Business 450 Chapter 1-4

functional-level strategies

Actions that managers take to improve the efficiency and effectiveness of one or more value creation activities.

support activities

Activities of the value chain that provide inputs that allow the primary activities to take place

resources

Assets of a company.

opportunities

Elements and conditions in a company's environment that allow it to formulate and implement strategies that enable it to become more profitable.

threats

Elements in the external environment that could endanger the integrity and profitability of the company's business.

risk capital

Equity capital invested with no guarantee that stockholders will recoup their cash or earn a decent return

barriers to imitation

Factors or characteristics that make it difficult for another individual or company to replicate something

distinctive competencies

Firm-specific strengths that allow a company to differentiate its products and/or achieve substantially lower costs to achieve a competitive advantage.

scenario planning

Formulating plans that are based upon "what-if" scenarios about the future.

potential competitors

Companies that are currently not competing in the industry but have the potential to do so.

learning effects

Cost savings that come from learning by doing.

switching costs

Costs that consumers must bear to switch from the products offered by one established company to the products offered by a new entrant.

fixed costs

Costs that must be incurred to produce a product regardless of level of output.

strategic leadership

Creating competitive advantage through effective management of the strategy-making process

outside view

Identification of past successful or failed strategic initiatives to determine whether those initiatives will work for project at hand.

total quality management

Increasing product reliability so that it consistently performs as it was designed to and rarely breaks down.

process knowledge

Knowledge of the internal rules, routines, and procedures of an organization that managers can leverage to achieve organizational objectives.

intellectual property

Knowledge, research, and information that is owned by an individual or organization

process innovation

Development of a new process for producing and delivering products to customers.

product innovation

Development of products that are new to the world or have superior attributes to existing products.

functional managers

Managers responsible for supervising a particular function; that is, a task, an activity, or an operation such as accounting, marketing, research and development (R&D), information technology, or logistics

general managers

Managers who bear responsibility for the overall performance of the company or for one of its major, self-contained subunits or divisions.

benchmarking

Measuring how well a company is doing by comparing it to another company, or to itself, over time.

Name Porter's PEST analysis

Political - legislation, regulation Economic - environment Sociocultural - demographic Technology

brand loyalty

Preference of consumers for the products of established companies.

strategy implementation

Putting strategies into action

economies of scale

Reductions in unit costs attributed to large output.

basic factors of production

Resources such as land, labor, management, plants, and equipment

advanced factors of production

Resources such as process knowledge, organizational architecture, and intellectual property that contribute to a company's competitive advantage

shareholder value

Returns that shareholders earn from purchasing shares in a company

strategy formulation

Selecting strategies based on analysis of an organization's external and internal environment

socially complex

Something that is characterized by, or is the outcome of, the interaction of multiple individuals.

just-in-time (JIT) inventory system

System of economizing on inventory holding costs by scheduling components to arrive just in time to enter the production process or only as stock is depleted.

cognitive biases

Systematic errors in decision making that arise from the way people process information.

self-managing teams

Teams where members coordinate their own activities and make their own hiring, training, work, and reward decisions.

competitive advantage

The achieved advantage over rivals when a company's profitability is greater than the average profitability of firms in its industry

vision statement

The articulation of a company's desired achievements or future state

organizational architecture

The combination of the organizational structure of a company, its control systems, its incentive systems, its organizational culture, and its human-capital strategy

SWOT analysis

The comparison of strengths, weaknesses, opportunities, and threats.

value chain

The concept that a company consists of a chain of activities that transforms inputs into outputs.

business model

The conception of how strategies should work together as a whole to enable the company to achieve competitive advantage

profit growth

The increase in net profit over time.

employee productivity

The output produced per employee.

customer defection

The percentage of a company's customers who defect every year to competitors.

marketing strategy

The position that a company takes with regard to pricing, promotion, advertising, product design, and distribution.

mission statement

The purpose of the company, or a statement of what the company strives to do.

profitability

The return a company makes on the capital invested in the enterprise

capital productivity

The sales produced by a dollar of capital invested in the business.

positioning strategy

The specific set of options a company adopts for a product based upon four main dimensions of marketing: price, distribution, promotion and advertising, and product features.

experience curve

The systematic lowering of the cost structure and consequent unit cost reductions that have been observed to occur over the life of a product.

supply chain management

The task of managing the flow of inputs and components from suppliers into the company's production processes to minimize inventory holding and maximize inventory turnover.

mass customization

The use of flexible manufacturing technology to reconcile two goals that were once thought to be incompatible: low cost and differentiation through product customization.

customer response time

Time that it takes for a good to be delivered or a service to be performed.

diseconomies of scale

Unit cost increases associated with a large scale of output.

reasoning by analogy

Use of simple analogies to make sense out of complex problems.

causal ambiguity

When the way that one thing, A, leads to an outcome (or "causes"), B, is not clearly understood.

Name the 4 primary activities that pertain to business

1. Marketing & Sales 2. Production 3. Customer Service 4. Research & Development

Name the 4 secondary activities that pertain to business

1. Materials/Management/Logistics 2. Human Resources- Hire/train/evaluation/termination 3. MIS/IT 4. Infrastructure/organization

Porter's 5 Forces +1

1. Power of buyers 2. Power of customers 3. Entry/exit barriers 4. Substitutes 5. Rivalry 6. Complementary products

representativeness

A bias rooted in the tendency to generalize from a small sample or even a single, vivid anecdote.

tacit

A characteristic of knowledge or skills such that they cannot be documented or codified but may be understood through experience or intuition

illusion of control

A cognitive bias rooted in the tendency to overestimate one's ability to control events.

prior hypothesis bias

A cognitive bias that occurs when decision makers who have strong prior beliefs tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong.

escalating commitment

A cognitive bias that occurs when decision makers, having already committed significant resources to a project, commit even more resources after receiving feedback that the project is failing.

multidivisional company

A company that competes in several different businesses and has created a separate, self-contained division to manage each.

sustained competitive advantage

A company's strategies enable it to maintain above-average profitability for a number of years

absolute cost advantage

A cost advantage that is enjoyed by incumbents in an industry and that new entrants cannot expect to match.

VRIO framework

A framework managers use to determine the quality of a company's resources, where V is value, R is rarity, I is inimitability, and O is for organization

flexible production technology

A range of technologies designed to reduce setup times for complex equipment, increase the use of machinery through better scheduling, and improve quality control at all stages of the manufacturing process.

business unit

A self-contained division that provides a product or service for a particular market.

strategy

A set of related actions that managers take to increase their company's performance

values statement

A statement of how employees should conduct themselves and their business to help achieve the company mission

Compare these four companies. Which of these companies has achieved a sustained competitive advantage? a. A company in the airline industry with an ROIC recorded above 25% in each of the last five years. b. A technology company that just launched a breakthrough product, but has not yet earned enough in sales to cover the research and development. c. A manufacturer that posted profits for several decades that were higher than the industry average, but lessening demand for its product category is causing profit erosion. In the most recent year, ROIC was below the industry average. d. A start-up boutique retailer went from 3 stores to 120 in just two years. Even with this explosive growth and the investment in new stores, the firm turned a profit in both of its two years of operation.

a. A company in the airline industry with an ROIC recorded above 25% in each of the last five years.

Michael is the CEO of a multidivisional company who has determined that it is time for his company to revisit its Strategic Plan. He is working on the agenda for the meeting and is beginning with a review of the company's mission, vision and values. On day 2, he plans to conduct an analysis of internal and external forces affecting the company. His invitee list for the strategic planning session includes the CFO, the COO, the Vice President of Human Resources and the Vice President of Sales. He believes this smaller team will be able to reach a greater consensus and be efficient in developing the Strategic Plan for the next five years. Which potential pitfall could impact the strategic plan for this company? a. An "ivory tower" approach could lead the executive team to a plan created in a vacuum without an understanding of current operating realities. b. The cognitive bias of the illusion of control could lead the CEO to believe he should be the only person directing the company's strategic plan. c. The utilization of outside view could lead the strategic plan to exclude data that doesn't reinforce the team's preconceived ideas about the company's direction. d. The scenario planning approach could lead the company to split its focus and prevent any meaningful progress toward the development of a competitive advantage.

a. An "ivory tower" approach could lead the executive team to a plan created in a vacuum without an understanding of current operating realities.

Lisa is the vice president of sales and marketing for a software development company. She's been working with her sales force in recent months to develop a promotion strategy to sell obsolete software quickly at a reduced price, rather than the original suggested price. Which strategic manager role is Lisa fulfilling with this approach? a. Functional-level manager b. Corporate-level manager c. Business-level manager d. Chief Financial Officer (CFO)

a. Functional-level manager

Compare the identified resources for each of the following four companies. Which company's resource could be considered valuable, rare, inimitable and organized? a. Nike's swoosh logo b. Coca Cola's aluminum can c. Delta Airlines' flights to and from Chicago O'Hare Airport d. Charles Schwab's online trading software

a. Nike's swoosh logo

Which of the following can be considered a strategy for increasing efficiency? a. Self-managing teams b. Reducing new product launch failures c. Researching customer needs d. Using information systems to monitor defect rates

a. Self-managing teams

Emotional intelligence is a term used to describe a group of psychological attributes that strong and effective leaders exhibit. Which of these is an emotional intelligence attribute? a. Self-regulation b. Dialectic inquiry skills c. Vision and eloquence d. Reasoning by analogy

a. Self-regulation

Customer responsiveness can be an important factor for non-profit organizations. How might a food pantry improve its customer responsiveness? a. Shift the hours it is open to later in the evening to accommodate people who work during the day but still require assistance. b. Collaborate with a local grocery store to accept non-perishable food that is technically past its expiration date but that is still able to be consumed. c. Organize its volunteers to work in shifts in an assembly-line style operation to sort and stock food. d. Create an easy online donation system for the general public to financially support the organization quickly and easily.

a. Shift the hours it is open to later in the evening to accommodate people who work during the day but still require assistance.

Which of these describes a marketing and sales activity contributing value in the personal care industry? a. The Dove campaign for real beauty, which revealed results about women's assumptions about beauty, sparked increased sales of the company's products within months of the campaign's launch. b. Crest launched Crest Complete mouthwash developed by their team with new ingredients designed not only to clean mouths but to protect teeth in between brushings from tartar build up. c. The cosmetics company Aveda adopts a strategy of environmental sustainability in its formulation of cosmetic products. d. Avon utilizes its direct seller, home party approach to empower sales people in every city and neighborhood to share its products with friends and family.

a. The Dove campaign for real beauty, which revealed results about women's assumptions about beauty, sparked increased sales of the company's products within months of the campaign's launch.

The IT team at a bank has a role to play in efficiency. As a service provider, the company must learn and develop more efficient ways to process customer requests and meet customer needs. Which of these is an example of the IT team contributing to increases in efficiency? a. The team builds a network that connects all of the branches to each other virtually so that transactions that occur in one branch of the bank are visible throughout the company in real-time. b. The team has a system that tracks IT support tickets - requests for support from the IT help desk. The metrics collected by the system report that it takes 7% longer to get an answer from IT this year than it did last year. c. The team implements a new system for entering new customer data that adds more than 50 additional fields to be collected at the time of sign up. d. The team evaluates the current software platform and a potential new software platform and determines the cost of the upgrade investment is too great to justify installing the new software.

a. The team builds a network that connects all of the branches to each other virtually so that transactions that occur in one branch of the bank are visible throughout the company in real-time.

Which of these is not a cognitive bias that can lead to poor strategic decisions: a. Willingness to delegate b. Illusion of control c. Escalating commitment d. Prior hypothesis bias

a. Willingness to delegate

Experts who study strategic leadership have identified the key characteristics of high-performing leaders. Which of these is a characteristic for strategic leadership? a. Willingness to delegate and empower b. Devil's advocacy c. Decentralized planning d. Autonomous Action

a. Willingness to delegate and empower

A grocery store chain makes a decision to limit its size and scope to offering what they consider to be only the best product in each food category, reducing the options available to its customers. It employs and recruits a highly-paid team of tasters who travel the world evaluating foods to introduce on its shelves. It has attracted a team with an excellent track record of identifying top sellers and earned a reputation for delivering high quality goods. This is an example of: a. a distinctive competency. b. intellectual property. c. a basic factor of production. d. a poorly organized resource

a. a distinctive competency.

A business-level manager in a multi-divisional company is: a. a strategic manager who is the head of an entire division, responsible for translating the corporate strategy into concrete strategies for the business unit. b. a strategic manager, responsible for a specific business function, such as marketing or human resources. c. a member of the Board of Directors, responsible for setting the strategic direction for the entire multi-divisional company. d. a vice president, C-suite or other company officer, responsible for the financial performance of the company across all business units.

a. a strategic manager who is the head of an entire division, responsible for translating the corporate strategy into concrete strategies for the business unit.

A firm can develop its competitive advantage through its resources. Resources include: a. both the physical elements of production, such as machines and workforce, as well as the knowledge and expertise for how to make and sell a product or service. b. only inputs that are bought and sold on the open market at fair and reasonable prices. c. the competitors within an industry who seek to serve the same group of customers and serve the same customers' needs. d. the customers who choose to buy products or services from a company.

a. both the physical elements of production, such as machines and workforce, as well as the knowledge and expertise for how to make and sell a product or service.

A high-end clothing manufacturer has a policy to inspect each article of clothing before it is shipped to customers. Recently, the number of finished items that are failing this final inspection has more than doubled from 3% six months ago to 7% last month. This company would benefit from a strategy designed to: a. examine the reliability of the process. b. improve its customer responsiveness. c. enhance its efficiency. d. build a structure for increased innovation.

a. examine the reliability of the process.

Rebecca is the CEO and founder of a start-up health food company. To improve customer responsiveness in her company, she can: a. make personal phone calls to five customers per week thanking them each time they purchase products from the company. b. prioritize efficiency and cost controls above all corporate initiatives and incentivize employees to cut costs whenever possible. c. design a bonus program that rewards the engineer or technical researcher that develops the best tasting health food each quarter. d. develop a total quality management (TQM) system in the company.

a. make personal phone calls to five customers per week thanking them each time they purchase products from the company

Rare resources include: a. process knowledge or organizational architecture that are path dependent and the consequence of the history of the company. b. locations and equipment, which are purchased on the open market. c. the company workforce of white and blue-collar workers with their skill sets and formal training. d. access to customers' attention through marketing and to customer information through distribution channels.

a. process knowledge or organizational architecture that are path dependent and the consequence of the history of the company.

The human resource team's role in functional-level strategies aimed at increasing innovation include: a. recruiting and hiring creative technical team members with an expertise in the company's core product offerings. b. organizing quality training for shop floor production team members. c. executive coaching for mid-level managers who have the potential to serve in the company's key leadership and infrastructure positions. d. assessments of the skills and performance of members of the sales team.

a. recruiting and hiring creative technical team members with an expertise in the company's core product offerings.

Customer responsiveness includes: a. serving customers quickly with quality products, meeting their after-sale service and follow-up needs, and developing new products to fill unmet customer needs. b. the development of new processes for manufacturing products. c. the output of a company's production workforce. d. the price at which a customer is willing to pay for a product based on their perceived value.

a. serving customers quickly with quality products, meeting their after-sale service and follow-up needs, and developing new products to fill unmet customer needs.

Sasha is a manager for an ice cream company. The company recently developed a delicious low-calorie version of its product. At current volumes, the per gallon cost is the same to produce this new line as to produce its traditional ice cream and it is produced on the same equipment. The company could improve profitability by: a. setting the price for this product line higher than its typical offering because of the increased perceived value by customers. b. marketing it as better tasting than the existing ice cream line. c. eliminating its other product offering entirely and focusing only on this new low-calorie option. d. setting the price for this product at less than your traditional ice cream because it has fewer calories and a smaller audience.

a. setting the price for this product line higher than its typical offering because of the increased perceived value by customers.

A company can sometimes implement a strategy designed to improve one factor of competitive advantage but also change another factor because: a. the factors are often interrelated, and functional-level strategies can have a positive or negative impact on each other. b. the managers don't recognize unintended consequences of their strategies. c. the company adopts the wrong strategies to achieve its goals. d. the factors are dependent on each other and you cannot have a strategy that doesn't include all four of them.

a. the factors are often interrelated, and functional-level strategies can have a positive or negative impact on each other.

The hubris hypothesis of takeovers is a term that describes: a. the overconfidence of leaders in their ability to create value by acquiring another company. b. a strategic plan for building a company through mergers and acquisitions. c. a commitment by managers to continue investing in a strategic plan even after they have received information that the project is failing. d. a manager deciding an acquisition is the right choice for a company because serendipity put the other firm in his or her path.

a. the overconfidence of leaders in their ability to create value by acquiring another company.

Response time as it relates to improving customer responsiveness is: a. the speed at which a company responds to customers' needs and demands. b. how quickly messages are relayed throughout different functional roles in the company. c. the speed of production and how quickly the company can manufacture a product. d. the amount of time it takes to bring a new product to market.

a. the speed at which a company responds to customers' needs and demands.

primary activities

activities related to the design, creation, and delivery of the product, its marketing, and its support and after-sales service

Shop floor employees can be a major source of ideas for improving product quality. Which of these represents a potential strategy for collecting ideas from team members for improving quality? a. An intranet site where employees can read articles from the CEO and vice presidents about their commitment to quality. b. A poster in the break room about everyone doing their part for quality along with a suggestion box encouraging employees to submit their ideas. c. A chart on the communication board that lists the percentage of defective products found during inspections each day. d. Monthly training talks about quality in which only the quality manager discusses the proper way to perform specific production tasks.

b. A poster in the break room about everyone doing their part for quality along with a suggestion box encouraging employees to submit their ideas.

Bhascar was recently named general manager of a newly created business unit of a multidivisional company. His first order of business will be to implement the new division's strategic plan. Which of these statements about Bhascar's responsibilities for the company is true? a. Bhascar isn't concerned with the performance of the other business units in his company. The other general managers are on their own. b. Bhascar works with managers within his business unit to develop and implement concrete strategies for his division that align with corporate goals. c. Bhascar should spend the majority of his time concerned with the human resources operations of his business unit, focusing on the employee team. d. Bhascar will manage the entire corporation's finance structure, working with the finance directors of each division to implement the company's strategies.

b. Bhascar works with managers within his business unit to develop and implement concrete strategies for his division that align with corporate goals.

A non-profit organization dedicated to providing homeless people with hot meals served at a local church is reviewing its internal resources. For this non-profit, the organization is seeking to invite and serve all homeless people within a 20-mile radius at the church. Which strategy best aligns with the goal highlighted in bold for each option? a. Quality. The non-profit is considering reducing the portion sizes of the meals to be able to serve more people. b. Efficiency. The non-profit is seeking a partnership with a food pantry to purchase food at a discount compared to the supermarket supplier they have been using. c. Innovation. The non-profit has a volunteer who is working on a cold-meal substitute that will be distributed on the streets instead of at the church. d. Customer Responsiveness. The non-profit is considering changing its policy and now requires everyone to stand outside in a line to receive their meals, rather than coming in and sitting down to be served.

b. Efficiency. The non-profit is seeking a partnership with a food pantry to purchase food at a discount compared to the supermarket supplier they have been using.

Which of these properly identifies the role a function can play in implementing reliability improvement methodologies? a. Marketing team providing feedback from customers about new product features they are seeking. b. HR team instituting a Six Sigma training program. c. Production team offering mass customization options through a flexible manufacturing technology. d. The leadership team models a commitment to customer focus.

b. HR team instituting a Six Sigma training program.

A leader's use of power can have an effect on his or her overall effectiveness as a strategic manager. Which of these statements is true? a. Edward Wrapp said effective leaders should use their power in a dictatorial fashion to ensure team members understood who the final decision maker is. b. Jeffrey Pfeffer explains that ultimately a manager's power comes from his or her control over resources, such as budgets, capital, positions, information and knowledge. c. Jeffrey Pfeffer believes that only those with a title and official position can exert power within an organization. d. Edward Wrapp argues that organizational leaders do not have anything in common with political leaders and should not behave democratically.

b. Jeffrey Pfeffer explains that ultimately a manager's power comes from his or her control over resources, such as budgets, capital, positions, information and knowledge.

An entrepreneur is starting a new online service for job seekers. He is assessing his internal resources to determine his distinctive competencies. He developed his software to be capable of managing a large quantity of job applicants simultaneously without slowing down. The result is a system that operates more quickly than the competitors. Which value chain activity does the software development represent? a. Sales and marketing b. Research and development c. Logistics d. Human Resources

b. Research and development

Which of these is a definition for an Emergent Strategy Making process? a. A process that leaves strategies up to chance and happenstance, waiting for technological discoveries, acquisition opportunities and changes in the industry environment to drive action. b. Strategies that evolve as the unplanned responses to unforeseen circumstances, arising from autonomous action by individual managers, serendipitous events and changed circumstances. c. A strategy process that utilizes "what-if" scenarios to arrive at a company's corporate strategy, including multiple views of the company's future state. d. Planning that relies on rules of thumb and cognitive biases to define strategies that will be successful despite a competitive industry environment.

b. Strategies that evolve as the unplanned responses to unforeseen circumstances, arising from autonomous action by individual managers, serendipitous events and changed circumstances.

Which of these companies in the news in recent years would benefit from a strategy that enhances quality to build and maintain its competitive advantage? a. Comcast is consistently criticized for its call center wait times and communications. b. Takata Corporation issues a recall for 34 million air bags installed on a variety of car brands due to potential faults and defects. c. Research in Motion works to launch new smartphones but continues to fall behind Apple and Android sales because of a lack of Blackberry apps. d. Delta's cost per available seat mile flown is $16.80 compared to rivals American Airlines $15.84 and Southwest $13.76.

b. Takata Corporation issues a recall for 34 million air bags installed on a variety of car brands due to potential faults and defects.

Which of these could be a definition of a competitive advantage? a. The status of a company with the largest top line sales number in an industry. b. The ability of a firm to outperform its rivals by achieving greater profitability and growth than others in the industry. c. A solid company with predictable sales and profitability every year, delivering predictability for its shareholders. d. A start-up company with an innovative new product that changes an industry.

b. The ability of a firm to outperform its rivals by achieving greater profitability and growth than others in the industry.

Which of these scenarios is an example of the R&D team contributing to the efficiency of a manufacturing process for a tool manufacturer, reducing the unit cost of the product? a. The team conducts a brainstorming session with the sales and marketing teams to discuss potential new breakthrough product innovations and takes one of the ideas into the next stage of development. b. The team reviews the component parts included in a line of drills with 25 variations in size and power. It finds that the 25 drills can share 75% of the same components and still work properly. The plant modifies the process to use more shared components. c. The team develops a new multi-use tool that works as both a saw and a drill. Customers in the field can have just one tool with two attachments, rather than investing in two separate tools. d. The team meets with customers at an industry trade show to gain feedback from them about the tools they are working with in the field. They ask about the additional features that the workers would find useful.

b. The team reviews the component parts included in a line of drills with 25 variations in size and power. It finds that the 25 drills can share 75% of the same components and still work properly. The plant modifies the process to use more shared components.

Compare the resources for each of the following four companies. Which resource represents an advanced factor of production, specifically a competency in process knowledge? a. Starbucks' locations in downtown areas b. Toyota's lean manufacturing systems c. Kellogg's food processing equipment d. General Motor's union workforce

b. Toyota's lean manufacturing systems

A company's rare and valuable process knowledge elements can be hard to copy because they are often unwritten, spread among many team members and kept secret within the firm. This is an example of: a. poorly organized inventory. b. causal ambiguity. c. organizational architecture. d. scarcity.

b. causal ambiguity.

Companies struggle with innovation because success is dependent on multiple factors, including: a. high investment costs, lack of creativity, low margins and high demand. b. certainty concerning demand, commercialization, positioning, technological myopia and slow cycle time. c. decentralized leadership, long-term development and customization. d. ordering ease, delivery, installation, customer training, customer consulting and maintenance and repair.

b. certainty concerning demand, commercialization, positioning, technological myopia and slow cycle time

Scenario planning is one methodology strategic managers can use to avoid pitfalls in their planning process. In scenario planning, managers: a. plan a sequence of events that a manager will execute in order, regardless of the circumstances or changing industry environment. b. create a what-if scenario for the future and develop strategic options associated with that future state. c. develop a single deliberate strategy through an organized process with its top leaders. d. change directions, adapt a strategy or develop a new strategy based on the results of an accidental event or unexpected opportunity.

b. create a what-if scenario for the future and develop strategic options associated with that future state.

An entrepreneur started a small consulting business to provide training on multi-cultural communication to large corporations, educating managers on how to communicate with people who have a different ethnic background than their own. In his conversations with customers, he learns there is a need for training on socio-economic issues as well. He develops a training class for teaching managers the differences in communication and perception across socioeconomic situations that he can provide to multiple customers. This is an example of strategies to improve: a. positioning strategy. b. customer responsiveness and innovation. c. efficiency. d. mass customization.

b. customer responsiveness and innovation.

A product is said to have superior quality when: a. the price is higher than more than other similar, substitute products. b. customers perceive that its attributes provide them with higher utility or value than the products sold by rivals. c. the marketing and sales activity is a distinctive competency among the company's resources. d. it is newer to the world and has the potential to replace existing products.

b. customers perceive that its attributes provide them with higher utility or value than the products sold by rivals.

Efficiency is a measure of the quantity of inputs required to produce a given output. It can be measured by: a. product price. b. employee productivity and capital productivity. c. overall profitability. d. customer satisfaction.

b. employee productivity and capital productivity

A company CEO can help his or her organization improve through innovation by: a. committing resources to copying competitors' innovations. b. ensuring that research and development is not performed by a single department, but instead has input from multiple functional areas. c. investing in newer machinery that will have less down-time and require fewer repairs and lower maintenance costs. d. directing the sales and marketing team to work alongside customers using the company's products and capture information about their experience.

b. ensuring that research and development is not performed by a single department, but instead has input from multiple functional areas.

Innovation can be a source of competitive advantage in two ways, including: a. tapping into new markets and working against competitors with a streamlined product portfolio. b. finding ways to distribute or manufacture the product with fewer inputs and making the product better so that the company can charge more for it. c. preventing competitors from releasing their own new products and retaining existing customers. d. increasing the cost structure of the company through overhead and hiring the most talented team members.

b. finding ways to distribute or manufacture the product with fewer inputs and making the product better so that the company can charge more for it.

In a SWOT Analysis, the primary objective of managers participating in this exercise is to: a. impress the CEO and other leaders in the organization with their knowledge and strategic decision-making. b. identify strategies that exploit external opportunities, counter threats, build on strengths and eradicate weaknesses. c. utilize a consultant group to gain an outside perspective on how the company's strategies can be improved. d. define at least two future states of the company and build strategies that address those specific scenarios.

b. identify strategies that exploit external opportunities, counter threats, build on strengths and eradicate weaknesses.

A functional-level strategy is designed to: a. define a company's overall competitive theme and the way it positions itself to the marketplace to gain a competitive advantage. b. improve the efficiency and effectiveness of one or more value creation activities of the company. c. serve many market segments with different strategies for different groups of customers. d. create products based on four main dimensions - price, distribution, promotion and advertising, and product features.

b. improve the efficiency and effectiveness of one or more value creation activities of the company.

Advanced factors of production are more likely to be rare and are harder to imitate. Strategically, managers who have identified these advanced factors should: a. let these resources manage themselves as they are already working and don't require interference from a manager. b. take steps to protect these assets, either formally or as a trade secret, optimize the company's use of them and not outsource them to other firms. c. abandon them and start over to seek out different resources to develop, manage and utilize to make the company more profitable. d. share them with competitors to improve the overall profitability of the industry.

b. take steps to protect these assets, either formally or as a trade secret, optimize the company's use of them and not outsource them to other firms.

As companies gain more experience producing their products, they are able to reduce unit costs because: a. suppliers and distributors offer lower costs to more established companies. b. the combination of learning effects and economies of scale lead to more efficient manufacturing. c. they can charge more for their products as their brands become more established and well-known in the marketplace. d. their equipment is more specialized to manufacture products reducing the cost structure.

b. the combination of learning effects and economies of scale lead to more efficient manufacturing.

A small brewery is working to determine the appropriate price for some of its products to achieve competitive advantage and greater profitability. In the past, the brewery releases a summer ale at the same price as its regular year-round beer. In the last three summers, the company sold out of the beer by early August. If the company raises its summer ale price and it continues to sell at a steady pace, that is a sign that: a. the company produces less of its summer ale than of its regular beer and therefore must increase prices on it to maintain profitability. b. the customer is assigning a greater value to the summer ale and the company can increase its price to gain profitability. c. the cost of the basic factors of production has increased forcing the company to increase its price for all of its products. d. the company must address the cost of its inputs to improve profitability.

b. the customer is assigning a greater value to the summer ale and the company can increase its price to gain profitability.

Research and development is one area of the value chain dedicated to: a. the identification of new industries and ways to meet customers' needs through technology. b. the development of new products, enhancing existing products and improving processes to reduce the production cost for existing products. c. the description of customer markets and demographics that companies can market existing products to. d. the improvement of ways to support customers after they've purchased a product and require service.

b. the development of new products, enhancing existing products and improving processes to reduce the production cost for existing products.

A company's profitability depends on: a. only the industry, strategic group and industry life-cycle stage in which the company operates. b. the value customers place on the company's products, the price it charges for its products and the costs of creating its products. c. the demand for the product in the marketplace and the number of competitors providing similar products. d. the quality of the managers and employees a company hires to manage its resources

b. the value customers place on the company's products, the price it charges for its products and the costs of creating its products.

A mission statement describes: a. the strategic direction of the company and its major goals. b. what the company does in terms of its customers, their needs and through what core competencies. c. the competitive environment where a company is choosing to conduct its business. d. the company's marketing approach and slogan.

b. what the company does in terms of its customers, their needs and through what core competencies

availability error

bias that arises from our predisposition to estimate the probability of an outcome based on how easy the outcome is to imagine.

Which of these companies is most in need of a strategy to improve customer responsiveness? a. A television manufacturer has had trouble keeping up with its competitors. The company hasn't released a significant new technology in the last three years. All of its new televisions are using preexisting technology. b. A grocery store chain has an inventory challenge. The store is purchasing fresh produce at a rate that is faster than customers are buying it, leading to excess produce that goes bad on the shelf and must be discarded. c. A cable television company has a public relations problem. Customers have been posting on social media that the phone lines are clogged and it takes more than 30 minutes on hold for them to speak to a representative about their cable bill. d. A fast food restaurant has seen a steep decline in sales of its previously top-selling burger since making a small change to its sauce recipe ingredients. It used to purchase its mayonnaise from one distributor and now purchases from a different seller.

c. A cable television company has a public relations problem. Customers have been posting on social media that the phone lines are clogged and it takes more than 30 minutes on hold for them to speak to a representative about their cable bill.

Which of these companies is experiencing a benefit of tight cross-functional integration in its innovation strategy? a. A company has a 5% success rate on its R&D projects in comparison to a 25% average success rate in its industry. b. A company's cycle time is three times longer than most of its competitors, resulting in it coming out with new products slower than its rivals. c. A company manages its R&D costs to shorten the length of time for return on investment in new products from 1 year after launch to 6 months after launch. d. A company's newest product meets customer needs but is challenging to manufacture due to the complexity of its assembly process.

c. A company manages its R&D costs to shorten the length of time for return on investment in new products from 1 year after launch to 6 months after launch.

There are four main categories of strategies that managers may define to create and sustain a competitive advantage. Which of these is an example of a business-level strategy: a. A finance director developing a plan to improve the return on invested capital (ROIC) by negotiating more favorable payment terms with customers and vendors. b. A CEO of a multidivisional company selecting a new customer market segment to pursue and establishing a new business unit to serve the segment. c. A general manager defining a superior customer service strategy for his division to better deliver its products. d. A local grocery store buyer choosing to stock a local farmer's unique sweet and spicy jellies.

c. A general manager defining a superior customer service strategy for his division to better deliver its products

Logan is an entrepreneur with a new idea for a software product. His start-up company grew quickly to a team of about 25. A new federal law recently passed by Congress will cause the software to become obsolete without a major change in the programming. The investment in the programming is going to be costly, and the company faces some hard choices. Logan announces that he will get back to his roots as a programmer to work alongside the software development team, and take the salary of a programmer, to ensure the newest version of the software will be compliant with the new law. Which of these characteristics of an effective leader is Logan demonstrating the most? a. Being well informed b. Willingness to delegate and empower c. Commitment d. Outside view

c. Commitment

An HVAC contractor is considering expanding into a new business line, offering commercial facility maintenance and service in addition to construction contracting services. As they consider this potential strategy, they are conducting a strategic planning process for this business unit, analyzing external and internal factors. Which of these can be classified as a part of the external operating environment of the company? a. The company has a handful of HVAC technicians with prior experience working for a service firm. b. The skills required to construct, assemble and install HVAC equipment currently possessed by our employees would be required to service the equipment in existing buildings. c. Local commercial properties are most often served by one of three big national HVAC service firms and a handful of local smaller firms. d. Selling HVAC service is different from selling construction services. Our team doesn't have anyone with experience selling to facilities managers.

c. Local commercial properties are most often served by one of three big national HVAC service firms and a handful of local smaller firms.

Which of these mission statements is customer-focused? a. AutoNation: To be America's best run, most profitable automotive retailer. b. Levi Strauss: People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world. c. Nike: To bring inspiration and innovation to every athlete in the world. d. Manpower: To be the best worldwide provider of higher-value staffing services and the center for quality employment opportunities.

c. Nike: To bring inspiration and innovation to every athlete in the world

Achieving quality as excellence is just as important in a service business as it is in a product business. A web services company that has a difficult and confusing online interface for consumers to select the services they need could increase its quality by focusing on which attribute? a. Responsiveness b. Maintenance and repair c. Ordering ease d. Durability

c. Ordering ease

"Robert is the manager of sales and marketing for one of the products offered by his organization. He was invited to participate in the strategic planning process for launching a new type of sunglasses to the millennial market. Robert, age 25, was excited to be able to contribute to this product because he liked these new sunglasses and, when he showed them to his three best buddies, they also liked them. During the planning session, Robert convinced the team that they did not need to conduct expensive focus groups to test the viability of the sunglasses. He was convinced the glasses would sell because every time he wore a pilot pair of the sunglasses, he got lots of compliments on them. Ultimately, the management team decided to go with his strategy and they did not do focus groups and launched the new product. Which cognitive bias was at work in this situation?" a. Illusion of control b. Escalating commitment c. Representativeness d. Reasoning by analogy

c. Representativeness

Why should strategic managers pay attention to cognitive biases and be able to recognize them in their strategic planning process? a. So that they can exclude or fire managers who exhibit these biases and remove these potentially negative impacts from the business. b. So they can use them to the greatest advantage when building a business, improving the planning process and resulting strategy. c. So that they can identify them when they are having an impact on the planning process and analyze whether the decision is being made strategically or relying on a "rule of thumb" or heuristic. d. So that they can reward and promote managers who demonstrate these characteristics of high-performing leaders.

c. So that they can identify them when they are having an impact on the planning process and analyze whether the decision is being made strategically or relying on a "rule of thumb" or heuristic.

A building block of a competitive advantage can impact profitability by accomplishing one of three goals - increasing value as perceived by customers, allowing the company to increase the price it charges or reducing the costs of producing products. Which of these actions by a car manufacturer would be part of a short-term strategy for increasing profitability through value creation, price increase or cost reduction? a. The company sales and marketing team chooses to undercut its nearest competitor by reducing prices to just below the rival's list price. b. The company fires its CEO and chooses to hire its competitor's former vice president for research and development. c. The company's operations team identifies 10 improvements to their production process that will reduce the per car manufacturing cost for each vehicle off the line. d. The company will expand an existing manufacturing plant to make room for additional capacity.

c. The company's operations team identifies 10 improvements to their production process that will reduce the per car manufacturing cost for each vehicle off the line.

A non-profit organization is considering holding a series of sessions to develop its, mission, vision, goals, operation model and strategic plan. Differentiate between planning for charities versus for companies. How will the process be different for the non-profit? a. Non-profit organizations do not conduct strategic planning. This meeting would be primarily symbolic for the charity's stakeholders to energize them and help them feel like they're involved in the cause. b. A non-profit organization will not utilize a SWOT analysis or employ strategic managers at a variety of levels to participate in their strategic planning process. c. The strategic goals of the organization will include a combination of performance goals toward the charity's mission, revenue and fundraising goals. d. The non-profit organization will be most concerned about creating a strategic plan that creates a high income for its board of directors.

c. The strategic goals of the organization will include a combination of performance goals toward the charity's mission, revenue and fundraising goals.

A positioning strategy is: a. the set of key messages the marketing team will utilize to tell customers about a product. b. the manufacturing design of a product, including the number of component parts needed to assemble it. c. a specific set of options for a product based upon four main dimensions of marketing: price, distribution, promotion and advertising, and product features. d. the company's infrastructure and leadership team's support of a new product or new product features.

c. a specific set of options for a product based upon four main dimensions of marketing: price, distribution, promotion and advertising, and product features.

Carol is a vice president for sales and marketing at her company. She conducts a survey asking customers their impressions of the product offering, the quality of the product and their level of customer satisfaction. Carol can use the survey results to: a. determine the most effective hiring strategy for recruiting future employees. b. improve employee efficiency by identifying bottlenecks in the manufacturing process that slow down production and add cost. c. identify the building blocks of competitive advantage and develop strategies to use them to increase profitability. d. set pricing strategy for the company's upcoming product line offering.

c. identify the building blocks of competitive advantage and develop strategies to use them to increase profitability.

Customer responsiveness is an important differentiating attribute because: a. it is rated and ranked by consumer news outlets. b. job candidates utilize it to determine if they will work for a company. c. it helps build brand loyalty and can give a company more pricing options. d. it is a measure of how much capital it takes for a company to turn its outputs into inputs.

c. it helps build brand loyalty and can give a company more pricing options

The price of a product or service is typically less than the customer's perceived value for the product because: a. companies operate as monopolies and can set the price at the minimum to meet the consumer's perception of value. b. prices are set based on a random amount above the cost of producing the product. c. it is impossible to offer products to each customer at the exact price he or she values it at because customer definitions of value will vary. d. government regulations limit the top price that industries can charge in a given industry for their products and services.

c. it is impossible to offer products to each customer at the exact price he or she values it at because customer definitions of value will vary.

Materials management, also known as logistics, can contribute to the value chain by: a. Leveraging qualified employees b. positioning the company's products with increased utility so they are willing to pay a higher price. c. lowering the cost of procurement, production and distribution to create more profit. d. incentivizing employees to be more productive through a profit-sharing compensation program.

c. lowering the cost of procurement, production and distribution to create more profit.

Economies of scale provide unit cost reductions, improving efficiency, and can come from multiple sources, including: a. learning effects gained over time. b. customer defection rates. c. spreading fixed costs over large production volume. d. supply chain management and streamlining.

c. spreading fixed costs over large production volume.

Candace is the research and development manager at a pharmaceutical company. The firm is in the process of developing a new heart medication that could be more effective than existing treatments for several heart conditions. To ensure the company's profitability after the new medication is cleared by the FDA by protecting this identified valuable resource, Candace should: a. work with the sales and marketing team to include all of the medication's chemical components in the sales literature. b. recruit additional research and development team members from a competitor's lab to attempt to imitate their heart medication research. c. supervise the filing of appropriate patent paperwork for the new medication to protect the company's intellectual property d. fire all of the researchers who have been working on the new heart medication research.

c. supervise the filing of appropriate patent paperwork for the new medication to protect the company's intellectual property.

The idea that the strategy-making process is constantly ongoing and adapting over time with the input of additional information is a. autonomous action. b. scenario planning. c. the feedback loop. d. a SWOT analysis.

c. the feedback loop

A company's functional activities transform its inputs into outputs and: a. customers purchase products to meet their needs regardless of the price. b. profitability is improved only through support activities in the value chain. c. value is added to the product at each stage in the value chain. d. is measured by the consumer surplus.

c. value is added to the product at each stage in the value chain.

Innovation is the result of: a. reliable products that meet the needs of customers predictably and consistently. b. the acquisition of technologies from rivals through imitation and hiring of talent away from competitors. c. work in the research and development to create superior product attributes and/or superior processes for delivering products. d. improving the time it takes for a good to be delivered or a service to be performed.

c. work in the research and development to create superior product attributes and/or superior processes for delivering products.

A division of a large corporation is presenting its financial results for the year to the board of directors for the parent company. The company has achieved a competitive advantage and would like to report on its profitability. Which of these financial results provides the best indicator of the company's success? a. Net Sales of $350 million b. Invested capital of $18 million c. 65% cost of goods sold d. 20% return on invested capital

d. 20% return on invested capital

Which of these includes a strategy for improving quality as excellence? a. A soap company conducts a market research survey to understand customer priorities when purchasing laundry detergent. b. A machine company establishes a Six Sigma training program for its production team. c. A food company invests in a piece of equipment that cuts in half the amount of time required to make its core product. d. A quick-service restaurant implements a personality assessment for cashiers to rate their level of positivity and hires the most upbeat candidates for this role.

d. A quick-service restaurant implements a personality assessment for cashiers to rate their level of positivity and hires the most upbeat candidates for this role.

Christopher is a mid-level manager who has been working with an executive coach to become a better leader within his organization. One of the goals has been to develop his emotional intelligence. Recently, he scheduled a meeting with a challenging objective - to inform his team of employees that the executive team has decided to abandon the project they've been working on. When he discusses the situation with the team, which of these approaches should he use to demonstrate emotional intelligence: a. He should inform them all that the project they are working on is no longer aligned with the company and that all of their work has been in vain. b. He should take a few promising leaders aside and tell them first that the project is being killed but that their jobs are safe. Then announce the change in direction to everyone else and tell them that their inferior work is the reason management is stopping the project. c. He should blame the executive management for killing this project and tell everyone on the team that he was passionate about their work, but the company is dropping the project anyway. d. He should start by complimenting the team on their hard work on the project so far and then explain that the company is shifting direction and no longer pursuing the project. He should have as much information as is available for the employees on how this change will affect their job status.

d. He should start by complimenting the team on their hard work on the project so far and then explain that the company is shifting direction and no longer pursuing the project. He should have as much information as is available for the employees on how this change will affect their job status.

There are multiple techniques for improving decision-making in the formulation and implementation of strategic plans. Which of these is not a means of improving decision-making? a. Presenting an alternative viewpoint, also called devil's advocacy. b. Creating a plan and an alternate plan using dialectic inquiry to better understand the complexity and implications of a decision. c. Comparing a strategic plan against previous similar plans and reviewing the results of those experiences to gain an outside view. d. Imagining the outcome and results of your strategic plan and deciding it will work because you believe there will be the positive results.

d. Imagining the outcome and results of your strategic plan and deciding it will work because you believe there will be the positive results.

The four building blocks of a competitive advantage have an interdependent relationship. Which of these describes a strategy that adds value to multiple factors as it goes through several activities in the value chain? a. A grocery store recognizes that its checkout lines are longest between 4 and 7 p.m. on weeknights. The company decides to add cashiers during these peak hours even though it results in a lower rate of sales per employee-hour. b. A sporting goods store recognizes the increased customer demand for running shoes in the early spring and implements a 5% price increase at the beginning of the season each year. c. A coffee shop replaces its espresso machines with a newer model that utilizes less energy but creates the same quality of coffee drink. d. In response to requests from customers for healthier food on the menu, a restaurant tweaks its recipe for its most popular sandwich to remove processed ingredients and replace them with fresh vegetables.

d. In response to requests from customers for healthier food on the menu, a restaurant tweaks its recipe for its most popular sandwich to remove processed ingredients and replace them with fresh vegetables.

Which of these is characteristic of a well-constructed goal? a. My company's goal is to create a more diverse employee base. We've decided we want to attract employees of different races, but our management team is uncomfortable with any kind of system that would count the number of employees we have of different races. b. My company's CEO has many pet projects. She's thinking about starting side businesses that are unrelated to our core competency and has set goals surrounding these new areas. c. My company has decided that we will pursue a goal to become the largest, ranked by revenue, grocery retailer in North America within three years. We currently operate 50 stores in 5 states. d. My company has set a goal of launching five new products each year for the next five years through at least a 10% annual investment in research & development.

d. My company has set a goal of launching five new products each year for the next five years through at least a 10% annual investment in research & development.

Cross-functional teams are critical to reducing innovation failures. One benefit of integration among departments is that: a. it allows for fewer people to be involved in research and development, making it easier to keep new products a secret from competitors. b. it ensures that only engineers and technical specialists are making product development decisions. c. it speeds up product development by streamlining the team that is working on projects. d. R&D teams, marketing and production teams work together to ensure the new product can be efficiently manufactured and will have a demand in the marketplace.

d. R&D teams, marketing and production teams work together to ensure the new product can be efficiently manufactured and will have a demand in the marketplace.

Poor quality component parts from outside suppliers can play a contributing role in poor-quality finished goods. What team might take steps to counteract this? a. The IT team may track all finished good defects and collect data about which of the company's production lines they were manufactured on. b. The marketing team might ask customers to take defective products apart to determine which element is malfunctioning. c. The leadership team may encourage all internal teams to meet monthly to discuss quality improvements to the end products. d. The materials management or logistics team may work with suppliers on an inspection process to ensure only 100% inspected components are delivered to the manufacturer.

d. The materials management or logistics team may work with suppliers on an inspection process to ensure only 100% inspected components are delivered to the manufacturer.

Identify which of these does not represent a common pitfall of the strategic planning process? a. Attaching too much importance to the role of top management and ignoring the input and strategic ideas of lower-level managers. b. Failing to take advantage of opportunities that arise that were unplanned for within the company's strategic plan. c. Refusing to adapt to breakthrough technologies and shifts in the competitive environment because the strategic plan didn't account for these changes. d. Utilizing information collected through the implementation of a strategic plan as inputs into the development of the next strategic plan.

d. Utilizing information collected through the implementation of a strategic plan as inputs into the development of the next strategic plan.

Effective quality improvements through functional-level strategies is the responsibility of: a. a single department - the quality management team within production. b. senior leadership, who must set a tone of quality-first. c. the quality manager. d. all functional teams with each playing a role in improving product or service quality.

d. all functional teams with each playing a role in improving product or service quality.

Your supervisor has asked you to take the lead in performing a VRIO analysis of the quality of the resources within your company. To perform the task, you must first identify the land, labor, management, plant and equipment, organizational architecture, process knowledge and intellectual property that make up the resources of the company. Then: a. treat each resource you identify as equally important to the company and develop a strategy that utilizes each one to achieve superior profitability. b. complete your report and submit it to your supervisor with a description of the resources you've identified. c. test each resource by removing it from your production for a defined length of time and track your productivity, sales and profitability in each of those timeframes and use the data collected to quantify how important each resource is to your company. d. evaluate each resource to determine if it can help the company take advantage of opportunities in the industry, if it's a resource that competitors don't have or would have trouble copying and if the company is managing the resource.

d. evaluate each resource to determine if it can help the company take advantage of opportunities in the industry, if it's a resource that competitors don't have or would have trouble copying and if the company is managing the resource.

A competitive advantage is based on the possession of distinctive competencies. By definition, these are: a. resources that are available to all firms operating in a given industry that are easily shared and copied by rivals. b. differences between companies in how they structure their companies and compensate their employees. c. characteristics, skills or knowledge that cannot be written down and must be understood through experience or intuition. d. firm-specific strengths that allow a company to differentiate its products from rivals or achieve lower costs than rivals.

d. firm-specific strengths that allow a company to differentiate its products from rivals or achieve lower costs than rivals

A potato chip manufacturer currently has a manufacturing line devoted to regular chips as well as individual lines dedicated to each variety, such as barbeque, sour cream and onion and cheese. The regular chip line operates for three shifts per day, but the varieties only run for one shift per day. To maximize efficiency, the company should consider: a. just-in-time systems to ensure that the raw material supplies - potatoes - are arriving several days before they are needed in the production process. b. counteracting diseconomies of scale by splitting the company into separate divisions, each one devoted to a specific variety. c. learning effects to improve the manufacturing speed of its regular chip line to reduce the number of shifts it is running and reduce overhead. d. flexible production technology, which would allow the company to produce different varieties off of the same line with brief set ups in between.

d. flexible production technology, which would allow the company to produce different varieties off of the same line with brief set ups in between.

Netflix has a strategy to employ only the top performers in each job role and pay them at the top of market value. The company philosophy is to only retain these top performers and to let others who don't perform as well go, regardless of the impact this has on the employee turnover rate. This Human Resources strategy is an example of: a. pay for performance b. self-managing teams c. employee training d. hiring strategy

d. hiring strategy

A value chain includes: a. a group of functional areas that are unique to each firm and can only be performed by that company. b. guidance for setting prices and maximizing profitability. c. a model for evaluating the quality of a company's resources and identifying distinctive competencies. d. primary activities in the design, creation and delivery of a product and support activities.

d. primary activities in the design, creation and delivery of a product and support activities

Quality can be thought of in two dimensions: a. low cost structure and high performance. b. efficiency and innovation. c. defect rates and warranty returns. d. reliability and excellence

d. reliability and excellence.

dialectic inquiry

generation of a plan (a thesis) and a counterplan (an antithesis) that reflect plausible but conflicting courses of action.

industry

group of companies offering products or services that are close substitutes for each other.

devil's advocacy

technique in which one member of a decision-making team identifies all the considerations that might make a proposal unacceptable.