BUS 450 Chapter 1 - McKendree

In order to contribute to sustained competitive advantage, firm resources should be

A. valuable and rare. B. not subject to perfect imitation. C. without strategically relevant resources. D. all of the above D all of the above

External analysis

Analyze the opportunities and threats or constraints that exist in the organization's external environment, including industry and forces in the external environment.

Internal analysis

Analyze the organization's strengths and weaknesses in its internal environment. Consider the context of managerial ethics and corporate social responsibility.

Each step in the strategic management process is independent so that changes in one step will not substantially affect other steps.

false

Strategic decisions are made solely by and are ultimately the responsibility of the chief executive alone

false

artistic perspective on strategy

the lack of environmental predictability and the fast pace of change render elaborate strategy planning as suspect at best. Instead, strategists should incorporate large doses of creativity and

IO assumes that an organization's performance and ultimate survival depend on its ability to adapt to industry forces over which it has little or no control. According to IO, strategic managers should seek to understand the nature of the industry and formulate

true

Outsiders analyzing a firm should apply a systematic approach that progresses through these steps in order. Doing so develops to a holistic understanding of the firm, its industry, and its strategic challenges.

true

Resource-based theory Firm's unique combination of strategic resources Analysis of internal strengths and weaknesses resource-based theory The perspective that views performance primarily as a function of a firm's ability to utilize its resources.

reviews performance primarily as a function of a firm's ability to utilize its resources. Although environmental opportunities and threats are important, a firm's unique resources comprise the key variables that allow it to develop a distinctive competence, enabling the firm to distinguish itself from its rivals and create competitive advantage. "Resources" include all of a firm's tangible and intangible assets, such as capital, equipment, employees, knowledge, and information.22 An organization's resources are directly linked to its capabilities, which can create value and ultimately lead to profitability for the firm.23 Resource-based theory focuses primarily on individual firms rather than on the competitive environment.

There are two different perspectives on the approach that top executives should take to strategic management

scientific and artistic

in reality, analysis of the external and internal environments occurs simultaneously.

true

inside organizations, strategies are being formulated, implemented, and controlled simultaneously while external and internal factors are continually reassessed. In addition, changes in one stage of the strategic management process will inevitably affect other stages as well. After a planned strategy is implemented it often requires modification as conditions change. Hence, because these steps are so tightly intertwined, insiders tend to treat all of the steps as a single integrated, ongoing process.5

true

many strategic problems can be traced to fundamental misunderstandings associated with defining the strategy.

true

intended strategy

(i.e., what management originally planned) may be realized just as it was planned, in a modified form, or even in an entirely different form. The original strategy top management plans and intends to implement.

Which of the following is not a characteristic of strategic decisions? A. They are long-term in nature. B. They involve choices. C. They do not involve trade-offs. D. All of the above are characteristics of strategic decisions.

A. They are long-term in nature. B. They involve choices. C. They do not involve trade-offs. D. All of the above are characteristics of strategic decisions. C. They do not involve trade offs.

The strategy originally planned by top management is called the

A. grand strategy. B. realized strategy. C. emergent strategy. D. none of the above D none of the above -- intended

The notion of distinctive competence is consistent with

A. industrial organization theory. B. resource-based theory. C. contingency theory. D. none of the above B resource-based theory

the notion that successful firms tend to be the ones that adapt to influences in their industries is based on

A. industrial organization theory. B. resource-based theory. C. contingency theory. D. none of the above A industrial organization theory

Strategies are formulated in the strategic management stage that occurs immediately after

A. the assessment of internal strengths and weaknesses. B. implementation of the strategy. C. control of the strategy. D. none of the above A. the assessment of international strengths and weaknesses

The intended strategy and the realized strategy can never be the same.

False, occasionally it happens

Strategy formulation:

Formulate strategies that build and sustain competitive advantage by matching the organization's strengths and weaknesses with the environment's opportunities and threats.

distinctive competence

Unique resources, skills, and capabilities that enable a firm to distinguish itself from its competitors and create

Strategy execution

Implement the strategies that have been developed.

Strategic control:

Measure success and make corrections when the strategies are not producing the desired outcomes.

strategic management

The continuous process of determining the mission and goals of an organization within the context of its external environment and its internal strengths and weaknesses, formulating and implementing strategies, and exerting strategic control to ensure that the organization's strategies are successful in attaining its goals. a broader term than strategy and is a process that includes top management's analysis of the organization's environment prior to formulating a strategy, as well as the plan for implementation and control of the strategy.

Mission

The reason for an organization's existence. The mission statement is a broadly defined but enduring statement of purpose that identifies the scope of an organization's operations and its offerings to affected groups (i.e., stakeholders, as defined later in the book).

Strategy

Top management's plans to attain outcomes consistent with the organization's mission and goals. Refers to top management's plans to develop and sustain competitive advantage—a situation whereby a firm's successful strategies cannot be easily duplicated by its competitors1—so that the organization's mission is fulfilled.

competitive advantage

a situation whereby a firm's successful strategies cannot be easily duplicated by its competitors—so that the organization's mission is fulfilled. A situation whereby a business unit's successful strategies cannot be easily duplicated by its competitors.

An effective strategy is built on the foundation of the organization's business model, the mechanism whereby the organization seeks to earn a profit by selling its goods or services.

business model The economic mechanism by which a business hopes to sell its goods or services and generate a profit.

Contingency theory, the most profitable firms develop beneficial fits with their environments. In other words, a strategy is most likely to be successful when it is consistent with the organization's mission, its competitive environment, and its resources. Contingency theory represents a middle ground perspective that views organizational performance as the joint outcome of environmental forces and the firm's strategic actions.

contingency theory The view that the most profitable firms are likely to be the ones that develop the best fit with their environment

two key economic concepts-

efficient market hypothesis and subjective value,

Industrial organization (IO), a branch of microeconomics, emphasizes the influence of the industry environment upon the firm.

industrial organization (IO) A view based in microeconomic theory that states that firm profitability is most closely associated with industry structure. The central tenet of industrial organization theory is the notion that a firm must adapt to influences in its industry to survive and prosper; thus, its financial performance is primarily determined by the success of the industry in which it competes.

subjective value,

or the idea that a resource's value is determined by the individual or organization possessing it, not an objective measure that would be the same for all firms. For example, having a highly trained workforce with strong technical skills is of greater value to an organization that emphasizes technology in production than to one whose approach is labor intensive.

efficient market hypothesis,

or the idea that all individuals or firms in a market earn the same returns in the long run For investors, this means that everyone has access to the same information, so it is impossible to consistently "buy low and sell high.

realized strategy—what management actually implements—usually differ.11 Hence, the original strategy may be realized with desirable or undesirable results, or it may be modified as changes in the firm or the environment become known.

realized strategy The strategy that top management actually implements

sustained competitive advantage—a firm's ability to enjoy strategic benefits over an extended period of time—those resources must be valuable, rare, not subject to perfect imitation, and without strategically relevant substitutes.

sustained competitive advantage A firm's ability to enjoy strategic benefits over an extended period of time.

A strategy seeks to develop and sustain competitive advantage.

true

scientific perspective

whereby strategic managers systematically assess the firm's external environment and evaluate the pros and cons of myriad alternatives before formulating strategy. The business environment is seen as largely objective, analyzable, and predictable. As such, strategic managers should follow an orderly process of environmental, competitive, and internal analysis, and build the organization's strategy accordingly.