MGMT 5760 Exam review

What is the balanced scorecard and its role in execution?

A balanced scorecard is a strategy performance management tool - a well structured report, that can be used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions.

horizontal differentiation

A condition arising in a market in which different consumers prefer different goods—that is, no good is acknowledged by all consumers as the best.

vertical differentiation

A condition arising in a market in which goods differ only in quality and, while all consumers prefer goods of higher quality, buyers differ in their willingness to pay for quality.

What are the advantages of ownership versus contractual relationships?

A contract by its very nature has to be equitable and has to give equal rights to all contracting parties. Therefore, a contract is limited in its scope

What are the basic premises of portfolio matrix? How can it serve as a tool for strategic managers?

A portfolio matrix is a chart used to define products in terms of both the growth in their industry and their specific market share, by assessing a firm's prospects for success within the industries in which it competes.

opportunity gap

A qualified assessment of the discrepancy between current results and those achievable by successfully pursuing a new opportunity, whether a new product, technology, service, or business model. The other trigger (see performance gap) for rethinking strategy formulation or execution.

willingness to pay

A reflection of the maximum the customer thinks a product or service is worth. This criterion is considered in pricing products and services.

value proposition

A statement which conveys why a buyer should buy a company's product or service

dual competitive advantage

A strategy based on providing a superior product while achieving a lower cost than the competition.

According to the article on hyper-differentiation - All answers are correct. With proper differentiation, firms may reap superb profits without scale in marketing or operation. The more people know about the competition, the more they are likely to differentiate. Differentiation is a strategy often used by smaller companies.

All answers are correct.

value chain

An analytical tool that catalogs the distinctive activities of a firm, in all functions.

cost drivers

Any factors that change the cost of performing an activity.

What are the different types of corporate strategies? What are their advantages and disadvantages for a corporation?

Business and corporate-level strategies differ primarily in their objectives. A business strategy focuses on competing in the marketplace, while a corporate strategy focuses on business growth and profits. Corporate strategies function at a higher level than business strategie

One of the videos you watched links the BCG matrix to stages of the industry / product life cycle. Which of the following is NOT a correct statement?

Companies classified as "dogs" are often found in industries that are in the growth stage.

Key success factors for differentiation strategy include all the following, EXCEPT

Having lower costs than the competition.

What is the technology s-curve ?

The Technology S-Curve of Innovation/product life cycle is a robust framework that can be used to analyze various products at their different stages and to explain their successes and failures.

ambidexterity

The ability to simultaneously manage existing core businesses (see exploitation)—maintaining stability and overseeing continuous improvement—and to pursue new opportunities (see exploration)—specifically, nurturing experimentation and discontinuous change through innovation streams. Ambidexterity is critical to sustaining competitive advantage and to an organization's enduring success. Ambidexterity applies to an organization as well as its leaders.

congruence

The alignment between strategy formulation and execution, as well as between and among the four organizational elements (or building blocks) by which strategy execution is carried out. All these relationships must be in harmony. (The four organizational elements are critical tasks, the formal organization [metrics, rewards, and organizational structure], skills and competencies, and culture.) Congruence enables the business to achieve its business design

willingness to pay (WTP)

The maximum amount a customer is willing to pay in order to obtain a good or service

Asset specificity is more likely to be a characteristic of a company involved in long-term contractual relationships than of a company that sell only in the spot market.

True

Opportunity gaps can be a catalyst for organizational change.

True

The perspective of industries, as introduced in Christensen's concept The Innovator's Dilemma, suggests that industries are ---

dynamic

transformation

A fundamental change in how business is done in order to adapt to major changes in the business environment, whether external (such as a disruptive technology) or internal (such as poor performance). Types of transformations include adopting a new organizational strategy, executing a turnaround (which may or may not include a restructuring), and implementing a new business process, such as a quality program or new IT platform.

milestone

A progress check or assessment that represents a decision point. Appropriate for innovation streams or early-stage businesses, in which many variables (such as production time or overhead costs) are quickly changing or unpredictable. Milestones are also used when metrics are unavailable or could be counterproductive. Milestones are softer and often related to learning: for example, "Have we acquired a piece of knowledge yet?" "Have we tested it?"

performance gap

A quantified shortfall between actual results and desired results. One of the triggers (see opportunity gap) for rethinking strategy formulation or execution.

differentiation strategy

A strategy based on offering products or services that are superior in quality, reliability, or prestige to those of competitors and thus command a higher price

low-cost strategy

A strategy based on the ability of a firm to provide a product or service at a lower cost than its competition.

matrix structure

A type of organizational structure that is organized around products as well as functions or geographies (or both). In such a structure, a sales manager for Product A would report to two people, the head of Product A and the company's head of sales. Common in large, global, multiproduct organizations.

Why do firms find dealing with disruptive technologies and innovation challenging?

According to Christensen, one of the reasons why building disruptive innovation is challenging for large organizations is because these companies depend on customers and investors for resources.

What is organizational ambidexterity? Why is it a challenge to manage?

According to organizational theorists O'Reilly and Tushman, ambidexterity is a dynamic leadership capability, "to orchestrate the complex trade-offs that the simultaneous pursuit of exploration and exploitation requires" (O'Reilly III & Tushman, 2011).

Why does a firm need a corporate strategy? To decide how to structure the relationship between its businesses To create synergy between business units To manage more than one business unit or compete in more than one industry To decide which industries it should operate in All answers are correct

All answers are correct

All the following are reasons why firms have different production costs, except - quality of products product design learning and experience economies of scale All options affect production costs.

All options affect production costs.

A commonality among the BCG matrix, the McKinsey matrix, and the ADL portfolio method approaches is that: all explicitly or implicitly suggest in which SBUs the conglomerate should invest more or less in. All options are correct. all consider the overall attractiveness of the SBU industry. all consider the overall strength of the SBU.

All options are correct.

Firms are unable to calculate accurately how much customers would be willing to pay for any set of activities because willingness to pay often depends on __________. All options are correct. intangible factors. perceptions. multiple parties, such as intermediaries.

All options are correct.

A challenge associated with acquisitions include which of the following? Personnel in both acquired and acquiring firms may not want to collaborate. All statements are associated with the challenges of acquisitions. Acquirers need time to decide which assets of the acquired firm need to be kept and which need to be disposed of. Cultural differences between acquired and acquiring firms make integration of knowledge difficult. Acquirers have a general idea of what assets in the acquired firm are valuable, but need time and money to gain deep understanding on how to create value.

All statements are associated with the challenges of acquisitions.

All the following are correct statements about the "question mark" companies, EXCEPT- All statements are correct. Question marks that strengthen their competitive position can become "stars". A question mark company should not be automatically divested because it has the potential to become a contributing unit to the corporation. Question marks need to be constantly evaluation by the corporation.

All statements are correct.

Considering the three approaches for corporate portfolio analysis, which is a correct statement? All statements are correct. The ADL approach is the most participative in setting much of the analysis as a result of the work and input of as a function of collaboration within the scope of the managers of the corporation. The three approaches reflect a consulting approach, where the consulting firm is involved to varying degrees in the portfolio analysis and recommendation process. Of the three approaches, the BCG approach relies on the expertise of consultants in researching and determining the dimensions of the portfolio.

All statements are correct.

When an organization has multiple businesses (such as GE), its strategy entails which of the following? The possibility of providing different degrees of funding for each business. Considering the different cultures of each of the businesses. All statements are correct. Identifying different characteristics of each business such as its growth rate or level of uncertainty in its environment.

All statements are correct.

Competitive advantage - All the answers are correct. occurs when a firm's range of activities (i.e., production, finance, marketing, logistics, etc.) act in harmony as a set of integrated choices. refers to intra-industry competition. refers to how a firm does something unique to create added value.

All the answers are correct.

Skunk Works

An innovation project developed by a small group of people in a closed environment removed from the company's main operations. The project team is given special resources and works on an accelerated basis to develop what is generally a radical innovation. The term originated with a Lockheed project during World War II.

Understanding the predictability of the industry life-cycle model is required for constructing which corporate portfolio method?

Arthur D. Little SBU system

What is disruptive technology? What is creative destruction? What are the implications for new innovators and for existing companies?

Disruption displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile. It is at once destructive and creative. Sustaining innovations are typically innovations in technology, whereas disruptive innovations change entire markets.

What are dynamic capabilities and why are they important?

Dynamic capabilities are the characteristics that allow businesses to adapt to quickly changing circumstances while maintaining a competitive advantage. They are important to a company's long-term success.

According to the reading, which of the following is NOT a potential source of negative synergy?

Economies of scale

A company that is successful at increasing the willingness of its customers to pay without experiencing additional costs was essentially implementing a low-cost strategy.

False

A firm with innovative capabilities will generally favor the use of low-cost strategy.

False

According to Christensen, when a corporation is faced with disruptive innovation, the best way to capitalize on the innovation is by getting the most successful business unit to reorganize and incorporate the innovation into its business model.

False

According to Geoffrey Moore, the best way to achieve adoption of an offering based on a new technology by the majority of mainstream customers is by targeting three to four different markets.

False

As a general rule, the best way a supplier can capture the most value is if it announces its opportunity costs so it is known to the company it negotiates with.

False

Firms producing commodity type products should only focus on low-cost because such products cannot be differentiated.

False

Firms that do not add any value can still be very profitable and competitive.

False

First-mover advantage was an important factor in Amazon's success.

False

Inertia, following procedures, and existing strong culture will typically increase the prospects of the successful execution of strategy.

False

Low-cost strategy is limited to products, while differentiation strategy is offered in both products and services.

False

Portfolio planning dictated that "cash cows" should not be maintained, but "dogs" should be.

False

The ride-sharing company Uber is an example of technological convergence.

False

The smaller the differentiation, the smaller the market segment to which a product will appeal.

False

The strategic approach implied from the McKinsey's matrix is that firms operating in an industry that is very attractive and which hold a strong competitive position, should be divested or harvested.

False

added value

For a participant or a firm, the value created by all participants in a transaction minus the value remaining when the participant or firm in question is eliminated.

How do the principles of generic strategies work? What does it mean to be the differentiator or the low-cost leader in the industry?

Generic strategies as the name suggests are generic in nature and is a way for a company to pursue its competitive advantage across the market scope of choice. While the advantage can be in the form of low cost or product differentiation the scope can be broad (Industry-wide) or narrow (Market Segment

Activities that account for a large part of the cost of a product or service should be given a _______ priority for conducting a cost analysis.

High

The Technology S curve suggests all the following, except -

It indicates the increasing rate at which new technologies are introduced

What is the role of organizational structure and culture in implementation of strategy?

It is shown that organizational culture influences the strategy formulation by determining the gathering of information, perception and interpretation. Also, organizational culture can, through the process of legitimization, facilitate or disable strategy implementation.

Which of the following is correct, regarding the concept of ambidexterityas discussed in the context of strategy execution?

It refers to managers' ability to manage existing core businesses and to pursue new opportunities simultaneously.

Which of the following is not an example of an organization that uses network effects as a strategic focus?

McDonalds

performance metrics

Measures of various business activities (or outcomes) that indicate whether an organization is meeting its operational or strategic goals. Examples include market share, customer profitability, revenues, percentage increase in sales over a period, service-call response time, number of items shipped on time.

What are network effects and how can it help with competitive advantage?

Network effects can decrease the viability of new, technologically superior entrants to the market, helping incumbent projects maintain a competitive advantage and continue to expand.

Which of the following four elements are core to execution in the congruence model?

Skills and competences, critical tasks, culture, formal organization

What is the role of complementary assets and switching costs in technology strategy?

Specifically, switching costs are found to be positively associated with technology commitment and patronage. Further, compatibility strategy is associated with the costs involved in switching away from incumbent technology because of an abundant or varied supply of complementary goods.

GreatAthlete is a company that manufactures athletic footwear. It buys most of it raw materials in competitive markets, through one time transactions mostly, from different suppliers, as needed. Such transactions are -

Spot market transactions

_________ inertia is the resistance to chance rooted in the size, complexity, and interdependence in the organization's structures, systems, and formal processes.

Structural

When an incumbent firm tries to defend against attack by new entrants trying to exploit a new technology, which of the following is NOT a strategy to use?

Technological leapfrogging

What information is needed to position SBUs in the matrix?

The Generic Business Strategy Matrix is divided into competitive position and market growth. The portfolio analysis provides the information required to position SBUs in the matrix. This matrix offers viable strategies for a company to consider, which are listed in the matrix's quadrants in descending order of attractiveness.

dynamic capabilities

The ability to adapt, integrate, and reconfigure organizational skills and resources to respond to changing environments, including evolving markets, customer priorities, and technologies. Dynamic capabilities enable companies to leverage skills and assets to achieve the strategies called for by their emerging as well as mature businesses.

mass customization

The approach of using information and production technologies to tailor products to individual customers while still serving a wide variety of customers

unrestricted bargaining

The assumption that participants or firms are free and able to form coalitions with all other firms or participants without limitations.

The firms labeled as Star in the BCG matrix can shift on the matrix. Which of the following is NOT an explanation of a hypothetical trajectory of such a shift?

The firm can become a "cash cow" if it loses its relative market share.

First versus second movers - advantages and disadvantages

The first move usually manages to set the price of its choosing, develops loyal customers, and increases the market share. The Second mover is the business that follows the success lead of the first-mover's business. The second mover doesn't have to incur a lot of research and development costs.

exploration

The fostering of experimentation and discontinuous change through innovation in pursuit of new business opportunities; the other side of ambidexterity (see exploitation), which organizations carry out to sustain competitive advantage and long-term success.

structural inertia

The inertia, or resistance to change, fostered by the structural characteristics of an organization—its complexity and interdependence among structures, systems, and processes.

cultural inertia

The institutionalized learning and common expectations that are reflected in the informal norms, values, social networks, and other elements of culture.

supplier opportunity cost (SOC)

The minimal amount a supplier is willing to accept for the efforts and resources required to produce a product or service.

exploitation

The optimization of efficiencies and the implementation of continuous improvements in an established business to extract maximum advantage; one of the two sides of ambidexterity. Organizations balance exploiting and exploring (see exploration) to sustain competitive advantage and long-term success.

All the following is correct about customer relationship strategy EXCEPT

The strategy is typically associated with lower costs, like a low-cost provider.

A key characteristic of information goods is that

They are inexpensive to reproduce.

Which of the following is NOT correct regarding the challenges potentially presented by alliances and/or joint ventures?

They are much more difficult to manage in emerging markets than in advanced economies.

A platform technology is essential for coordinating suppliers and buyers to deliver customer value.

True

A value chain should list primary and supporting activities that a firm does differently from competitors, including what it does not do to show potential sources of competitive advantage.

True

Commodity products that have relatively standard features, quality, and price, can be differentiated from those of competitors by way of better or more reliable delivery, service, or customer support.

True

Different market segments have different needs and adopt new technology at different rates. Consumers who are considered early adopters are quick to see the benefits of a new technology, while those considered early majority are content to see how other people are making out before they buy in themselves.

True

Dynamic capabilities incorporate the ability to adapt, integrate, and reconfigure organizational skills and resources to match the changing environment in ways that are valuable to the firm's customers but are difficult for competitors to imitate.

True

Factors such as market share, percent increase of sales year over year, or service call response time are all examples of performance metrics.

True

It is possible for a company that identified multiple types of value propositions and excels on all of them to not have competitive advantage if its relative cost position is poor.

True

It is quite possible that with proper management and investments, SBUs can move over time to a different position in the corporate portfolio.

True

One of the advantages of the McKinsey approach over the BCG approach is that it attempts to lower the simplicity of the BCG by suggesting multiple factors that should be evaluated before determining the industry attractiveness and the business strength.

True

Relatedness in the context of diversification is assessed by how similar to each other the underlying businesses in the portfolio are.

True

True or False: Long-term contracts often create more value than vertical integration does.

True

Unlike the BCG and the McKinsey matrix, the Arthur D. Little approach also addresses the broad strategies to be used by each individual SBU.

True

Vertically integrating "forward" in an industry value chain will draw firms closer to their customers.

True

When the market for an offering based on a new technology is early in its growth stage, an innovator may find opportunities to preempt competitors by securing ownership of scarce assets before others can do so, which is one way to capture value that can lead to competitive advantage.

True

Where switching costs are low, a small improvement in performance may be enough to get the early majority of the market to switch.

True

The extent to which equipment required to produce a good or service can be reused for some other purpose is referred to as ____________.

asset specificity

For an innovation to truly provide competitive advantage, it is necessary that it be -

commercialized.

The ___________________ of an organization captures such factors as norms of behaviors, informal communication networks, and standards regarding motivating for and rewarding of accomplishments.

culture

When a single business company such as McDonalds, wants to lower its costs, it will do it through -

economies of scale

What is experience curve and how does it relate to strategy?

enables better strategic planning in business. The experience curve states that the more often a task is performed the lower will be the cost of doing it. The task can be the production of any good or service.

The focus on experimentation and the pursuit of new business opportunities through change and innovation is referred to as _______________.

exploration

In the context of strategy execution, creativity is associated with _____________, whereas stability is associated with _________________.

exploration; exploitation

The systems through which an organizations tasks are performed is referred to as ______________:

formal organization.

As a rule, when a firm decides on pricing, the price should be ____________ than customers' willingness to pay and ___________ than the company's costs.

lower; higher

When a company has a product of which value increases as more products are sold, and the company sets its strategy to increase sales based on this characteristic, the company is pursuing which strategy?

network effects

According to the congruence model, which of the following is NOT one of the building blocks of strategy execution?

organizational assets

The starting point in the portfolio planning process requires a firm to analyze businesses in terms of their ___________

overall competitive strength and the characteristics of the industry they are in

On the BCG matrix, a ________ is a business that has a weak competitive position but is in a high growth industry. star question mark cash cow dog

question mark

Growth companies in a portfolio are typically companies that -

require cash

All the following are critical in ensuring the success of executing a low-cost strategy, EXCEPT

seeking highest quality supplies.

When Willingness to Pay is lower than Supplier Opportunity Costs, it suggests that...

the company should re-negotiate its agreements with its suppliers.

Identifying and analyzing critical tasks is one of the building blocks of strategy execution. Exploring the interrelationships among critical tasks is often done by using -

the value chain

The ___________shows the sequence of activities that a company performs to design, produce, sell, deliver, and support its products and services.

value chain

A statement which conveys why a buyer should buy a company's products or services is a (an)

value proposition.

The total value of a transaction is:

willingness to pay - supplier's opportunity cost.