service or warranties |
| Five Forces analysis is essentially a | static analysis |
| Global monitoring deals with tracking changes in environmental trends that are often uncovered during the environmental scanning process. True or false? | False, environmental monitoring is tracking the evolution of environmental trends, sequences of events, or streams of activities |
| Technological innovations have no effect on industries. True or false? | False, technological innovations can create entirely new industries and alter the boundaries of existing industries. |
| Industries characterized by high economies of scale typically attract more entrants. True or false? | False, economies of scale deter entry by forcing the entrant to come in at a large scale and risk strong reaction from existing firms or come in at a small scale and accept a cost disadvantage |
| If able to maintain a credible threat of forward integration, the power of suppliers will be enhanced. True or false? | True |
| All automobile makers around the world are in the same strategic group because they manufacture automobiles. True or false? | False |
| This involves developing plausible projections about the direction, scope, and speed of environmental change. | Environmental forecasting |
| These are important elements of the political/legal segment of the general environment. | tort reform, americans with disabilities ace, deregulation of utility and other industries |
| When is the bargaining power of the buyer greater than the supplier? | when the buyer's profit margin is low |
| Under these positions, according to Porter's Five Forces Model, can a supplier group gain power | when there is lack of importance of the buyer to the supplier group |
| from what do exit barriers arise? | specialized assets with no alternative use, governmental and social pressures, strategic interrelationships with other business units within the same company |
| value chain analysis | a strategic analysis of an organization that uses value creating activities |
| value | the amount that buyers are willing to pay for what a firm provides them and is measured by total revenue |
| primary activities | contribute to the physical creation of the product or service, its sale and transfer to the buyer, and its service after the sale |
| types of primary activities | inbound logistics, operations, outbound logistics, marketing and sales, and service |
| support activities | activities of the value chain that either add value by themselves or add value through important relationships with both primary activities and other support activities |
| types of support activities | procurement, technology development, human resource management, and general administration |
| operations | associated with transforming inputs into the final product form |
| resource based view of the firm | perspective that firms competitive advantages are due to their endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute |
| 2 perspectives of resource based view | the internal analysis of phenomena within a company and an external analysis of the industry and its competitive environment |
| firm resources and sustainable competitive advantages | the resource must be valuable in the sense that it exploits opportunities and neutralizes threats in the firm's environment and it must be rate among firm's current and potential competitors |
| sources of inimitability | physical uniqueness, path dependency, causal ambiguity, social complexity |
| path dependency | resources are unique and therefore scarce because of all that has happened along the path followed in their development and/or accumulation |
| financial ratio analysis | balance sheet, income statement, historical comparison, comparison with industry norms, comparison with key competitors |
| stakeholder perspective | employees, customers, owners |
| customer perspective | time, quality, performance and service, cost |
| internal business perspective | processes, decisions, actions, coordination, resources and capabilities |
| innovation and learning perspective | introduction of new products and services, greater value for customers, increased operating efficiencies |
| primary activities do not contribute to the physical creation of a product or service, its sale and transfer to the buyer, and its service after the sale. true or false? | false, they do contribute to all listed |
| research and development is a narrower concept than technology development. true or false? | true |
| products and services that are easy to imitate help firms sustain their profitability. true or false? | false, inimitability is a key value creation because it constrains competition |
| a primary detriment of the balanced scorecard is that it fails to complement financial indicators with operational measures of customer satisfaction, internal processes, and the organization's innovation and improvement activities. true or false? | false, its a method of evaluating a firm's performance using performance measures from the customers', internal, innovation and learning, and financial perspectives |
| an important implication of the balanced scorecard is that managers need to look at their job as primarily balancing stakeholder demands. true or false? | false, a key implication of the balanced scorecard is that managers do not need to look at their job as primarily balancing stakeholder demands |
| this includes all activities associated with transforming inputs into the final product form. | operations |
| the resource based view of the firm suggests that these are due to the firms' endowment of strategic resources that are valuable, rare, costly to imitate, and costly to substitute | competitive advantages |
| these are examples of socially complex organizational phenomenas | a firm's culture, interpersonal relations among a firm's managers, a firm's reputation with its suppliers and customers |
| these ratios reflect whether or not a firm is efficiently using its resources | turnover ratios |
| from which perspectives does the balanced scorecard enable managers to consider their business? | customer perspective, internal perspective, innovation and learning perspective |
| case analysis | a method of learning complex strategic management concepts |
| differentiate | evaluate many different elements of a situation at once |
| speculate | envision explanation that might not readily be apparent |
| integrate | have an organization wide perspective |
| prepare for a case discussion | investigate, analyze, research potential solutions, gather the advice of others, become immersed in facts, options, and implications |
| tools to conduct an analysis | five forces model, value analysis, contingency frameworks, financial ratio analysis |
| financial ratio analysis | method of evaluating a company's performance and financial wellbeing through ratios of accounting values, including short term solvency, long term solvency, asset utilization, profitability, and market value ratios |
| preparing an oral case presentation | organize your thoughts, emphasize strategic analysis, be logical and consistent, defend your position, share presentation responsibilities |
| preparing a written case analysis | be thorough, coordinate team efforts, avoid restating the obvious, present information graphically, exercise quality control |
| how to get the most from a case analysis | keep an open mind, take a stand for what you believe, draw on your own personal experience, participate and persuade, be concise and to the point, think outside the box, learn from the insights of others |
| devils advocacy | a method of introducing conflict into a decision making process by having specific individuals or groups act a critic to an analysis or planned solution |
| dialectical inquiry | a method of introducing conflict into a decision making process by devising different proposals that are feasible, politically viable, and credible, but rely on different assumptions; and debating the merits of each |
| symptoms of groupthink | an illusion of invulnerability, a belief in the morality of the group, stereotyped view of members of opposing groups, the application of pressure to members who express doubts ab the groups shared illusions or questions |
| competitive intelligence | helps firms define and understand a firm's industry, identify rival's strengths and weaknesses, helps avoid surprises |
| demographic segment examples | aging population, rising or declining affluence, changes in ethnic composition, geographic distribution of population, greater disparities in income levels |
| socioculural segment examples | more women in the workforce, dual income families, increase in temporary workers, greater concern for healthy diets and physical fitness, greater interest in the environment, postponement of having children |
| political/legal segment examples | health care reform, ADA, increased regulation of banking, deregulation of utility and other industries, increases in federally mandated minimum wages |
| technological segment examples | genetic engineering, emergence of internet technology, computer aided design, wireless communication, nanotechnology, research into exotic materials |
| economic segment examples | interest rates, unemployment, consumer price index, trends in GNP, changes in stock market valuations |
| global segment examples | increasing global trade, currency exchange rates, emergence of the Indian and Chinese economies |
| Why does a manager need to know 5 forces model? | helps determine whether to remain in an industry or exit, provides rationale for increasing or decreasing resource commitment, helps assess how to improve firm's competitive position relative to each of the forces |
| the threat of new entrants | profits of established firms in the industry may be eroded by new competitors |
| sources of entry barriers | economies of scale, product differentation, capital requirement, switching costs, access to distribution channels, cost disadvantages independent of scale |
| economies of scale | spreading costs of production over number of units, costs decline as volume increases |
| product differentiation | strong brand and customer loyalty, barrier forcing high spending by competition |
| capital requirements | need to invest large financial resources |
| switching costs | barrier exists if one time switching costs exist when going from one product to another |
| access to distribution channels | new entrant needs to secure distribution for product |
| cost disadvantages independent of scale | proprietary products, favorable access to raw materials, government subsidies, favorable government policies |
| a buyer group is powerful when | concentrated or purchases large volumes relative to sales, products are standard, faces few switching costs, earns low profits, credible threat of backward integration, product is unimportant to the quality |
| a supplier group is powerful when | dominated by a few companies and is more concentrated than industry it sells to, not obliged to contend with substitute products for sale to the industry, not an important customer of supplier, product is important input to the quality, products are diff. |
| vertical dimension | suppliers and customers-direct transactions |
| horizontal dimension | substitutes and complements-firm interacts but no direct transaction |
| complements | products or services that have a potential impact on the value of a firm's own products or services |
| the point of industry analysis is not to declare the industry attractive or unattractive but to | understand the underpinnings of competition and the root causes of profitability |
| 2 unassailable assumptions in industry analysis | no two firms are totally different, no two firms are exactly the same |
| strategic groups | cluster of firms that share similar strategies, breadth of product, price/quality, degree of vertical integration, type of distribution system |
| value of strategic groups as an analytical tool | identify barriers to mobility that protect a group from attacks by other groups, identify groups whose competitive position may be marginal, chart the future direction, thinking through the implications of each industry trend |
| to get the most from value chain analysis | view concept from broadest context, place organization in broader value chain that includes suppliers, customers, and alliance partners, know own value chain |
| inbound logistics | associated with receiving, storing, and distributing inputs to the product, location of dist. facilities, material and inventory control systems, systems to reduce time to send returns to suppliers, warehouse layout and designs |
| outbound logistics | associated with collecting, storing, and distributing the product or service to buyers, effective shipping processes to provide quick delivery and minimize damages, efficient finished goods warehousing processes, shipping of goods to large lot sizes |
| marketing and sales | associated with purchase of products by end users and the inducements used to get them to make purchases |
| service | associated with providing service to enhance or maintain the value of the product |
| procurement | function of purchasing inputs used in the firm's value chain |
| human resource management | activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel |
| technology development | related to a wide range of activities and those embodied in processes and equipment and the product itself |
| general administration | typically supports the entire value chain and not individual activities |
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